LIBRARY 
 
 THE UNIVERSITY 
 OF CALIFORNIA 
 
 SANTA BARBARA 
 
 PRESENTED BY 
 
 ELIZABETH HARDISON
 
 A HISTORY OF 
 
 ECONOMIC DOCTRINES
 
 A iHISTORY OF 
 
 ECONOMIC DOCTRINES 
 
 FROM THE TIME OF THE PHYSIOCRATS 
 TO THE PRESENT DAY 
 
 BY CHARLES GIDE 
 
 PROFESSOR OF SOCIAL ECONOMICS IN THE 
 FACULTY OF LAW UNIVERSITY OF PARIS 
 
 AND 
 
 CHARLES RIST 
 
 PROFESSOR OF POLITICAL ECONOMY IN THE 
 
 FACULTY OF LAW IN THE UNIVERSITY OF 
 
 MONTPELLIER 
 
 AUTHORISED TRANSLATION FROM THE SECOND REVISED 
 AND AUGMENTED EDITION OP 1913 
 
 UNDER THE DIRECTION OF THE LATE 
 
 PROFESSOR WILLIAM SMART 
 BY 
 
 R. RICHARDS B.A. 
 
 LECTURER IN THE UNIVERSITY COLLEGE OF 
 NORTH WALES 
 
 D. C. HEATH AND COMPANY 
 
 BOSTON NEW YORK CHICAGO 
 
 DALLAS ATLANTA LONDON SAN FRANCISCO
 
 rights reserved 
 
 Printed in Great Britain at THE BALLANTYNE PRESS by 
 
 SPOTTUWOODE. BALLANTYNE & Co. LTD. 
 
 Colchester, London & Eton
 
 PREFATORY NOTE 
 
 GIBE'S Principles of Political Economy, of which there are several 
 translations, is probably better known to English students than 
 any similar work of foreign origin on the subject, and many 
 readers of that book will welcome an opportunity of perusing this 
 volume which Professor Gide has produced in collaboration with 
 Professor Rist. 
 
 The remarkable dearth of literature of this kind in English 
 may be pleaded in further extenuation of the attempt to present 
 the work in an English garb, and readers of the Preface will be 
 able to contrast the position in this country with the very 
 different condition of things prevailing across the Channel. The 
 contrast might even be carried a stage farther, and it would 
 be interesting to speculate upon the historical causes which 
 have made Germany supreme in the field of economic research 
 and history, which influenced France in her choice of the 
 history of theory, and which decreed that England should on 
 the whole remain faithful to the tradition of the " pure 
 doctrine." Can it be that something like a " territorial 
 division of labour" applies in matters intellectual as well as 
 economic ? 
 
 Be that as it may, we can hardly pretend to be satisfied with the 
 position of our country in this matter of doctrinal history. Of the 
 nine names mentioned in the Preface, only two are English, namely, 
 Ashley and Ingram; and it is no disparagement to Ashley's illu- 
 minating study of mediaeval England to say that the main interest of 
 his work is not doctrinal, and that Cunningham's name might with 
 equal appropriateness have been included in the list. 
 
 Omitting both Ashley and Cunningham, whose labours have been 
 largely confined to the realm of economic history, we are thus left 
 with Ingram's short but learned work as the sole contribution of 
 English scholarship to the history of economic thought. 
 
 English readers may possibly be puzzled by the omission of 
 any references, except a stray quotation or two, to Cannan's History 
 of the Theories of Production and Distribution. But the microscopic 
 care with which the earlier theories are examined and elucidated in 
 that work have resulted in its being regarded as a most valuable 
 contribution to economic theory itself, and under the circumstances
 
 vi PREFATORY NOTE 
 
 the absence of any reference to it in the Preface is not altogether 
 surprising. 
 
 Our apparent indifference to the development which theory 
 has undergone in the course of the last 150 years is all the more 
 difficult to explain when we recall the fact that England has always 
 been the classic home of theory, both orthodox and socialist, and 
 our backwardness in this respect contrasts very unfavourably with 
 the progress made in the kindred study of economic history during 
 the last twenty-five years under the inspiration of writers like 
 Ashley, Cunningham, Maitland, Round, and Seebohm. 
 
 Most critics are by this time agreed that Ingram's work, lucid 
 and learned though it is, is somewhat marred by being written too 
 exclusively from the standpoint of a Positivist philosopher who 
 thought he saw in the rapid rise of the Historical school an indis- 
 putable proof of the soundness of the Comtean principles and a 
 presage of their ultimate triumph. 
 
 Complete impartiality in the writing of history, even were it 
 attainable, may not be altogether desirable, and the present authors 
 have hastened to disclaim any such qualification. Notwithstanding 
 this, some of their readers will possibly feel that certain French 
 Schools, both ancient and modern, have been dealt with at dispro- 
 portionate length, and that scarcely enough attention has been paid to 
 certain English and American writers. But it will surely do us little 
 harm occasionally " to see ourselves as others see us." 
 
 The chief interest of the present volume will probably be found to 
 consist in the attempt made to give us something like a true per- 
 spective of certain modern theories by connecting them with their 
 historical antecedents ; and we can imagine its later pages being 
 scanned with a great deal of justifiable curiosity. After all, the 
 verdict of history upon the achievements of Smith, the measure of 
 his indebtedness to his immediate predecessors, and the extent to 
 which the " car of economic progress " was accelerated or retarded 
 in its movements at the hands of Ricardo and his contemporaries is 
 fairly well established by this time. On one point only do the present 
 writers seem to challenge that verdict, namely, in their designation of 
 Ricardo and Malthus as Pessimists. 
 
 It is otherwise with the more modern writers, however. Their 
 work has not the distinctness of that of the earlier writers, partly 
 because we are not sufficiently removed from it as yet, and partly 
 because some of it is obscured by the haze of party strife. But it 
 may help us to a better understanding of their relative positions to 
 learn, for example, that the Historical school, which set out on its
 
 PREFATORY NOTE vii 
 
 career of conquest with a considerable flourish of trumpets, has not 
 yet succeeded in giving us a new science of Political Economy ; that 
 the Marxian doctrine is already antiquated, in the opinion of certain 
 members of that school ; that the Socialism of the Fabian Society is 
 merely a recrudescence of Ricardian economics, and that Anarchism 
 is nothing but a violent form of Liberalism. 
 
 I cannot hope to have succeeded in retaining in this translation 
 the freshness and vivacity of the original. But I have endeavoured 
 to make the rendering as accurate as possible ; and with this object 
 in view considerable trouble has been taken to verify the quotations. 
 
 As the title-page implies, the work was originally begun at the 
 suggestion of the late Professor Smart of Glasgow, and to-day more 
 than ever I am conscious of what I owe to his kindly criticism and 
 genial encouragement. 
 
 The passage of the book through the press has been watched with 
 assiduous care by Mr. C. C. Wjjod, who is also responsible for the 
 Index at the end of the volume. I can scarcely express the measure 
 of my indebtedness to him. To my friends Mr. W. H. Porter, M.A., 
 and Mr. J. G. Williams, M.A., both of Bangor, I am also indebted 
 for reading some of the proofs. 
 
 R. RICHARDS
 
 PREFACE 
 
 IN the economic curricula of French universities much greater 
 stress is laid upon the history of economic theory than is the case 
 anywhere else. Attached to the Faculty of Law in each of these 
 universities is a separate chair specially devoted to this subject ; at 
 the examination for the doctor's degree a special paper is set in the 
 history of theory, and if necessary further proof of competence is 
 demanded from the student before his final admission to the degree. 
 At the Sorbonne, where there is only one chair in economics, that 
 chair is exclusively devoted to the history of doctrines, and the same 
 
 -Jf-. -Jt 
 
 is true of the chair recently founded at the Ecole des Hautes Etudes. 
 
 Such prominence given to the history of theory must seem 
 excessive, especially when it is remembered that in economic 
 history, as distinct from the history of economics, there is not a 
 single chair in the whole of France. Those who believe that the 
 French people are somewhat prone to ideology will not fail to see 
 in this fact a somewhat unfortunate manifestation of that tendency. 
 Elsewhere the positions are reversed, the premier place being given 
 to the study of facts rather than ideas. Extreme partisans of the 
 historical method, especially the advocates of historical materialism, 
 regard doctrines and systems as nothing better than a pale reflection 
 of facts. It is a part of their belief that facts are the only things 
 that matter, and that the history of the evolution of property or the 
 rise of the wage system may prove quite as instructive as the history 
 of the controversies concerning the nature of the right of property 
 or the wages-fund theory. 
 
 Such views as we have just expressed, however, are not altogether 
 devoid of exaggeration, though of a kind directly opposite to that 
 which we would naturally impute to them. The influence exerted 
 by the economic environment, whence even the most abstract 
 economist gets material for reflection and the exercise of his logical 
 acumen, is indisputable. The problems which the theorist has to 
 solve are suggested by the rise of certain phenomena which at one 
 moment cut a very prominent figure and at another disappear 
 altogether. Such problems must vary in different places and at 
 different times. The peculiar economic condition in which England 
 found herself at the beginning of the nineteenth century had a great 
 
 ix
 
 x PREFACE 
 
 deal to do in directing Ricardo 1 s thought to the study of the problems 
 of rent and note issue. But for the advent of machinery, with the 
 subsequent increase in industrial activity and the parallel growth 
 of a proletarian class, followed by the recurrence of economic crises, 
 we may be certain that neither the doctrine of Sismondi nor 
 that of Karl Marx would ever have seen the light of day. It is 
 equally safe to assume that the attention which economists have 
 recently bestowed upon the theory of monopoly is not altogether 
 unconnected with the contemporary development of the trust 
 movement. 
 
 But, while recognising all this, it is important that we should 
 remember that facts alone are not sufficient to explain the origin 
 of any doctrines, even those of social politics, and still less those of 
 a purely scientific character. Ideas even are not independent of 
 time and place. Similar conditions in the same epoch of history 
 have not infrequently given rise to heterogeneous and even antago- 
 nistic theories J. B. Say's and Sismondi's, for example, Bastiat's 
 and Proudhon's, Schulze-Delitzsch's and Marx's, Francis Walker's 
 and those of Henry George. With what combination of historical 
 circumstances are we to connect Cournofs foundation of the 
 Mathematical school in France, or how are we to account for the 
 simultaneous discovery in three or four countries of the theory of 
 final utility ? 
 
 Although anxious not to seem to make any extravagant claims 
 for the superiority of the history of theory, we are not ashamed of 
 repeating our regrets for the comparative neglect of economic 
 history, and we are equally confident in claiming for our subject 
 the right to be regarded as a distinct branch of the science. 1 We 
 shall accordingly omit all reference to the history of economic facts 
 and institutions except in so far as such reference seems indispensable 
 to an understanding of either the appearance or disappearance of such 
 and such a doctrine or to the better appreciation of the special 
 prominence which a theory may have held at one moment, although 
 it is quite unintelligible to us to-day. Sometimes even the facts 
 are connected with the doctrines, not as causes, but as results, for, 
 notwithstanding the scepticism of Cournot, who was wont to declare 
 that the influence exerted by economists upon the course of events 
 was about equal to the influence exerted by grammarians upon 
 the development of language, it is impossible not to see a connection 
 between the commercial treaties of 1860, say, and the teachings of 
 
 1 See an article by M. Deschamps in the Reforms sociale of October 1, 1902, 
 on the value of this kind of teaching.
 
 PREFACE xi 
 
 the Manchester school, or between labour legislation and the doctrine 
 of State Socialism. 
 
 To write a history of economic doctrines which should not 
 exceed the limits of a single volume was to attempt an almost 
 impossible task, and the authors cannot pretend that they have 
 accomplished such a difficult feat. Even a very summary exposition 
 of such doctrines as could not possibly be neglected involved the 
 omission of others of hardly less importance. 
 
 But in the first place it was possible to pass over the pioneers by 
 taking the latter part of the eighteenth century as the starting-point. 
 There is no doubt that the beginnings of economic science lie in a 
 remoter past, but the great currents of economic thought known as 
 the " schools " only began with the appearance of those two typical 
 doctrines, individualism and socialism, in the earlier half of the nine- 
 teenth century. 1 Moreover, the omission is easily made good, for 
 it so happens that the earlier periods are those most fully dealt with 
 in such works as have already appeared on the subject. For the 
 period of antiquity we have the writings of Espinas 2 and Souchon ; 
 the mediaeval and post-mediaeval periods, right up to the eighteenth 
 century, are treated of in the works of Dubois and Rambaud ; 
 while, in addition to these, we have the writings of Ashley, Ingram, 
 Hector Denis, Brants, and Cossa, to mention only a few. Modern 
 theories, as contrasted with those of the earlier periods, have received 
 comparatively little attention. 
 
 Not only have we been obliged to confine our attention to 
 certain periods, but we have also had to restrict ourselves to certain 
 countries. We would claim the indulgence of those of our readers 
 who feel that French doctrines have been considered at dispropor- 
 tionate length, reminding them that we had French students 
 chiefly in view when writing. Each author is at liberty to do the 
 same for his own particular country, and it is better so, for readers 
 generally desire to learn more about those things of which they 
 already know something. But, despite the prominence given to 
 France, England and Germany were bound to receive considerable 
 attention, although in the case of the latter country we had to 
 
 1 In an article on the teaching of the history of economic doctrines (Revue 
 de V Enseignement, March 15, 1900) M. Deschamps declares that it is unpardon- 
 able that we should be unable to make better use of the marvellous economic 
 teachings of which both ancient and mediaeval history are full, but he adds 
 that " as far as the history of the science is concerned there is no need to go 
 farther back than the Physiocrats." 
 
 2 In the new edition of M. Espinas's work an entire volume is devoted to the 
 study of economic doctrines in ancient and mediaeval times.
 
 xii PREFACE 
 
 make considerable omissions. With regard to the other countries, 
 which we were too often obliged to pass by in silence or to mention 
 only very casually in connection with some theory or other, we are 
 most anxious not to appear indifferent to the eminent services 
 rendered by them, and especially Italy and the United States, to 
 the cause of economic science, both in the past and in the present. 
 
 But, notwithstanding such restrictions, the field was still too wide, 
 and we were obliged to focus attention on the minimum number of 
 names and ideas, with a view to placing them in a better light. Our 
 ambition has been, not to write as full or detailed a history as we 
 possibly could, but merely to draw a series of pictures portraying 
 the more prominent features of some of the more distinct epochs in 
 the history of economic doctrines. 
 
 Such choice must necessarily be somewhat arbitrary, for it is 
 not always an easy matter to fix upon the best representative of 
 each doctrine. Especially is this the case in a science like economics, 
 where the writers, unknown to one another, not infrequently repeat 
 the same ideas, and it becomes a matter of some difficulty to decide 
 the claim to priority. But although it may be difficult to hit upon 
 the exact moment at which a certain idea first made its appearance, 
 it is comparatively easy to determine when such an idea attracted 
 general attention or took its place in the hierarchy of accepted 
 or scarcely disputed truths. This has been our criterion. With 
 regard to those whose names do not figure in our list, although 
 quite worthy of a place in the front rank, we cannot believe that 
 they will suffer much through this temporary eclipse, especially in 
 view of the partiality of the age for the pioneers. That we are not 
 unduly optimistic in this matter may be inferred from the numerous 
 attempts recently made to discover the poetce minores of the science, 
 and to make amends for the scant justice done them by the more 
 biased historians of the past. 
 
 Not only was selection necessary in the case of authors, but a 
 similar procedure had to be applied to the doctrines. It must be 
 realised, however, that a selection of this character does not warrant 
 the conclusion that the doctrines dealt with are in any way superior 
 to those which are not included, either from the standpoint of 
 moral value, of social utility, or of abstract truth, for we are not 
 of the number who think with J. B. Say that the history of error 
 can serve no useful purpose. 1 We would rather associate ourselves 
 
 1 " "What useful purpose can be served by the study of absurd opinions and 
 doctrines that have long ago been exploded, and deserved to be ? It is mere 
 useless pedantry to attempt to revive them. The more perfect a science becomes
 
 PREFACE xiii 
 
 with Condillac when he remarks : " It is essential that everyone who 
 wishes to make some progress in the search for truth should know 
 something of the mistakes committed by people like himself who 
 thought they were extending the boundaries of knowledge. 1 ' The 
 study of error would be thoroughly well justified even though the 
 result were simply a healthy determination to avoid it in future. It 
 would be even more so if Herbert Spencer's version of the saying of 
 Shakespeare, that there is no species of error without some germ of 
 truth in it, should prove correct. One cannot, moreover, be said to 
 possess a knowledge of any doctrine or to understand it until one 
 knows something of its history, and of the pitfalls that lay in the path 
 of those who first formulated it. A truth received as if it has fallen 
 from the sky, without any knowledge of the efforts whereby it has 
 been acquired, is like an ingot of gold got without toil of little 
 profit. 
 
 Moreover, it is to be remembered that this book is intended 
 primarily for students, and that it may be useful to show them in 
 what respects certain doctrines are open to criticism, either from 
 the point of view of logic or of observation. We have attempted 
 to confine such criticism within the strictest limits, partly because we 
 did not wish the volume to become too bulky, and partly because 
 we felt that what is important for our readers are not our own 
 opinions, but the opinions of the masters of the science with which 
 we deal. Wherever possible these have been given tlje opportunity 
 of speaking for themselves, and for this reason we have not been 
 afraid to multiply quotations. 
 
 A special effort has been made to bring into prominence such 
 doctrines whether true or false as have contributed to the 
 formation of ideas generally accepted at the present time, or such 
 as are connected with these in the line of direct descent. In other 
 words, the book is an attempt to give an answer to the following 
 questions : Who is responsible for formulating those principles that 
 constitute the framework whether provisionary or definitive it is 
 not for us to determine of economics as at present taught ? At 
 what period were these principles first enunciated, and what were 
 the circumstances which accounted for their enunciation just at 
 that period ? Thus we have thought it not altogether out of place 
 to pay some attention to those ideas which, although only on 
 the shorter becomes its history. Al ember t truly remarks that the more light 
 we have on any subject the less need is there to occupy ourselves with the false 
 or doubtful opinions to which it may have given rise. Our duty with regard 
 to errors is not to revive them, but simply to forget them." (Traitt pratique, 
 vol. ii, p. 540.)
 
 xiv PREFACE 
 
 the borderland of economics, have exercised considerable influence 
 either upon theory itself, upon legislation, or upon economic thought 
 in general. We refer to such movements as Christian Socialism, 
 Solidarism, and Anarchism. Had we considered it advisable to 
 retain the official title by which this kind of work is generally known, 
 we should have had to describe it as A History of the Origin and 
 Evolution of Contemporary Economic Doctrines. 
 
 The plan of a history of this kind was a matter that called for 
 some amount of deliberation. It was felt that, being a history, fairly 
 close correspondence with the chronological order was required, which 
 meant either taking a note of every individual doctrine, or breaking up 
 the work into as many distinct histories as there are separate schools. 
 The former procedure would necessitate giving a review of a great 
 number of doctrines in a single chapter, which could only have the 
 effect of leaving a very confused impression upon the reader's mind. 
 The alternative proposal is open to the objection that, instead of 
 giving us a general outline, it merely treats us to a series of mono- 
 graphs, which prevents our realising the nature of that fundamental 
 unity that in all periods of history binds every doctrine together, 
 similar and dissimilar alike. We have attempted to avoid the in- 
 conveniences and to gain something of the advantages offered by these 
 alternative methods by grouping the doctrines into families according 
 to their descent, and presenting them in their chronological order. 
 This does not mean that we have classified them according to the 
 date of their earliest appearance ; it simply means that we have 
 taken account of such doctrines as have reached a certain degree of 
 maturity. There is always some culminating-point in the history of 
 every doctrine, and in deciding to devote a separate chapter to some 
 special doctrine we have always had such a climacteric in mind. 
 Nor have we scrupled to abandon the chronological order when 
 the exigencies of the exposition seemed to demand it. 
 
 The first epoch comprises the end of the eighteenth and the 
 beginning of the nineteenth centuries. It deals mainly with the 
 founders of Classical political economy, with the Physiocrats, Smith 
 and Say, and with Malthus and Ricardo, the two writers whose 
 gloomy forebodings were to cloud the glory of the " natural order." 
 
 The second epoch covers the first half of the nineteenth century. 
 The " adversaries " include all those writers who either challenged 
 or in some way disputed the principles which had been laid down 
 by their predecessors. To these writers five chapters are devoted, 
 dealing respectively with Sismondi, Saint-Simon, the Associative 
 Socialists, List, and Proudhon.
 
 PREFACE xv 
 
 A third epoch deals with the middle of the nineteenth century 
 and the triumph of the Liberal school, which had hitherto with- 
 stood every attack, though not without making some concessions. 
 It so happened that the fundamental doctrines of this school were 
 definitely formulated about the same time, though in a very different 
 fashion, of course, in the Principles of Stuart Mill in England and 
 the Harmonies of Bastiat in France. 
 
 The second half of the nineteenth century constitutes a fourth 
 period. Those who dissented from the Liberalism of the previous 
 epoch are responsible for the schisms that began to manifest them- 
 selves in four different directions at this time. The Historical 
 school advocates the employment of the inductive method, and 
 the State Socialists press the claims of a new social policy. Marxism 
 is an attack upon the scientific basis of the science, and Christian 
 Socialism a challenge to its ethical implications. 
 
 A fifth epoch comprises the end of the nineteenth century and 
 the beginning of the twentieth. The heading " Recent Doctrines " 
 includes several theories that are already well known to us, but 
 which seem transfigured or disfigured, as some would prefer to put 
 it in their new surroundings. The Hedonistic doctrine and the 
 theory of rent represent a kind of revision of the Classical theories. 
 Solidarism is an attempt to bridge the gap that exists between 
 individualism and socialism, whilst Anarchism can only be described 
 as a kind of impassioned Liberalism. 
 
 This order of succession must not be taken to imply that each 
 antecedent doctrine has either been eliminated by some subsequent 
 doctrine or else incorporated in it. The rise of the Historical 
 school in the middle of the nineteenth century, for example, happened' 
 to be contemporaneous with the triumph of the Liberal school and 
 the revival of Optimism. In a similar fashion the new Liberalism 
 of the Austrian school was coincident with the advent of State 
 intervention and the rise of Collectivism. 
 
 We cannot, however, help noticing a certain rhythmical sequence 
 in this evolutionary process. Thus we find the Classical doctrine, 
 as it is called, outlined in the earliest draft of the science, but dis- 
 appearing under the stress of more or less socialistic doctrines, to 
 reappear in a new guise later on. There is no necessity for regarding 
 this as a mere ebb and flow such as distinguishes the fortunes of 
 political parties under a parliamentary regime. Such alternation in 
 the history of a doctrine has its explanation not so much in the 
 character of the doctrine itself as in the favour of public opinion, 
 which varies with the fickleness of the winds of heaven.
 
 xvi PREFACE 
 
 But doctrines and systems have a vitality of their own which 
 is altogether independent of the vagaries of fashion. It were better 
 to regard their history, like all histories of ideas, as a kind of struggle 
 for existence. At one moment conflicting doctrines seem to dwell 
 in harmony side by side, content to divide the empire of knowledge 
 between them. Another moment witnesses them rushing at each 
 other with tumultuous energy. It may happen that in the course 
 of the struggle some of the doctrines are worsted and disappear 
 altogether. But more often than not their conflicting interests are 
 reconciled and the enmity is lost in the unity of a higher synthesis. 
 And so it may happen that a doctrine which everybody thought 
 was quite dead may rise with greater vigour than ever. 
 
 The bibliography of the subject is colossal. In addition to the 
 general histories, which are already plentiful, the chapters devoted 
 to the subject in every treatise on political economy, and the 
 numerous articles which have appeared in various reviews, there 
 is scarcely an author, however obscure, who is not the subject 
 of a biography. To have attempted to enumerate all these 
 works would merely have meant increasing the bulk of the book 
 without being able to pretend that our list was exhaustive. It 
 is scarcely necessary to add that this meant that we had to con- 
 fine ourselves to the work done by the " heroes " of this volume. 
 Their commentators and critics only came in for our attention 
 when Ave had to borrow either an expression or an idea directly 
 from them or when we felt it necessary that the reader should 
 fill up the gaps left by our exposition. This accounts for the 
 number of names which had to be relegated to the foot-notes. 
 But such deliberate excision must not prevent our recognising at 
 the outset the debt that we owe to the many writers who have 
 traversed the ground before us. They have facilitated our task 
 and have a perfect right to regard themselves as our collaborators. 
 We feel certain that they will find that their labours have not been 
 ignored or forgotten. 
 
 Although this book, so far as the general task of preparation 
 and revision is concerned, must be regarded as the result of a 
 collective effort on the part of the two authors whose names are 
 subjoined, the actual work of composition was undertaken by each 
 writer separately. The Contents will sufficiently indicate the nature 
 of this division of labour. 
 
 The authors refuse to believe that collaboration in the pro- 
 duction of a scientific history of ideas need imply absolute agree- 
 ment on every question that comes up for consideration. Especially
 
 PREFACE xvii 
 
 is this the case with the doctrines of political and social economy 
 outlined herein ; each of the authors has retained the fullest right 
 of independent judgment on all these matters. Consequently any 
 undue reserve or any extravagant enthusiasm shown for some of 
 these doctrines must be taken as an expression of the personal 
 predilection of the signatory of the particular article. 
 
 CHARLES GIDE 
 CHARLES RIST 
 
 E.D
 
 CONTENTS 
 
 BOOK I: THE FOUNDERS 
 
 PAQI 
 
 CHAPTER I : THE PHYSIOCRATS (M. GIDE) 1 
 
 I 
 
 L THE NATURAL OKDJEB 5 
 
 IE. THE NET PRODUCT 12 
 
 HI. THE CIRCULATION OF WEALTH 18 
 
 n 
 
 I. TRADE 27 
 
 II. THE FUNCTIONS or THE STATE 33 
 
 III. TAXATION 38 
 
 IV. RESUME OF THE PHY8IOCRATIO DOCTRINE. CRITICS AND DlSSENTERS 45 
 
 CHAPTER H : ADAM SMITH (M. RIST) 60 
 
 L DIVISION OF LABOUR 56 
 
 n. THE " NATURALISM " AND " OPTIMISM " OF SMITH 68 
 
 HI. ECONOMIO LIBERTY AND INTERNATIONAL TRADE 93 
 
 IV. THE INFLUENCE OF SMITH'S THOUGHT AND ITS DIFFUSION. J. B. 
 
 SAT 102 
 
 CHAPTER III : THE PESSIMISTS (M. GIDE) 118 
 
 L MALTHUS 120 
 
 THE LAW OF POFULATIOH 121 
 
 EL RICARDO 138 
 
 1. THE LAW OF RENT 141 
 
 2. OF WAGES AND PROFITS 157 
 
 3. THE BALANCE OF TRADE THEORY AND THE QUANTITY THEORY 
 
 OF MONEY 163 
 
 4. PAPER MONEY, m ISSTTE AND REGULATION 165 
 
 XII
 
 xx CONTENTS 
 
 BOOK II : THE ANTAGONISTS 
 
 CHAPTER I : SISMONDI AND THE ORIGINS OF THE 
 CRITICAL SCHOOL (M. RIST) 
 
 L THE AIM AND METHOD OF POLITICAL ECONOMY 
 II. SISMONDI'S CBITICISM OF OVER-PRODUCTION AND COMPETITION 
 
 III. THE DIVORCE OF LAND FROM LABOUB AS THE CAUSE OF PAUPERISM 
 
 AND OF CRISES 
 
 IV. SISMONDI'S REFORM PROJECTS. His INFLUENCE UPON THE HISTORY 
 
 OF DOCTRINES 
 
 CHAPTER II : SAINT-SIMON, THE SAINT-SIMONIANS, 
 
 AND THE BEGINNINGS OF COLLECTIVISM (M. RIST) 198 
 
 I. SAINT-SIMON AND INDUSTRIALISM 202 
 
 II. THB SAINT-SIMONIANS AND THEIR CRITICISM OF PRIVATE PROPERTY 211 
 
 III. THE IMPORTANCE OF SAINT-SIMONISM IN THE HISTORY OF DOCTRINES 225 
 
 CHAPTER III : THE ASSOCIATIVE SOCIALISTS 
 
 I. ROBERT OWEN (M. GIDE) 
 
 1. THE CREATION OF THE MILIEU 
 
 2. THE ABOLITION OF PROFIT 
 II. CHARLES FOURIER (M. GIDE) 
 
 1. THE PHALANSTERE 
 
 2. INTEGRAL CO-OPERATION 
 
 3. BACK TO THE LAND 
 
 4. ATTRACTIVE LABOUR 
 
 III. Louis BLANC (M. RIST) 
 
 CHAPTER IV : FRIEDRICH LIST AND THE NATIONAL 
 
 SYSTEM OF POLITICAL ECONOMY (M. RIST) 264 
 
 I. LIST'S IDEAS IN RELATION TO THE ECONOMIC CONDITIONS IN GERMANY 266 
 II. SOURCES OF LIST'S INSPIRATION. His INFLUENCE UPON SUBSEQUENT 
 
 PROTECTIONIST DOCTRINES 277 
 
 III. LIST'S REAL OMQINALITY 287
 
 CONTENTS xxi 
 
 PAGB 
 
 ' CHAPTER V : PROUDHON AND THE SOCIALISM OF 
 
 1848 (M. RiST) 290 
 
 L CRITICISM OP PEIVATU PROPERTY AND SOCIALISM 291 
 
 II. THB REVOLUTION or 1848 AND THB DISCREDIT or SOCIALISM 300 
 
 III. THB EXCHANGE BANK THEORY 307 
 
 IV. PROUDHOJJ ' IKFLUJBNC.E ATTEB 1848 320 
 
 BOOK III: LIBERALISM 
 
 CHAPTER I : THE OPTIMISTS (M. GIDE) 322 
 
 I. THB THEORY or SERVICE- VALUE 332 
 
 II. THE LAW or FREE UTILITY AND RENT 335 
 
 III. THE RELATION OF PROFITS TO WAGES 340 
 
 IV. THE SUBORDINATION OF PRODUCER TO CONSUMES 342 
 V. THE LAW OF SOLIDARITT 844 
 
 CHAPTER II : THE APOGEE AND DECLINE OF THE 
 CLASSICAL SCHOOL. JOHN STUART MILL (M. 
 
 GIDE) 34S 
 
 L THE FUNDAMENTAL LAWS 354 
 
 n. MILL'S INDIVIDUALIST-SOCIALIST PROGRAMME 366 
 
 LTL MILL'S SUCCESSORS 274 
 
 BOOK IV : THE DISSENTERS 
 
 CHAPTER I : THE HISTORICAL SCHOOL AND THE 
 
 CONFLICT OF METHODS (M. RIST) 878 
 
 I. THB ORIGIN AND DEVELOPMENT OF THE HISTORICAL SCHOOL 381 
 
 II. THE CRITICAL IDEAS OF THE HISTORICAL SCHOOL 388 
 
 III. THE POSITIVB IDEAS OF THB HISTORICAL SCHOOL 398
 
 rxii CONTENTS 
 
 CHAPTER II : STATE SOCIALISM (M. RIST) 407 
 
 L THE ECONOMISTS' CRITICISM OF LAISSEZ-FAIRE 410 
 
 IL THE SOCIALISTIC ORIGIN OP STATE SOCIALISM. RODBERTUS AND 
 
 LASS ALLS 414 
 
 1. RODBEBTTTS 415 
 
 2. LASSALLB 432 
 in. STATB SOCIALISM PROPERLY, so CALLED 436 
 
 CHAPTER III : MARXISM (M. GIDE) 449 
 
 L KABL MARX 449 
 
 1. SURPLUS LABOUR AND SURPLUS VALUE 460 
 
 2. THE LAW OF CONCENTRATION OR APPROPRIATION 469 
 II. TOT MARXIAN SCHOOL 466 
 
 III. THE MARXIAN CRISIS AND THE NEO-MARXIANS 473 
 
 1. THE NEO -MARXIAN REFORMISTS 473 
 
 2. THE NEO-MARXIAN SYNDICALISTS 479 
 
 CHAPTER IV: DOCTRINES THAT OWE THEIR IN- 
 SPIRATION TO CHRISTIANITY (M. GIDE) 483 
 
 L LE PLAT'S SCHOOL 486 
 
 II. SOCIAL CATHOLICISM 496 
 
 III. SOCIAL PROTESTANTISM 503 
 
 IV. THE MYSTICS 510 
 
 BOOK V : RECENT DOCTRINES 
 
 CHAPTER I : THE HEDONISTS (M. GIDE) 517 
 
 1. THE PSEUDO-RENAISSANCE OF THH CLASSICAL SCHOOL 517 
 
 II. THE PSYCHOLOGICAL SCHOOL 621 
 
 III. THE MATHEMATICAL SCHOOL 528 
 
 IV. CRITICISM OF THE HEDONISTIC DOCTRINES 537
 
 CONTENTS xxiii 
 
 PAOB 
 
 CHAPTER II : THE THEORY OF RENT AND ITS 
 
 APPLICATIONS (M. RIST) 645 
 
 I. THE THEORETICAL EXTENSION OF THE CONCEPT RENT 646 
 IL UNEARNED INCREMENT AND THE PROPOSAL TO CONFISCATE RENT 
 
 BY MEANS or TAXATION 668 
 
 EEL SYSTEMS or LAND NATIONALISATION 670 
 
 IV. SOCIALIST EXTENSIONS OF THE DOCTRINE OF RENT 679 
 
 CHAPTER III : THE SOLIDARISTS (M. GIDE) 687 
 
 I. THE CAUSES OF THE DEVELOPMENT or SOLIDARISM 
 It. THE SOLIDARIST THESIS 
 
 HL THE PRACTICAL APPLICATION OF SOLJDABIST DOCTRINES 
 IV. CRITICISM 
 
 CHAPTER IV : THE ANARCHISTS (M. RIST) 614 
 
 I. STIRNER'S PHILOSOPHICAL ANARCHISM AND THE CULT OF THE 
 
 INDIVIDUAL 616 
 
 EL SOCIAL AND POLITICAL ANARCHISM AND THE CRITICISM OF AUTHORITY 619 
 
 HI. MUTUAL AID AND THE ANARCHIST CONCEPTION OF SOCIETY 629 
 
 IV. REVOLUTION 637 
 
 CONCLUSION (MM. GIDE AND RIST) 643 
 
 INDEX 649
 
 BOOK I : THE FOUNDERS 
 
 CHAPTER I: THE PHYSIOCRATS 
 
 POLITICAL ECONOMY as the name of a special science is the invention 
 of one Antoine de Montchrtien, who first employed the term about 
 the beginning of the seventeenth century. Not until the middle of the 
 eighteenth century, however, does the connotation of the word in 
 any way approach to modern usage. A perusal of the article on 
 Political Economy which appeared in the Grande Encyclopedic of 
 1755 will help us to appreciate the difference. That article was 
 contributed by no less a person than Jean Jacques Rousseau, but 
 its medley of politics and economics seems utterly strange to us. 
 Nowadays it is customary to regard the adjective " political " as 
 unnecessary, and an attempt is made to dispense with it by employing 
 the terms "economic science" or "social economics," but this article 
 clearly proves that it was not always devoid of significance. It also 
 reveals the interesting fact that the science has always been chiefly 
 concerned with the business side of the State, especially with 
 the material welfare of the citizens " with the fowl in the pot," 
 as Henry IV put it. Even Smith never succeeded in getting quite 
 beyond this point of view, for he declares that " the object of the 
 political economy of every nation is to increase the riches and the 
 power of that country." 1 
 
 But the counsels given and the recipes offered for attaining 
 the desired end were as diverse as they were uncertain. One school, 
 known as the Mercantilist, believed that a State, like an individual, 
 must secure the maximum of silver and gold before it could become 
 wealthy. Happy indeed was a country like Spain that Jiad dis- 
 covered a Peru, or Holland, which, in default of mines, could procure 
 gold from the foreigner in exchange for its spices. Foreign trade 
 really seemed a quite inexhaustible mine. Other writers, who were 
 socialists in fact though not in name for that term is of later inven- 
 tion thought that happiness could only be found in a more equal 
 distribution of wealth, in the abolition or limitation of the rights of 
 private property, or in the creation of a new society on the basis 
 of a new social contract in short, in the foundation of the Utopian 
 commonwealth. 
 
 1 Wealth of Nation*, vol. i, p. 351. 
 E.D. 1 A'
 
 2 THE PHYSIOCRATS 
 
 It was at this juncture that Quesnay appeared. Quesnay wai 
 a doctor by profession, who now, when on the verge of old age, had 
 turned his attention to the study of " rural economy " the problem 
 of the land and the means of subsistence. 1 Boldly declaring that 
 the solution of the problem had always lain ready to hand, needing 
 neither inventing nor discovering, he further maintained that all 
 social relations into which men enter, far from being haphazard, 
 are, on the contrary, admirably regulated and controlled. To those 
 who took the trouble to think, the laws governing human asso- 
 ciations seemed almost self-evident, and the difficulties they involved 
 no greater than the difficulties presented by the laws of geometry. 
 So admirable were these laws in every respect that once they 
 were thoroughly known they were certain to command allegiance. 
 Dupont de Nemours cannot be said to have exaggerated when, in 
 referring to this doctrine, he spoke of it as " very novel indeed." f 
 
 It is not too much to say that this marks the beginning of a new 
 science the science of Political Economy. The age of forerunners 
 is past. Quesnay and his disciples must be considered the real 
 founders of the science. It is true that their direct descendants, 
 the French economists, very inconsiderately allowed the title to 
 pass to Adam Smith, but foreign economists have again restored 
 it to France, to remain in all probability definitely hers. But, as is 
 the case with most sciences, there is not very much to mark the date of 
 its birth or to determine the stock from which it sprang ; all that 
 we can confidently say is that the Physiocrats were certainly the first 
 to grasp the conception of a unified science of society. In other words, 
 they were the first to realise that all social facts are linked together in 
 the bonds of inevitable laws, which individuals and Governments 
 would obey if they were once made known to them. It may, of course, 
 be pointed out that such a providential conception of economic laws 
 has little in common with the ordinary naturalistic or deterministic 
 standpoint of the science, and that several of the generalisations are 
 simply the product of their own imaginations. It must also be ad- 
 mitted that Smith had far greater powers of observation, as well as a 
 superior gift of lucid exposition, and altogether made a more notable 
 contribution to the science. Still, it was the Physiocrats who con- 
 structed the way along which Smith and the writers of the hundred 
 
 1 Quesnay*8 first economic articles, written for the Grande Encyclopldie, were 
 on Let Grains and Let Fermiers. 
 
 1 Professor Hector Denis, speaking of the Physiocratio doctrine, remarks 
 that its imperfections are easily demonstrated, bat that we seldom recognise its 
 incomparable greatness.
 
 THE PHYSIOCRATS 8 
 
 years which follow have all marched. Moreover, we know that but for 
 the death of Quesnay in 1774 two years before the publication of 
 the Wealth of Nations Smith would have dedicated his master- 
 piece to him. 
 
 The Physiocrats must also be credited with the foundation of 
 the earliest " school " of economists in the fullest sense of the 
 term. The entrance of this small group of men into the arena of 
 history is a most touching and significant spectacle. So complete 
 was the unanimity of doctrine among them that their very names 
 and even their personal characteristics are for ever enshrouded by 
 the anonymity of a collective name. 1 
 
 Their publications follow each other pretty closely for a period 
 of twenty years, from 1756 to 1778. 2 
 
 1 " The genuine economists are easily depicted. In Dr. Quesnay they 
 have a common master ; a common doctrine in the Philosophic rurale and the 
 Analyse iconomique. Their classical literature is summed up in the generic 
 term Physiocracy. In the Tableau iconomique they possess a formula with 
 technical terms as precise as old Chinese characters." This definition of the 
 Physiocrats, given by one of themselves, the Abbe" Baudeau (Ephimiridea, April 
 1776) writing, we may be sure, in no malicious spirit shows us that the school 
 possessed not a little of the dogmatism of the Chinee. 
 
 1 The first not only in chronological order but the chief recognised by all 
 was Dr. Quesnay (1694-1774), the physician of Louis XV and of Mme. de 
 Pompadour. He had already published numerous works on medicine, especially 
 the Essai physique sur VEconomie animate. (1736) before turning his attention to 
 economic questions, and more especially to problems of ' rural economy." His 
 first contributions, the essays on Let drains and Les Fermiera. which appeared 
 in the Grande Encydopedie in 1756 and 1757, were followed by his famous Tableau 
 ieonomique in 1758, when he was sixty -four years of age, and in 1760 by his 
 Maximes generates du Gouvemement iconomique eFun Royaume agricole, which is 
 merely a development of the preceding work. 
 
 His writings were not numerous, but his influence, like that of Socrates, 
 disseminated as it was by bis disciples, became very considerable. 
 
 The best edition of his works is that published by Professor Oncken of Berne, 
 (Euvres economiques et philosophiquea de F. Quesnay (Paris and Frankfort, 1888). 
 Our quotations from the founders are taken from Collections des Principaux 
 Economistes, published by Daire. 
 
 The Marquis de Mirabeau, father of the great orator of the Revolution, a 
 man of a fiery temperament like his son, published at about the same date as the 
 production of the Tableau his L'Ami des Hommes. This book, which created a 
 great sensation, does not strictly belong to Physiocratic literature, for it ignores 
 the fundamental doctrine of the school. La Thiorie de VImp6t (1760) and La 
 Philosophic rurale (1763), on the other hand, owe their inspiration to Physiocracy. 
 
 Mercier de la Riviere, a parliamentary advocate, published L'Ordrc natural 
 et easentiel des Sociitia politiques in 1767. Dupont de Nemours refers to this as 
 a "sublime work," and though it does not, perhaps, deserve that epithet it 
 contains, nevertheless, the code of the Physiocratio doctrine. 
 
 Dupont de Nemours, as he is called after his native town published about
 
 4 THE PHYSIOCRATS 
 
 Turgot was the only literary person among them, but like his 
 confreres he was devoid of wit, though the age was noted for 
 its humorists. On the whole they were a sad and solemn sect, 
 and their curious habit of insisting upon logical consistency as 
 
 the same time, 1768, when he was only twenty-nine, a book entitled Physiocratie, 
 on Constitution essentiette du Gouvernement U plus avantageux au Genre humain. 
 To him we owe the term from which the school took its name Physiocracy, 
 which signifies " the rule of nature." But the designation " Physiocrats " was 
 unfortunate and was almost immediately abandoned for " Economistes." 
 Quesnay and his disciples were the first " Economistes." It was only much 
 later, when the name " Economist " became generic and useless as a distinc- 
 tive mark for a special school, that writers made a practice of reverting to the 
 older term " Physiocrat." 
 
 An enthusiastic disciple of Quesnay, Dupont's rSle was chiefly that of a 
 propagandist of Physiocratic doctrines, and he made little original contribution 
 to the science. At an early date, moreover, the great political events in which 
 he took an active part proved a distraction. He survived all his colleagues, 
 and was the only one of them who lived long enough to witness the Revolution, in 
 which he played a prominent part. He successively became a deputy in the Tiers 
 Etat, a president of the Constituent Assembly, and later on, under the Directoire, 
 President du Conseil des Anciens. He even assisted in the restoration of the 
 Empire, and political economy was first honoured at the hands of the Institut 
 when he became a member of that body. 
 
 In 1777 Le Trosne, an advocate at the Court of Orleans, published a book 
 entitled De I'Interet social, par rapport a la Valuer, a la Circulation, a V Industrie 
 et au Commerce, which is perhaps the best or at least the most strictly economic 
 of all. Mention must also be made of the Abbe Baudeau, who has no less than 
 eighty volumes to his credit, chiefly dealing with the corn trade, but whose 
 principal work is L 1 Introduction a la Philosophic iconomique (1771) ; and of the 
 Abb6 Roubaud, afterwards Margrave of Baden, who had the advantage of 
 oeing not merely a writer but a prince, and who carried out some Physiocratic 
 experiments in some of the villages of his small principality. 
 
 We have not yet mentioned the most illustrious member of the school, both 
 in respect of his talent and his position, namely, Turgot (1727-81). His name is 
 generally coupled with that of the Physiocrats, and this classification is sufficiently 
 justified by the similarity of their ideas. Still, as we shall see, in many respects 
 he stands by himself, and bears a close resemblance to Adam Smith. Moreover, 
 he commenced writing before the Physiocrats. His essay on paper money dates 
 from 1748, when he was only twenty -one years of age, but his most important 
 work, Reflexions sur la Formation et la Distribution des Richesses, belongs to 1766. 
 As the Intendant of Limoges and again as a minister of Louis XVI he possessed 
 the necessary authority to enable him to realise his ideas of economic liberty, 
 which he did by his famous edicts abolishing taxes upon corn passing from one 
 province to another, and by the abolition of the rights of wardenship and privilege. 
 
 Unlike the other Physiocrats, who swore only by Dr. Quesnay, Turgot owed a 
 great deal to a prominent business man, Vincent de Gournay, who at a later 
 date became the Intendant of Commerce. Gournay died in 1759, at the early age 
 of forty -seven. Of Gournay we know next to nothing beyond what Turgot says 
 of him in his eulogy (See Schelle, Vincent de Gournay, 1897). 
 
 Bibliography. Books dealing with the Physiocratic system, both in French
 
 THE NATURAL ORDER 5 
 
 if they were the sole depositaries of eternal truth must often 
 have been very tiresome. They soon fell an easy prey to the 
 caustic sarcasm of Voltaire. 1 But despite all this they enjoyed 
 a great reputation among their more eminent contemporaries. 
 Statesmen, ambassadors, and a whole galaxy of royal personages, 
 including the Margrave of Baden, who attempted to apply their 
 doctrines in his own realm, the Grand Duke Leopold of Tuscany, 
 the Emperor Joseph II of Austria, Catherine, the famous Empress 
 of Russia, Stanislaus, King of Poland, and Gustavus III of Sweden, 
 were numbered among their auditors. Lastly, and most un- 
 expectedly of all, they were well received by the Court ladies at 
 Versailles. In a word, Physiocracy became the rage. All this may 
 seem strange to us, but there are several considerations which may 
 well be kept in view. The society of the period, raffint and licentious 
 as it was, took the same delight in the "rural economy " of the Phy- 
 siocrats as it did in the pastorals of Trianon or Watteau. Perhaps it 
 gleaned some comfort from the thought of an unchangeable " natural 
 order," just when the political and social edifice was giving way 
 beneath its feet. It may be that its curiosity was roused by that 
 terse saying which Quesnay wrote at the head of the Tableau 
 economique : " Pauvres paysans, pauvre royaume ! Pauvre royaume, 
 pauvre roi ! " or that it felt in those words the sough of a new breeze, 
 not very threatening as yet, but a forerunner of the coming storm. 
 
 An examination of the doctrine, or the essential principles as they 
 called them, must precede a consideration of the system or the pro- 
 posed application of those principles. 
 
 I : THE NATURAL ORDER 
 
 THE essence of the Physiocratic system lay in their conception of 
 the " natural order." L'Ordre naturel et essential des Societes politiques 
 is the title of Mercier de la Riviere's book, and Dupont de Nemours 
 defined Physiocracy as " the science of the natural order." 
 
 What are we to understand by these terms ? 
 
 It is hardly necessary to say that the term ** natural order " is 
 meant to emphasise the contrast between it and the artificial social 
 and other languages, are fairly numerous. A very detailed account of these 
 may be found in M. Weulersse's work, Le Mouvement phyaiocratique en France de 
 1756 a 1770, published in 1910, which also contains a very complete exposition 
 of the Physiocratic doctrine. In English there is a succinct account of the system 
 inHiggs' Physiocrats (1897). 
 
 1 Especially in the celebrated pamphlet, L'Homme aux Quarante Ecus.
 
 6 THE PHYSIOCRATS 
 
 order voluntarily created upon the basis of a social contract. 1 But a 
 purely negative definition is open to many different interpretations. 
 
 In the first place, this " natural order " may be conceived as a 
 state of nature in opposition to a civilised state regarded as an 
 artificial creation. To discover what such a " natural order " really 
 was like man must have recourse to his origins. 
 
 Quotations from the Physiocrats in support of this view might 
 easily be cited. 2 This interpretation has the further distinction of 
 
 1 J. J. Rousseau, the author of the Contrat Social (1762), was a con- 
 temporary of the Physiocrats, but he never became a member of the school. 
 Mirabeau's attempt to win his allegiance proved a failure. The " natural 
 order " and the " social contract " seem incompatible, for the natural and spon- 
 taneous can never be the subject of contract. One might even be tempted to think 
 that Rousseau's celebrated theory was formulated in opposition to Physiocracy, 
 unless we remembered that the social contract theory is much older than 
 Rousseau's work. Traces of the same idea may be found in many writings, 
 especially those inspired by Calvinism. To Rousseau the social question 
 seemed to be a kind of mathematical problem, and any proposed solution must 
 satisfy certain complicated conditions, which are formulated thus : " To find a 
 form of association which protects with the whole common force the person and 
 property of each associate, and in virtue of which everyone, while uniting himself 
 to all, obeys only himself and remains as free as before." Nothing could well be 
 further from the Physiocratic view. Their belief was that there was nothing to 
 find and nothing to create. The " natural order " was self-evident. 
 
 It is true that Rousseau was an equally enthusiastic believer in a natural 
 order, in the voice of nature, and in the native kindness of mankind. " The 
 eternal laws of nature and order have a real existence. For the wise they serve 
 as positive laws, and they are engraved on the innermost tablets of the heart 
 by both conscience and reason." (Smile, Book V.) The language is identical 
 with that of the Physiocrats. But there is this great difference. Rousseau 
 thought that the state of nature had been denaturalised by social and especially 
 by political institutions, including, of course, private property ; and his chief 
 desire was to give back to the people the equivalent of what they had lost. 
 The " social contract " is just an attempt to secure this. The Physiocrats, on the 
 other hand, regarded the institution of private property as the perfect bloom of 
 the " natural order." Its beauty has perhaps suffered at the hands of turbulent 
 Governments, but let Governments be removed and the " natural order " will at 
 once resume its usual course. 
 
 There is also this other prime difference. The Physiocrats regarded interest 
 and duty as one and the same thing, for by following his own interest the individual 
 is also furthering the good of everybody else. To Rousseau they seemed antago- 
 nistic : the former must be overcome by the latter. " Personal interest is always 
 in inverse ratio to duty, and becomes greater the narrower the association, and 
 the less sacred." (Contrat Social, ii, chap. 3.) In other words, family ties and 
 co-operative associations are stronger than patriotism. 
 
 * " There is a natural society whose existence is prior to every other human 
 association. . . . These self-evident principles, which might form the founda- 
 tion of a perfect constitution, are also self -revealing. They are evident not only to 
 the well-informed student, but also to the simple savage as he issues from the lap
 
 THE NATURAL ORDER 7 
 
 being in accord with the spirit of the age. The worship of the 
 " noble savage " was a feature of the end of the eighteenth century. 
 It pervades the literature of the period, and the cult which began with 
 the tales of Voltaire, Diderot, and Marmontel reappears in the 
 anarchist writers of to-day. As an interpretation of the Physiocratic 
 position, however, it must be unhesitatingly rejected, for no one bore 
 less resemblance to a savage than a Physiocrat. They all of them 
 lived highly respectable lives as magistrates, intendants. priests, and 
 royal physicians, and were completely captivated by ideas of orderli- 
 ness, authority, sovereignty, and property none of them conceptions 
 compatible with a savage state. " Property, security, and liberty 
 constitutes the whole of the social order." 1 They never acquiesced 
 in the view that mankind suffered loss in passing from the state 
 of nature into the social state ; neither did they hold to Rousseau's 
 belief that there was greater freedom in the natural state, although its 
 dangers were such that men were willing to sacrifice something in 
 order to be rid of them, but that nevertheless in entering upon the new 
 state something had been lost which could never be recovered.* All 
 this was a mere illusion in the opinion of the Physiocrats. Nothing 
 was lost, everything was to be gained, by passing from a state of nature 
 into the civilised state. 
 
 In the second place, the term " natural order " might be taken 
 to mean that human societies are subject to natural laws such as 
 govern the physical world or exercise sway over animal or organic 
 life. From this standpoint the Physiocrats must be regarded as the 
 forerunners of the organic sociologists. Such interpretation seems 
 highly probable because Dr. Quesnay through his study of " animal 
 economy " (the title of one of his works) and the circulation of the 
 
 of nature." (Dupont, vol. i, p. 341.) Some Physiocrats even seem inclined to the 
 belief that this " natural order " has actually existed in the past and that men lost 
 it through their own remissness. Dupont de Nemours mournfully asks : " How 
 have the people fallen from that state of felicity in which they lived in those 
 far off , happy days ? How is it that they failed to appreciate the natural order ? " 
 But even when interpreted in this fashion it had no resemblance to a savage 
 state. It must rather be identified with the Golden Age of the ancients or the 
 Eden of Holy Scripture. It is a lost Paradise which we must seek to regain. 
 
 The view is not peculiar to the Physiocrats, but it is interesting to note how 
 unfamiliar they were with the modern idea of evolutionary progress. 
 
 1 Mercier de la Riviere, vol; ii, p. 615. " Natural right is indeterminate in a 
 state of nature [note the paradox]. The right only appears when justice and 
 labour have been established." (Quesnay, p. 43.) 
 
 1 " By entering society and making conventions for their mutual advantage 
 men increase the scope of natural right without incurring any restriction of theii 
 liberties, for this is just the state of things that enlightened reason would have 
 chosen." (Quesnay, pp. 43, 44.)
 
 8 THE PHYSIOCRATS 
 
 blood was already familiar with these ideas. Social and animal 
 economy, both, might well have appeared to him in much the same 
 light as branches of physiology. From physiology to Physiocracy 
 was not a very great step. At any rate, the Physiocrats succeeded 
 in giving prominence to the idea of the interdependence of all social 
 classes and of their final dependence upon nature. And this we 
 might almost say was a change tantamount to a transformation from 
 a moral to a natural science. 1 
 
 Even this explanation seems to us insufficient. Dupont, in the 
 words which we have quoted in the footnote below, seems to imply that 
 the laws of the beehive and the ant-hill are imposed by common 
 consent and for mutual benefit. Animal society, so it seemed 
 to him, was founded upon social contract. But such a conception 
 of " law " is very far removed from the one usually adopted by the 
 natural sciences, by physicians and biologists, say. And, as a matter 
 of fact, the Physiocrats were anything but determinists. They 
 neither believed that the " natural order " imposed itself like gravi- 
 tation nor imagined that it could ever be realised in human society 
 as it is in the hive or the ant-hill. They saw that the latter were 
 well-ordered communities, while human society at its present stage 
 is disordered, because man is free whereas the animal is not. 
 
 What are we to make of this " natural order " then ? The 
 " natural order," so the Physiocrats maintained, is the order which 
 God has ordained for the happiness of mankind. It is the provi* 
 dential order. * To understand it is our first duty to bring our lives 
 into conformity with it is our next. 
 
 1 Pursuing this same idea, Dupont writes as follows : " It is thirteen years 
 since a man of exceptional genius, well versed in profound disquisition, and already 
 known for his success in an art where complete mastery only comes with careful 
 observation and complete submission to the laws of nature, predicted that natural 
 laws extended far beyond the bounds hitherto assigned to them. If nature 
 gives to the bee, the ant, or the beaver the power of submitting by common 
 consent and for their own interest to a good, stable, and equable form of govern- 
 ment, it can hardly refuse man the power of raising himself to the enjoyment of 
 the same advantages. Convinced of the importance of this view, and of the 
 important consequences that might follow from it, he applied his whole intel- 
 lectual strength to an investigation of the physical laws which govern society." 
 Elsewhere he adds : " The natural order is merely the physical constitution which 
 God Himself has given the universe." (Introduction to Quesnay's works, p. 21.) 
 
 Hector Denis in his Histoire des Doctrines expresses the belief that the most 
 characteristic feature of the Physiocratic system is the emphasis laid upon a 
 naturalistic conception of society. He illustrates this by means of diagrams 
 showing the identity of the circulation of wealth and the circulation of the blood. 
 
 1 " Its laws are irrevocable, pertaining as they do to the essence of matter 
 nd the soul of humanity. They are just the expression of the will of God. . . .
 
 THE NATURAL ORDER 9 
 
 But can a knowledge of the " order " ever be acquired by men ? 
 To this they reply that the distinctive mark of this " order " is its 
 obviousness. This word occurs on almost every page they wrote. 1 
 Still, the self-evident must in some way be apprehended. The most 
 brilliant light can be seen only by the eye. By what organ can 
 this be sensed ? By instinct, by conscience, or by reason ? Will 
 a divine voice by means of a supernatural revelation show us the 
 way of truth, or will it be Nature's hand that shall lead us in the 
 blessed path ? The Physiocrats seem to have ignored this question, 
 for every one of them indifferently gives his own answer, regardless 
 of the fact that it may contradict another's. Mercier de la Riviere 
 recalls the saying of St. John concerning the " Light which lighteth 
 every man that cometh into the world." This may be taken to be 
 an internal light set by God in the heart of every man to enable him to 
 choose Ms path. Quesnay, so Dupont affirms, " must have seen 
 that man had only to examine himself to find within him an in- 
 articulate conception of these laws. In other words, introspection 
 clearly shows that men are unwittingly guided by an *' inherent " 
 knowledge of Physiocracy." 2 But, after all, it seems that this 
 intuitive perception is insufficient to reveal the full glory of the 
 order. For Quesnay declared that a knowledge of its laws must 
 be enforced upon -men, and this afforded a raison d'etre for an 
 educational system which was to be under the direct control of 
 the Government. 
 
 To sum up, we may say that the " natural order " was that 
 order which seemed obviously the best, not to any individual 
 whomsoever, but to rational, cultured, liberal-minded men like the 
 Physiocrats. It was not the product of the observation of external 
 facts ; it was the revelation of a principle within. And this is one 
 reason why the Physiocrats showed such respect for property and 
 authority. It seemed to them that these formed the very basis 
 of the " natural order." 
 
 It was just because the " natural order " was ** supernatural," 
 and so raised above the contingencies of everyday life, that it 
 seemed to them to be endowed with all the grandeur of the geo- 
 
 All our interests, all our wishes, are focused at one point, making for 
 harmony and universal happiness. We must regard this as the work of a kind 
 Providence, which desires that the earth should be peopled by happy human 
 beings." (Mercier de la Riviere, vol. i, p. 390 ; vol. ii, p. 638.) 
 
 1 " There is a natural judge of all ordinances, even of the sovereign's. This 
 judge, which recognises no exceptions, is just the evidence of their conformity with 
 or opposition to natural laws." (Dupont, vol. i, p. 746.) 
 
 1 Dupont, introduction to Quesnay'e works, vol. i, pp. 19 and 2S(,
 
 10 THE PHYSIOCRATS 
 
 metrical order, with its double attributes of universality and immu- 
 tability. It remained the same for all times, and for all men. Its 
 fiat was " unique, eternal, invariable, and universal." Divine in its 
 origin, it was universal in its scope, and its praises were sung in 
 litanies that might rival the Ave Maria. 1 Speaking of its uni- 
 versality. Turgot writes as follows : " Whoever is unable to overlook 
 the accidental separation of political states one from another, or 
 to forget their diverse institutions, will never treat a question of 
 political economy satisfactorily." * Referring to its immutability, 
 he adds : " It is not enough to know what is or what has been ; we 
 must also know what ought to be. The rights of man are not 
 founded upon history : they are rooted in his nature." 
 
 It looked as if this dogmatic optimism would dominate the whole 
 Classical school, especially the French writers, and that natural 
 law would usurp the functions of Providence. To-day it is every- 
 where discredited, but when it first loomed above the horizon its 
 splendour dazzled all eyes. Hence the many laudatory remarks, 
 which to us seem hyperbolical, if not actually ridiculous. 3 But 
 it was no small thing to found a new science, to set up a new aim and 
 a fresh ideal, to lay down the framework which others were to fill in. 
 
 It was the practical results, however, that revealed the full 
 powers of the " natural order." It so happened that the mass of 
 regulations which constituted the old regime fell to the ground 
 before its onslaughts almost immediately, and it all came about in 
 this fashion. 
 
 Knowledge of the " natural order " was not sufficient. Daily 
 life must also conform to the knowledge. Nothing could be easier 
 than this, for " if the order really were the most advantageous " 4 
 every man could be trusted to find out for himself the best way of 
 attaining it without coercion of any kind. 6 
 
 This psychological balance which every individual was supposed 
 to carry within himself, and which, as the basis of the Neo-Classical 
 school, is known as the Hedonistic principle, is admirably described 
 by Quesnay. 6 " To secure the greatest amount of pleasure with 
 
 1 Baudeau, vol. i, p. 820. * Letter to Mdlle. Lespinasse (1770). 
 
 * See some remarks on the Tableau economique on p. 18. 
 4 Baudeau, Ephemerides du Citoyen. 
 
 6 " The laws of the natural order do not in any way restrain the liberty of 
 mankind, for the great advantage which they possess is that they make for 
 greater liberty." (Quesnay, Droit Naturel, p. 55.) And Mercier de la Riviere says 
 (vol. ii, p. 617): "The institution of private property and of liberty would 
 secure perfect order without the help of any other law." 
 
 Dialogues sur les Artisans.
 
 THE NATURAL ORDER 11 
 
 the least possible outlay should be the aim of all economic effort." 
 And this was what the " order " aimed at. " When every one does 
 this the natural order, instead of being endangered, will be all the 
 better assured." It is of the very essence of that order that the 
 particular interest of the individual can never be separated from the 
 common interest of all, but this happens only under a free system. 
 *' The movements of society are spontaneous and not artificial, and 
 the desire for joy which manifests itself in all its activities unwit- 
 tingly drives it towards the realisation of the ideal type of State." 1 
 This is laissez-faire pure and simple. 2 
 
 These famous formulae have been so often repeated and criticised 
 since that they appear somewhat trite to-day. But it is certain 
 that they were not so at the time. It is easy to laugh at their social 
 philosophy, to mock at its naivete and simplicity, and to show that 
 such supposed harmony of interests between men does not exist, that 
 the interests of individuals do not always coincide with those of the 
 community, and that the private citizen is not always the best 
 judge even of his own interests. It was perhaps necessary that 
 the science should be born of such extreme optimism. No science 
 can be constructed without some amount of faith in a pre-established 
 order. 
 
 Moreover, laissez-faire does not of necessity mean that 
 nothing will be done. It is not a doctrine of passivity or fatalism. 
 There will be ample scope for individual effort, for it simply means 
 leaving an open field and securing fair play for everyone, free from 
 all fear lest his own interests should injure other people's or in any 
 way prejudice those of the State. It is true that there will not be 
 much work for the Government, but the task of that body will by no 
 means be a light one, especially if it intends carrying out the Physio- 
 cratic programme. This included upholding the rights of private 
 property and individual liberty by removing all artificial barriers, 
 and punishing all those who threatened the existence of any of these 
 
 1 Mercier de la Riviere, vol. ii, p. 617. 
 
 1 The origin of the famous formula is uncertain. Several of the Physio- 
 crats, especially Mirabeau and Mercier de la Riviere, assign it to Vincent 
 de Gournay, but Turgot, the friend and biographer of Vincent de Gournay, 
 attributes it, under a slightly different form, laissez-nous faire, to Le Gendre, a 
 merchant who was a contemporary of Colbert. Oncken thinks that the credit 
 must go to the Marquis d'Argenson, who employed the term in his Memoires as 
 early as the year 1736. The formula itself is quite commonplace. It only became 
 important when it was adopted as the motto of a famous school of thinkers, so 
 that this kind of research has no great interest. For a discussion of this trivial 
 question, see the work of M. Schelle, Vincent de Gournay (1897), and especiaJl.v 
 Oncken's Die Maxime. Laissez-faire ei Laissez-passer (Berne, 1886).
 
 12 THE PHYSIOCRATS 
 
 rights ; while, most important of all, there was the duty of giving 
 instruction in the laws of the " natural order." 
 
 II: THE NET PRODUCT 
 
 EVERY social fact had a place within the ** natural order " of the 
 Physiocrats. Such a wide generalisation would have entitled them 
 to be regarded as the founders of sociology rather than of eco- 
 nomics. But there was included one purely economic phenomenon 
 which attracted their attention at an early stage, and so completely 
 captivated their imaginations as to lead them on a false quest. This 
 was the predominant position which land occupied as an agent of 
 production the most erroneous and at the same time the most 
 characteristic doctrine in the whole Physiocratic system. 
 
 Every productive undertaking of necessity involves certain 
 outgoings a certain loss. In other words, some amount of wealth 
 is destroyed in the production of new wealth an amount that 
 ought to be subtracted from the amount of new wealth produced. 
 This difference, measuring as it does the excess of the one over the 
 other, constitutes the net increase of wealth, known since the time 
 of the Physiocrats as the " net product." 
 
 The Physiocrats believed that this "net product" was confined 
 to one class of production only, namely, agriculture. Here alone, 
 so it seemed to them, the wealth produced was greater than the 
 wealth consumed. Barring accidents, the labourer reaped more 
 than he consumed, even if we included in his consumption his main- 
 tenance throughout a whole year, and not merely during the seasons 
 of harvest and tilth. It was because agricultural production had 
 this unique and marvellous power of yielding a " net product " that 
 economy was possible and civilisation a fact. 1 It was not true of 
 any other class of production, either of commerce or of transport, 
 where it was very evident that man's labour produced nothing, 
 but merely replaced or transferred the products already produced. 
 Neither was it true of manufacture, where the artisan simply com- 
 bined or otherwise modified the raw material. 2 
 
 It is true that such transfer or accretion of matter may increase 
 
 1 " The prosperity of mankind is bound up with a maximum net product." 
 (Dupont de Nemours, Origine d'une Science nouvette, p. 346.) 
 
 1 " Labour applied anywhere except to land is absolutely sterile, for man is 
 not a creator." (Le Trosne, p. 942.) 
 
 " This physical truth that the earth is the source of all commodities is so very 
 evident that none of us can doubt it." (Le Trosne, Intert social,) 
 
 " The produce of the soil may be divided into two parts . . . what
 
 THE NET PRODUCT 13 
 
 the value of the product, but only in proportion to the amount of 
 wealth which had to be consumed in order to produce it ; because 
 the price of manual labour is always equal to the cost of the neces- 
 saries consumed by the worker. All that we have in this case, how- 
 ever, is a collection of superimposed values with some raw material 
 thrown into the bargain. But, as Mercier de la Riviere put it, 
 " addition is not multiplication." x 
 
 Consequently, industry was voted sterile. This implied no 
 contempt for industry and commerce. " Far from being useless, 
 these are the arts that supply the luxuries as well as the necessaries 
 of life, and upon these mankind is dependent both for its preservation 
 and for its well-being." 2 They are unproductive in the sense that 
 they produce no " extra " wealth. 
 
 It may be pointed out, on the other hand, that the " gains," both 
 in industry and commerce, are far in excess of those of agriculture. 
 All this was immaterial to the Physiocrats, for " they were gained, 
 not produced." 8 Such gains simply represented wealth transferred 
 
 remains over is free and disposable, a pure gift given to the cultivator in addition 
 to the return for his outlay and the wages of his labour." (Turgot, Reflexions.) 
 
 " Raw material is transformed into beautiful and useful objects through the 
 diligence of the artisan, but before his task begins it is necessary that others 
 should supply the raw material and provide the necessary sustenance. When 
 their part is completed others should recompense them and pay them for their 
 trouble. The cultivators, on the other hand, produce their own raw material, 
 whether for use or for consumption, as well as everything that is consumed by 
 others. This is just where the difference between a productive and a sterile 
 class comes in." (Baudeau, Correspondence avec M. Graslin.) 
 
 1 " A weaver buys food and clothing, giving 150 francs for them, together with 
 a quantity of flax, for which he gives 50 francs. The cloth will be sold for 200 
 francs, a sum that will cover all expenditure." (Mercier de la Riviere, vol. ii, 
 p. 598.) " Industry merely superimposes value, but does not create any which 
 did not previously exist." (Ibid.) 
 
 1 Baudeau, Sphem. ix (1770). One feels that the Physiocrats go too far when 
 they say that " the merchant who sells goods may occasionally prove as useful as 
 the philanthropist who gives them, because want puts a price upon the service of 
 the one just as it does upon the charity of the other." (Du Marchand de Grains, 
 in the Journal de F Agriculture, du Commerce, et dee Finances, December 1773, 
 quoted in a thesis on the corn trade by M. Curmond, 1900.) We must insist upon 
 the fact that " unproductive " or " sterile " did not by any means signify " use- 
 less." They saw clearly enough that the labour of the weaver who makes linen 
 out of flax or cloth out of wool is at any rate as useful as that of the cultivator who 
 produced the wool and the flax, or rather that the latter's toil would be perfectly 
 useless without the industry of the former. They also realised that although we 
 may say that agricultural labour is more useful than that of the weaver or the 
 mason, especially when the land is used for raising corn, one cannot say RB 
 much when that same land is employed in producing roses, or mulberry treta 
 for rearing silkworms. Le Trosne, p. 946.
 
 14 THE PHYSIOCRATS 
 
 from the agricultural to the industrial classes. 1 The agricultural 
 classes furnished the artisans not only with raw material, but also 
 with the necessaries of life. The artisans were simply the domestic 
 servants, or, to use Turgot's phrase, the hirelings of the agricul- 
 turists. 2 Strictly speaking, the latter could keep the whole net 
 product to themselves, but finding it more convenient they entrust 
 the making of their clothes, the erection of their houses, and the 
 production of their implements to the artisans, giving them a portion 
 of the net product as remuneration. 8 It is possible, of course, 
 that, like many servants in fine houses, the latter manage to make a 
 very good living at their masters' expense. 
 
 The " sterile classes " in Physiocratic parlance simply signifies 
 those who draw their incomes second-hand. The Physiocrats had 
 the good sense to try to give an explanation of this unfortunate 
 term, which threatened to discredit their system altogether, and 
 which it seemed unfair to apply to a whole class that had done more 
 than any other towards enriching the nation. 
 
 It is a debatable point whether the Physiocrats attributed 
 this virtue of furnishing a net product solely to agriculture or whether 
 they intended it to apply to extractive industries, such as mining 
 and fishing. They seem to apply it in a general way to mines, but 
 the references are rare and not infrequently contradictory. We can 
 understand their hesitating, for, on the one hand, mines undoubtedly 
 give us new wealth in the form of raw materials, just as the land or 
 sea does ; on the other hand, the fruits of the earth and the treasures 
 of the deep are not so easily exhausted as mines. Turgot put it 
 excellently when he said, " The land produces fruit annually, but 
 a mine produces no fruit. The mine itself is the garnered fruit," 
 and he concludes that mines, like industrial undertakings, give no 
 net product, that if any one had any claim to that product it would 
 be the owner of the soil, but that in any case the surplus would be 
 almost insignificant. 4 
 
 1 " It seems necessary as well as simple and natural to distinguish the men 
 who pay others and draw their wealth directly from nature, from the paid men, 
 who can only obtain it as a reward for useful and agreeable services which they 
 have rendered to the former class." (Dupont, vol. i, p. 142.) 
 
 1 It is rather strange that Turgot should have added this qualification, because 
 he was more favourable to industry and less devoted to agriculture than the 
 rest of the Physiocrats. 
 
 * " I must have a man to make my clothes, just as I must have a doctor whose 
 advice I may ask concerning my health, or a lawyer concerning my affairs, or 
 a servant to work instead of me." (Le Trosne, p. 949.) 
 
 * On this point see M. Pervinquiere, Contribution d V Etude, de la Productivity 
 dans la Pkysiocratie. The indifference of the Physiocrats to mines shows a want of
 
 THE NET PRODUCT 15 
 
 This essential difference which the Physiocrats sought to establish 
 between agricultural and industrial production was at bottom 
 theological. The fruits of the earth are given by God, while the 
 products of the arts are wrought by man, who is powerless to create. l 
 The reply is obvious. God would still be creator if He decreed to 
 give us our clothes instead of our daily bread. And, although 
 man cannot create matter, but simply transform it, it is important 
 to remember that the cultivation of the soil, like the fashioning of 
 iron or wood, is merely a process of transformation. They failed to 
 grasp the truth which Lavoisier was to demonstrate so clearly, 
 namely, that in nature nothing is ever created and nothing lost. 
 A grain of corn sown in a field obtains the materials for the ear 
 from the soil and atmosphere, transmuting them to suit its own 
 purpose, just as the baker, out of that same corn, combined with 
 water, salt, and yeast, will make bread. 
 
 But they were sufficiently clear-sighted to see that all natural 
 products, including even corn, were influenced by the varying 
 condition of the markets, and that if prices fell very low the net 
 product disappeared altogether. In view of such facts can it still 
 be said that the earth produces real value or that its produce differs 
 in any essential respects from the products of industry ? 
 
 The Physiocrats possibly thought that the bon prix i.e. the 
 price which yielded a surplus over and above cost of production 
 was a normal effect of the "natural order." Whenever the price 
 fell to the level of the cost of production it was a sure sign that the 
 "order** had been destroyed. Under these circumstances there 
 was nothing remarkable in the disappearance of the net product. 
 This is doubtless the significance of Quesnay's enigmatic saying : 
 " Abundance and cheapness are not wealth, scarcity and dearness 
 are misery, abundance and dearness are opulence." * 
 
 But if the bon prix simply measures the difference between 
 the value of the product and its cost of production, then it is not 
 
 scientific spirit, for even from their own point of view the question was one of 
 prime importance. No commodity could be produced without raw material, and 
 wealth is simply a collection of commodities. Raw material is furnished by 
 the mine as well as by the soil. In the history of mankind iron has played as im- 
 portant a part as corn. Agriculture itself is an extractive industry, where the 
 miner the agriculturist uses plants instead of drills, and in both cases the 
 product is exhaustible. 
 
 1 Le Trosne, p. 942. 
 
 " Land owes its fertility to tha might of the Creator, and out of His blessing 
 flow its inexhaustible riches. This power is already there, and man simply makes 
 use of it." (Le Trosne, InterSi social, ohap. 1, 2.) Quesnay, p. 325.
 
 16 THE PHYSIOCRATS 
 
 more common in agriculture than in other modes of production. 
 Nor does it extend over a longer period in the one case than in the 
 other, provided competition be operative in both cases ; on the con- 
 trary, it will become manifest in the one case as easily as in the 
 other, especially if there be any scarcity. It remains to be seen 
 then whether monopoly values are more prevalent in agricultural 
 production than in industrial. In a very general way, seeing that 
 there is only a limited quantity of land, we may answer in the 
 affirmative, and admit a certain degree of validity in the Physio- 
 cratic theory. But the establishment of protective rights and the 
 occurrence of agricultural crises clearly prove that competition also 
 has some influence upon the amount of that revenue. 
 
 The net product was just an illusion. The essence of production 
 is not the creation of matter, but simply the accretion of value. 
 But it is not difficult to appreciate the nature of the illusion if we 
 recall the circumstances, and try to visualise the kind of society 
 with which the Physiocrats were acquainted. One section of the 
 community, consisting solely of nobility and clergy, lived upon the 
 rents which the land yielded. Their luxurious lives would have 
 been impossible if the earth did not yield something over and above 
 the amount consumed by the peasant. It is curious that the Physio- 
 crats, while they regarded the artisans as nothing better than 
 servants who depended for their very existence upon the agricul- 
 turists, failed to recognise the equally complete dependence of the 
 worthless proprietor upon his tenants. If there had existed 
 instead a class of business men living in ease and luxury, and 
 drawing their dividends, it is quite possible that the Physiocrats 
 would have concluded that there was a net product in industrial 
 enterprise. 
 
 So deeply rooted was this idea of nature, or God operating through 
 nature, as the only source of value that we find traces of it even in 
 Adam Smith. Not until we come to Ricardo do we have a definite 
 contradiction of it. With Ricardo, rent, the income derived from 
 land, instead of being regarded as a blessing of nature the Alma 
 Parens which was bound to grow as the "natural order" extended 
 its sway, is simply looked upon as the inevitable result of the limited 
 extent and growing sterility of the land. No longer is it a free gift 
 of God to men, but a pre-imposed tax which the consumer has to 
 pay the proprietor. No longer is it the net product ; henceforth 
 it is known as rent. 
 
 As to the epithet " sterile," which was applied to every kind of 
 work other than agriculture, we shall find that it has been superseded.
 
 THE NET PRODUCT 17 
 
 and that the attribute " productive " has been successively applied to 
 every class of work first to industry, then to commerce, and finally 
 to the liberal professions. Even if it were true that industrial under- 
 takings only yield the equivalent of the value consumed, that is 
 not enough to justify the epithet " sterile," unless, as Adam Smith 
 wittily remarks, we are by analogy to consider every marriage 
 sterile which does not result in the birth of more than two children. 
 To invoke the distinction between addition and multiplication is 
 useless, because arithmetic teaches us that multiplication is simply 
 an abridged method of adding. 
 
 It seems very curious that that kind of wealth which appeared 
 to the Physiocrats to be the most legitimate and the most superior 
 kind should be just the one that owed nothing to labour, and which 
 later on, under the name of rent, seems the most difficult to justify. 
 
 But we must not conclude that the Physiocratic theory of the 
 net product possessed no scientific value. 
 
 It was a challenge to the economic doctrines of the time, especially 
 Mercantilism. The Mercantilists thought that the only way to 
 increase wealth was to exploit neighbours and colonists, but they 
 failed to see that commerce and agriculture afforded equally satis- 
 factory methods. Nor must we forget the Physiocrats' influence upon 
 practical politics. Sully, the French minister, betrays evidence of 
 their influence when he remarks that the only two sources of national 
 wealth are land and labour. Let us also remember that, despite 
 some glaring mistakes, agriculture has never lost the pre-eminence 
 which they gave it, and that the recent revival of agricultural 
 Protection is directly traceable to their influence. They were 
 always staunch Free Traders themselves, but we can hardly blame 
 them for not being sufficiently sanguine to expect such whole- 
 hearted acceptance of their views as to anticipate some of the more 
 curious developments of their doctrines. It is almost certain that 
 if they were living to-day they would not be found supporting the 
 Protectionist movement. At least this is the opinion of M. Oncken, 
 the economist, who has made the most thorough study of their 
 ideas. 1 
 
 Although the Physiocratic distinction between agriculture and 
 industry was largely imaginary, it is nevertheless true that agriculture 
 does possess certain special features, such as the power of engendering 
 the forces of life, whether vegetable or animal. This mysterious 
 
 1 Gtschichte, der National Oekonojnie, Part I, Die Zeit vor Adam Smith. 
 M. Meline's book, Le Retour a la Terre, though Protectionist in tone, is wholly 
 imbued with the Physiocratic spirit.
 
 18 THE PHYSIOCRATS 
 
 force, which under the term " nature " was only very dimly under- 
 stood by the Physiocrats, and still is too often confused with 
 the physico-chemical forces, does really possess some characteristics 
 which help us to differentiate between agriculture and industry. 
 At some moments agriculture seems inferior because its returns are 
 limited by the exigencies of time and place ; but more often superior 
 because agriculture alone can produce the necessaries of life. This 
 is no insignificant fact ; but we are trenching on the difficult problems 
 connected with the name of Malthus. 
 
 Ill : THE CIRCULATION OF WEALTH 
 
 THE Physiocrats were the first to attempt a synthesis of distribution. 
 They were anxious to know and it was surely a praiseworthy 
 ambition how wealth passed from one class in society to another, 
 why it always followed the same routes, whose meanderings they 
 were successful in unravelling, and how this continual circulation, 
 as Turgot said, " constituted the very life of the body politic, just as 
 the circulation of the blood did of the physical." 
 
 A scholar like Quesnay, the author of the work on animal 
 economy 1 and a diligent student of Harvey's new discovery, was 
 precisely the man to carry the biological idea over into the realm 
 of sociology. He made use of the idea in his Tableau Sconomique, 
 which is simply a graphic representation of the way in which the 
 circulation of wealth takes place. The appearance of this table caused 
 an enthusiasm among his contemporaries that is almost incredible, 8 
 
 1 Essai physique sur I'Economie animate (1747). 
 
 1 " There have been since the world began three great inventions which have 
 principally given stability to political societies, independent of many other in- 
 ventions which have enriched and advanced them. The first is the invention 
 of writing, which alone gives human nature the power of transmitting without 
 alteration its laws, its contracts, its annals, and its discoveries. The second is 
 the invention of money, which binds together all the relations between civilised 
 societies. The third is the Economical Table, the result of the other two, which 
 completes them both by perfecting their object ; the great discovery of our age, 
 but of which our posterity will reap the benefit." (Mirabeau, quoted in Wealth 
 of Nations, Book IV, chap. 9.) Baudeau is no less enthusiastic. " These 
 figures," he writes, " are borrowed with the consent and upon the advice of the 
 great master whose genius first begat the sublime idea of this Tableau. The 
 Tableau gives us such a clear idea of the premier position of the science that all 
 Europe is bound to accept its teaching, to the eternal glory of the invention and 
 the everlasting happiness of mankind." (P. 867.) 
 
 The first edition of the Tableau, of which only a few copies were printed, 
 is missing altogether, but a proof of that edition, corrected by Quesnay himself, 
 was recently discovered in the Bibliotl:eque Nationale in Paris by Professor
 
 THE CIRCULATION OF WEALTH 19 
 
 although Professor Hector Denis declares that he is almost ready 
 to share in Mirabeau's admiration. 1 
 
 We know by this time that this circulation is much more com- 
 plicated than the Physiocrats believed, but it is still worth while 
 to give an outline of their conception. 2 
 
 Quesnay distinguishes three social classes : 
 
 1. A productive class consisting entirely of agriculturists perhaps 
 also of fishermen and miners. 
 
 2. A proprietary class, including not only landed proprietors, 
 but also any who have the slightest title to sovereignty of any kind 
 a survival of feudalism, where the two ideas of sovereignty and 
 property are always linked together. 
 
 8. A sterile class, consisting of merchants and manufacturers, 
 together with domestic servants and members of the liberal 
 professions. 
 
 The first class, being the only productive class, must supply all 
 that flow of wealth whose course we are now to follow. Let us sup- 
 pose, then the figures are Quesnay's and seem sufficiently near the 
 facts that the value of the total wealth produced equals 5 milliard 
 francs. Of this 5 milliards 2 milliards are necessary for the upkeep 
 of the members of this class and its oxen during harvest and sowing. 
 This portion does not circulate. It simply remains where it was 
 produced. The produce representing the remaining 3 milliards is sold. 
 
 Stephen Bauer, of the University of Bale. A facsimile was published by the 
 British Economic Association in 1894. 
 
 1 " The discovery of the circulation of wealth in economic societies occupies 
 in the history of the science the same position as is occupied by the discovery 
 of the circulation of the blood in the history of biology." 
 
 * Quesnay's table consists of a number of columns placed in juxtaposition 
 with a number of zigzag lines which cross from one column to another. If he had 
 been living now he would almost certainly have used the graphic method, which 
 would have simplified matters very considerably, and it is somewhat strange 
 that no one has attempted this with his Tableau. Hector Denis has compared his 
 tables with those of the anatomist and traced a parallel between the links of the 
 economical world and the plexus of veins and arteries in the human body. 
 
 His explanation of the Tableau by means of mathematical tables gives him 
 a claim to be considered a pioneer of the Mathematical school. Full justice 
 has been done to him in this respect. An article by Bauer in the Quarterly 
 Journal of Economics, 1890, recognises his claim, and there is another by Oncken 
 in the Economic Journal for June 1896, entitled The Physiocrats as Founders 
 of the Mathematical School. His contemporary Le Trosne is even more emphatic 
 on the point : " Economic science, being a study of measurable objects, is an 
 exact science, and its conclusions may be mathematically tested. What the 
 science lacked was a convenient formula which might be applied to test its 
 general conclusions. Such a formula we now have in the Tableau iconomique." 
 (De I'Ordre social, viii, p. 218.)
 
 20 THE PHYSIOCRATS 
 
 But agricultural products alone do not suffice for the upkeep of Class 1. 
 Manufactured goods, clothes, and boots also are required, and these are 
 got from the industrial classes, for which a milliard francs is given. 
 
 There remain just 2 milliards, which go to the landowners and the 
 Government in rents and taxes. By and by we shall see how they 
 attempted to justify this apparent parasitism. 
 
 Let us pass on to consider the propertied class, It manages 
 to live upon the 2 milliards which it receives by way of rents, and 
 it lives well. Its food it must obtain from the agricultural class 
 (unless, of course, the rents are paid in kind), and for this it possibly 
 pays a milliard francs. It also requires manufactured goods, which 
 it must get from the sterile class, and for which it pays another 
 milliard francs. This completes their account. 
 
 As to the sterile class, it produces nothing, and so, unlike the 
 preceding class, it can only get its necessaries second-hand from the 
 productive class. These may be got in two ways : a milliard from 
 the agricultural class in payment for manufactured goods and 
 another milliard from the landed proprietors. The latter milliard 
 being one of the two which the landed proprietors got from the agri- 
 culturists, has in this way described the complete circle. 
 
 The 2 milliards obtained as salaries by the sterile class are 
 employed in buying the necessaries of life and the raw material 
 of industry. And since it is only the productive class that can 
 procure these necessaries and raw materials, this 2 milliards passes 
 into the hands of the agriculturists. The 2 milliards, in short, 
 return to their starting-point. Adding the milliard already paid 
 by the landed proprietors to the 2 milliards' worth of products 
 unsold, the total of 5 milliards is replaced in the hands of the pro- 
 ductive class, and so the process goes on indefinitely. 1 
 
 This resumt gives but a very imperfect idea of the vast com- 
 plexities and difficulties involved in tracing the growth of revenues 
 an evolution which the Physiocrats followed with the enthu- 
 siasm of children. They imagined that it was all very real. 2 The 
 
 1 Turgot, although he is not speaking of the Tableau itself in this case, sums 
 it up admirably in the following : " "What the labourers get from the land in 
 addition to what is sufficient to supply their own needs constitutes the only 
 wages fund [note the phrase], which all the other members of society can draw 
 upon in return for their labour. The other members of society, when they 
 buy the commodities which the labourer has produced, simply give him the btire 
 equivalent of what it has cost the labourer to produce them." (Turgot, vol. i, p. 10.) 
 For a more detailed account see Baudeau, Explication du Tableau iconomique. 
 
 a " This movement of commerce from one class to another, and the conditions 
 which give riee to it, are not mere hypotheses. A little reflection will show that 
 they are faithfully copied from nature." (Quesnay, p. 60.)
 
 THE CIRCULATION OF WEALTH 21 
 
 rediscovery of their millions intoxicated them, but, like many of the 
 mathematical economists of to-day, they forgot that at the end of 
 their calculations they only had what they had assumed at the 
 beginning. It is very evident that the table proves nothing as to 
 the essential point in their system, namely, whether there really 
 exist a productive and a sterile class. 1 
 
 The most interesting thing in the Physiocratic scheme of distri- 
 bution is not the particular demonstration which they gave of it, but 
 the emphasis which they laid upon the fact of the circulation of 
 wealth taking place in accordance with certain laws, and the way in 
 which the revenue of each class was determined by this circulation. 
 The singular position which the proprietors hold in this tripartite 
 division of society is one of the most curious features of the 
 system. 
 
 Anyone examining the table in a non-Physiocratic fashion, 
 but simply viewing it in the modern spirit, must at once feel surprised 
 and disappointed to find that the class which enjoys two-fifths of 
 the national revenue does nothing in return for it. We should 
 not have been surprised if such glaring parasitism had given to 
 the work of the Physiocrats a distinctly socialistic tone. But they 
 were quite impervious to all such ideas. They never appreciated 
 the weakness of the landowners' position, and they always treated 
 them with the greatest reverence. The epithet " sterile " is applied, 
 not to them, but to manufacturers and artisans I Property is the 
 foundation-stone of the " natural order." The proprietors have been 
 entrusted with the task of supplying the staff of life, and are endued 
 with a kind of priestly sacredness. It is from their hands that all of 
 us receive the elements of nutrition. It is a ** divine " institution 
 the word is there. 2 Such idolatry needs some explanation. 
 
 One might have expected even from their own point of view 
 that the premier position would have been given to the class which 
 they termed productive, i.e. to the cultivators of the soil, who were 
 
 1 They imagined that it was actually so. " On the one hand, we see the pro- 
 ductive class living on a series of payments, which are given in return for its 
 labour, and always bearing a close relation to the outlay upon its upkeep. On 
 the other, there is nothing but consumption and annihilation of goods, but no 
 production." (Quesnay, p. 60.) 
 
 1 " It is impossible not to recognise the right of property as a divine institution, 
 for it has been ordained that this should be the indirect means of perpetuating 
 the work of creation." (La Rivi4re, p. 618.) "The order of society presupposes 
 the existence of a third class in society, namely, the proprietors who make pre- 
 paration for the work of cultivation and who dispense the net product. " ( Quesnay, 
 p. 181.)
 
 22 THE PHYSIOCRATS 
 
 mostly farmers and mltayers. The land was not of their making, it 
 is true. They had simply received it from the proprietors. This 
 latter class takes precedence because God has willed that it should 
 be the first dispenser of all wealth. 1 
 
 There is no need to insist on this strange aberration which led 
 them to look for the creator of the land and its products, not amid 
 the cultivators of the soil, but among the idlers. 2 Such was the 
 logical conclusion of their argument. We must also remember that 
 the Physiocrats failed to realise the inherent dignity of all true 
 labour simply because it was not the creator of wealth. This 
 applied both to the agricultural labourer and the industrial worker, 
 and though the former alone was considered productive it was 
 because he was working in co-operation with nature. It was nature 
 that produced the wealth and not the worker. 
 
 Something must also be attributed to their environment. Knowing 
 only feudal society, with its economic and political activities governed 
 and directed by idle proprietors, they suffered from an illusion as 
 to the necessity for landed property similar to that which led 
 Aristotle to defend the institution of slavery. 8 
 
 Although they failed to foresee the criticisms that would be 
 levelled against the institution of private property, they were very 
 assiduous especially the Abbe Baudeau in seeking an explanation 
 of its origin and a justification of its existence. The reasons which 
 they advanced are more worthy of quotation than almost any 
 argument that has since been employed by conservative economists. 
 
 The most solid argument, in their opinion at least the one that 
 was most frequently used is that these proprietors are either the 
 men who cleared and drained the land or else their rightful descendants. 
 They have incurred or they are incurring expenditure in clearing 
 the land, enclosing it and building upon it what the Physiocrats 
 call the avances fancier es* They never get their revenues through 
 
 1 " Immediately below the landed proprietors come the productive classes, 
 whose labour is the only source of their income, but who cannot exercise that 
 labour unless the landlord has already incurred some outlay in the way of ground 
 expenses." (Baudeau, p. 691.) 
 
 a The Physiocrats never mention the agricultural workers, and one might 
 almost think that there were none. Their solicitude for the agriculturists does 
 not extend beyond the farmers and mttayers. M. Weulersse has referred to 
 their system, not without some justification, as an essentially capitalistic one. 
 
 1 " We may call them the nobility, as well as the propertied class. Nobility 
 in this sense, far from being illusory, is a very useful institution in the history of 
 civilised nations." (Baudeau, p. 670.) 
 
 4 " In the third line they generally occupy the first rank we have the 
 landed proprietors who prepare the soil, build houses, make plantations and
 
 THE CIRCULATION OF WEALTH 23 
 
 some one else as the manufacturers do, and they are anything but 
 parasites. Their portion is optima jure, in virtue of a right prior and 
 superior even to that of the cultivators, for although the cultivators 
 help to make the product, the proprietors help to make the land. 
 The three social classes of the Physiocratic scheme may be likened 
 to three persons who get their water from the same well. It is 
 drawn from the well by members of the productive class in bucket- 
 enclosures at their own expense or who pay for those outlays by buying property 
 already developed. This revenue, they might argue, belongs to us because of 
 the wisdom and forethought we have exercised in preparing the land, in under- 
 taking to keep it in repair, and to improve it still further." (Baudeau, PhilO' 
 sophic iconomique, p. 757. ) " The foremost and most essential agent of production 
 must be that man who makes it possible. But who is this agent but the landed 
 proprietor, whose claims to his prerogatives are based upon the need for his 
 productive services ? " (Mercier de la Riviere, pp. 466-467.) 
 
 " It is this expenditure that makes the claim of proprietors real and their 
 existence just and necessary. Until such expenditure is incurred the right 
 of property is merely an exclusive right to make the soil capable of bearing 
 fruit." (Baudeau, p. 851.) In other words, so long as the proprietor has not 
 incurred some expenditure the right of property is simply reduced to occupation. 
 
 The Physiocrats distinguished three kinds of avarices : 
 
 1. The annual expenditure (avarices annuelles) incurred in connection with 
 the actual work of cultivation, which recurs every year, such as the cost of seed 
 and manure, cost of maintaining labourers, etc. The annual harvest ought to 
 repay all this, which to-day would be called circulating capital. 
 
 2. The " original " outlay (avarices primitives) involved in buying cattle and 
 implements which render service for a number of years, and for which the pro- 
 prietor does not expect to be recompensed in a single year. The return is spread 
 out over a number of years. Here we have the distinction between fixed and 
 circulating capital, and the idea of the gradual redemption of the former as against 
 the total repayment of the latter at one single use. It did not escape the Physio- 
 crats' notice that an intelligent increase of the fixed might gradually reduce the 
 annual expenditure. Such ideas were quite novel. But they immediately took 
 their place as definite contributions to the science. They are no longer confined 
 to agriculture, however, but apply equally to all branches of production. 
 
 3. The avances foncieres are the expenses which are undertaken with a view to 
 preparing the land for cultivation. (The adjective " primitive " would have been 
 better applied here.) 
 
 The first two kinds of expenditure are incumbent upon the agriculturist and 
 entitle him to a remuneration sufficient to cover his expenses. 
 
 The third is incumbent upon the proprietor and constitutes his claim to a 
 share of the funds. " Before you can set up a farm where agriculture may be 
 steadily practised year in and year out what must be done ? A block of buildings 
 and a farmhouse must be built, roads made and plantations set, the soil must 
 be prepared, the stones cleared, trees cut down and roots removed ; drains must 
 also be cut and shelters prepared. These are the avances foncieres, the work 
 that is incumbent upon proprietors, and the true basis of their claim to the 
 privileges of proprietorship." (Baudeau, Ephtmtrides, May 1776. A reply to 
 Condillao.)
 
 24 THE PHYSIOCRATS 
 
 fuls, which are passed on to the proprietors, but the latter class 
 gives nothing in return for it, for the well is of their making. At a 
 respectable distance comes the sterile class, obliged to buy water in 
 exchange for its labour. 1 
 
 The Physiocrats failed to notice the contradiction involved in 
 this. If the revenue which the proprietor draws represents the 
 remuneration for his outlay and the return for his expenditure it is 
 no longer a gift of nature, and the net product vanishes, for, by 
 definition, it represented what was left of the gross product after 
 paying all initial expenses the excess over cost of production. If we 
 accept this explanation of the facts there is no longer any surplus 
 to dispose of. It is as capitalists pure and simple and not as the 
 representatives of God that proprietors obtain their rents. 
 
 Must we really believe that although these outlays afford some 
 explanation of the existence of private property they supply no 
 means of measuring or of limiting its extent ? Is there no connection 
 between these outlays and the revenues which landed proprietors 
 draw ? 
 
 Or must we distinguish between the two portions of the revenue 
 the one, indispensable, representing the reimbursement of the 
 original outlay, and in every respect comparable to the revenue of 
 the farmer, and the other, being a true surplus, constituting the 
 net product ? How can they justify the appropriation of the 
 latter ? 
 
 There is another argument held in reserve, namely, that based 
 upon social utility. They point out that the cultivation of land 
 would cease and the one source of all wealth would become barren 
 if the pioneer were not allowed to reap the fruits of his labour. 
 
 The new argument is a contradiction of the old. In the former 
 case land was appropriated because it had been cultivated. In the 
 present case land must be appropriated before it can be cultivated. 
 In the former labour is treated as the efficient cause, in the latter 
 as the final cause of production. 
 
 Finally, the Physiocrats believed that landed proprietorship was 
 simply the direct outcome of " personal property," or of the right 
 of every man to provide for his own sustenance. This right includes 
 the right of personal estate, which in turn involves the right of landed 
 property. These three kinds of property are so closely connected 
 
 1 " Without that sense of security which property gives, the land would still be 
 uncultivated." (Quesnay, Mateimes, iv. ) " Everything would be lost if this fount 
 of wealth were not as well assured as the person of the individual." (Dupont, 
 vol. i. p. 26.)
 
 THE CIRCULATION OF WEALTH 25 
 
 that in reality they form one unit, and no one of the three can be 
 detached without involving the destruction of the other two. 1 
 They were full of veneration for property of every description 
 not merely for landed property. " The safety of private property 
 is the real basis of the economic order of society," says Quesnay. 2 
 Mercier de la Riviere writes : " Property may be regarded as a 
 tree of which social institutions are branches growing out of the 
 trunk." 3 We shall encounter this cult of property even during 
 the terrible days of the French Revolution and the Reign of Terror. 
 When all respect for human life was quite lost there still remained 
 this respect for property. 
 
 The defence of private property was already well-nigh complete. 4 
 But if they were strong in their defence of the institution they did not 
 fail to impose upon it some onerous duties^which counterbalanced 
 its eminent dignity. Of course, every proprietor should always be 
 guided by reason and be mannerly in his behaviour, and he should 
 never allow mere authority to become the rule of life. 5 Their duties 
 are as follows : 
 
 1. They must continue without fail to bring lands into culti- 
 vation, i.e. they must continue the avances fonder vs.* 
 
 2. They must dispose of the wealth which the nation has pro- 
 duced in such a way as to further the general interest ; this is their 
 task as the stewards of society. 7 
 
 3. They must aim during their leisure at giving to society all 
 those gratuitous services which they can render, and which society 
 so sorely needs. 
 
 4. They must bear the whole burden of taxation. 
 
 1 Mercier de la Riviere, vol. i, p. 242. 
 
 * Maximes, iv. Pp. 615, 617. 
 
 * It is necessary to make a note here of one of the many differences between 
 Turgot and the Physiocrats. Turgot seems much less firmly convinced of the 
 social utility of landed property and of the legitimacy of the right of property. 
 He thinks that its origin is simply due to occupation. This weakens the 
 Physiocratic case very considerably. " The earth is peopled and cultivation 
 extends. The best lands will in time all be occupied. For the last comers 
 there will only be the unfertile lands rejected by the first. In the end every 
 piece of land will have its owner, and those who possess none will have no other 
 resource than to exchange the labour of their arm for the superfluous corn of the 
 proprietor." (Vol. i, p. 12.) We are here not very far from the Ricardian theory. 
 
 8 Baudeau, p. 378. 
 
 * " A proprietor who keeps up the avances fonci&res without fail is performing 
 the noblest service that anyone can perform on this earth." (Baudeau. J 
 
 7 "The rich have the control of the fund from which the workers are paid, 
 but they are doing a great injustice if they appropriate it." (Quesnay, vol. i, 
 p. 193.) 
 
 E.I>. B
 
 26 THE PHYSIOCRATS 
 
 5. Above all they must protect their tenants, the agriculturists, 
 and be very careful not to demand more than the net product. 
 The Physiocrats never go the length of advising them to give to their 
 tenants a portion of the net product, but they impress upon them the 
 importance of giving them the equivalent of their annual expenditure 
 and of dealing liberally with them. It does not seem much, but it 
 must have been something in those days. " I say it boldly," writes 
 Baudeau, " cursed be every proprietor, every sovereign and emperor 
 that puts all the burden upon the peasant, and the land, which 
 gives all of us our sustenance. Show them that the lot of the 
 worthy individuals who employ their own funds or who depend 
 upon those of others is to none of us a matter of complete indifference, 
 that whoever hurts or degrades, attacks or robs them is the cruellest 
 enemy of society, and that he who ennobles them, furthers their 
 well-being, comfort, or leisure increases their output of wealth, 
 which after all is the one source of income for every class in society." * 
 Such generous words, which were none too common at the time, 
 release the Physiocrats from the taunt of showing too great a favour 
 to the proprietors. In return for such privileges as they gave them 
 they demanded an amount of social service far beyond anything that 
 was customary at the time. 
 
 II 
 
 So far we have considered only the Physiocratic theory. But the 
 Physiocratic influence can be much more clearly traced if we turn to 
 applied economics and examine their treatment of such questions as 
 the regulation of industry, the functions of the State, and the problems 
 of taxation. 2 
 
 1 Pp. 835, 839. And Mercier de la Riviere writes in terms not less severe ; 
 " He is responsible under pain of annihilation for the products of society, and 
 no part of the produce which goes to support the cultivator should wittingly 
 be employed otherwise." The history of Ireland is an interesting commentary 
 on these words. 
 
 But let us always remember that when the Physiocrats speak of the rights 
 of the cultivator they think only of the farmer and metayer and never of the 
 paid agriculturist. They are content to demand merely a decent existence for the 
 latter. Were they put too nmch at ease they would perhaps leave off working. 
 Seo Weulersse, vol. ii, p. 729. He seems a little unjust, and quotes some words of 
 Quesnay, who protests against the belief that " the poor must be kept poor if they 
 are not to become indolent." 
 
 1 One is perhaps surprised to find that freedom of work- mother words, the 
 abolition of corporations is not included in their list, especially since the credit 
 for the downfall of those institutions is usually given to the Physiocrats. Their 
 writings contain only very occasional reference to this topic, beoausa industrial
 
 TRADE 27 
 
 I: TRADE 
 
 ALL exchange, the Physiocrats thought, was unproductive, for 
 by definition it implies a transfer of equal values. If each party 
 Dnly receives the exact equivalent of what it gives there is no wealth 
 produced. It may happen, however, that the parties to the exchange 
 are of unequal strength, and the one may grow rich at the expense 
 of the other. 1 In giving a bottle of wine in exchange for a loaf of 
 bread there is a double displacement of wealth, which evidently 
 affords a fuller satisfaction of wants in both cases, but there is no 
 wealth created, for the objects so exchanged are of equal value. 
 To-day the reasoning would be quite different. The present-day 
 economist would argue as follows : " If I exchange my wine for 
 your bread, that is a proof that my hunger is greater than my 
 thirst, but that you are more thirsty than hungry. Consequently 
 the wine has increased in utility in passing from my hands into 
 yours, and the bread, likewise, in passing from your hands into 
 mine, and this double increase of utility constitutes a real increase 
 of wealth." Such reasoning would have appeared absurd to the 
 Physiocrats, who conceived of wealth as something material, and 
 they could never have understood how the creation of a purely 
 subjective attribute like utility could ever be considered pro- 
 ductive. 
 
 We have already had occasion to remark that industry and 
 commerce were considered unproductive. This was a most signi- 
 ficant fact, so far as commerce was concerned, because all the 
 theories that held the field under Mercantilism, notably the doctrine 
 that foreign commerce afforded the only possible means of increasing 
 a country's wealth, immediately assumed a dwindling importance. 
 For the Mercantilists the prototype of the State was a rich merchant 
 of Amsterdam. For the Physiocrats it was John Bull. 
 
 labour is regarded as sterile, and reform touching its organisation concerned them 
 but little. They did, however, protest against the rule that confined the right to 
 engage in a trade to those who had received an express privilege from the Crown. 
 They considered that " to an honest soul this was the most odious maxim which 
 the spirit of domination and rapacity ever invented." (Baudeau, in fiphkmi- 
 rides, 1768, vol. iv.) Turgot's famous Edict of January 1776, abolishing the 
 rights of corporations and establishing liberty for all, is, with good reason, attri- 
 buted to Physiocratic influence. 
 
 1 " Exchange is a contract of equality, equal value being given in exchange 
 for equal value. Consequently it is not a means of increasing wealth, for one 
 gives as much as the other receives, but it is a means of satisfying wants and of 
 varying enjoyment." (Le Trosne, pp. 903, 904.) But what does this satisfying 
 of wants and variation of enjoyment signify if it d^e* r ot n can increased wealth f
 
 28 THE PHYSIOCRATS 
 
 And foreign trade, like domestic, produced no real wealth : 
 the only result was a possible gain, and one man's gain is another 
 man's loss. *' Every commercial nation flatters itself upon its 
 growing wealth as the outcome of foreign trade. This is a truly 
 astonishing phenomenon, for they all believe that they are growing rich 
 and gaining from one another. It must be admitted that this gain, 
 as they call it, is a most remarkable thing, for they all gain and none 
 loses." * A country must, of course, obtain from foreigners the 
 goods which it cannot itself produce in exchange for those it cannot 
 itself consume. Foreign trade is quite indispensable, but Mercier 
 de la Riviere thinks that it is a necessary evil a (he underlines the 
 word). Quesnay contents himself with referring to it merely as 
 & pis aller. 3 He thought that the only really useful exchange is one 
 in which agricultural products pass directly from producers to con- 
 sumers, for without this the products would be useless and would 
 simply perish in the producer's hands. But that kind of exchange 
 which consists in buying products in order to resell them trafficking, 
 or a commercial transaction, as we call it is sheer waste, for the 
 wealth instead of growing larger becomes less, because a portion of 
 it is absorbed by the traffickers themselves. 4 We meet with the 
 same idea in Carey. Mercier de la Rividre ingeniously compares 
 such traders to mirrors, arranged in such a way that they reflect 
 a number of things at the same time, all in different positions. 
 " Like mirrors, too, the traders seem to multiply commodities, but 
 they only deceive the superficial." 6 
 
 That may be ; but, admitting a contempt for commerce, what 
 conclusions do they draw from it ? Shall they prohibit it, or regulate 
 it, or shall they just let it take its own course ? Any one of these 
 conclusions would follow from their premises. If commerce be as 
 useless as they tried to make out, the first solution would be the 
 best. But it was the third that they were inclined to adopt, and we 
 must see why. 
 
 1 Mercier de la Riviere, p. 545. * P. 54.8. 
 
 * " The settlement of international indebtedness by payment of money Is 
 a mere pis aller of foreign trade, adopted by those nations which are unable 
 to give commodities in return for commodities according to custom. And 
 foreign trade itself is a mere pis aller adopted by those nations whose home 
 trade is insufficient to enable them to make the best use of their own productions. 
 It is very strange that anyone should have laid such stress upon a mere pis aller 
 of commerce." (Quesnay's Dialogues, p. 175.) 
 
 4 " After all merchants are only traffickers, and the trafficker is just a person 
 who employs his ability in appropriating a part of other people's wealth." 
 (Mercier de la Riviere, p. 551.) "Merchants' gains are not a species of profit." 
 (Quesnay, p, 151.J 6 Ordre Naturel, p. 538.
 
 TRADE 29 
 
 It seems quite evident that the Physiocrats would have condemned 
 both the Mercantile and the Colbertian systems. Both of these 
 aimed at securing a favourable balance of trade an aim which 
 the Physiocrats considered illusory, if not actually immoral. But 
 if they thought all trade was useless it is not easy to understand their 
 enthusiasm for Free Trade. Those economists who nowadays favour 
 Free Trade support it in the belief that it is of immense benefit to 
 every country wherein it is practised, and that the more it is 
 developed the richer will the exchanging countries become. But 
 such was not the Physiocratic doctrine. It is a noteworthy fact that 
 they are to be regarded as the founders of Free Trade, not because 
 of any desire to favour trade as such, but because their attitude 
 towards it was one of disdainful laissez-faire. They were not, 
 perhaps, altogether free from the belief that laissez-faire would lead 
 to the disappearance of commerce altogether. They were Free 
 Traders primarily because they desired the freedom of domestic 
 trade, and we must not lose sight of those extraordinary regulations 
 which completely fettered its movements at this time. 1 
 
 The " natural order " also implied that each one would be free to 
 buy or sell wherever he chose, within or without the country. It 
 recognised no frontiers, 3 for only through " liberty " could the 
 " good price " be secured. The " good price " meant the highest 
 price and not the lowest, dearth and not cheapness. " Free 
 competition with foreign merchants can alone secure the best 
 possible price, and only the highest price will enable us to increase 
 our stock of wealth and to maintain our population by agriculture." 3 
 This is the language of agriculturists rather than of Free Traders. 
 
 1 Enforcing sales in open market and in limited quantities only, keeping 
 corn beyond two years, etc. Corn was to be supplied to consumers in the first 
 place, then to bakers, and finally to merchants, etc. 
 
 2 " Let entire freedom of commerce be maintained, for the surest, the exactest, 
 the most profitable regulator both of home and of foreign trade for the nation 
 as well as for the State is perfect freedom of competition." (Quosnay's Maximes, 
 xxv.) " "We must tell them that free trade is in accordance with the order and 
 with the demands of justice, and everything that conforms to the order 
 bears its own reward." (Le Trosne, p. 586.) 
 
 s Dialogues, p. 153. The dearth of plenty, as they paradoxically put it, 
 stimulates production, and Boisguillebert, in an equal paradox, remarks that 
 " Low price gives rise to want." In the Maximes, p. 98, Quesnay contents 
 himself by saying that free trade in corn makes the price more equal. " It is 
 clear," he adds, " that, leaving aside the question of foreign debt, equal prices 
 will increase the revenue yielded by the land, which will again result in extended 
 cultivation, which will provide a guarantee against those dearths that decimate 
 population." 
 
 Mercier de la Riviere writes in a similar vein. " A good oonstant average
 
 30 THE PHYSIOCRATS 
 
 It is the natural result of thinking about agricultural problems, 
 and especially about the question of raising corn ; and since Free 
 Trade at this time gave rise to no fears on the score of importation, 
 free exchange meant free exportation. Oncken points out that the 
 commercial rSgime which the Physiocrats advocated was identical 
 with that in operation in England about this time, where in case 
 of over-abundance exportation was encouraged in order to keep 
 up the price, and in case of dearth importation was permitted in 
 order to ensure a steady supply and to prevent the price rising 
 too much. 1 
 
 In a word, Free Trade meant for the Physiocrats the total aboli- 
 tion of all those measures which found so much favour with the Mer- 
 cantilists, and which aimed at preventing exportation to places out- 
 side the country and checking the growth of free intercourse within 
 it. 2 Narrow as their conception of Free Trade at first was, it was not 
 long in growing out of the straitened circumstances which gave it 
 birth, and it developed gradually into the Free Trade doctrine as we 
 know it, which Walras expressed as follows : " Free competition 
 secures for every one the maximum final utility, or, what comes to 
 the same thing, gives the maximum satisfaction." We no longer 
 admit that international trade is a mere pis aller. But all the argu- 
 ments which have been used in its defence on the Free Trade side were 
 
 price ensures abundance, but without freedom we Lave neither a good price noi 
 plenty." (P. 570.) 
 
 Turgot in his Lettres sur le Commerce lea Gratis develops the argument at great 
 length and tries to give a mathematical demonstration of it. There was no need for 
 this. It is a commonplace of psychology that a steady price of 20 is preferable 
 to alternative prices of 35 and 5 francs respectively, although the average in both 
 cases is the same. 
 
 1 It is worth noting that the nature of American competition was clearly 
 foreseen by Quesnay one of the most remarkable instances of scientific prevision 
 on record. In bis article on corn in the Encyclopedic he says that he views 
 the fertility of the American colonies with apprehension and dreads the growth 
 of agriculture in the New World, but the fear is provisionally dismissed because 
 the corn is inferior in quality to that of France and is damaged in transit. (See our 
 remarks concerning the Physiocratic connection with modern Protectionist 
 theories.) 
 
 1 It must not bo forgotten that the Protectionist system aided the develop- 
 ment of industry and retarded that of agriculture by its policy of encouraging 
 the exportation of manufactured products and its restrictions on the exportation 
 of agricultural products and raw materials with a view to securing cheap labour 
 and a plentiful supply of raw materials for the manufacturing industries. The 
 Protectionists were not concerned to prevent the exportation of corn. Both 
 Colbertism and Mercantilism sacrificed the cultivator by preventing the expor- 
 tation of corn and by allowing of its importation, while doing the exact 
 opposite for manufactured products.
 
 TRADE 31 
 
 first formulated by the Physiocrats. We shall refer to a few of 
 them. 
 
 The fallacy lurking behind the " balance of trade " theory is 
 exposed with great neatness by Mercier de la Rivi&re. " I wiJl 
 drown the clamour of all your blind and stupid policies. Suppose 
 that I gave you all the money which circulates among the nations 
 with whom you trade. Imagine it all in your possession. What 
 would you do with it ? " He goes on to show how not a single 
 foreign country will any longer be able to buy, and consequently 
 all exportation will cease. The result of this excessive dearness 
 will be that buying from foreign countries will be resorted to, and 
 this will result in the exportation of metallic currency, which will 
 soon readjust matters. 1 
 
 The contention that import duties are paid by the foreigner 
 is also refuted. Nothing will be sold by the foreigner at a lower 
 price than that which other nations would be willing to give him. 
 An import duty on such goods will increase the real price, which the 
 foreigner will demand, and this import duty will be paid by those 
 who buy the goods. 2 
 
 There is also a' refutation of the policy known as reciprocity. 
 "A nation levies an import duty upon the goods of another nation, 
 but it forgets that in trying to injure the selling nation it is really 
 checking the possible consumption of its own goods. This indirect 
 effect, of course, is inevitable, but can nothing be done to remedy 
 this by means of reprisals ? England levies a heavy duty on French 
 wines, thereby reducing its debit account with France very con- 
 siderably, but more French wine will not be bought if a tax is also 
 placed upon the goods which England exports to France. Do 
 you think that the prejudice which England has taken against 
 France can be remedied in this way ? " 
 
 We have multiplied instances, for during the whole of the hundred 
 years which have since elapsed has anyone deduced better arguments ? 
 
 These theories immediately received legal sanction in the edicts 
 of 1763 and 1766 establishing free trade in corn, first within 
 
 1 " Upon final analysis do you find that you have gained anything by your 
 policy of always selling to foreigners without ever buying from them ? Have you 
 gained any money by the process ? But you cannot retain it. It has passe d 
 through your hands without being of the least use. The more it increases the 
 more does its value diminish, while the value of other things increases propor- 
 tionally." (Mercier de la Riviere, pp. 580-583.) 
 
 1 Turgot, (Euvres, vol. i, p. 181. "If you succeed in keeping back foreign 
 merchants by means of your protective tariffs they will not bring you those 
 goods which you need, thus causing th: se impositions which were designed foi 
 others to retaliate upon your own head." (Quesnay, Dialogues.)
 
 32 THE PHYSIOCRATS 
 
 the country and then without, but some very serious restrictions 
 were still retained. Unfortunately Nature proved very ungrateful to 
 her friends. For four or five years she ran riot with a series of bad 
 harvests, for which, as we may well imagine, the Physiocratic regime 
 and its inspirers were held responsible. Despite the protests of the 
 Physiocrats, this liberal act was repealed in 1770. It was re-estab- 
 lished by Turgot in 1774, and again repealed by Necker in 1777 a 
 variety of fortune that betokens a fickleness of public opinion. 
 
 This new piece of legislation, and, indeed, the whole Physiocratic 
 theory, was subjected to severe criticism by an abbot of the name 
 of Galiani. Galiani was a Neapolitan monsignor residing at the 
 French court. At the age of twenty-four he had written a remarkable 
 work in Italian dealing with money, and in 1770, written in splendid 
 French, appeared his Dialogues sur le Commerce des Bles. It was 
 an immediate success, and it won the unqualified approval of 
 Voltaire, who was possibly attracted more by the style than by the 
 profundity of thought. Galiani was not exactly opposed to laissez- 
 faire. " Liberty," he wrote, " stands in no need of defence so long 
 as it is at all possible. Whenever we can we ought to be on the side 
 of liberty." l But he is opposed to general systems and against 
 complete self -surrender into the hands of Nature. "Nature," 
 says he, " is too vast to be concerned about our petty trifles." ' 
 He shares the realistic or historical views of the writers of to-day, 
 and thinks that before applying the principles of political economy 
 some account should be taken of time, place, and circumstances. 
 " The state of which the Physiocrats speak what is it ? Where 
 is it to be found." 8 
 
 Along with Galiani we must mention the great financier Necker, 
 who in a bulky volume entitled La Legislation et le Commerce des 
 Grains (1775) advocates opportunistic views almost identical in 
 character with those of Galiani, and who, as Minister of State 
 (1776-81 and 1788-90), put an end to free trade in corn. 
 
 In monetary matters, especially on the question of interest, the 
 Physiocrats were willing to recognize an exception to their principle 
 of non-intervention. Mirabeau thought that whenever a real in- 
 crease of wealth resulted from the use of capital, as in agriculture, 
 the payment of interest was only just. It was simply a sign or 
 symbol of the net product. But in trade matters he thought it 
 
 1 Dialogues, pp. 254, 274. ' Ibid., p. 237. 
 
 * Ibid., p. 22. He proposed a highly complicated system imposing moderate 
 duties both upon the importation and exportation of corn a 6 psr cent, ad 
 valorem duty in the one case and a 10 per cent, in the other.
 
 THE FUNCTIONS OF THE STATE 33 
 
 best to limit if not to prohibit it altogether. It often proved very 
 harmful, and frequently was nothing better than a tax levied by 
 order of " the corrosive landowners." Quesnay could not justify it 
 except in those cases where it yielded a net product, but he was 
 content simply to suggest a limitation of it. The Physiocrats are at 
 least logical. If capital sunk in industrial and commercial under- 
 takings yields no income it is evident that the interest must be taken 
 from the borrower's pocket, and they condemned it just as they 
 condemned taxing the industrial and commercial classes. 
 
 Turgot 1 is the only one of them who frankly justifies taking 
 interest. The reason that he gives is not the usual Physiocratic 
 argument, but rather that the owner of capital may either invest it 
 in the land or undertake some other productive work capital being 
 the indispensable basis of all enterprise 2 and that, consequently, the 
 capital will never be given to anyone who will offer less than what 
 might have been made out of it did the owner himself employ it. 
 This argument implies that every undertaking is essentially a pro- 
 ductive one, and indeed one of the traits which distinguishes Turgot 
 from the other Physiocrats is the fact that he did not think that 
 industry and commerce were entirely unproductive. 
 
 II : THE FUNCTIONS OF THE STATE 
 
 SEEING that the Physiocrats believed that human society was pervaded 
 by the principle of " natural order," which required no adventitious 
 aid from any written law, and since Nature's voice, without any 
 artificial restraint, was sufficient guide for mankind, it might have been 
 expected that the trend of Physiocracy would have been toward 
 the negation of all legislation, of all authority in a word, toward the 
 subversion of the State. 
 
 It is certain that the Physiocrats wished to reduce legislative 
 activity to a minimum, and they expressed the belief which has 
 often been repeated since by every advocate of laissez-faire 
 that the most useful work any legislative body can do is to abolish 
 useless laws. 8 If any new laws are required they ought simply to be 
 copies of the unwritten laws of Nature. Neither men nor Govern- 
 
 1 Turgot was the author of a work on this subject, entitled Memoire sur let 
 Pr&ts d" Argent (1769). 
 
 1 Reflexions sur la Formation des Richesses, lix, Ixi, Ixxiv. 
 
 1 "Remove all useless, unjust, contradictory, and absurd laws, and there will 
 not be much legislative machinery left after that." (Baudeau, p. 817.) "It is 
 not a question of procuring immense riches, but simply a question of letting 
 people alone, a problem that hardly requires a moment's thought." So wrote 
 Boisguillebert sixty years before.
 
 34 THE PHYSIOCRATS 
 
 merits can make laws, for they have not the necessary ability. Every 
 law should be an expression of that Divine wisdom which rules 
 the universe. Hence the true title of lawgiver, not law-maker. 1 
 It is in this connexion that we meet with those anecdotes 
 some of more than doubtful authenticity it is true that have 
 gathered round their names. Of these the best known is that which 
 tells of Mercier de la Riviere's visit to St. Petersburg, and his 
 laconic reply to Catherine the Great. He had been invited there 
 to advise the Empress about a new constitution for the country. 
 After dilating upon the great difficulties of the undertaking and the 
 responsibilities it involved, he gave it as his opinion that the best way 
 of achieving her object was just to let things take their course. 
 Whereupon the Empress promptly wished him good-bye. 
 
 But it would be a great mistake to think of the Physiocrats as 
 anarchists. What they wanted to see was the minimum of legislation 
 with a maximum of authority. The two things are by no means in- 
 compatible. The liberal policy of limitation and control would have 
 found scant favour with them. Their ideal was neither democratic 
 self-government, as we have it in the Greek republics, nor a parlia- 
 mentary regime such as we find in England. Both were detested. 2 
 
 1 Quesnay, Maximes, vol. i, p. 390. Mercier de la Riviere writes in much the 
 same style ; " The positive laws that are already in existence are merely expres- 
 sions of such natural rights." (VoL ii, p. 61.) It sounds like a preamble to the 
 Declaration of the Rights of Man. 
 
 * " The Physiocrats had the most absolute contempt for political liberty." 
 (Esmein, La Science politique des Physiocrates, address at the opening session of 
 the Congress of Learned Societies, Paris, 1906.) 
 
 " The Greek republics never became acquainted with the laws of the order. 
 Those restless, usurping, tyrannical tribes never ceased to drench the plains with 
 human blood, to cover with ruins and to reduce to waste the most fertile and 
 the best situated soil in the then known world." (Baudeau, p. 800.) 
 
 " It is evident that a democratic sovereign i.e. the whole people cannot itself 
 exercise its authority, and must be content to name representatives. These 
 representatives are merely agents, whose functions are naturally transitory, and 
 such temporary agents cannot always be in complete harmony with every interest 
 within the nation. This is not the kind of administration contemplated by 
 the Physiocrats. The sovereignty of the natural order is neither elective 
 nor aristocratic. Only in the case of hereditary monarchy can all interests, 
 both personal and individual, present and future, be clearly linked with those of 
 the nation, by their copartnership in all the net products of the territory sub- 
 mitted to their care." (Dupont, vol. i, pp. 359-360.) 
 
 This sounds very much like a eulogy of the House of Hohenzollern, delivered 
 by William IL 
 
 Very curious also are Dupont's criticises of the parliamentary regime. In 
 his letter to J. B. Say (p. 414) he notes " its tendency to corruption and canker," 
 which had not then manifested itself in the United States of America. These 
 letters, though very interesting, hardly belong to a history of economic doctrines.
 
 THE FUNCTIONS OF THE STATE 35 
 
 On the other hand, great respect was shown for the social hierarchy? 
 and they were strong in their condemnation of every doctrine that 
 aimed at attacking either the throne or the nobility. What they 
 desired was to have sovereign authority in the guise of a hereditary 
 monarchy. In short, what they really wanted and they were not 
 frightened by the name was despotism. 1 
 
 "The sovereign authority should be one, and supreme above 
 all individual or private enterprise. The object of sovereignty 
 is to secure obedience, to defend every just right, on the one 
 hand, and to secure personal security on the other. A govern- 
 ment that is based upon the idea of a balance of power is use- 
 less." 2 
 
 This should help us to realise the distance separating the Physio- 
 crats from the Montesquieuian idea of the distribution of the sovereign 
 authority, and from the other idea of local or regional control. 
 There is no mention of representation as a corollary of taxation. 
 This form of guarantee, which marks the beginnings of parliamentary 
 government, could have no real significance for the Physiocrats. 
 Taxation was just a right inherent in the conception of proprietary 
 sovereignty, a territorial revenue, which was in no way dependent 
 upon the people's will. 
 
 It seems strange that such should be the opinion of a future 
 President of the Constituent Assembly. How can we explain this 
 apparent contradiction and such love of despotism among the 
 apostles of laissez-faire ? 
 
 Despotism, in the eyes of the Physiocrats, had a peculiar signi- 
 ficance of its own. It was the work of freedom, not of bondage. It 
 did not signify the rule of the benevolent despot, prepared to make 
 men happy, even against their own will. It was just the sovereignty 
 of the " natural order " 3 nothing more. Every reasonable person 
 
 1 " It is only when the people are ingenuous that we find real despots, 
 because then the sovereign can do whatever ho wills." (Dupont, p. 384.) 
 
 1 Quesnay, Maximes, i. The Physiocrats were in favour of a national 
 assembly, but would give it no legislative power. It was to be just a council of 
 State concerned chiefly with public works and with the apportionment of the 
 burden of taxation. See M. Esmein's memoire on the proposed National Assembly 
 of the Physiocrats (Camples rendus de V Academic des Sciences Morales et Politiques, 
 1904). 
 
 " The personal despotism will only bo the legal despotism of an obvious 
 and essential order. In legal despotism the obviousness of a law demands 
 obedience before the monarch enjoins it. Euclid is a veritable despot, and the 
 geometrical truths that he enunciates are really despotic laws. The legal and 
 personal despotism of the legislator are one and the same. Together they are 
 irresistible," (Mercier de la Riviere, pp. 460-471.) This despotism is really not
 
 36 THE PHYSIOCRATS 
 
 felt himself bound to obey it, and realised that only through such 
 obedience could the truth be possibly known. 
 
 It is quite different from the despotism of the ancient maxim, 
 Sicut principi placuit legis habet vigorem. 1 They would never have 
 subscribed to the doctrine that the king's word is law, but they 
 were equally energetic in rejecting the claim of the popular will. 2 
 They are as far from modern democracy as they are from monarchical 
 absolutism. 
 
 This despotism was incarnate in the person of the sovereign or 
 king. But he is simply an organ for the transmission of those 
 higher laws which are given to him. They would compare him 
 with the leader of an orchestra, his sceptre being the baton that keeps 
 time. The conductor's despotism is greater than the Tsar's, for 
 every musician has to obey the movement of the hand, and that 
 immediately. But this is not tyranny, and whoever strikes a false 
 note in a spirit of revenge is not simply a revolter, but also an 
 idiot. 
 
 Sovereignty appealed to the Physiocrats in the guise of heredi- 
 tary monarchy, because of its associations with property under the 
 feudal regime, and since hereditary rights were connected with landed 
 property so must royalty be. The sovereign who best represents 
 the Physiocratic ideal is perhaps the Emperor of China. 3 As the 
 Son of Heaven he represents the " natural order," which is also the 
 ** divine order." As an agricultural monarch he solemnly puts his 
 hand to the plough once a year. His people really govern them- 
 selves ; that is, he rules them according to custom and the practice 
 of sacred rites. 4 
 
 unlike that of Comte, who remarks that there is no question of liberty of con- 
 science in geometry. 
 
 1 " On the contrary," says Quesnay in a letter to Mirabeau, " this despotism 
 is a sufficient guarantee against the abuse of power." 
 
 1 "That is an abominable absurdity, "says Baudeau, ' for on this reckoning a 
 mere majority vote would be sufficient to justify parricide." 
 
 Is it necessary to point out that this is exactly the reverse of the view held 
 by interventionists and socialists of these later times, who think that the mission 
 of the State is to redress the grievances caused by natural laws ? 
 
 8 " This single supreme will which exercises supreme power is not, strictly 
 speaking, a human will at all. It is just the voice of nature the will of God. 
 The Chinese are the only people whose philosophy seems to have got hold of this 
 supreme truth, and they regard their emperor as the eldest son of God." (Baudeau, 
 p. 798.) 
 
 * Some writers for example, Pantaleoni in his introduction to Arthur 
 Labriola's book,Le Dottrine economiche di Quesnay seem to think that the Physio- 
 cratic criticism proved fatal to feudal society, just as the socialistic criticism of 
 the present time is undermining the bourgeois society. Politically this is true
 
 THE FUNCTIONS OF THE STATE 37 
 
 In practice there will be nothing of great importance for the 
 despot to do. " As kings and governors you will find how easy it is 
 to exercise your sacred functions, which simply consist in not 
 interfering with the good that is already being done, and in punish- 
 ing those few persons who occasionally attack private property." l 
 In short, the preservation of the " natural order " and the defending 
 of its basis private property against the attacks of the ignorant 
 and the sacrilegious is the first and most important duty of the 
 sovereign. "No order of any kind is possible in society unless the 
 right of possession is guaranteed to the members of that society 
 by the force of a sovereign authority." a 
 
 Instruction is the second duty upon which the Physiocrats lay 
 special stress. " Universal education," says Baudeau, " is the first 
 and only social tie." Quesnay is specially anxious for instruction on 
 the "natural order," and the means of becoming acquainted with it. 
 Further, the only guarantee against personal despotism lies in well- 
 diffused instruction and an educated public opinion. If public 
 opinion, as Quesnay said, is to lead, it should be enlightened. 
 
 Public works are also mentioned. A wise landlord has good 
 roads on his property, for good roads and canals improve it. These 
 represent a species of avances foncieres, similar to those undertaken 
 by proprietors. 
 
 This is by no means all. 3 There are a number of duties recognised 
 as belonging to the State, of which every economist of the Liberal 
 school up to Bastiat and M. de Molinari approves. 
 
 We will add one other trait. Like the Liberal school, the Physio- 
 crats were whole-hearted " internationalists." In this respect they 
 differ from their prototypes, the Chinese. They believed that all 
 class distinctions and all international barriers ought to be removed 
 in the interest of political development, as well as in that of scientific 
 study.* The peace advocates of to-day would do well to make the 
 acquaintance of their illustrious predecessors. 
 
 enough, for the Physiocrats advocated the establishment of a single supreme 
 monarch with undivided authority. Economically it is incorrect, for their 
 conception even of sovereignty and taxation is impregnated with feudal ideas. 
 1 Dupont, Discours en tete dei (Euvres de Quesnay, vol, i, p. 35. 
 
 Ibid. p. 22. 
 
 Turgot, who is less inclined to favour agriculture, thinks that certain royal 
 privileges must be granted before manufacturers can compete with agriculture 
 ((Euvres, vol. i, p. 360). 
 
 4 " One has come to regard the various nations as drawn up against one 
 another in a perpetual state of war. This unfortunate prejudice is almost sacred, 
 and is regarded as a patriotic virtue." (Baudeau, p. 808.) 
 
 The three errors usually committed by States, and the three that led to the
 
 38 THE PHYSIOCRATS 
 
 III: TAXATION 
 
 THE bulk of the Physiocratic system is taken up with the exposition 
 of a theory of taxation, which really forms one of the most charac- 
 teristic portions of their work. Though inextricably bound up with 
 the theory of the net product and with the conception of landed 
 proprietorship, curiously enough, it has survived the rest of their 
 doctrine, and quite recently has been given a new lease of life. 
 
 In the table showing the distribution of the national income three 
 participators only are mentioned the landed proprietor, the farmer, 
 and the artisan. But there is also a fourth. the Physiocratic 
 sovereign, who is none other than the State itself, and who thoroughly 
 deserves a share. This benevolent despot, whose duties we have 
 just mentioned, cannot be very exacting, for, having little to do, his 
 demands must be moderate. In addition to his double mission of 
 maintaining security and giving instruction, he must also contribute 
 towards increasing the productivity of the land by establishing public 
 works, making roads, etc. 1 Money is required for all this, and the 
 Physiocrats argued that taxes ought to be paid liberally, 2 and not 
 grudgingly, as is too often the case under a parliamentary rtgime. 
 Where is this money to come from ? 
 
 The reply is obvious if we have grasped their system. The only 
 available fund is the net product, which is the only new wealth 
 that is really dispensable the rest is necessarily absorbed in the 
 repayment of the advances made for the upkeep of the agricultural 
 and industrial classes. Were taxation to absorb a proportion of the 
 revenues that are devoted to production it would gradually drain 
 away the source of all wealth. So long as it only takes the surplus 
 the true net product, which is a mere tributary of the main stream 
 no harm will be done to future production. 
 
 All this is quite clear. But if taxation is to absorb the net 
 
 downfall of Greece, Baudeau thought, were arbitrary use of legislative authority, 
 oppressive taxation, and aggressive patriotism (p. 801). 
 
 1 " Before a harvest can be reaped not only must the cultivators incur the 
 usual outlay upon stock, etc., and the proprietors upon clearing the land, but the 
 public authoritymust also incur some expense, which might be designated avarices 
 souveraine&," (Baudeau, p. 758.) 
 
 2 '* The Government ought to be less concerned with the task of saving than 
 with the duty of spending upon those operations that are necessary for the 
 prosperity of the realm. This heavy expenditure will cease when the country 
 has become wealthy." (Quesnay, Maximes, xxvi.J 
 
 " It is a narrow and churlish English idea which decrees that an annual sum 
 should be annually voted to the Government, and that Parliament should reserve 
 to itself the right of refusing this tax. Such a procedure is a travesty of demo- 
 cracy." (Dupont, in a letter to J. B. Say.)
 
 TAXATION 39 
 
 product the question arises as to who is to pay it. It is equally 
 evident that it can only be taken from those who already possess it, 
 namely, from the landed proprietors, who must bear the whole 
 burden of taxation. Just now we were amazed at the privileges which 
 the Physiocrats so light-heartedly granted them : this is the ransom, 
 and it is no light one. The next problem is how to assess this tax. 
 
 The Physiocrats were extremely loth to rob the gentry of their 
 incomes, and a number of pages in their writings are devoted to a 
 justification of their claims upon them. Not only were they willing to 
 leave them everything that was necessary to compensate them for.the 
 outlay of capital and labour, but also all that might be required to 
 make the property thoroughly valuable and the position of the land- 
 owner a most enviable one. 1 The preference shown for the landowner 
 is just the result of the social importance attributed to him by the 
 Physiocrats. " If some other class were preferable," says Dupont de 
 Nemours, ** people would turn their attention to that." They 
 would no longer spend their capital in clearing or improving the 
 land. But if the possession of land be so desirable, is there not some 
 danger lest everybody should become a landlord and neglect the 
 other walks of life ? The Physiocrats thought not, for, since Nature 
 has set a limit to the amount of land in existence, there must also 
 be a limit to the number of landowners. 
 
 A third of the net product, or, if we accept Baudeau's figures, 
 six-twentieths, i.e. 30 per cent., was to be paid in taxes. Taking the 
 net product at 2 milliard francs, which is the figure given in the 
 Explication du Tableau Iconomique, this gives us exactly 600 million 
 francs as the amount of the tax. 2 
 
 The proprietors, who were then for the most part free from 
 taxation, felt that this was a very considerable contribution, and that 
 the Physiocrats demanded a heavy price for the high honour which 
 
 1 " The amount of the tax as compared with the amount of the net product 
 should be such that the position of the landed proprietor shall be the best 
 possible and the state of being a landowner preferable to any other state in 
 society." (Dupont, p. 356.) 
 
 1 If we compare this figure with the total gross revenue of France, valued then at 
 5 milliard francs, it would represent a tax of 12 per cent., which is rather heavy 
 for a State that was supposed to I e governed by the laws of the " natural order." 
 The proportion which the present French Budget bears to the total revenue of 
 the country is 16 per cent. 
 
 The French Budget of 1781, introduced by Necker, corresponded almost 
 exactly with the figure given by the Physiocrats, namely, 610 millions. Of 
 course, we ought to add to this the ecclesiastical dues, the seigniorial rights, and 
 the compulsory labour of every kind, which were to disappear under the Phytiio- 
 cratic rtgimt.
 
 40 THE PHYSIOCRATS 
 
 they had conferred upon them. Even to-day a tax of 30 per cent, 
 on the gross revenue of landlords would cause some consternation. 
 The Physiocrats anticipated this objection, and .in reply brought 
 forward an argument which shows that they possessed exceptionally 
 keen economic insight. They argued that none would feel the 
 burden, seeing that no one was really paying it. Land would now be 
 bought at 70 per cent, of its former value, so that the 30 per cent, 
 nominally paid by the proprietor was in reality not paid by him 
 at all. 1 Land let at 10,000 would be valued at 200,000. But 
 with a tax of 3000 it is really only yielding 7000, and its value will 
 be 140,000. The buyer who pays this price, despite the fact that 
 he has paid a tax of 3000, will enjoy all the revenue to which he has 
 any claim, for he can only lay claim to what he has paid for, and he 
 did not pay for that portion of the revenue which is affected by the 
 tax. It is exactly as if he had only bought seven-tenths of the 
 land, the remaining three-tenths being the State's. And if at some 
 later time this tax should be abolished, it would merely mean 
 making him a present of 3000 a year the equivalent of a lump 
 sum of 60,000. a 
 
 The reasoning was excellent for those buying land after the tax 
 had been levied. It had, however, a much wider import than the 
 Physiocrats thought, for it might be applied not merely to taxes 
 on land, but also to taxes on capital. But this gave little consolation 
 to those who were to have the honour of inaugurating the new 
 regime, and the first task evidently was to convert them. 3 
 
 1 " The tax is a kind of inalienable common property. When proprietors 
 buy or sell land they do not buy and sell the tar. They can only dispose of 
 that portion of the land which really belongs to them, after deducting the amount 
 of the tax. This tax is no more a charge upon property than is the right of 
 fellow proprietors a burden upon one's property. And so the public revenue 
 is not burdensome to anyone, costs nothing, and is paid by no one. Hence, it 
 in no way curtails the amount of property which a person has." (Dupont, 
 vol. i, pp. 357, 358.) 
 
 * In order to give every security to proprietors the Physiocrats were anxious 
 that the value of the property, when once it was fixed, should vary as little as 
 possible. Baudeau, however, recognised the advisability of periodical revalua- 
 tions " in order that the sovereign power should always share in both the profits 
 and the losses of the producer." And he addresses this important caution to 
 the proprietors : " Take no credit to yourselves for the increase in the revenue 
 of land. The thanks are really due to the growing efficiency of the sovereign 
 authority." (P. 708.) 
 
 1 " Let us observe, in passing, that the terms ' taxation ' and ' public revenue ' 
 have unfortunately become synonymous in the public mind. The term ' taxation ' is 
 always unpopular. It implies a charge that is hard to bear, and which everybody 
 is anxious to shirk. The public revenue is the product of the sovereign's landed
 
 TAXATION 41 
 
 The sovereign's position in the main is like that of the landed 
 proprietors, which is in agreement with the Physiocratic conception 
 of sovereignty. The landed proprietors and the king in reality 
 form one class of fellow landowners, with the same rights, the same 
 duties, and the same revenues. Hence the sovereign's interests 
 are completely bound up with those of his country. 1 
 
 The Physiocrats attached the greatest practical importance to 
 their fiscal system, and were thoroughly convinced that the misery of 
 the people was due to the unequal distribution of the burden of taxa- 
 tion. They thought that this was the true source of injustice in 
 short, that this was the social problem. To-day we ascribe misery to 
 unequal distribution of wealth rather than to any particular fiscal 
 system, and consequently the Physiocratic view seems to us somewhat 
 extreme. Still, it was perhaps not so difficult to justify, in view of 
 the frightful conditions of fiscal organisation under the old regime. 
 
 The objections which a single tax, levied only on the landed 
 interest, was bound to provoke were not unforeseen by the Physiocrats, 
 nor did they neglect to answer them. 
 
 To the objection that it was unjust to place the burden of taxation 
 upon the shoulders of a single class of the nation, 2 instead of dis- 
 tributing it equally among all classes, the Physiocrats replied that 
 the statesman's ideal was not equal taxation, but the complete 
 abolition of all taxation. This could only be achieved by taxing 
 the " net product." 
 
 Suppose that we agree that the taxes should be paid by some 
 other class. The question then is to determine what class of the 
 community should be chosen. 
 
 Shall we say that the farmer must pay them ? But after deduct- 
 ing the " net product " what remains for the farmer is just the bare 
 equivalent of his original outlay. Consequently, if we take 600 
 millions from the farmers by way of taxation there will be so much 
 less capital for the land, resulting in a smaller gross product the 
 following year,' unless they agitate for a reduction of 600 millions in 
 
 property, which is disAnct from his subjects' property." (Mercier de la Riviere, 
 p. 451.) 
 
 1 " The sovereign takes a fixed amount of the net product for his annual income. 
 This amount of necessity grows with every increase of the net product and 
 diminishes with every shrinking of the product. The people's interests and the 
 sovereign's are, consequently, necessarily one." (Baudeau, p. 769.) 
 
 1 This was the basis of Voltaire's lively satire, VHomme. avec Quarante Ecus. 
 It treats of a wealthy financier who escapes taxation, and who makes sport of 
 the poor agriculturist who pays taxes for both, although his income is only 
 forty ecus. 
 
 '> " Such a reduction of the necessary expenditure must result in diminished
 
 42 THE PHYSIOCRATS 
 
 their rents. , If they succeed this will leave the proprietors in the 
 position of having paid over the 600 millions to the State. But 
 we must also reckon the losses and friction incurred in every devia- 
 tion from the " natural order." Suppose we decide that the sterile 
 classes should pay the taxes. This class is ex hypothesi sterile that 
 is, it produces the exact equivalent of what it consumes. To 
 take 600 millions from this class is tantamount to a reduction of 
 its consumption by 600 millions, or an equivalent limitation of its 
 purchases of raw material. The result would be a diminished 
 product in the future, unless the industrial classes succeeded in 
 increasing prices by an equivalent amount. Even in that case the 
 landed proprietors will have to bear the brunt of it : firstly, they 
 will have to reduce their own consumption, and secondly, their 
 tenants', whose efficiency will thereby be impaired. 1 
 
 This process of reasoning seems to imply that the revenues of 
 the agricultural and industrial classes are not squeezable because 
 they represent the indispensable minimum necessary for the 
 expenses of production. This seems to be an anticipation of the 
 notorious " iron law." Turgot's formula incisively stating this law, 
 but containing no attempt at a justification, is known to most people. 2 
 Long before his day, however, it had been stated by Quesnay in 
 terms no less pronounced, though perhaps not so well known. " It 
 is useless to urge that wage-earners can pay the tax so levied upon 
 them, by restricting consumption and depriving themselves of 
 luxuries without thereby causing the burden to fall upon the classes 
 who pay the wages. The rate of wages, and consequently the 
 
 production, because there can be no harvest without some amount of preliminary 
 expense. You may check your expenditure, but it will mean diminishing your 
 harvest a decrease in the one means an equal decrease of the other. Such a 
 fatal blow to the growth of population would, in the long run, injure the 
 landed proprietor and the sovereign." (Dupont de Nemours, p. 353.) 
 
 " A fall in the expenditure means a smaller harvest, which means that less 
 will be expended upon making preparation for the next harvest. This cyclical 
 movement seems a terrible thing to those who have given it some thought." 
 (Mercier de la Riviere, p. 499.) 
 
 1 " There would bo something to say for this if the rich repaid them by 
 increased wages or additional almsgiving. But the poor give to the rich, and so 
 add to their misery, already sufficiently great. The State demands from those 
 who have nothing to give, and directs all its penalties and exercises all its severity 
 upon the poor." (Turgot, (Euvres, vol .i, p. 413). 
 
 " It would be better for the landed proprietors to pay it direct to the Trea- 
 sury, and thus save the cost of collection." (Dupont de Nemours, p. 352.) 
 
 1 " It might happen arid, indeed, it often does happen that the worker's 
 wage is only equal to what is necessary for his subsistence." (Reflexions, vi.) 
 
 It IB also possible that Jesus was not formulating a general law when He said
 
 TAXATION 43 
 
 amount of comfort and luxury which wages can purchase, are fixed 
 at the irreducible minimum by the action of the competition which 
 prevails among them." This is quite a characteristic trait. 1 The 
 author of the " natural order," without any hesitation, admits that 
 the direct outcome of the establishment of that order would be to 
 reduce the life of the wage-earners to a level of bare subsistence. 
 
 It is also remarkable that in their study of the industrial classes 
 wages should have claimed the exclusive attention of the Physiocrats. 
 Profits even then were by no means unsqueezable, but curiously 
 enough they failed to realise this. Voltaire's rich banker would 
 have proved embarrassing here. They would have had some 
 difficulty in showing how a reduction of his extravagance could 
 possibly have endangered production. But they might have replied 
 that since he had so little difficulty in squeezing the 400,000 livres 
 out of his fellow-citizens he would not experience much more trouble 
 in getting another 400,000 out of them and paying them over to the 
 State. 
 
 Another objection consists in the insufficiency of a single tax 
 to meet all the needs of the State. " In some States it is said that a 
 third, a half, or even three-fourths of the clear net revenue from 
 all sources of production is insufficient to meet the demands of the 
 Treasury, and consequently other forms of taxation are neces- 
 sary." 2 
 
 In reply to this the Physiocrats would point out that the mere 
 application of their fiscal system would result in such an increase 
 in the net product that the yield from the tax would progressively 
 grow. We must also take account of the economies resulting from 
 the simplicity of the tax, and the almost complete absence of 
 expenses of collection. But the most interesting point of all is that 
 they thought the State should adapt its needs to meet its revenue, 
 and not vice versa. The great advantage of the Physiocratic impot, 
 however, was that it was regulated by a natural norm, which gave 
 the amount of the net product. Without this, taxation becomes 
 
 that we have the poor always with us. Turgot likewise wished to state the 
 simple fact, and not to draw a general conclusion. 
 
 1 Quesnay , Second Probleme iconomique, p. 1 34. The argument which follows 
 is rather curious. He does not seem to think that a fall in wages even below the 
 minimum would result in the death of many people, but simply that it would 
 result in emigration to other countries, and that as a consequence of such emigra- 
 tion the diminished supply at home would soon lead to higher wages being 
 paid a fairly optimistic conclusion for the period. 
 
 1 Baudeau (p. 770) points out the error of confusing the gross revenue 
 with the net revenue. Allowance should be made for the cost of collecting 
 the revenue, etc.
 
 44 THE PHYSIOCRATS 
 
 arbitrary. 1 At bottom the system affords a barrier against the 
 autocracy of the sovereign a barrier that is much more effective 
 than a parliamentary vote. 
 
 One of the disciples of Quesnay put the theory to the test of 
 practice. The Margrave of Baden had the advantage of being 
 a prince, and he proceeded to experiment on his own subjects. The 
 system was tried in three communes of his principality, but, like most 
 social experiments, failed. In two of the communes it was abandoned 
 at the end of four years. In a third, despite its evil effects, it was 
 prolonged until 1802. The increase in the land tax caused a veritable 
 slump in the value of property just when the remission of taxes upon 
 consumption was resulting in the rapid multiplication of wineshops 
 and beerhouses. 2 It is unnecessary to add that the failure of the 
 experiment did nothing to weaken the faith of the Margrave or his 
 fellow Physiocrats. An experiment on so small a scale could not 
 possibly be accepted as decisive. This is the usual retort of inno- 
 vators when social experiments prove failures, but we must recognise 
 the element of truth contained in their reply. 
 
 But if we wish to see the real results of the Physiocratic system 
 we must look beyond the private experiments of a prince. Elsewhere 
 the effects were much more far-reaching. 
 
 The fiscal aspect of the French Revolution owed its guiding 
 inspiration to their ideas. Out of a budget of 500 million francs the 
 Constituent Assembly decreed that about half of it that is, 240 
 millions should be got out of a tax levied upon land, equal to a tax 
 of 2400 million francs nowadays ; and the greatest part of it was 
 to be raised by direct taxation. 
 
 Distrust of indirect taxation, and of all taxes on commodities, 
 is also a consequence of the Physiocratic system a distrust that is 
 bound to grow as society becomes more democratic. Most of the 
 arguments in favour of direct taxation are to be found in the Physio- 
 cratic writings. But the chief one employed nowadays namely, 
 that indirect taxes often bear no proportion to the amount of the 
 
 1 " If unfortunately it be true that three-tenths of the annual product is not 
 sufficient to cover the ordinary expenditure, there is only one natural and reason- 
 able conclusion to be drawn from this, namely, curtail the expenditure." (Dupont 
 de Nemours, p. 775.) 
 
 " The tax must never be assessed in accordance with individual caprice. The 
 amount is determined by the natural order." (Dupont, SurT Origin d'un Science 
 nourelle.) Neither should the State, in their opinion, exceed the limit, because 
 it would mean having recourse to borrowing, which would simply mean increased 
 deferred taxation. 
 
 * See M. Gargon's instructive brochure, Un Prince ollemand physiocraie, for a 
 resume of the Margrave's correspondence.
 
 OF THE PHYSIOCRATIC DOCTRINE 45 
 
 revenue, but weigh heaviest upon those who have least, is not among 
 them. This concern about proportionality, which is merely another 
 word for justice, was quite foreign to their thoughts. 1 
 
 At a later stage of this work it will be our duty to call attention 
 to the enthusiasm aroused by this old theory of an impot unique as 
 advocated in the works of an eminent American economist, 2 who 
 renders homage to the Physiocrats for inspiring him with ideals 
 altogether opposed to those of the landed proprietors. And a similar 
 movement under the very same name the single-tax system is 
 still vigorous in the United States. 
 
 IV : RESUME OF THE PHYSIOCRATIC DOCTRINE. 
 CRITICS AND DISSENTERS 
 
 A BRIEF risumi of the contributions made to economic science by 
 the Physiocrats will help us to realise their great importance. 
 From the theoretical point of view we have : 
 
 1. The idea that every social phenomenon is subject to law, 
 and that the object of scientific study is to discover such laws. 
 
 2. The idea that personal interest if left to itself will discover 
 what is most advantageous for it, and that what is best for the 
 individual is also best for everybody. But this liberal doctrine 
 had many advocates before the Physiocrats. 
 
 3. The conception of free competition, resulting in the establish- 
 ment of the bon prix, which is the most advantageous price for 
 both parties, and implies the extinction of all usurious profit. 
 
 4. An imperfect but yet searching analysis of production, and 
 of the various divisions of capital. An excellent classification of 
 incomes and of the laws of their distribution. 
 
 5. A collection of arguments which have long since become 
 classic in favour of landed property. 
 
 From a practical point of view we have : 
 
 1. The freedom of labour. 
 
 2. Free trade within a country, and an impassionate appeal for 
 the freedom of foreign trade. 
 
 3. Limitation of the functions of the State. 
 
 4. A first-class demonstration of the superiority of direct taxation 
 over indirect. 
 
 1 We find the word in one of Dupont's letters to Say, but that is much later. 
 
 1 Henry George dedicated his volume entitled Protection or Free Trade to 
 them because he considered that they were his masters. But his tribute loses its 
 point somewhat when we remember that he admits that he had never read them.
 
 46 THE PHYSIOCRATS 
 
 It is unjust to reproach the Physiocrats, as is sometimes done, 
 with giving us nothing but social metaphysics. A little over- 
 systemisation may prove useful in the early stages of a science. Its 
 very faults have some usefulness. We must admit, however, that 
 although their conception of the " natural order " supplied the 
 foundation, or at least the scaffolding, for political economy, it be- 
 came so intertwined with a kind of optimism that it nullified the 
 work of the Liberal school, especially in France. 1 
 
 But the greatest gap in the Physiocratic doctrine is the total 
 absence of any reference to value, and their grossly material, almost 
 terrestrial, conception of production. They seldom mention value, 
 and what little they do say is often confused and commonplace. 
 Herein lies the source of their mistakes concerning the unproductive 
 character of exchange and industry, which are all the more remark- 
 able in view of the able discussions of this very question by a number 
 of their contemporaries. Among these may be mentioned Cantillon,* 
 who resembles them in some respects and whose essay on commerce 
 was published in 1755 ; the Abbe Galiani, who dealt with the 
 question in his Delia Moneta (1750) ; and the Abbe Morellet, who dis- 
 cussed the same topic in his Prospectus (Pun Nouveau Dictionnaire du 
 Commerce (1769). More important than any of them, perhaps, is 
 Condillac, whose work Du Commerce et du Gouvernement was unfor- 
 tunately not published until 1776 ; but by that time the Physiocratic 
 system had been completed, and their pre-eminence well established. 
 
 1 Listen to Mercier de la Riviere : " We must admire the way in which one 
 man becomes an instrument for the happiness of others, and the manner in which 
 this happiness seems to communicate itself to the whole. Speaking literally, 
 of course I do not know whether there will not be a few unhappy people even in 
 this State, but their numbers will be so few and the happy ones will be so numerous 
 that we need not be much concerned about helping them. All our interests 
 and wills will be linked to the interest and will of the sovereign, forming for our 
 common good a harmony which can only be regarded as the work of a kind 
 Providence that wills that the land shall be full of happy men." This enchanting 
 picture only applies to future society, when the " natural order " will be estab- 
 lished. The optimism of the Physiocrats is very much like the anarchists'. 
 
 * Very little seems to have been known about Cantillon for more than a century 
 after his death. But, like all the rediscovered founders of the science, he has 
 received considerable attention for some years past. His influence upon the 
 Physiocrats has perhaps been exaggerated. Mirabeau's earliest book, L'Ami des 
 Hommea, which appeared just twelve months after Cantillon's work, is un- 
 doubtedly inspired by Cantillon. No discussion of his work is included in the text 
 because it was felt that it might interfere with the plan of the work as already 
 mapped out. There are several articles in various reviews which deal with 
 Cantillon's work, the earliest being that contributed by Stanley Jevons to the 
 Contemporary Review in 1881,
 
 RBSUMS OF THE PHYSIOCRATIC DOCTRINE 47 
 
 Turgot, though one of their number, is an exception. He was 
 never a thoroughgoing Physiocrat, and his ideas concerning value 
 are much more scientific. 1 He defines it as " an expression of the 
 varying esteem which man attaches to the different objects of his 
 desire." This definition gives prominence to the subjective character 
 of value, and the phrases " varying esteem " and " desire " give it 
 greater precision. 2 It is true that he also added that besides this 
 relative attribute value always implied " some real intrinsic quality 
 of the object." He has frequently been reproached for this, but all 
 that he meant to say was that our desire always implies a certain cor- 
 rectness of judgment, which is indisputable unless every judgment 
 is entirely illusory. But Turgot would never have admitted that. 
 
 It is possible that Turgot inspired Condillac, and that he himself 
 owed his inspiration to Galiani, whose book, which appeared twenty 
 years earlier, he frequently quotes. This work contains a very 
 acute psychological analysis of value, showing how it depends upon 
 scarcity on the one hand and utility on the other. 
 
 Besides a difference in his general standpoint, there are other 
 considerations which distinguish Turgot from the members of the 
 Physiocratic school, and it would have been juster to him as well as 
 more correct to have devoted a whole chapter to him. 3 Generally 
 speaking, his views are much more modern and more closely akin to 
 Smith's. In view of the exigencies of space we must be content to 
 draw attention to the principal doctrines upon which he differs from 
 the Physiocrats. 
 
 1. The fundamental opposition between the productivity of 
 agriculture and the sterility of industry, if not altogether abandoned, 
 is at least reduced in importance. 
 
 2. Landed property is no longer an institution of divine origin. 
 Even the appeal to the " ground expenses " is dropped. As an institu- 
 tion it rests merely upon the fact of occupation and public utility. 
 
 3. Movable property, on the other hand, holds a prominent 
 
 1 Valeurs etMonnaies, which dates from 1769, and again in his Reflexions. 
 Quesnay's conception of value may be gleaned from his article entitled Hommes, 
 which remained unpublished for a long time, and has only recently appeared 
 in the Revue d'Histoire des Doctrines iconomiques et societies, vol. i, No. 1. 
 
 1 He dilates at considerable length on the distinction between estimative 
 value (what would now be called subjective value) and appreciative (or social) 
 value. The first depends upon the amount of time and trouble we are willing 
 to sacrifice in order to acquire it. In this connection the notion of labour- value 
 appears. As to appreciative value, it differs from the preceding only in being 
 an " average estimative value." 
 
 3 Turgot, though a disciple of Quesnay, remained outside the Physiocratio 
 school. He always referred to them contemptuously as " the sect."
 
 48 THE PHYSIOCRATS 
 
 place. The function of capital is more carefully analysed and the 
 legitimacy of interest definitely proved. 
 
 But we must turn to Condillac's book if we want to see how the 
 Physiocratic doctrine should be completed and expurgated of its 
 errors. Condillac was already well known as a philosopher when, 
 in his sixtieth year, he published this new work in 1776. This 
 admirable book, entitled I*e Commerce et le Gouvernement considers 
 relativement Vun a Vautre, contains an outline of most modern problems. 
 The title gives no adequate indication of the character of the work, 
 and possibly accounts for the oblivion into which the book has fallen. 
 
 It is a genuine economic treatise, and not a medley of economic 
 and political suggestions concerning social science, with an admixture 
 of ethics and jurisprudence. Value is regarded as the foundation 
 of the science, and the Physiocrats are thus out-classed from the 
 very first. 1 Value itself is considered to be based upon utility, which 
 is stripped of its popular meaning, and given a scientific connotation 
 which it has never lost. It no longer implies an intrinsic, physical 
 property of matter, but connotes a degree of correspondence between 
 a commodity and a given human want. " Value is not an attribute 
 of matter, but represents our sense of its usefulness, and this utility 
 is relative to our need. It grows or diminishes according as our 
 need expands or contracts." This is the foundation of the psycho- 
 logical theory of value. 2 
 
 But this is not all though a great deal. He clearly realises that 
 utility is not the only determinant of value ; that quantity, i.e. scarcity 
 or abundance, also exercises an important influence. With admirable 
 judgment he seizes upon the connection between them, and shows 
 how the two statements are united in one, for quantity only influences 
 value according as its action upon utility intensifies or weakens de- 
 mand. " But since the value of things is based upon need it is natural 
 that a more keenly felt need should endow things with greater value, 
 while a less urgent need endows them with less. Value increases 
 with scarcity and diminishes with plenty. In case of plenty it may 
 even disappear ; a superabundant good will be valueless if one 
 has no use for it." 8 This could not be put more clearly to-day. 
 Here we have the germ of the theories of Jevons and the Austrian 
 school, though it took a long time to develop. 
 
 We might naturally expect a superior treatment of exchange 
 following upon this new theory of value. If value is simply the 
 
 1 " I am so struck with this notion that I think it must serve as the basis of 
 this whole treatise." (Chap. 1.) 
 
 7 Le Commerce et le Gouvernement, p. 15. * Ibid., Part I, chap. 1.
 
 RESUME OF THE PHYSIOCRATIC DOCTRINE 49 
 
 satisfaction of want, exchange creates two values when it satisfies 
 two needs at the same time. The characteristic of exchange is that 
 each of the two parties yields what it has in superabundance in return 
 for what it needs. But what is given up is superabundant, is useless, 
 and consequently valueless ; what is demanded has greater utility, 
 and consequently greater value. Two men come to market each 
 with a useless thing, and each returns with a useful one. 1 Conse- 
 quently the Physiocratic saying that exchange means no gain to 
 anyone, or at least that the gain of on 3 only compensates for the 
 loss of the others, is seen to be radically false. The Physiocrats 
 notably Trosne attempted a reply, but, for reasons already given, 
 they never succeeded in realising the subjective character of value. 
 
 This same theory should have carried Condillac a stage further, 
 and helped in the rectification of the Physiocratic error concerning 
 production. If value is simply utility and utility itself is just the 
 correspondence between things and our demand for them, what is 
 the agency that produces this harmony between things and desires ? 
 It is very seldom that nature succeeds in establishing it. " Nature 
 is frequently fertile in things we have no desire for and lavish of 
 what is useless " a profound remark that ought to have cooled 
 the Physiocrats' love of the Alma Parens. " Matter is transformed 
 and made useful by dint of human labour. Production means giving 
 new form to matter." 2 If this be true, then there is no difference 
 between agricultural and industrial production, for they both trans- 
 form what already exists. 8 
 
 Moreover, the theory proves very clearly that if artisans and pro- 
 prietors are dependent upon the agriculturists as, indeed, they are 
 the latter in their turn are nothing but artisans. " If someone asks 
 whether agriculture ought to be preferred to manufacture or manufac- 
 ture to agriculture, we must reply that we have no preferences, and 
 that the best use should be made of both." * 
 
 Lastly, his definition of wages, short as it is, is of immense 
 significance. " Wages represent the share of the product which is 
 
 1 " It is not correct to say that the exchanged values are equal ; on the 
 contrary, each party seeks to give a smaller value in exchange for a larger one. 
 The process proves advantageous to both ; hence, doubtless, the origin of the 
 idea that the values must be equal. But one ought to have come to the conclu- 
 sion that if each gains both must have given less and obtained more." (Op. cit., 
 pp. 55, 86.) Compare this with the quotation from do Trosne, p. 27, and note its 
 psychological superiority. * Op. cit., Part I, chap. 9. 
 
 3 " Even where the land is covered with products there is no additional 
 material beyond what there was formerly. They have just boon given a new 
 form, and wealth consists merely of such transformations." 
 
 * Op. cit., Part 1, chap. 29.
 
 50 ADAM SMITH 
 
 due to the workers as co-partners." J Wages only " represent " the 
 share that is due to the workers. In other words, the wage-earner, 
 either through want of will or of power, cannot exercise his rightful 
 claim to his own work, and simply surrenders the claim in return for 
 a money price. This constitutes his salary, which is regulated, like 
 every other price, by competition between buyers and sellers. 
 Condillac makes no reference to an iron law of wages, but regards 
 them as determined by the forces of demand and supply. He does, 
 however, hint at the implicit alliance which exists between capital 
 and labour. 2 
 
 From a practical standpoint also, especially in his defence of free 
 labour and his condemnation of corporations, Condillac is more 
 categorical than the Physiocrats. " All these iniquitous privileges," 
 he writes, " have no claim to a place in the order beyond the fact 
 that they are already established." He is as persistent as Turgot 
 in his justification of the taking of interest and in his demand for 
 the determination of the rate by competition. This very elegant 
 argument is employed to show its similarity to exchange : Exchange 
 implies compensation for overcoming the drawbacks of distance, 
 whether of place or of time. 3 Exchange generally refers to place, 
 interest to time, and this is really the foundation of the modern theory. 
 
 CHAPTER II: ADAM SMITH 
 
 NOTWITHSTANDING the originality and vigour displayed by the 
 Physiocrats, they can only be regarded as the heralds of the new 
 science. Adam Smith, 4 it is now unanimously agreed, is its true 
 
 1 In a recent study of the wage bargain we find M. Chatelain giving expression 
 to similar ideas, though apparently knowing nothing of Condillac's work. 
 1 Op. cit., chap, xv, par. 8. 
 
 * See Turgot, Memoir e aur les Frets <T Argent, p. 122 : " In every bargain 
 involving the taking of interest a certain sum of money is given now in exchange 
 for a somewhat larger sum to be paid at some future date ; difference of time 
 as well as of place makes a real difference to the value of money." Further on 
 he adds (p. 127) : " The difference is faniili&r to everyone, and the well-known 
 proverb ' A bird in the hand is worth two in the bush ' is simply a popular way of 
 expressing it." 
 
 * The life of Adam Smith presents nothing remarkable. It is easily summed 
 up in the story of his travels, his professional activities, and the records of his 
 friendships, and among these his intimacy with Hume the philosopher has 
 become classical. He was born at Kirkcaldy, in Scotland, on June 5, 1723. 
 From 1737 to 1740 he studied at the University of Glasgow under Francis 
 Hutcheson, the philosopher, to whom he became much attached. From 1740 to
 
 ADAM SMITH 51 
 
 founder. The appearance of his great work on the Wealth of Nations 
 in 1776 instantly eclipsed the tentative efforts of his predecessors. 
 To-day the Physiocratic doctrines scarcely do more than arouse 
 historical curiosity, while Smith's work has been the guide for 
 successive generations of economists and the starting-point of all 
 their speculation. Even at the present day, despite many changes 
 in the fundamental principles of the science, no economist can afford 
 to neglect the old Scotch author without unduly narrowing his 
 scientific horizon. 
 
 Several reasons account for the commanding position held by 
 this book a position which no subsequent treatise has ever suc- 
 cessfully rivalled. 
 
 First is its supreme literary charm. It is above all an interesting 
 book, bristling with facts and palpitating with life. The burning 
 questions of the hour, such as the problems presented by the colonial 
 regime, the trading companies, the mercantile system, the monetary 
 question, and taxation, supply the author with congenial themes for 
 
 1746 he continued his studies at Oxford, where he seems to have worked steadily, 
 chiefly by himself. The intellectual state of the university was at that time 
 extremely low, and a number of the professors never delivered any lectures 
 at all. Returning to Scotland, he gave two free courses of lectures at Edinburgh, 
 one on English literature and the other on political economy, in the course 
 of which he defended the principles of commercial liberty. In 1751 he became 
 Professor of Logic at Glasgow, at that time one of the best universities in Europe. 
 Towards the end of the year he was appointed to the chair of Moral Philosophy, 
 which included the four divisions of Natural Theology, Ethics, Jurisprudence, 
 and Politics within its curriculum. In 1759 he published his Theory of Moral 
 Sentiments, which speedily brought him a great reputation. In 1764, when 
 forty years of age, he quitted the professorial chair at Glasgow University 
 and accompanied the young Duke of Buccleuch, son-in-law of Charles Townshend, 
 the celebrated statesman, on his travels abroad. With the young nobility of 
 this period foreign travel frequently took the place of a university training, 
 on account of the disrepute into which the latter had fallen. Smith was given a 
 pension of 300 a year for the rest of his life, so that the mere material advantage 
 was considerably in excess of his earnings as a professor. The years 1764-66 
 were spent in this way. A year and a half was passed at Toulouse, two months 
 at Geneva, where he met Voltaire, and another ten months at Paris. While 
 in Paris he became acquainted with the Physiocrats, particularly with Turgot and 
 the Encyclopaedists. It was at Toulouse that he began his Wealth of Nations. 
 Returning to Scotland in 1767, he went to live with his mother, with the sole 
 object of devoting himself to this work. By 1773 the book was nearly complete. 
 But Smith moved to London, and the work did not appear till 1776. By this 
 achievement Smith crowned the great celebrity which he already enjoyed. In 
 January 1778 Smith was appointed Commissioner of Customs at Edinburgh, a 
 distinguished position which he held until his death in 1790. 
 
 All that we know of Smith's character shows him to have been a man of 
 tender feelings and of great refinement of character. His absent-mindedness
 
 52 ADAM SMITH 
 
 his treatment. His discussion of these questions is marked by such 
 mastery of detail and such balance of judgment that he convinces 
 without effort. His facts are intermixed with reasoning, his illustra- 
 tions with argument. He is instructive as well as persuasive. Withal 
 there is no trace of pedantry, no monotonous reiteration in the work, 
 and the reader is not burdened with the presence of a cumbersome 
 logical apparatus. All is elegantly simple. Neither is there the 
 slightest suggestion of the cynic. Rather a passion of genuinely 
 human sympathy, occasionally bordering upon eloquence, breathes 
 through the pages. Thanks to rare qualities such as these we can 
 still feel something of the original freshness of this old book. 
 
 In addition to this, Smith has been successful in borrowing from 
 his predecessors all their more important ideas and welding them 
 into a more general system. He superseded them because he 
 rendered their work useless. A true social and economic philosophy 
 was substituted for their fragmentary studies, and an entirely new 
 value given to their contributions. Taken out of their isolation, they 
 help to illustrate his general theory, becoming themselves illuminated 
 in the process. 
 
 has become proverbial. In politics his sympathies were with the Whigs. In 
 religion he associated himself with the deists, a school that was greatly in vogue 
 towards the end of the eighteenth century, and of which Voltaire, who was much 
 admired by Smith, was the most celebrated representative. 
 
 For a long time the only life of Smith which we possessed was the memoir 
 written by Dugald Stewart, Account of the Life and Writings of Adam Smith, 
 and read by him in 1793 before the Royal Society of Edinburgh. It appeared 
 in the Transactions of the society for 1794, and was published in volume form in 
 1811 along with other biographies, under the title of Biographical Memoir 9 oj 
 Adam Smith, Robertson, etc., by Dugald Stewart. To-day we are more fortunate, 
 John Rae in his charming Life of Adam Smith (London, 1895) has succeeded 
 in bringing to light all that we can know of Smith and his circle. To him 
 we are indebted for mcst of the details we havo given. In 1894 James Bonar 
 published a catalogue of Smith's library, containing about 2300 volumes, and 
 comprising about two-thirds of his whole library. A still more important con- 
 tribution to the study of Smith's ideas has been made by Dr. Edwin Cannan, 
 who in 1896 published Lectures on Justice, Police, Revenue, and Arms, delivered 
 in Glasgow by Adam Smith, from Notes taken by a Student in 1763 (Oxford). 
 This represents the course of lectures on political economy delivered by Smith 
 while professor at Glasgow. A manuscript copy of the notes taken in this 
 course by a student, probably in 1763, was accidentally discovered by a 
 London solicitor in 1876. These notes were in 1895 forwarded to Dr. Cannan 
 for publication. They are especially precious in helping us to understand Smith's 
 ideas before his stay in France and his meeting with the Physiocrats. Of the 
 numerous editions of the Wealth of Nations which have hitherto been published, 
 the more important are those of Buchanan, McCulloch, Thorold Rogers, and 
 Nicholson. The latest critical edition is that of Dr. Cannan, publishedin 1904 by 
 Methuen, containing very valuable notes. This is the edition we have used.
 
 ADAM SMITH 53 
 
 Like most great writers, Smith knows how to borrow without 
 impairing his originality. Over a hundred authors are quoted in 
 his book, but he does not always acknowledge them. The names of 
 some of the writers who exercised such influence over him, and 
 opened up the path which he afterwards followed, deserve more 
 than a passing reference. 
 
 The first place among these belongs, perhaps, to Hutcheson, 
 Smith's predecessor in the chair of Moral Philosophy at Glasgow. 
 The divisions of the subject are almost identical with those given by 
 Hutcheson, and many of Smith's best known theories can be traced 
 in the System of Moral Philosophy published by Hutcheson in 
 1755, but which we know was written long before. Hutcheson laid 
 great stress upon the supreme importance of division of labour, and 
 his views on such questions as the origin and variations in the value 
 of money and the possibility of corn or labour affording a more 
 stable standard of value closely resemble those of the Wealth of 
 Nations. 
 
 David Hume is a near second. Smith refers to him as " by far 
 the most illustrious philosopher and historian of the present age," 1 
 and from 1752 onward they were the closest of friends. Hume was 
 already the author of some essays on economic questions, the most 
 important among them dealing with money, foreign trade, the rate 
 of interest, etc. These, along with several other writings, were pub- 
 lished in the Political Discourses in 1752. Hume's examination of 
 these problems displays his original penetrative thought, and there 
 is evident the profundity and lucidity of treatment characteristic 
 of all his writings. The absurdity of the Mercantile policy and 
 of interfering with the natural tendency of money to adapt itself 
 to the needs of each community, the sophistry of the balance of 
 trade theory, and the impious consequences resulting from com- 
 mercial jealousy among nations are exposed with admirable force 
 in these essays. No doubt the essays left a great impression upon 
 Smith. He quoted them in his lectures at Glasgow, and Hume 
 consulted him before bringing out a second edition. It is true that 
 Smith eventually became the stauncher Liberal of the two. Hume, 
 in his essay on the Balance of Trade, recognized the legitimacy of 
 certain protective rights which Smith wished removed altogether. 
 Still it was to Hume that Smith owed his conversion to the Liberal 
 faith. 
 
 On this matter of commercial liberty there was already, towards 
 the end of the seventeenth and the beginning of the eighteenth 
 1 Wealth of Nations, vol. ii, p. 275.
 
 54 ADAM SMITH 
 
 centuries, a small but a growing band of Mercanti lists who had 
 begun to protest against the irksomeness of the Customs regulations. 
 They were, of course, still largely imbued with mercantile prejudice, 
 but they are rightly classed as " Liberals." Just as in France 
 Boisguillebert had foreshadowed the Physiocrats, so in England 
 Child, Petty, Tucker, Dudley North, and Gregory King had been 
 preparing the way for a more liberal policy in foreign trade. 1 
 
 In addition to Hutcheson and Hume one other writer must be 
 mentioned in this connection, namely, Bernard de Mandeville. He 
 was not an economist at all, but a doctor with considerable philo- 
 sophical interests. In 1704 he had published a small poem, which, 
 along with a number of additions, was republished in 1714 under the 
 title of The Fable of the Bees ; or, Private Vices Public Benefits. The 
 fundamental idea of the book, which caused quite a sensation at the 
 time, and which was seized by order of the Government, is that 
 civilisation understanding by that term not only wealth, but also 
 the arts and sciences is the outcome, not of the virtues of mankind, 
 but of what Mandeville calls its vices ; in other words, that the 
 desire for well-being, comfort, luxury, and all the pleasures of life 
 arises from our natural wants. The book was a sort of apology 
 for the natural man and a criticism of the virtuous. 
 
 Smith criticised Mandeville in his Theory of Moral Sentiments* 
 and reproached him particularly for referring to tastes and desires as 
 vices though in themselves they were nowise blameworthy. But 
 despite his criticism Mandeville's idea bore fruit in Smith's mind. 
 Smith in his turn was to reiterate the belief that it was personal 
 interest (in his opinion no vice, but an inferior virtue) that unwittingly 
 led society in the paths of well-being and prosperity. A nation's 
 wealth for Smith as well as for Mandeville is the result, if not of a 
 vice, at least of a natural instinct which is not itself virtuous, but 
 which is bestowed upon us by Providence for the realisation of 
 ends that lie beyond our farthest ken. 
 
 Such are the principal writers in whose works we may find an 
 outline of some of the more important ideas which Smith was to 
 incorporate in a true system. 
 
 Mere systematisation, however, would not have given the Wealth 
 of Nations its unique position. Prior to Smith's time attempts had 
 been made by Quesnay and the Physiocrats to outline the scope of 
 
 1 On this point see Schatz's Individualisme, economique et social (Paris, 
 1908). 
 
 * Chap iv of sec. ii of the 7th part of the Theory of Moral Sentiments is entitled 
 Of Syatemt of License.
 
 ADAM SMITH 55 
 
 the science and to link its various portions together by means of a 
 few general principles. Although he was not the first to produce a 
 connected scientific treatise out of this material, he had a much 
 greater measure of success than any of his predecessors. 
 
 Smith owed much to the Physiocrats, but he had little personal 
 acquaintance with them beyond that afforded by his brief stay in 
 Paris in 1765. Slight as the intimacy was, however, there is no 
 doubt about the influence they had upon him. It is also very im- 
 probable that he had read all their works : Turgot's Reflexions, for 
 example, written in 1766, but only published in 1769-70, was probably 
 not known to him. But frequent* personal converse with both 
 Turgot and Quesnay had helped him in acquiring precise first-hand 
 knowledge - of their views. We can easily guess which ideas would 
 attract him most. 
 
 On one point at least he had no need to be enlightened, for in the 
 matter of economic liberalism he had long been known as a doughty 
 champion. But the ardent faith of the Physiocrats must have 
 strengthened his own belief very considerably. 
 
 On the other hand, it appears that he borrowed from the Physio- 
 crats the important idea concerning the distribution of the annual 
 revenue between the various classes in the nation. In his lectures 
 at Glasgow he scarcely mentions anything except production, but 
 in the Wealth of Nations an important place is given to distribution. 
 The difference can hardly be explained except upon the hypothesis 
 of Smith's growing acquaintance with the Tableau tconomique and 
 the theory of the " net product." 
 
 But admitting that he borrowed what was most characteristic 
 and most suggestive in their teaching, his treatment of its many 
 complicated aspects is altogether superior to theirs. The Physiocrats 
 were so impressed by the importance of agriculture that they utterly 
 failed to see the problem in its true perspective. They scanned the 
 field through a crevice, and their vision was consequently narrow 
 and limited. Smith, on the other hand, took the whole field of 
 economic activity as his province, and surveyed the ground from an 
 eminence where the view was clearest and most extensive. 
 
 The economic world he regarded as a vast workshop created by 
 division of labour, one universal psychological principle the desire 
 of everyone to better his lot supplying unity to its diverse pheno- 
 mena. Political economy was at last to be based, not on the interests 
 of a particular class, whether manufacturing or agricultural, but 
 upon a consideration of the general interest of the whole community. 
 Such are the directing principles that inspire the whole work, the
 
 56 ADAM SMITH 
 
 guiding lines amidst what had hitherto seemed a mere chaos 
 of economic facts. Contemporaries never counted upon the diffi- 
 culties which the new science was bound to encounter, so great was 
 their enthusiasm at having a fixed standpoint from which for the 
 first time the complex interests of agriculture, industry, and com- 
 merce might be impartially surveyed. With Smith the study 
 emerged from the " system " stage and became a science. 
 
 Our examination of Smith's views will be grouped around three 
 points : 
 
 (I) Division of labour. 
 
 (II) The "natural" organisation of the economic world under 
 the influence of personal interest. 
 
 (III) Liberalism. 
 
 I : DIVISION OF LABOUR 
 
 IT was Quesnay who had propounded the theory that agriculture 
 was the source, of all wealth, both the State's and the individual's. 1 
 Adam Smith seized upon the phrase and sought to disprove it in his 
 opening sentence by giving to wealth its true origin in the general 
 activity of society. " The annual labour of every nation is the fund 
 which originally supplies it with all the necessaries and conveniences 
 of life which it annually consumes, and which consist always either 
 in the immediate produce of that labour or in what is purchased with 
 that produce from other nations." 
 
 Labour is the true source of wealth. When Smith propounded 
 this celebrated theory, which has given rise to so many misunder- 
 standings since, it was not intended that it should minimise the 
 importance of natural forces or depreciate the part which capital 
 plays in production. 2 No one, except perhaps J. B. Say, has been 
 more persistent in emphasising the importance of capital, and to the 
 land, as we shall presently see, he attributed a special degree of pro- 
 ductivity. But from the very outset Smith was anxious to emphasise 
 the distinction between his doctrine and that of the Physiocrats. 
 So he definitely affirms that it is human activity and not natural 
 forces which produces the mass of commodities consumed every year. 
 
 1 One ken's edition, p. 331. 
 
 1 The theory that there are three factors of production, which has since become 
 a commonplace of economics, is not to be found in Smith. Indirectly, however, 
 it was he who originated the idea by distinguishing in his treatment of distribu- 
 tion between the various sources of revenue. The distinction once made, it waa 
 quite natural to consider each source as a factor of production ; and this is just 
 what J. B. Say did in his Treatise (2nd ed., chaps, iv and v). Cf. Cannan's 
 History of the Theories of Production and Distribution, p. 40 (1894).
 
 DIVISION OF LABOUR 57 
 
 Without the former's directing energy the latter would for ever 
 remain useless and fruitless. 
 
 He is not slow to draw inferences from this doctrine. Work, 
 employed in the widest sense, and not nature, is the parent of wealth 
 not the work of a single class like the agriculturists, but the work 
 of all classes. Hence all work has a claim to be regarded as produc- 
 tive. The nation's annual income owes something to everyone who 
 toils. It is the result of their collaboration, of their ** co-operation " 
 as he calls it. There is no longer any need for the distinction between 
 the sterile and the productive classes, for only the idle are sterile. 
 
 A nation is just a vast workshop, where the labour of each, 
 however diverse in character, adds to the wealth of all. The passage 
 in which Adam Smith expresses this idea is well known, but no 
 apology is needed for quoting it once again. 1 " What a variety of 
 labour too is necessary in order to produce the tools of the meanest 
 of those workmen ! To say nothing of such complicated machines 
 as the ship of the sailor, the mill of the fuller, or even the loom of 
 the weaver, let us consider only what a variety of labour is requisite 
 in order to form that very simple machine, the shears with which 
 the shepherd clips the wool. The miner, the builder of the furnace 
 for smelting the ore, the feller of the timber, the burner of the 
 charcoal to be made use of in the smelting-house, the brick-maker, 
 the brick-layer, the workmen who attend the furnace, the mill-wright, 
 the forger, the smith, must all of them join their different arts in 
 order to produce them. Were we to examine, in the same manner, 
 all the different parts of his dress and household furniture, the 
 coarse linen shirt which he wears next his skin, the shoes which 
 cover his feet, the bed which he lies on, and all the different parts 
 which compose it, the kitchen-grate at which he prepares his victuals, 
 the coals which he makes use of for that purpose, dug from the bowels 
 of the earth, and brought to him perhaps by a long sea and a long 
 land carriage, all the other utensils of his kitchen, all the furniture 
 of his table, the knives and forks, the earthen or pewter plates upon 
 which he serves up and divides his victuals, the different hands 
 employed in preparing his bread and his beer, the glass window 
 which lets in the heat and the light, and keeps out the wind and the 
 rain, with all the knowledge and art requisite for preparing that 
 beautiful and happy invention, without which these northern parts 
 of the world could scarce have afforded a very comfortable habita- 
 tion, together with the tools of all the different workmen employed 
 in producing those different conveniences ; if we examine, I say, 
 1 Wealth of Nations, Book I, chap. 1 ; Carman, vol. i, pp. 13-14. 
 
 E.D. C
 
 58 ADAM SMITH 
 
 all these things, and consider what a variety of labour is employed 
 about each of them, we shall be sensible that without the assistance 
 and co-operation of many thousands, the very meanest person in a 
 civilized country could not be provided, even according to, what we 
 very falsely imagine, the easy and simple manner in which he is 
 commonly accommodated." 
 
 Division of labour is simply the spontaneous realisation of a 
 particular form of this social co-operation. Smith's peculiar merit 
 lies in placing this fact in its true position as the basis of his whole 
 work. The book opens upon this note, whose economic and social 
 importance has been so frequently emphasised since that it sounds 
 almost commonplace to-day. 
 
 This division of labour effects an easy and natural combination 
 of economic efforts for the creation of the national dividend. Whereas 
 animals confine themselves to the direct satisfaction of their indi- 
 vidual needs, 1 men produce commodities to exchange them for others 
 more immediately desired. Hence there results for the community 
 an enormous increase of wealth ; and division of labour, by establish- 
 ing the co-operation of all for the satisfaction of the desires of each, 
 becomes the true source of progress and of well-being. 
 
 In order to illustrate the growth in total production as the 
 outcome of division of labour, Smith gives an example of its effects 
 in a particular industry. '* The effects of the division of labour, in 
 the general business of society, will be more easily understood by 
 considering in what manner it operates in some particular manu- 
 factures." It is in this connection that he introduces his celebrated 
 description of the manufacture of pins. " A workman not educated 
 to this business (which the division of labour has rendered a distinct 
 trade), nor acquainted with the use of the machinery employed in it 
 (to the invention of which the same division of labour has probably 
 given occasion), could scarce, perhaps, with his utmost industry, make 
 one pin in a day, and certainly could not make twenty. But in the 
 way in which this business is now carried on, not only the whole 
 work is a peculiar trade, but it is divided into a number of branches, 
 of which the greater part are likewise peculiar trades. One man 
 draws out the wire, another straights it, a third cuts it, a fourth 
 points it, a fifth grinds it at the top for receiving the head ; to make 
 the head requires two or three distinct operations ; to put it on, is a 
 
 1 " In almost every other race of animals each individual, when it is grown up 
 to maturity, is entirely independent, and in its natural state has occasion for the 
 assistance of no other living creature." (Wealth of Natiuna, Book I, chap. 2 ; 
 Carman, vol. i, p, 16.)
 
 DIVISION OF LABOUR 59 
 
 peculiar business, to whiten the pins is another ; it is even a trade 
 by itself to put them into the paper ; and the important business of 
 making a pin is, in this manner, divided into about eighteen distinct 
 operations, which, in some manufactories, are all performed by 
 distinct hands, though in others the same man will sometimes 
 perform two or three of them. I have seen a small manufactory of 
 this kind where ten men only were employed, and where some of 
 them consequently performed two or three distinct operations. But 
 though they were very poor, and therefore but indifferently accom- 
 modated with the necessary machinery, they could, when they 
 exerted themselves, make among them about twelve pounds of pins 
 in a day." 1 
 
 Such is the picture of man as we find him in society. Division 
 of labour and exchange have resulted in augmenting production 
 a hundredfold, and thus increasing his well-being, whereas left to 
 himself he could scarcely supply his most urgent needs. 
 
 In a subsequent analysis Smith ascribes the gain resulting from 
 division of labour to three principal causes : (1) The greater dexterity 
 acquired by each workman when confined to one particular task ; 
 (2) the economy of time achieved in avoiding constant change 
 of occupation ; (3) the number of inventions and improvements 
 which suggest themselves to men absorbed in one kind of work. 
 
 Criticism has been levelled at Smith for his omission to mention 
 the disadvantages of division of labour which might possibly counter- 
 balance its many advantages. The omission is the result of his 
 method of treating the whole question, and it is not of much 
 real importance. The disadvantages, moreover, were not altogether 
 lost sight of, and it would be difficult to find a more eloquent plea 
 for some counteracting influence than that which Smith puts forward 
 in the fifth book of the Wealth of Nations. " In the progress of the 
 division of labour," he remarks, " the employment of the far greater 
 part of those who live by labour, that is, of the great body of the people, 
 comes to be confined to a few very simple operations ; frequently to 
 one or two." But ** the man whose whole life is spent in performing 
 a few simple operations, of which the effects too are, perhaps, always 
 the same, or very nearly the same, has no occasion to exert his 
 understanding, or to exercise his invention in finding out expedients 
 for removing difficulties which never occur. He naturally loses, 
 therefore, the habit of such exertion, and generally becomes as stupid 
 and ignorant as it is possible for a human creature to become." a 
 
 1 Wealth of Nations, Book 1, chap. 1 ; Oannan, vol. i, p. 6. 
 * Ibid., Book V, chap, i, pur iii, art. 2 ; vol. ii, p. 207.
 
 60 ADAM SMITH 
 
 This passage seems in contradiction with the ideas expressed 
 above. At one moment constant application to one particular kind 
 of work is regarded as the mother of invention, at another the 
 unremitting task is branded as a fertile cause of stupefaction. The 
 contradiction is, however, more apparent than real. An occupation 
 at first stimulating to the imagination may, if constantly pursued, 
 result in mental torpor. Smith's conclusions are at any rate interest- 
 ing. In order to remove the inconveniences resulting from over- 
 specialisation he emphasises the need for bringing within reach of 
 the people, even of imposing upon them, a system of education 
 consisting of the three R's 1 such education to be supplied through 
 institutions partly supported by the State. We can imagine the 
 shock which such heterodoxy must have given to the prophets of 
 laissez-faire. Fortunately it was not the only one they had to 
 bear. 
 
 Smith next proceeds to indicate the limits of this division of 
 labour. Of such limits he mentions two : (1 ) In the first place it 
 must be limited by the extent of the market. " When the market 
 is very small, no person can have any encouragement to dedicate 
 himself entirely to one employment, for want of the power to exchange 
 all that surplus part of the produce of his own labour, which is over 
 and above his own consumption, for such parts of the produce of 
 other men's labour as he has occasion for." 2 This is why foreign 
 trade, including trade with the colonies, by extending the market 
 for some products is favourable to further division of labour and 
 a further increase of wealth. (2) The other consideration which, 
 according to Smith, limits division of labour is the quantity of capital 
 available. 8 The significance of this observation is not quite so 
 obvious as that of the former one. Here it seems to us that a 
 conclusion drawn from one particular trade has been applied to 
 industry as a whole. It may be true of a private manufacturer that 
 
 1 " For a very small expence the public can facilitate, can encourage, and can 
 even impose upon almost the whole body of the people, the necessity of acquiring 
 those most essential parts of education." (Wealth of Nations, Book V, chap. 1, 
 part iii, art. 2 ; Cannan, vol. ii, p. 270.) 
 
 1 Ibid., Book I, chap. 3 ; vol. i, p. 19. 
 
 1 " As the accumulation of stock must, in the nature of things, be previous to 
 the division of labour, so labour can be more and more subdivided in proportion 
 only as stock is previously more and more accumulated." (Ibid., Book II, 
 Introd. ; vol. i, p. 259.) It is true that in another passage he speaks of the 
 quantity of stock which can be employed in any branch of business depending 
 very much upon that of the labour which can be employed in it (Book I, chap. 10, 
 part ii ; vol. i, p. 1 37). But this observation remains isolated, while the former 
 represents his true teaching.
 
 DIVISION OF LABOUR 61 
 
 he will be able to push technical division of labour further than any 
 of his rivals provided he has more capital than they ; but taking 
 society as a whole it is clear that the existence of division of labour 
 enables the same product to be produced with less capital than is 
 necessary for the single producer. 1 
 
 Such is an outline of Adam Smith's theory of division of labour 
 a theory so familiar to everyone to-day that we are often unable to 
 realise its importance and to appreciate its originality, and this 
 despite the fact that certain sociologists like Durkheim have 
 hailed it as supplying the basis of a new ethic. Juxtaposed 
 with the Physiocratic theory, it is not very difficult to realise its 
 superiority. 
 
 To the Physiocrats the economic world was a hierarchy of classes. 
 The agriculturist in some mysterious way bore the " whole weary 
 weight of this unintelligible world " upon his own shoulders, giving 
 to the other classes a modicum of that sustenance which he had 
 wrested from the soil. Hence the fundamental importance of the agri- 
 cultural classes and the necessity for making the whole economic system 
 subordinate to them. Adam Smith, on the other hand, attempted 
 to get a view of production as a whole. He regarded it as the result 
 of a series of joint undertakings engineered by the various sections 
 of society and linked together by the tie of exchange. The progress 
 of each section is bound up with that of every other. To none of 
 these classes is entrusted the task of keeping all the others alive ; all 
 are equally indispensable. The artisan who spares the labourer the 
 task of building his house or of making his shoes contributes to the 
 accumulation of agricultural products just as much as the ploughman 
 who frees the artisan from turning the furrow or sowing the seed. 
 The progress of national wealth cannot be measured in terms of a 
 single net product ; it must be estimated by the increase in the 
 whole mass of commodities placed at the disposal of consumers. 
 
 One very evident practical conclusion follows; namely, that 
 taxation should fall, not upon one class, as the Physiocrats wished, 
 but upon all classes alike. As against the impot unique, Smith 
 advocates multiple taxation which shall strike every source of 
 revenue equally, labour and capital as well as land ; and the funda- 
 mental rule which he lays down is as follows : " The subjects of 
 every State ought to contribute towards the support of the Govern- 
 ment, as nearly as possible, in proportion to their respective abilities ; 
 that is, in proportion to the revenue which they respectively enjoy 
 
 1 Cf. Carman's penetrating criticism of this idea of Smith's in Theories of 
 Production atid Distribution, pp. 80-83.
 
 62 ADAM SMITH 
 
 under the protection of the State." 1 This is his famous maxim of 
 equality so frequently quoted in every financial discussion. 2 
 
 It is very curious that Smith should have failed to make the best 
 possible use of this theory. Its full significance was lost upon him. 
 The theory of division of labour alone was sufficient to dispose of 
 the whole Physiocratic system. Nevertheless, in the last chapter of 
 Book IV we find him still valiantly struggling to disprove the con- 
 clusions of the Physiocrats, by the aid of arguments not always 
 very convincing. Forgetting his principle of division of labour, he 
 even adopts a part of their thesis and finds himself entangled by the 
 invalid distinctions which they had drawn between productive and 
 unproductive workers. He simply gives another definition and 
 describes as unproductive all works which " perish in the very instant 
 of their performance, and seldom leave any trace or value behind 
 them for which an equal quantity of service could afterwards be 
 procured." 8 All these services, which comprise the labours of 
 domestic servants, of administrators and magistrates, of soldiers and 
 priests, of counsellors, doctors, artists, authors, musicians, etc., Say 
 classed together as " immaterial products." By restricting the 
 term " productive " to material objects only, Smith gave rise to a very 
 useless controversy on the nature of productive and unproductive 
 works a controversy that was first taken up by Say and revived 
 by Mill, but which to-day seems to be decided against Smith, 
 thanks to a more exact interpretation of his own doctrines. It is, 
 indeed, quite clear that all these services constitute a part of the 
 
 1 This is the first of the four celebrated maxims enunciated by Smith in his 
 theory of taxation. Here are the other three : " (ii) The tax which each individual 
 is bound to pay ought to be certain and not arbitrary. The time of payment, 
 the manner of payment, the quantity to be paid, ought all to be clear and plain 
 to the contributor, and to every other person, (iii) Every tax ought to be levied 
 at the time, or in the manner, in which it is most likely to be convenient for the 
 contributor to pay it. (iv) Every tax ought to be so contrived as both to take 
 out and to keep out of the pockets of the people as little as possible, over and 
 above what it brings into the public treasury of the State." ( Wealth of Nations, 
 Book V, chap. 2, part ii ; Carman, vol. ii, pp. 310-311.) 
 
 * This rule of payment according to ability did not prevent his pronouncing 
 in another paragraph in favour of progressive taxation. This is an instance of 
 a want of logic frequently evidenced in his writings. Speaking of taxes upon 
 rent, he remarks that they weigh more heavily upon rich than upon poor, because 
 the former in proportion to their income spend more upon house rent than the 
 latter. But " it is not very unreasonable that the rich should contribute to 
 the public expence, not only in proportion to their revenue, but something 
 more than in that proportion." (Ibid., "Book V, chap. 2, part ii, art. 1 ; vol. ii, 
 p. 327.) 
 
 1 Ibid., Book II, chap. 3 ; vol. i, p. 314.
 
 DIVISION OF LABOUR 63 
 
 annual revenue of the nation, and that " production " in a general 
 sense would be diminished if some persons did not exclusively 
 devote themselves to the performance of such tasks. 
 
 After criticising the Physiocratic distinction drawn between the 
 wage-earning classes and the productive, Smith immediately admits 
 that the labour of artisans and traders is not as productive as that 
 of farmers and agricultural labourers, for the latter not only return 
 the capital employed by them together with profits, but they also 
 furnish the proprietor with rent. 1 
 
 Whence this hesitation on the part of Smith ? Where did he 
 come by the idea of the special and superior productivity of agricul- 
 ture ? An attempt to account for it may prove interesting, and it 
 will help us to give Smith his true place in a history of economic 
 doctrines. 
 
 Notwithstanding his recantation, Smith was never quite rid 
 of Physiocratic influence. Writing of the Physiocratic system, he 
 described it as perhaps " the nearest approximation to the truth 
 that has yet been published." 2 So indelible was the impression 
 which the Physiocrats left upon him that both they and their doc- 
 trines, even when the latter are directly opposed to his own, are 
 always spoken of with the greatest respect. The most important 
 evidence of their power over him is the thesis just mentioned which 
 he attempted to defend, namely, that between agriculture and other 
 industries lies an essential distinction, because in industry and 
 commerce the forces of nature are never brought into play, whereas 
 in agriculture they always collaborate with man. " No equal quan- 
 tity of productive labour employed in manufactures can ever occasion 
 so great a reproduction. In them nature does nothing ; man does 
 all ; and the reproduction must always be in proportion to the 
 strength of the agents that occasion it." 8 We almost think we 
 are dreaming when we read such things in the work of a great econo- 
 mist. Water, wind, electricity, and steam, are they not natural 
 forces, and do they not co-operate with man in his task of production ? 
 
 * " Fanners and country labourers, indeed, over and above the stock which 
 maintains and employs them, reproduce annually a neat produce, a free rent to 
 the landlord. As a marriage which affords three children is certainly more 
 productive than one which affords only two ; so the labour of farmers and 
 country labourers is certainly more productive than that of merchants, artificers, 
 and manufacturers. The superior produce of the one class, however, does not 
 render the other barren or urpro Inctive." (Wealth of Nations, Book IV, chap. 9 ; 
 Cannan, vol. ii, p. 173.) 
 
 * Ibid., Book IV, chap. 9 ; vol. ii, p. 176. 
 Ibid., Book II, chap. 6 ; vol. i, p. 344.
 
 64 ADAM SMITH 
 
 Considerations such as these were allowed to pass quite unheeded, 
 and Smith persisted in his error because he believed that this new 
 doctrine furnished him with an explanation of rent, that strange 
 enigma which had puzzled English economists for so long. How was 
 it that while other branches of production gave a return only suffi- 
 cient to remunerate the capital and labour employed, agriculture, in 
 addition to these two revenues, yielded a supplementary income 
 known as rent ? It was because " in agriculture nature labours 
 along with man : and though her labour costs no expence, its 
 produce has its value as well as that of the most expensive workman." 
 Thus " rent may be considered as the produce of those powers of 
 nature, the use of which the landlord lends to the farmer." l Had 
 Smith arrived at a true theory of rent this recourse to the natural 
 powers of the soil to furnish an explanation of the proprietor's 
 revenue would have been quite unnecessary, and in all probability 
 he would not have so easily accepted the idea of the special produc- 
 tivity of the soil. But this false conception of nature has persisted 
 in economic theory, and in it Smith thought he saw an additional 
 reason for adhering to those errors which the Physiocrats had first 
 induced him to commit. 2 
 
 1 Wealth of Nations, Book II, chap. 5 ; Carman, vol. i, p. 344. Note that 
 here as elsewhere Smith entertains more than one opinion. In other passages 
 in the book he regards rent as a monopoly price " that enters into the composition 
 of the price of commodities in a different way from wages and profit. High or 
 low wages and profit, are the causes of high or low price ; high or low rent is 
 the effect of it. It is because high or low wages and profit must be paid, in 
 order to bring a particular commodity to market, that its price is high or low. 
 But it is because its price is high or low ; a great deal more, or very little more, 
 or no more, than what is sufficient to pay those wages and profit, that it affords 
 a high rent, or a low rent, or no rent at all." (Ibid., Book I, chap. 11 ; vol. i, 
 p. 147.) 
 
 It is impossible to reconcile these statements. In the one case rent is regarded 
 as a constituent element of price, in the other it is the effect of price. 
 
 In the first edition this contradiction was still more evident. In that edition 
 rent, along with profit and wages, was treated as a third determinant of value. 
 (See Caiman's edition, vol. i, p. 51, note 7.) The paragraph was deleted from the 
 second edition, and rent was treated merely as a component part of the price. 
 This modification was perhaps the outcome of a letter written by Hume to Smith 
 on April 1, 1776, after he had read the Wealth of Nations for the first time. " I 
 cannot think," says Hume, " that the rent of farms makes any part of the price 
 of the produce, but that the price is determined altogether by the quantity and 
 the demand." (Quoted by Bae in his Life of Adam Smith, p. 286.) The cele- 
 brated controversy as to whether rent enters into prices is not a thing of yesterday. 
 Its origin dates from the birth of political economy iteelf, and it will probably 
 only die with it. 
 
 * His error is partly due to the fact that he failed to distinguish between 
 the profits of the entrepreneur and the interest of the capitalist. Both with
 
 DIVISION or LABOUR 65 
 
 Apart from his personal attachment to the Physiocrats we must 
 also remember that Smith more than shared their predilection for 
 agriculture. 
 
 Nothing can be more incorrect, though it is frequently done, 
 than to regard Smith as the prophet of industrialism and to contrast 
 him with the Physiocrats, the champions of agriculture. When the 
 Wealth of Nations appeared in 1776 the economic transformation 
 known to history as the Industrial Revolution, which consisted 
 in the rapid substitution of machine production for the old domestic 
 regime, had as yet scarcely begun. Hargreaves and Arkwright 
 had doubtless some inventions to their credit. The one had pro- 
 duced the spinning jenny in 1765, and the other had perfected 
 the water frame in 1767, improvements that had given considerable 
 impetus to the cotton trade. James Watt, 1 who was known to 
 Smith, took out a patent for a steam-engine in 1769. But these 
 inventions were as yet quite novel, and required time before they 
 could modify the industrial system. The more important among 
 them, Crompton's " mule " 2 and Cartwright's weaving machine, 
 were as yet of the future. These dates are significant ; they prove 
 conclusively that the Industrial Revolution had scarcely begun when 
 Smith's great work appeared. Moreover, several of the more 
 important themes treated of in the Wealth of Nations may be dis- 
 covered in the course of lectures which Smith delivered at Glasgow 
 about 1759, so that it is quite impossible to establish anything like 
 an exact connection between the Industrial Revolution which was 
 just beginning and the ideas embodied in the Wealth of Nations. 
 One cannot even say that Smith was particularly enamoured of the 
 
 Smith and with his successors th" word " profit " signified a twofold revenue, and 
 this was perfectly correct so long as the entrepreneur was also a capitalist. The 
 word " interest " was reserved for the income of that person who lent capital but 
 who did not himself produce anything. The revenue " derived from stock, 
 by the person who manages or employs it, is called profit. That derived from it 
 by the person who does not employ it himself, but lends it to another, is called the 
 interest or the use of money." (Ibid., Book I, chap. 6 ; vol. i, p. 54.) J. B. Say 
 was the first to give us a definite idea of the entrepreneur. Had Smith realised 
 more clearly the functions of the entrepreneur he would probably have perceived : 
 (1) That the entrepreneur, in addition to paying interest on his capital, frequently 
 has to pay rent for the use of the soil ; (2) that profit strictly so called includes 
 an element analogous to rent. According to Smith, profit was simply payment 
 for risks undergone or for work undertaken. 
 
 1 James Watt in 1756 had set up his workshop within the precincts of the 
 University of Glasgow, for which he manufactured mathematical instruments. 
 The corporation had refused him permission to set it up in the town a striking 
 .llustration of the narrowness and inflexibility of " the corporative regime." 
 
 1 A combination of Hargreave's spinning jenny and Arkwright's water frame. 
 
 E.D. 0'
 
 60 ADAM SMITH 
 
 manufacturing regime apart from the mechanical advance which it 
 implied. For, as Marx says, 1 the characteristic trait of English 
 economic life, despite the undisputed advance that industry was 
 making at that time, was commercial rather than industrial.* 
 Especially was this true of Glasgow, where Smith made most of his 
 observations. Glasgow then was an essentially commercial town, 
 principally engaged in the importation of American tobacco. 3 
 
 Far from constituting a prophetic manifesto of the new age, 
 Smith's work reveals even to the most superficial reader a thorough 
 abhorrence of traders and manufacturers. All his sarcasm is 
 reserved for them, all his criticism levelled at them. While the 
 interest of landed proprietors and workers appears to him always to 
 accord with a country's general interest, that of traders and manu- 
 facturers ** is never exactly the same with that of the public," the 
 manufacturers having " generally an interest to deceive and even 
 to oppress the public, and who accordingly have, upon many 
 occasions, both deceived and oppressed it." * 
 
 Again, when it comes to choosing between capitalists and work- 
 men the issue is not long in doubt. It is quite clear from more 
 than one passage that Smith's sympathy was wholly with the workers. 
 Several paragraphs could be cited in proof of this. Suffice it to 
 recall the very sympathetic way in which he speaks of the high 
 wages of workmen and contrast it with his discussion of profits. " Is 
 this improvement in the circumstances of the lower ranks of the 
 people to be regarded as an advantage or as an inconveniency to 
 the society? The answer seems at first sight abundantly plain. 
 Servants, labourers and workmen of different kinds, make up the 
 far greater part of every great political society. But what improves 
 the circumstances of the greater part can never be regarded as an 
 inconveniency to the whole. No society can surely be flourishing 
 and happy, of which the far greater part of the members are poor 
 and miserable. It is but equity, besides, that they who feed, 
 
 1 Marx speaks of Smith as the economist who is the very epitome of the 
 manufacturing period. (Das Kapital, vol. i, p. 313, note.) 
 
 1 See Mantoux' work, La Revolution industrielle au XVIII' Siede, p. 75 
 (Paris, 1905). "We are mistaken," says he, "if we think that manufacture 
 was the dominant feature of the period preceding the factory system. Logically 
 it may be the necessary antecedent, but historically its claim to priority is weak, 
 although it left its indelible marks upon industry. The appearance of industry 
 at the time of the Renaissance is an event of the greatest importance and signifi- 
 cance, but it only played a part of secondary importance for a century or two." 
 
 Rae's Life of Adam Smith, p. 89. 
 
 Wealth of Nations, Book I, chap. 11 ; Cannan, vol. i, p. 250.
 
 DIVISION OF LABOUR 67 
 
 cloath, and lodge the whole body of the people, should have 
 such a share of the produce of their own labour as to be themselves 
 tolerably well fed, cloathed, and lodged." * The tune changes when 
 he comes to speak of profits. He is of opinion that high profits 
 raise the price of commodities much more than high wages, and he 
 dismisses the consideration of the problem with this ironical remark : 
 " Our merchants and master-manufacturers complain much of the 
 bad effects of high wages in raising the price, and thereby lessening 
 the sale of their goods both at home and abroad. They say nothing 
 concerning the bad effects of high profits. They are silent with 
 regard to the pernicious effects of their own gains. They complain 
 only of those of other people." a The contrast is significant. It is 
 still more deeply marked in that phrase which one is surprised not 
 to see more frequently quoted by the champions of labour legislation. 
 " Whenever the legislature attempts to regulate the differences 
 between masters and their workmen, its counsellors are always the 
 masters. When the regulation, therefore, is in favour of the work- 
 men, it is always just and equitable ; but it is sometimes otherwise 
 when in favour of the masters." 3 
 
 This is not the tone of most of his contemporaries. Nor do we 
 meet with this note m the writings of the appointed champions of 
 the industrial system the MacCullochs, the Ures, and the Babbages 
 of the next fifty years. His words ring with that generous pity which 
 proved a source of inspiration to Lord Shaftesbury and Michael Sadler 
 in their efforts to secure the passing of the Factory Act of 1833. 
 
 Smith cannot, accordingly, be regarded as the herald of dawning 
 industrialism. He clung to agriculture with all the tenacity of his 
 nature, and no opportunity of showing his preference was ever 
 missed. The difficulties of agriculture are quite beyond those of 
 any other craft. " After what are called the fine arts, and the liberal 
 professions, however, there is perhaps no trade which requires so 
 great a variety of knowledge and experience." * Not only is it more 
 difficult, but it is also more useful. Between agriculture, manu- 
 facture, and commerce he draws a long comparison (to which we 
 shall have to make reference again) purporting to show that of all 
 employments agriculture is the most profitable field of investment, 
 and the one most in accord with the general interest. For the more 
 
 1 Wealth of Nations, Book I, chap. 8 ; Cannan, vol. i, p. 80, 
 1 Ibid., Book I, chap. 9, in fine ; vol. i, p. 100. 
 r Ibid., Book I, chap. 10, part ii ; vol. i, p. 143. 
 
 4 Ibid., Book I, chap. 10, part ii ; vol. i, p. 128. The whole passage contains 
 a curious eulogy of proprietors and farmers.
 
 68 ADAM SMITH 
 
 progressive nations ** the natural course of things " would seem to 
 suggest the investment of capital firstly in agriculture, in the second 
 place in industry, and finally in foreign trade. The whole of 
 Book III is an endeavour to show how the policy of European 
 nations had for many centuries been hostile to agriculture and how 
 the natural order had been inverted in the interests of merchants 
 and artisans. Agriculture had always been the victim. In his 
 theory of taxation he shows how a portion of the taxes on profits 
 and wages ultimately falls upon property. In his discussion of 
 duties on imported corn those duties which aroused the indignation 
 of Ricardo against the landlords he reveals the same partiality. And 
 he even goes the length of saying that it is not because of their 
 personal interest, but owing solely to a badly conceived imitation of 
 the doings of merchants and manufacturers, that "the country gentle- 
 men and farmers of Great Britain so far forgot the generosity which 
 is natural to their station, as to demand the exclusive privilege of 
 supplying their countrymen with corn and butchers'-meat." * 
 
 Smith's preference for agriculture and agriculturists need not be 
 further insisted upon. Despite his own theory of division of labour, 
 he still cherished a secret regard for the Physiocratic prejudice. He 
 never subjected agriculture to the indignity of equal treatment along 
 with other forms of economic activity. In his work at least it still 
 retains its ancient pre-eminence. 
 
 II : THE " NATURALISM " AND " OPTIMISM " OF 
 SMITH 
 
 IN addition to the conception of the economic world as a great 
 natural community created by division of labour, we can distinguish 
 in Smith's work two other fundamental ideas, around which his 
 more characteristic theories group themselves. First is the idea of the 
 spontaneous origin of economic institutions, and secondly their bene- 
 ficent character or, more briefly, Smith's naturalism and optimism. 
 
 The two ideas, though frequently intermingled and sometimes 
 even confused in Smith's work, must be carefully distinguished by 
 the historian of economic thought. 
 
 Spontaneity and beneficence were intimately connected for Smith. 
 In the eighteenth century anything natural or spontaneous was 
 immediately voted good, and the terms " natural," " just," and 
 ' advantageous " were often used as synonymous. Smith did not 
 escape the confusion of ideas. Having shown the natural origin of 
 1 Wealth of Nations, Book IV, chap. 2 ; Cannan, vol. i, p. 427.
 
 THE NATURALISM AND OPTIMISM OF SMITH 69 
 
 economic institutions, he imagined that at the same time he had 
 demonstrated their useful and beneficent character. 1 The confusion 
 is no longer permissible. To give a scientific demonstration of the 
 origin of social institutions and to gauge their value from the point of 
 view of the general interest are two equally legitimate but very 
 different intellectual pursuits. We may agree with Smith that our 
 economic organisations, both in their origin and functions, participate 
 of thfe spontaneity of natural organisms, but we may at the same time 
 reserve judgment as to their real worth. Pessimism no less than 
 optimism may be engendered by contemplation of the spontaneous 
 character of economic institutions. While this conception of the 
 spontaneity of economic institutions seems to us just and fruitful, 
 the demonstration given of their beneficent character appears in- 
 sufficient and doubtful. The former conception is a commonplace 
 with all the greatest economists ; the latter is rejected by the 
 majority of them. 
 
 These two ideas which have played such an important part in 
 the history of economic doctrines must be separately examined. 
 
 The conception of spontaneity is the one to which Smith refers 
 most frequently. II mondo va da se. Here at any rate he and the 
 Physiocrats were entirely at one. There is no need for organisation, 
 no call for the intervention of any general will, however far-seeing 
 or reasonable, and no necessity for any preliminary understanding 
 between men. Such are the reflections that the study of the 
 economic world suggests ever anew to our author. The present 
 aspect of the economic world is the result of the spontaneous action 
 of millions of individuals, each of whom follows his own sweet will, 
 taking no heed of others, but never doubting the ultimate result. 
 The noble outlines of the economic world as we know it have been 
 traced, not by following a plan issuing complete from the brain of 
 an organiser and deliberately carried out by an intelligent society, 
 but by the accumulation of numberless deeds designed by a crowd 
 of individuals in obedience to an instinctive force wholly unconscious 
 of the work which it was encompassing. 
 
 This idea of the spontaneous constitution of the economic world 
 is in some aspects analogous to the conception of an " economic 
 law " of a later period. Both ideas suggest the presence of something 
 superior to individual wills, and imposed upon them even despite 
 their resistance. The differences are equally marked, however, the 
 
 1 For the connection between Smith's t ystem and the philosophy of his time 
 Bee W. Hasbach, Die, allgemeinen philosophischen Grumllagen der von F. Quesnai 
 und A. Smith begrdndtten polilisdt&n Oekonomie (Leipzig, 1890).
 
 70 ADAM SMITH 
 
 scope of the former being far greater than that of the latter. The 
 words " natural law," in the first place, suggest regularity and repeti- 
 tion the constant recurrence of the same phenomena under similar 
 conditions. This is not the aspect that particularly struck Smith. 
 He insists less upon the constancy of economic phenomena and more 
 on their spontaneity, their instinctive and natural character. Say's 
 delight was to compare the economic and the physical worlds. 
 Smith loves to regard the economic world as a living organism which 
 creates for itself its own indispensable organs. Nowhere is the term 
 " economic law" employed, but his delineation of the chief economic 
 institutions and the account of their functions always results in the 
 same conclusion. 
 
 First of all take division of labour, which we have just studied, 
 and which more than any other institution contributes to the increase 
 of wealth. 
 
 This marvellous institution is " not originally the effect of any 
 human wisdom, which foresees and intends that general opulence to 
 which it gives occasion." " It is the necessary, though very slow 
 and gradual, consequence of a certain propensity in human nature 
 which has in view no such extensive utility ; the propensity to 
 truck, barter, and exchange one thing for another." 1 This tendency 
 itself is the outcome of personal interest. " Man has almost constant 
 occasion for the help of his brethren, and it is in vain for him to 
 expect it from their benevolence only. He will be more likely to 
 prevail if he can interest their self-love in his favour, and show them 
 that it is for their advantage to do for him what he requires of them. 
 Whoever offers to another a bargain of any kind, proposes to do this : 
 Give me that which I want, and you shall have this which you want, 
 is the meaning of every such offer ; and it is in this manner that 
 we obtain from one another the far greater part of those good offices 
 which we stand in need of. It is not from the benevolence of the 
 butcher, the brewer, or the baker that we expect our dinner, but 
 from their regard to their own interest. We address ourselves, not 
 to their humanity, but to their self-love, and never talk to them of 
 our own necessities, but of their advantages." 2 This gives rise to 
 exchange, and with exchange comes division of labour. " And thus 
 the certainty of being able to exchange all that surplus part of the 
 produce of his own labour, which is over and above his own consump- 
 tion, for such parts of the produce of other men's labour as he may 
 
 1 Wealth of Nations, Book I, chap. 2 ; Carman, vol. i, p. 15. 
 1 The whole passage, almost word for word, may be found in Smith's course of 
 lectures at Glasgow, and the whole is taken from Mandeville'e Fable des Abeille.s.
 
 THE NATURALISM AND OPTIMISM OF SMITH 71 
 
 have occasion for, encourages every man to apply himself to a 
 particular occupation, and to cultivate and bring to perfection 
 whatever talent or genius he may possess for that particular species 
 of business." Division of labour is the outcome of a tendency 
 common to all men, the tendency to barter ; and this tendency itself 
 is spontaneously developed under the influence of personal interest, 
 which acts simultaneously for the benefit of each and all. 
 
 Next comes money, and nothing has so facilitated exchange or 
 so greatly increased wealth. Every economic treatise since Smith's 
 has demonstrated its advantages in terms almost identical with his. 
 But how did money first come to be employed T It was not by the 
 act of a public body, nor was it the outcome of a nation's reflective 
 judgment. It is simply the result of the operation of a collective 
 instinct. Some men who were keener than others saw the incon- 
 veniences of the truck system. And " in order to avoid the incon- 
 veniency of such situations, every prudent man in every period of 
 society, after the first establishment of the division of labour, must 
 naturally have endeavoured to manage his affairs in such a manner, 
 as to have at all times by him, besides the peculiar produce of his 
 own industry, a certain quantity of some one commodity or other, 
 such as he imagined few people would be likely to refuse in exchange 
 for the produce of their industry." 1 Money is thus the product of 
 the simultaneous though not concerted action of a great number 
 of people, each obeying his personal inclination. The intervention 
 of the public authority is much later, and its object is merely to 
 guarantee by means of a design the weight and purity of such coins 
 as are already in circulation. 
 
 Take another well-known phenomenon capital. 2 With the 
 
 1 Wealth of Nations, Book I, chap. 4 ; Canaan, vol. i, p. 24. 
 
 1 For a long time economists were quite content with Smith's theory of 
 capital. Like other portions of his work, it readily became classic, and sub- 
 sequent writers simply repeated it. To-day, however, this success hardly seems 
 to have been warranted. " It can scarcely be denied," writes Cannan, " that 
 Smith left the whole subject of capital in the most unsatisfactory state." 
 (Theories of Production and Distribution, p. 89.) If this remark needs any 
 justification we have it in the many discussions which have taken place on this 
 subject during the last fifty years, and which are not yet at an end. Some of 
 the most original works of recent years, Bohm-Bawerk's Positive Theory of 
 Capital, for example, are entirely taken up with this topic. In England, America, 
 and Italy the best-known economists, Cannan, Fisher, and Pareto, have recently 
 revived the ancient notions, and the discussions which have followed are 
 sufficient evidence that Smith had by no means exhausted the subject. If 
 we carefully read Book II of the Wealth of Nations, which is entirely 
 devoted to this topic, what do we find ? We have a distinction drawn 
 between fixed and circulating capital borrowed from practical affairs, but
 
 72 ADAM SMITH 
 
 exception of division of labour and the invention of money, Smith 
 thought there was no phenomenon of greater importance and no 
 more essential fount of national wealth than capital. The larger 
 the store of capital, the greater the number of productive workers, 
 makers of tools and machinery the essentials of increased produc- 
 tivity the further will division of labour extend. To increase a 
 nation's capital is to expand its industry and to further its well- 
 being. 1 In some passages the growth of wealth appears not merely 
 as the chief but as the only method of augmenting a nation's wealth. 
 " The industry of the society can augment only in proportion as its 
 capital augments, and its capital can augment only in proportion to 
 what can be gradually saved out of its revenue." 2 In short, capital 
 limits industry, 3 a phrase that was destined to become classic, and 
 one that was repeated by every economist down to Mill. Capital is 
 the true source of economic life. Let capital increase and industry 
 will expand in every direction ; diminish it and a bar is set to all 
 improvement. Capital fertilises the earth, whereas the labour of 
 man simply leaves it a weary waste. 
 
 Criticism has been freely levelled at this extravagant importance 
 which capital is made to assume. It is certainly somewhat curious 
 that labour should now be treated as altogether subordinate to 
 capital, whereas earlier in the volume labour alone was regarded as 
 the great wealth-producing agent. But we are not here concerned 
 
 possessing no great scientific value; the very doubtful identification of 
 national capital with the sum of private capitals ; a very unsatisfactory 
 attempt at differentiating between the notions of capital and revenue ; 
 the affirmation that saving involves consumption, a paradox repeated ad 
 nauseam down to the days of Mill; the commonplace statement that capital 
 increases as saving grows ; and, finally, the proposition that " capital limits 
 industry." 
 
 1 Wealth of Nations, Book II, chap. 3 ; Cannan, vol. i, p. 325. " The annual 
 produce of the land and labour of any nation can be increased in its value by no 
 other means, but by increasing either the number of its productive labourers, or 
 the productive powers of those labourers who had before been employed. The 
 number of its productive labourers, it is evident, can never be much increased, 
 but in consequence of an increase of capital, or of the funds destined for main- 
 taining them. The productive powers of the same number of labourers cannot 
 be increased, but in consequence either of some addition and improvement to 
 these machines and instruments which facilitate and abridge labour ; or of a more 
 proper division and distribution of employment. In either case an additional 
 capital is almost always required." 
 
 1 Ibid., Book IV, chap. 2 ; vol. i, p. 423. 
 
 1 " The general industry of the society never can exceed what the capital of 
 the society can employ." (Ibid., Book IV, chap. 2 ; vol. i, p. 419.) John 
 Stuart Mill was the first to employ the formula in its condensed form, " Industry 
 is limited by capital."
 
 THE NATURALISM AND OPTIMISM OF SMITH 78 
 
 with the revival of these threadbare controversies. 1 We merely wish 
 to note that Smith finds in this accumulation of capital a new 
 illustration of spontaneity. The saving of capital is not the result of 
 any foresight on the part of society, but is solely due to the simul- 
 taneous and concurrent actions of thousands of individuals. These 
 individuals, urged on by a desire to better their situation, are 
 spontaneously urged to save their earnings and to employ those 
 savings productively. 
 
 " The principle which prompts to save, is the desire of bettering 
 our condition, a desire which, though generally calm and dispas- 
 sionate, comes with us from the womb, and never leaves us till we go 
 into the grave. . . . An augmentation of fortune is the means by 
 which the greater part of men propose and wish to better their condi- 
 tion. It is the means the most vulgar and the most obvious ; and 
 the most likely way of augmenting their fortune, is to save and 
 accumulate some part of what they acquire." This desire is so 
 powerful that even the greatest follies perpetrated by Governments 
 have never succeeded in annulling its beneficial effects. " The 
 uniform, constant, and uninterrupted effort of every man to better 
 his condition, the principle from which public and national as well 
 as private opulence is originally derived, is frequently powerful 
 enough to maintain the natural progress of things toward improve- 
 ment, in spite both of the extravagance of government, and of the 
 greatest errors of administration. Like the unknown principle of 
 animal life, it frequently restores health and vigour to the constitution, 
 in spite, not only of the disease, but of the absurd prescriptions of 
 the doctor."* 
 
 But the idea of the spontaneity of economic institutions finds its 
 most interesting illustration in the theory of demand and supply, 
 upon which we must dwell a little. 
 
 In a society based upon division of labour, where everyone 
 
 1 We have spoken of the controversies as threadbare, for every economist 
 is by this time persuaded that, assuming the necessity for the co-operation of 
 capital, land, and labou in production, it is quite clear that the amount of produce 
 raised must depend upon the amount of each of these factors employed, and not 
 upon thu amount of any one of them. 
 
 Smith had anticipated the arguments advanced by such socialists as 
 Rodbertus and Lassalle, who regard saving rather than labour as the source of 
 capital. "Parsimony, and not industry, is the immediate cause oi the increase 
 of capital. Industry, indeed, provides the subject which parsimony accumulates. 
 But whatever industry might acquire, if parsimony did not save and store up, 
 the capital would never be the greater." (Wealth of Nations, Book II, chap. 3; 
 Cannan, vol. i, p. 320.) 
 
 Ibid., Book II, chap. 3 ; vol. i, pp. 323, 324, 325.
 
 74 ADAM SMITH 
 
 produces for a market without any previous arrangement with his 
 fellow producers and without any external direction, the great diffi- 
 culty lies in adapting the amount of goods supplied to the amount 
 demanded. How, as a matter of fact, are these producers to know 
 at any particular moment what they ought to produce and in what 
 quantities ? Moreover, who is to direct and who can restrain 
 them ? It is true that Smith was careful to point out that they are 
 not concerned with the satisfaction of all needs, of whatever kind 
 they may be. Their duty lies towards what he calls the " effectual," 
 not the " absolute," demand. By effectual demand we are to under- 
 stand the demand of those who are capable of offering not merely 
 something in exchange for the products which they desire, but of 
 offering at least enough to cover the expenses of raising those 
 products. 1 Society founded upon division of labour and exchange 
 implies that nothing can be gratuitous and every loss involves a 
 sacrifice on the part of some person or other. 2 But if production is 
 carried on in this haphazard fashion how are we to avoid an 
 occasional over-production or an accidental under-supply ? 
 
 Before we can understand this we must acquaint ourselves with 
 Adam Smith's theory of prices. 
 
 In the preceding chapter we had occasion to note how Condillac 
 in 1776 put forward a theory of value which was altogether superior 
 to the Physiocrats'. Smith's book, also published in 1776, betrays 
 not the least sign of Condillac's influence, and the new theory never 
 
 1 Wealth of Nations, Book I, chap. 7 ; Cannan, vol. i, p. 58. " The market 
 price of every particular commodity is regulated by the proportion between the 
 quantity which is actually brought to market, and the demand of those who are 
 willing to pay the natural price of the commodity, or the whole value of the rent, 
 labour, and profit, which must be paid in order to bring it thither. Such people 
 may be called the effectual demanders, and their demand the effectual demand ; 
 since it may be sufficient to effectuate the bringing of the commodity to market. 
 It is different from the absolute demand. A very poor man may be said in some 
 sense to have a demand for a coach and six ; he might like to have it ; but his 
 demand is not an effectual demand, as the commodity can never be brought 
 to market in order to satisfy it." 
 
 1 For Smith oppression meant the tyranny either of producers or consumers. 
 When profits are above the normal rate "it is a proof that something is either 
 bought cheaper or sold dearer than it ought to be, and that some particular 
 class of citizens is more or less oppressed either by paying more or by getting 
 less than what is suitable to that equality which ought to take place, and which 
 naturally does take place among all the different classes of them." (Ibid.. 
 Book IV, chap. 7, part iii ; vol. ii, p. 128.) 
 
 The correspondence between selling price and the cost of production seemed 
 to Smith to be of the very essence of justice. Complete correspondence would 
 realise t e ideal of the just price.
 
 THE NATURALISM AND OPTIMISM OF SMITH 75 
 
 comes up for discussion. The very success of the Wealth of Nations 
 had eclipsed the fame of the French philosopher, and Smith's theory, 
 though quite inferior to Condillac's, held the field for so many years 
 simply because it won the allegiance of the English economists, whose 
 influence was paramount throughout the first half of the nineteenth 
 century. Its popularity only waned with the publication of the 
 works of Walras, Jevons, and Menger. Its historic interest is further 
 enhanced by the fact that it had the singular good fortune to win 
 the approval both of the socialists and the Liberal economists. It 
 is the fate of writers like Smith, remarkable for wealth of ideas 
 rather than for logical presentation, to impel minds along different 
 and sometimes even opposite paths. Unfortunately the theory of 
 value is not the only one that presents a somewhat hazy outline. 
 We cannot here enter into the details of the theory, but must content 
 ourselves with a mere sketch of it. Even this, however, will imme- 
 diately enable us to understand its insufficiency, and appreciate the 
 twofold influence which it exercised upon subsequent doctrines. 
 
 Smith opens his treatment by emphasising the fundamental 
 distinction which exists between " value in use " and " value in 
 exchange." J By value in use he means almost 2 exactly what we 
 understand by utility, or what other writers call subjective value, 
 desirability, or ophelimity. 
 
 Present-day economists when treating of prices the exchange 
 value of things chiefly rely upon this conception of " value in use." 
 The explanation of the " ratio of exchange " of commodities is based 
 upon a previous analysis of their utility for those who exchange 
 
 1 Wealth of Nations, Book I, chap. 4 ; Cannan, vol. i, p. 30. The passage is 
 well known. " The word ' value,' it is to be observed, has two different meanings, 
 and sometimes expresses the utility of some particular object, and sometimes the 
 power of purchasing other goods which the possession of that object conveys. 
 The one may be called ' value in use,' the other ' value in exchange.' The things 
 which have the greatest value in use have frequently little or no value in exchange; 
 and, on the contrary, those which have the greatest value in exchange have fre- 
 quently little or no value in use. Nothing is more useful than water : but it will 
 purchase scarce anything ; scarce anything can be had in exchange for it. A 
 diamond, on the contrary, has scarce any valu in use ; but a very great quantity 
 of other goods may frequently be had in exchange for it." 
 
 1 The statement has been qualified because in the passage referred to Smith 
 seems to define utility in the vulgar sense (i.e. utility as contrasted with mere 
 agreeableness). This want of exactness was corrected by Ricardo, and is the 
 subject of a searching criticism by Mill. The following passage from his Lectures 
 on Justice may serve to throw some light upon the definition : " There is no 
 demand for a thing of little use ; it is not a rational object of desire." Smith could 
 not conceive the possibility of a demand or even a desire for a commodity which 
 was useless from a rational point of view. But this is evidently a great mista ke.
 
 76 ADAM SMITH 
 
 them. Smith proceeds in a different fashion. ** Value in use " is 
 mentioned, but only for the purpose of contrasting it with value in 
 exchange. It is then dismissed without further consideration. The 
 two notions seem to have no point of contact. Value in exchange 
 was the only one that was of any interest to Smith ; hence there 
 was all the more reason for denying its derivative character. 1 
 
 Thus from the very first the only avenue that might have led to a 
 satisfactory solution of this problem of prices was closed. One could 
 easily have predicted that this was bound to land Smith in difficulty ; 
 as a matter of fact he is doubly involved. 2 Two different but equally 
 erroneous solutions have been successively adopted by him, but he 
 has never actually decided between them. The socialists and 
 economists who are to follow will be engaged in the same task, and 
 the cleavage between them will be marked by their adoption of one 
 or other of these two theories. 
 
 Smith was led to the study of prices because he wished to know 
 something of the constant oscillation which is such a feature of their 
 history. The actual or market price is unstable because of the 
 unstable connection between demand and supply, 3 or, as he puts it, 
 " It is adjusted, however, not by any accurate measure, but by 
 the higgling and bargaining of the market, according to that sort of 
 rough equality which, though not exact, is sufficient for carrying on 
 the business of common life." 4 It seemed impossible that their 
 perpetual fluctuation should represent the true value of the com- 
 modity. Its real value could not vary from this moment to the 
 next or from one place to another. Underneath the constantly 
 oscillating market price may be discerned another price, referred to 
 by Smith as the real or sometimes as the natural price. The 
 discovery of a more stable and a more constant element beneath the 
 continual fluctuations of price movements still constitutes the great 
 problem of pure economics. 6 
 
 1 The radical separation of the two ideas was perhaps more a matter of 
 expression than of reasoning, for in his Lectures on Justice, p. 176, value in use, 
 coupled with the purchasing power possessed by those who desired the commodity, 
 was regarded as one of the elements which determined the demand for it and 
 fixed its market price. The whole discussion of the theory of value by Smith 
 is very unsatisfactory. 
 
 1 We ought perhaps to have said that he had to choose between three possible 
 definitions, for in the Lectures on Justice we find a third definition of " natural 
 price " (p. 176). 
 
 * Wealth of Nations, Book I, chap. 7 ; Carman, vol. i, p. 58. 
 
 * Ibid., Book I, chap. 5 ; vol. i, p. 33. 
 
 * Pareto in his recent article L'Economie et la Sociologie au point de vue scienti- 
 fique (Rivista di Scienza, 1907, No. 2) expresses himself as follows : " Underneath-
 
 THE NATURALISM AND OPTIMISM OF SMITH 77 
 
 Smith's first theory makes the true value of any commodity I 
 depend upon the amount of labour or effort it has taken to produce, j 
 " Labour, therefore, is the real measure of the exchangeable value 
 of all commodities. " " The real price of every thing, what every thing 
 really costs to the man who wants to acquire it, is the toil and trouble 
 of acquiring it." l Labour that is, the effort expended upon the 
 production of a commodity is both the origin and the measure of 
 its exchange value. The theory that labour or effort is the cause 
 of value (if value can be said to have a cause) was first formulated 
 by the father of political economy himself. It is curious to think 
 that it was this same theory that was used with such good effect by 
 Karl Marx in his attack upon capitalism. 
 
 This first attempt to find a firmer foundation for exchange value 
 than that afforded by the shifting sands of demand and supply was 
 scarcely made before Smith became aware of some difficulties in the 
 path. For example, how was this work and the value dependent 
 upon it to be measured ? " There may be more labour in an hour's 
 hard work than in two hours' easy business ; or in an hour's applica- 
 tion to a trade which it cost ten years' labour to learn, than in a 
 month's industry at an ordinary and obvious employment. But it 
 is not easy to find any accurate measure either of hardship or 
 ingenuity." a A second objection arises when the theory is applied 
 to civilized society. Work by itself cannot produce anything; 
 something must be contributed by both land and capital. But 
 neither of these is a free good, and they must cost something to those 
 who employ them. Accordingly primitive societies 3 are the only 
 ones where " the quantity of labour commonly employed in acquiring 
 or producing any commodity is the only circumstance determining 
 its value." We must nowadays take some account of land and 
 
 the actual prices quoted on the exchanges, prices varying according to the exi- 
 gencies of time and place and dependent upon an infinite number of circumstances, 
 is there nothing which has any constancy or is in any degree less variable ? 
 This is the problem that political economy must solve." 
 
 1 Wealth of Nations, Book I, chap. 6 ; Carman, vol. i, p. 32. In this passage 
 Smith seems to imply that the value of an object is determined, not by the amount 
 of labour which it cost to produce it, but by the amount of labour which can be 
 bought in exchange for it. Fundamentally the two ideas are one, for objects of 
 equal value only can be exchanged, so that the amount of labour anyone can 
 buy with any given object is equal to the amount of labour which that object 
 cost to produce. " Goods," says Smith, " contain the value of a certain quantity 
 of labour, which we exchange for what is supposed at the time to contain the 
 value of an equal quantity." 
 
 1 Ibid., Book I, chap. 5 ; vol. i, p. 33. 
 
 Ibid., Book I, chap. 6 ; vol. i, p. 60.
 
 78 ADAM SMITH 
 
 capital. So that labour is not the only source of value, nor is it 
 its sole measure. 
 
 Another hypothesis becomes necessary forthwith. This time cost 
 of production is hit upon as the likely regulator of value. Hitherto 
 the " real " price has signified the price that is based upon labour. 
 Now the " natural " price is defined as the price of goods valued at 
 their cost pf production. The change of name is not of any great 
 significance. What Smith was in search of on both occasions was 
 that true value which always kept in hiding behind the fluctuations 
 of market prices. It is the same problem, but with a new solution. 
 Just now we were informed that if a commodity sold at a price 
 representing the labour which it cost to produce, that price would 
 also represent its real cost. With no less assurance we are now told 
 that a commodity sold at cost of production " is then sold precisely 
 for what it is worth, or for what it really costs the person who brings 
 it to market." x The true value of goods corresponds to their cost of 
 production. By this we are to understand a sum sufficient to pay 
 at normal rates the wages of labour, the interest of capital, and the 
 rent of land, all of which have collaborated in the production of 
 the particular commodity. 
 
 Smith, having discarded labour, finds a new determinant of value 
 in cost of production, and if socialists rallied to his first hypothesis 
 the great majority of economists right up to Jevons have clung to 
 his second. As for Smith himself, he never had the courage to 
 choose between them. They remain juxtaposed in the Wealth of 
 Nations because he never made up his mind which to adopt. As a 
 result his work is full of contradictions which it would be futile to 
 try to reconcile. For example, land and capital in one place are 
 regarded as sources of new values, adding to and increasing the value 
 which labour creates, and producing normally an element of profit 
 and rent, which, together with the wages of labour, makes up the 
 cost of production. In another connection they are treated as 
 deductions made by capitalists and landlords from the value created 
 by labour alone." Some writers accordingly argue that Smith must 
 
 1 Wealth of Nations, Book I, chap. 7 ; Carman, vol. i, p. 57. 
 
 1 Ibid., chap. 6 ; vol. i, p. 51. Here, for example, is a passage in which, 
 as Bohm-Bawerk forcibly remarks (Kapital und Kapitakins, 2nd ed., 1900, 
 p. 84), the two conceptions are found in juxtaposition without any attempt 
 at reconciliation: "In this state of things [where labour and capital have 
 already been appropriated] the whole produce of labour does not always belong 
 to the labourer. He must in most cases share it with the owner of the stock 
 which employs him. Neither is the quantity of labour commonly employed 
 iu acquiring or producing any commodity, the only circumstance which can
 
 THE NATURALISM AND OPTIMISM OF SMITH 79 
 
 have been a socialist. On the whole the cost of production theory 
 prevailed, and the natural price of commodities is taken to mean 
 that price which coincides with their cost of production. As to 
 market price, he makes the remark that it is higher or lower than the 
 natural price according as the quantity offered diminishes or increases 
 as compared with the quantity demanded. 
 
 Such is Smith's theory of prices. The element of truth which it 
 contains, namely, that the prices of goods tend to coincide with their 
 cost of production (the remark is not originally Smith's at all), must 
 not blind us to its many faults. It is open to at least two very 
 serious objections. 
 
 An attempt is made to explain the price of goods by referring 
 to the price of the services (wages, interest, and rent) which make up 
 the cost of production. When the cost of those services comes up 
 for consideration it is assumed that their cost is dependent upon the 
 price of the goods. Wages, for example, are determined by the 
 selling price of the commodities which labour has produced. Escape 
 from the vicious circle is only possible by availing ourselves of the. 
 
 regulate the quantity which it ought commonly to purchase, command, or 
 exchange for. An additional quantity, it is evident, must be due for the profits 
 of the stock which advanced the wages and furnished the materials of that 
 labour." At the beginning of the passage the workman shared the produce 
 of his labour and profits constituted a deduction from the value created by labour 
 alone ; at the end of the paragraph profits issue from a supplementary value which 
 is an addition to the value already given it by labour. Other passages where the 
 two conceptions come into contact are also cited by Bohm-Bawerk. Interest 
 and rent are also occasionally taken as evidence that the workman is being 
 exploited, and this entitles Smith to be regarded as the father of socialism. More 
 than one passage in his work seems to point to this conclusion. " In other 
 countries, rent and profit eat up wages, and the two superior orders of people 
 oppress the inferior one." (Book IV, chap. 7, part ii ; vol. ii, p. 67.) Con- 
 cerning property he writes : " Civil government, so far as it is instituted for the 
 security of property, is in reality instituted for the defence of the rich against the 
 poor, or of those who have some property against those who have none at all." 
 (Book V, chap. 1, part ii ; vol. ii, p. 207.) And finally there is the famous passage 
 from the sixth chapter : " As soon as the land of any country has all become 
 private property, the landlords, like all other men, love to reap where they never 
 sowed, and demand a rent even for its natural produce. . . . He [the workman] 
 must then pay for the licence to gather them ; and must give up to the landlord 
 a portion of what his labour either collects or produces. This portion, or, what 
 comes to the same thing, the price of this portion, constitutes the rent of land, 
 and in the price of the greater part of commodities makes a third component 
 part." (Book I, chap. 6 ; vol. i, p. 51.) Dr. Caiman in his History of the. Theories 
 of Production and Distribution goes the length of declaring that the theory of 
 spoliation is the only one in Smith's work. It is to Smith that we owe that idea 
 BO frequently expressed by socialists, namely, that the workman in modern society 
 never really obtains the produce of his toil.
 
 80 ADAM SMITH 
 
 modern theory of economic equilibrium. That theory shows us 
 how prices generally, whether of goods or of services, are inter- 
 dependent ; all being determined simultaneously like the unknown 
 in an algebraical formula just when the exchange is taking place. 
 But this theory of economic equilibrium was, of course, unknown to 
 Smith. 
 
 Cost of production being the regulator of price, it is very 
 important that an analysis of cost of production and a study of the 
 causes which determine the rates of wages, profit, and rent should be 
 made. One might have expected that this study would have cleared 
 away any obscurity that still clung to the theory of prices. But 
 this analysis is one of the least satisfactory portions of Smith's work. 
 We have already had occasion to note the unsatisfactory charactei 
 of his theory of rent. That of profits which Smith fails to dis- 
 tinguish from interest is equally useless ; l and his theory of wages 
 is hopelessly inconsistent. He hesitates between the subsistence 
 theory of wages and the other theory which makes them depend 
 upon the relations between demand and supply, without ever making 
 a final choice. 
 
 We cannot agree with Say in considering Smith's theory of 
 distribution one of his best claims to fame. His treatment of this 
 problem, which afterwards became the kernel of Ricardian economics, 
 is altogether inferior to his handling of production. We also know 
 that this is the least original part of his work. It was simply added 
 as a kind of afterthought, the original intention being to deal 
 only with production. This becomes evident if we compare the 
 Wealth of Nations with the Glasgow course of 1763, the whole of 
 which is devoted to production. The addition of a theory of 
 distribution to the original skeleton was probably due to the 
 Physiocrats, with whom in the meantime he had become acquainted ; 
 and the hesitations and uncertainties which mar this part of the 
 work merely go to prove that Smith had not thought it out a* 
 clearly as the other sections. 
 
 The subject cannot be pursued here. We can only point to the 
 inference which Smith draws from his theory of value, and how it is 
 made to support the contention that demand adapts itself spon- 
 taneously to the conditions of supply. This is how Smith explains 
 the continual oscillation of prices : " When the quantity brought to 
 market exceeds the effectual demand, it cannot be all sold to those 
 who are willing to pay the whole value of the rent, wages and profit, 
 which must be paid in order to bring it thither. Some part must be 
 
 * Cf. supra, p. 64, note 2.
 
 THE NATURALISM AND OPTIMISM OF SMITH 81 
 
 sold to those who are willing to pay less, and the low price which 
 they give for it must reduce the price of the whole. The market 
 price will sink more or less below the natural price according as the 
 greatness of the excess increases more or less the competition of the 
 sellers, or according as it happens to be more or less important to 
 them to get immediately rid of the commodity." The reverse will 
 happen when demand exceeds supply. " When the quantity brought 
 to market is just sufficient to supply the effectual demand and no 
 more, the market price naturally comes to be either exactly, or as 
 nearly as can be judged of, the same with the natural price. The 
 whole quantity upon hand can be disposed of for this price, and 
 cannot be disposed of for more. The competition of the different 
 dealers obliges them all to accept of this price, but does not oblige 
 them to accept of less." Thus " the quantity of every commodity 
 brought to market naturally suits itself to the effectual demand." 1 
 
 And this very remarkable result is simply the outcome of personal 
 interest. " If at any time it exceeds the effectual demand, some of 
 the component parts of its price must be paid below their natural 
 rate. If it is rent, the interest of the landlords will immediately 
 prompt them to withdraw a part of their land ; and if it is wages or 
 profit, the interest of the labourers in the one case, and of their 
 employers in the other, will prompt them to withdraw a part of 
 their labour or stock from this employment. The quantity brought to 
 market will soon be no more than sufficient to supply the effectual 
 demand. All the different parts of its price will rise to their natural 
 rate, and the whole price to the natural price." 
 
 And so, in the majority of cases at least, this natural and spon- 
 taneous mechanism secures a constant balancing of the quantities of 
 goods produced and the quantities effectively demanded. The 
 circumstances under which such a result does not follow are really 
 quite exceptional although Smith does not deny that sometimes 
 they do exist. Whenever such conditions obtain that is, when the 
 market price remains for a considerable length of time above the 
 natural price we find that it is always due to the capitalists' action 
 in concealing the high rate of profits which they draw, or in retaining 
 possession of some patent or natural monopoly, such as wine of a 
 special quality. It occasionally happens also as the result of an 
 artificial monopoly. 2 But these are mere exceptions, their rare 
 
 1 Wealth of Nations, Book I, chap. 7 ; Cannan, vol. i, p. 59. 
 
 1 Smith only gives at most seven or eight lines to monopoly price. He 
 simply states that " the price of monopoly is upon every occasion the highest 
 which can be got." (Ibid., Book I, chap. 7 ; vol. i, p. 63.) To-day the theory 
 of monopoly priors is one of the most important in the whole of economics.
 
 82 ADAM SMITH 
 
 occurrence confirming the fundamental rule concerning the spon- 
 taneous adaptation of the quantity offered to the quantity demanded, 
 thanks to this oscillation of the market price about the natural. 
 
 This theory of adaptation, we know, is one of the most important 
 in the whole of political economy. Since Smith wrote it has been 
 reproduced by almost every economist, and without any very 
 substantial alteration. It remains even to this day the basis of our 
 theory of production. 
 
 It is interesting to note the manner in which Smith makes use of 
 his theory to illustrate his thesis. We shall refer to two cases which 
 are intrinsically important as well as affording admirable illustrations 
 of that spontaneity upon which Smith laid such stress. 
 
 The first concerns population. Population, like commodities, 
 may be superabundant or it may be insufficient. What regulates its 
 numbers ? " The number of people," Smith replies, " depends upon 
 the demand of society, and this is how it works. Among the 
 proletariat, generally speaking, children are plentiful enough. It is 
 only when wages are very low that poverty and misery cause the 
 death of many of them ; but when wages are fairly high several of 
 them manage to reach maturity." " It deserves to be remarked, 
 too," he continues, " that it necessarily does this as nearly as 
 possible in the proportion which the demand for labour requires. If 
 this demand is continually increasing, the reward of labour must 
 necessarily encourage in such a manner the marriage and multiplica- 
 tion of labourers as may enable them to supply that continually 
 increasing demand by a continually increasing population. If the 
 reward should at any time be less than what was requisite for this 
 purpose, the deficiency of hands would soon raise it ; and if it should 
 at any time be more, their excessive multiplication would soon lower 
 it to this necessary rate. The market would be so much under-stocked 
 with labour in the one case, and so much over-stocked in the other, as 
 would soon force back its price to that proper rate which the circum- 
 stances of the society required. It is in this manner that the demand 
 for men, like that for any other commodity, necessarily regulates the 
 production of men ; quickens it when it goes on too slowly, and 
 stops it when it advances too fast." x 
 
 The second case relates to the demand for money and its supply. 
 We have already seen how the problem of its origin is solved. 
 Alongside of that problem is now placed another, namely, how 
 is the quantity in circulation regulated to meet the requirements 
 of exchange ? Smith's first task was to expose the popular fallacy 
 1 WttUlh of Nations, Book I, chap. 8; Cannan, vol. i, pp. 81-82.
 
 THE NATURALISM AND OPTIMISM OF SMITH 83 
 
 concerning this topic. 1 According to one school of thinkers, money 
 was wealth par excellence, and it was all the more important that he 
 should get rid of this view seeing that it constituted the very 
 foundation of the Mercantile theory, the overthrow of which was the 
 immediate object in publishing the Wealth of Nations. The Mercan- 
 tilists contended that a country should export more than it imports, 
 receiving the balance in money. If it can be proved that this balance 
 is useless because money is a mere commodity possessing no greater 
 and no less utility than any other, then the Mercantilist foundation 
 is completely destroyed. Smith thought that money was less 
 indispensable than some other goods, seeing that we are anxious to 
 pass it on as often as we can. The disdain with which Smith 
 regarded money was the result of a reaction against Mercantilism, 
 and it led some of his followers to over-emphasise his point of view 
 and to misconceive the special character of monetary phenomena. 
 A nation's true wealth " consists," Smith tells us, " not in its gold 
 and silver only, but in its lands, houses, and consumable goods of 
 all different kinds." z " It is the annual produce of the land and 
 labour of the society." 3 Hence in evaluating a country's net revenue 
 we must omit money because it is not consumed. It only serves 
 as an instrument for the circulation of wealth and for the measure- 
 ment of value. It is the " great wheel of circulation," 4 In virtue 
 of this title, although Smith himself classed money along with circu- 
 lating capital, he remarks that it might be likened to the fixed 
 capital of an industry, to machinery or workshops. The greater the 
 economy in the use of fixed capital, provided there is no diminution 
 in production, the better, for the larger will be the net product. 
 
 1 " That wealth consists in money, or in gold and silver, is a popular notion 
 which naturally arises from the double function of money, as the instrument of 
 commerce, and as the measure of value." (Wealth of Nations, Book IV, chap. 1 ; 
 Cannan, vol. i, p. 396.) The whole chapter is an attempt to get rid of this 
 prejudice. 
 
 1 Ibid., Book IV, chap. 1 ; vol. i, p. 416 ; also Book II, chap. 2 ; vol. i, 
 p. 274. " Though the weekly or yearly revenue of all the different inhabitants 
 of any country, in the same manner, may be, and in reality frequently is, paid to 
 them in money, their real riches, however, the real weekly or yearly revenue of 
 all of them taken together, must always be great or small in proportion to the 
 quantity of consumable goods which they can all of them purchase with this 
 money. The whole revenue of all of them taken together is evidently not equal 
 to both the money and the consumable goods ; but only to one or other of those 
 two values, to the latter more properly than to the former." 
 
 * We meet with this expression several times : in Book I, chap. 11, part iii 
 (vol. i, pp. 4 and 240), and in Book II, chap. 3 (vol. i, pp. 315, 323). 
 
 * An expression that is met with three times in chap. 2 of Book II (vol. i, 
 pp. 272, 276, 279).
 
 84 ADAM SMITH 
 
 This is equally true of money a necessary but a very costly instru- 
 ment of social production. " Every saving in the expence of collect- 
 ing and supporting that part of the circulating capital which consists 
 in money is an improvement of exactly the same kind " x as that 
 which reduces the fixed capital of industry. 2 
 
 This is why bank-notes the circulation of which diminishes the 
 quantity of money needed have proved such a precious invention. 
 What they do is to set free a certain quantity of gold and silver which 
 may be sent abroad to pay for machinery and other instruments of 
 production, and which will in turn increase the true revenue of the 
 country. Smith's parable in which he illustrates these advantages, 
 has long since become classic : " The gold and silver money which 
 circulates in any country may very properly be compared to a high- 
 way, which, while it circulates and carries to market alT the grass 
 and corn of the country, produces itself not a single pile of either. 
 The judicious operations of banking, by providing, if I may be 
 allowed so violent a metaphor, a sort of waggon-way through the 
 air ; enable the country to convert, as it were, a great part of its 
 highways into good pastures and cornfields, and thereby to increase 
 very considerably the annual produce of its land and labour." 3 
 
 The conclusion is that every policy the Mercantilist, for example 
 which aims at increasing the quantity of money within the country, 
 whether by direct or indirect methods, is absurd, for money, far 
 from being indispensable, is really an encumbrance. 
 
 It is not only absurd, but also useless. Have we not seen already 
 that money is a mere commodity designed to facilitate circulation 
 and that the demand for it is entirely determined by that object ? 
 But the supply of any commodity usually adapts itself spontaneously 
 to the demand for it. No one concerns himself with supplying the 
 nation with wine or with crockery. Why trouble about money ? * 
 If the quantity of goods diminishes, exchange slackens and a part 
 of the money becomes useless. But " the interest of whoever 
 possesses it requires that it should be employed." 5 Accordingly 
 
 1 Wealth of Nations, Book II, chap. 2 ; Carman, vol. i, p. 275. 
 
 1 All these questions so obscurely treated in Smith's work are handled with 
 admirable lucidity in Irving Fisher's Nature of Capital and Income (New York, 
 1907). Revenue is entirely stripped of that material suggestion which was 
 always associated with it in Smith's work, and is looked upon as a continual flow 
 of services, whilst capital as a whole is regarded as total wealth existing at one 
 particular moment and from which these services flow out. 
 
 8 Wealth of Nations, Book II, chap. 2 ; Cannan, vol. i, p. 304. 
 
 * Ibid., Book IV, chap. 1 ; vol. i, pp. 402, 406. 
 
 * Ibid., Book II, chap. 3 ; vol. i, p. 322.
 
 THE NATURALISM AND OPTIMISM or SMITH 85 
 
 ' it will, in spite of all laws and prohibitions, be sent abroad, and 
 employed in purchasing consumable goods which may be of some 
 use at home." 
 
 On the other hand, as the prosperity of a nation grows it neces- 
 sarily attracts the precious metals because a multiplication of 
 exchanges leads to a growing demand for money. These exporta- 
 tions and importations will depend, as Hume x had already shown, 
 upon the relative cheapness or dearness of money. What is true 
 of metallic money is also true of a special kind of money known 
 as bank-notes. Smith has given us a vivid description of the functions 
 of banks, and especially of the fortunes of the most famous bank of 
 this period, the Bank of Amsterdam. This afforded him another 
 opportunity of demonstrating how the quantity of notes offered 
 spontaneously adapts itself to the quantity demanded. If banks 
 issue more notes than the circulation warrants prices will rise. Buy- 
 ing from foreign countries will be resorted to and the notes will be 
 returned to the banks to be exchanged for gold and silver the only 
 international money. The banks clearly have no interest in issuing 
 too many notes, because it involves a greater metallic reserve as 
 the result of the more frequent demands for payment which they 
 will have to face. Of course, " every particular banking company 
 has not always understood or attended to its own particular interest, 
 and the circulation has frequently been overstocked with paper 
 money." 2 But this does not affect the main principle, and we have 
 one further proof of the spontaneous activity of the economic 
 mechanism. 
 
 We have now reviewed some of Smith's principal themes, and we 
 have seen how every phenomenon impresses him in the same fashion. 
 Had space permitted we might have cited other examples all pointing 
 to the same conclusion. 8 This conception of spontaneity and wise 
 beneficence is by no means the product of mere a priori thinking. It 
 was no abstract theory that needed the backing of a rigid demonstra- 
 tion. It was a belief gradually borne in upon him in the course of 
 
 1 Hume's treatment of the quantity theory of money in his essays on Money 
 and The Balance of Trade is much clearer than Smith's. 
 
 1 Wealth of Nations, Book II, chap. 2 ; Cannan, vol. i, p. 285. 
 
 * For instance, a high rate of exchange immediately readjusts the commercial 
 indebtedness of nations. (Ibid., Book IV, chap. 1 ; vol. i, p. 400.) Elsewhere' 
 he points out that the advantages enjoyed by Europe from the possession of 
 colonies were not exactly Bought by her. The search for colonies, their discovery 
 and exploitation, all this was undertaken without any preconceived plan, and 
 in spite of the disastrous regulations imposed by European Governments. (Ibid., 
 Book TV, chap. 7, part ii ; vol. ii, pp. 90, 91.)
 
 86 ADAM SMITH 
 
 his review of the economic field. This is characteristic of all his 
 thought, and with every new vista we are reminded of it. The 
 conclusion is hinted at again and again, and the impression left upon 
 the reader's mind is that no other conclusion could ever be possible. 
 Smith thought of the economic order as an organism the creation 
 of a thousand human wills unconscious of the end whither they are 
 tending, but all of them obedient to the impulse of one instinctive, 
 powerful force. This force, the root of all economic activity, its 
 constancy and uniformity triumphant over every artificial obstacle 
 and giving unity to the whole system, what is it ? 
 
 We have already encountered it on more than one occasion. It 
 is personal interest, or, as Smith prefers to call it, " the natural effort 
 of every individual t better his own condition." 1 Hidden deep in 
 the heart of every individual lies this essential spring of human life 
 and social progress. 
 
 Doubtless it is not the only one. Smith is never exclusive. He 
 knew that there were other passions 2 besides self-interest, and he is 
 not afraid of naming them, as when he attributes an economic 
 revolution which had such beneficial effects as the emancipation of 
 the rural classes to " the most childish vanity of proprietors." * 
 Neither did he omit to point out that personal interest is not equally 
 strong in the breast of every one, and that there is the greatest 
 diversity in human motives. All this he had forgotten, according to 
 some of his critics, while others charge him with the creation of the 
 homo aeconomicus, a poor representation of reality and a mere auto- 
 maton exclusively guided by material interests. Someone has 
 remarked that if you add to this figure a tinge of patriotism you have 
 a faithful picture of the Englishman and Scotsman of his day. Had 
 he been acquainted with Germans or Frenchmen, with their less 
 sordid attachment to material gain, he might have judged differently. 
 It may be that our reading of him is incorrect. He seems to have 
 taken care to note that his remarks do not apply to all, but only 
 to the generality of men. He continually recalls the fact that 
 he is speaking of men of common understanding, 4 or of those gifted 
 
 1 Wealth of Nations, Book IV, chap. 5 ; Caiman, vol. i, p. 324 ; Book II, 
 chap. 9 ; vol. ii, p. 43 ; Book IV, chap. 9 ; vol. ii, p. 172. 
 
 1 " It is thus that the private interests and passions of individuals naturally 
 dispose them to turn their stock towards the employments which in ordinary 
 cases are most advantageous to the society." The word " passion " was not 
 inserted by chance. It occurs no less than three times on the same page. (Ibid., 
 Book IV, chap. 7, part iii ; vol. ii, p. 129.) 
 
 3 Ibid., Book III, chap. 4 ; vol. i, pp. 389, 390. 
 
 4 Ibid., Book II, chap. 1, in fine ; vol. i, p. 267.
 
 THE NATURALISM AND OPTIMISM OF SMITH 87 
 
 with common prudence. 1 He knew well enough that the principles 
 of common prudence do not always govern the conduct of every 
 individual, but he was of opinion that they always influenced 
 that of the majority of every class and order. 2 His reasoning is 
 applicable to men en masse, and not to individuals in particular. 
 Moreover, he does not deny that man may be unacquainted with 
 or may even entirely ignore his own interest. We have just quoted 
 a passage wherein he remarks that bankers who temporarily issue too 
 many notes are at that moment ignorant of their own interests. 
 
 These reservations notwithstanding, and full account being taken 
 of all the exceptions to the principle as laid down by Smith, it is still 
 true to say that as a general thesis he considers " the natural effort 
 of every individual to better his own condition " that is, personal 
 interest as the fundamental psychological motive in political 
 economy. Any reference to the case of business men who are really 
 actuated by a desire to take general welfare as their guide in matters 
 of conduct is treated with a measure of scepticism which it is difficult 
 not to share. " I have never known much good done by those who 
 affected to trade for the public good. It is an affectation, indeed, 
 not very common among merchants, and very few words need be 
 employed in dissuading them from it." 8 Not that sentiment does 
 not play a part, and a very important part, in the philosophy of 
 Smith ; but sentiment, or sympathy, as he calls it, has the domain 
 of morality for its own, while interest dominates that of economics. 
 All his thinking led him to a firm belief in a spontaneous economic 
 order founded and guided by self-interest. 
 
 Comparison with the Physiocratic doctrine concerning the 
 natural and essential order of societies is illuminating. To the 
 Physiocrats the " natural order " implied a system an ideal. It 
 required a genius to discover it, and only an enlightened despotism 
 could realise it. For Smith the ** spontaneous order " was a fact. 
 It was not a thing to be brought into being. It already existed. It 
 was doubtless held in check by a hundred imperfections, including, 
 among others, the stupidity of human legislation. 4 But it was 
 triumphant over them all. Beneath the artificial constitution of 
 society lay the natural constitution which completely dominated it. 
 
 1 Wealth of Nations, Book II, chap. 4, beginning of chapter ; Cannan, vol. i, 
 p. 332. 
 
 Ibid., Book II, chap. 2 ; vol. i, p. 278. 
 
 1 Ibid., Book IV, chap. 2 ; vol. i, p. 421. After having just said : " Bj 
 pursuing hia own interest, he frequently promotes that of the society more 
 effectually than when he really intends to promote it." 
 
 Ibid., Book IV, chap. 5 ; vol. ii, p. 43.
 
 88 ADAM SMITH 
 
 This natural constitution, which for the Physiocrats was nothing 
 more than an ideal, Smith discovered in actual operation, and he was 
 able to describe its modus operandi. Political economy, which with 
 Quesnay was nothing better than a system of rules and regulations, 
 became in Smith's hands a natural science based upon the observation 
 and analysis of existing facts. In a passage written in his usual 
 lucid style Smith shows the superiority of his system over that of the 
 Physiocrats. " Some speculative physicians seem to have imagined 
 that the health of the human body could be preserved only by a 
 certain precise regimen of diet and exercise, of which every, the 
 smallest, violation necessarily occasioned some degree of disease or 
 disorder proportioned to the degree of the violation. . . . Mr. 
 Quesnai, who was himself a physician, and a very speculative phy- 
 sician, seems to have entertained a notion of the same kind concerning 
 the political body, and to have imagined that it would thrive and 
 prosper only under a certain precise regimen, the exact regimen of 
 perfect liberty and perfect justice. He seems not to have considered 
 that in the political body, the natural effort which every man is 
 continually making to better his own condition, is a principle of 
 preservation capable of preventing and correcting, in many respects, 
 the bad effects of a political oeconomy in some degree both partial 
 and oppressive. Such a political oeconomy, though it no doubt retards 
 more or less, is not always capable of stopping altogether the natural 
 progress of a nation towards wealth and prosperity, and still less of 
 making it go backwards. If a nation could not prosper without the 
 enjoyment of perfect liberty and perfect justice, there is not in the 
 world a nation which could ever have prospered. In the political 
 body, however, the wisdom of nature has fortunately made ample 
 provision for remedying many of the bad effects of the folly and 
 injustice of man ; in the same manner as it has done in the natural 
 body, for remedying those of his sloth and intemperance." l 
 
 This passage leads us to his second thesis, namely, the excellence 
 of these economic institutions. As we have already remarked, these 
 two ideas of spontaneity and excellence, though confused by Smith, 
 ought to be treated apart. His naturalism and optimism are 
 inseparable, and both of them find expression in the same paragraph. 
 The passage just quoted affords a proof of this. Personal interest 
 not only creates and maintains the economic organism, but at the 
 same time ensures a nation's progress towards wealth and prosperity. 
 The institutions are not only natural, but are also beneficial. They 
 interest him not merely as objects of scientific curiosity, but also as 
 1 Wealth of Nations, Book IV, chap. 9 ; Carman, vol. ii, p. 172.
 
 THE NATURALISM AND OPTIMISM OF SMITH 89 
 
 the instruments of public weal. Herein lies their chief attraction 
 for him, for political economy to him was more of a practical art 
 than a science. 1 
 
 But this is hardly emphatic enough. Natural economic insti- 
 tutions are not merely good : they are providential. Divine Pro- 
 vidence has endowed man with a desire to better his condition, 
 whence arises the ** natural " social organism : so that man, following 
 where this desire leads, is really accomplishing the beneficent designs 
 of God Himself. By pursuing his own interest, man " is in this as 
 in many other cases " (he is writing now of the employment of 
 capital) " led by an invisible hand to promote an end which was no 
 part of his intention." 2 The Physiocrats could hardly have improved 
 upon that. 
 
 We can scarcely share in his optimism to-day. But it has played 
 too prominent a role in the history of ideas not to detain us for a 
 moment. We must examine the arguments upon which it is based 
 and endeavour to grasp their import. 
 
 Let us note, in the first place, that every example hitherto deduced 
 with a view to proving the spontaneity of economic institutions at 
 the same time furnishes a demonstration of the beneficial effects of 
 personal interest. Owing to a coincidence by no means fortuitous 
 every institution mentioned by Smith as owing its existence to the 
 prevalence of action of this kind is at the same time favourable to 
 economic progress. Division of labour, the invention of money, and 
 the accumulation of capital are so many natural social facts that 
 also increase wealth. The adaptation of demand and supply, the 
 distribution of money according to the need for a circulating medium, 
 the growth of population according to the demand for it, are so 
 many spontaneous phenomena which ensure the efficient working of 
 economic society. A perusal of Smith's work leaves us with the 
 impression that these spontaneous institutions must also be the 
 best. 
 
 The general proof of this thesis is scattered throughout the 
 whole book. But there was one point especially upon which Smith 
 was very anxious to show complete accord between public and 
 private interest. This was in connection with the investment of 
 capital. In his opinion capital spontaneously seeks, and as spon- 
 
 1 " The great object of the political oeconomy of every country, is to increase 
 the riches and power of that country." ( Wealth of Nations, Book II, chap. 6 ; 
 Carman, vol. i, p. 351.) The expression " the political economy of every count ry," 
 which Smith frequently employed, might be used in answer to writers such as 
 Knies, who speak of the Universalism or Internationalism of Smith. 
 
 1 Ibid., Book IV, chap. 1 ; vol. i, p. 421. 
 
 C.D. D
 
 90 ADAM SMITH 
 
 taneously finds, the most favourable field for investment most 
 favourable, that is to say, to the interest of society in general. This 
 proof at first sight seems to apply only to one special fact, but 
 it really has a more general import. We know the great stress 
 which Smith laid upon capital. Division of labour depends upon 
 it, and so does the abundance or scarcity of produce. It determines 
 the quantity of work and fixes the limit of population. To show 
 that the investment of capital conforms to the general interest is to 
 show that all production is organised in the manner most favourable 
 to national prosperity. 
 
 Smith distinguishes between four methods of investing capital : 
 in agriculture, in industry, in the wholesale and in the retail trades. 
 Wholesale industry is further divided into three classes : domestic 
 trade ; foreign trade, furnishing the nation with foreign products ; 
 and the carrying trade which transports those goods from one country 
 to another. Smith maintained that the order in which these various 
 forms of activity were mentioned was also the order of their utility, 
 agriculture being the most advantageous, industry the second 
 best, etc. 
 
 He also proposes two criteria for testing this hierarchy : (1 ) the 
 quantity of productive labour put into operation by means of the 
 capital employed by each; (2) the amount of exchange value 
 annually added to the revenue by each of these employments. As 
 we pass from agriculture to the other branches, the quantity of 
 productive labour brought into operation and the amount of exchange 
 value obtained gradually decreases, and with this decrease goes a 
 diminishing utility for the country. Smith thought that a nation 
 ought to employ its capital in the way he had suggested. It ought 
 to give the preference to agriculture, and engage in the other 
 branches only as the accumulation of capital permitted. 
 
 But this is precisely what the capitalists would do were they 
 entirely free. Every one of them, in fact, is interested in keeping 
 his capital as near home as possible, with a view to better super- 
 vision. Only as a last resource does he venture to engage in foreign 
 commerce. Again, even among the industries carried on in his own 
 country every capitalist will preferably choose that which will result 
 in the production of the greatest exchange value, seeing that his profit 
 varies with the amount of this exchange value. His investments 
 will accordingly be made in the order mentioned, an order which 
 roughly corresponds to the greater or lesser quantity of exchange 
 values produced by each industry. And finally, when contemplating 
 investment in foreign trade he will for the same reason follow the
 
 THE NATURALISM AND OPTIMISM OF SMITH 91 
 
 order specified above the order of greatest general utility. Thus the 
 double desire of keeping one's capital within one's reach and of 
 finding for it the most lucrative field of investment leads every 
 capitalist to employ his capital in the fashion which is most advan- 
 tageous for the nation. Such is the argument, whatever its value. 
 
 Even if we adopted his criteria it is obvious that his classification 
 is altogether too arbitrary. How, for example, can we justify the 
 statement that an industrial enterprise or the carrying trade employs 
 less capital than agriculture ? The exact contrary would be nearer 
 the truth, and agriculture ought to be given a much more modest 
 position. Moreover, the conception of such a hierarchy does not 
 accord very well with the theory of division of labour, which seeks 
 to put the various forms of human activity more nearly on an 
 equality. 
 
 As a matter of fact we cannot even accept a criterion which takes 
 the amount of exchange values furnished by an industry as the test 
 of its social utility. This increase in the quantity of exchange values 
 simply proves that the demand for the goods concerned is stronger 
 than the demand for some others. When capital flows into 
 certain industries it only points to the spontaneous satisfaction of 
 social demand. But social demand and social utility are not 
 necessarily the same. Demand is the outcome of human desires, 
 and its intensity depends upon the revenue drawn by the individual. 
 But we can neither regard these desires in themselves or the system 
 of distribution that makes such desires " effective " as sufficient tests 
 of social utility. And to say that production follows demand is to 
 prove nothing at all. Smith himself seems to have realised this ; 
 hence his other criterion the quantity of productive labour em- 
 ployed by capital. According to this test those industries that 
 employ the least amount of machinery and the greatest amount of 
 hand labour are the most useful quite an untenable view. 
 
 A demonstration of a somewhat similar character has been 
 attempted by the Hedonistic school. They have shown how free 
 competition always tends to direct production into such channels as 
 will result in maximum utility, or, in other words, that it affords the 
 best method of satisfying the actual demands of the market. But 
 they have been very careful to note that social utility and ophelimity 
 are two very different expressions that must never be confused, 
 and that they have failed to find any scientific test of social utility. 
 
 Smith's argument is unsatisfactory, and its foundation untrust- 
 worthy. We do not forget that his optimism is based not so 
 much upon this specious demonstration as upon the great number
 
 92 ADAM SMITH 
 
 of observations which he had occasion to make in the course of his 
 work. This idea of a harmony between private interest and the 
 general well-being of society was not put forward as a rigidly demon- 
 strable a priori theory, open to no exceptions. It was rather a 
 general view of the whole position the conclusion drawn from 
 repeated observations, the resume of a detailed inquiry which 
 had covered every corner of the economic field. A particular process 
 of reasoning may have helped to confirm this conclusion, but the 
 reasoning itself was largely based upon experience, the universal 
 experience of history. It was the study of this experience that led 
 to the discovery of a " vital " principle of health and progress in the 
 " body social." Smith would have been the first to oppose the 
 incorporation of his belief in any dogma. He was content to say 
 that " most frequently " and in a " majority of cases " general 
 interest was satisfied by the spontaneous action of private interest. 
 He was also the first to point out instances in the case of merchants 
 and manufacturers, for example where the particular and the 
 general interest came into conflict. We might cite many charac- 
 teristic passages in which he takes pains to qualify his optimism. 
 
 Absolute his optimism was not, neither was it universal. In fact, 
 it would not be difficult to prove that it was never intended to apply 
 to anything other than production. Nowhere does the great Scotch 
 economist pretend that the present distribution of wealth is the justest 
 possible a trait that distinguishes him from the optimists of Bastiat's 
 school. His optimism deserted him when he reached that portion of 
 his subject. On the contrary, he showed that landed proprietors as 
 well as capitalists " love to reap where they have not sown," that in- 
 equalities in social position give masters an advantage in bargaining 
 with their men. 1 In more than one passage he speaks of interest and 
 rent as deductions from the produce of labour. 2 Smith, indeed, 
 might well be regarded as a forerunner of socialism. There is no 
 difficulty in believing, so far as the experience of old countries goes, 
 that " rent and profit eat up wages and the two superior orders of 
 people oppress the inferior one." 3 
 
 It is especially important that we should make a note of the 
 opinions of those people who think that Smith intended his optimism 
 
 1 Wealth of Nations, Book I, chap. 8 ; Cannan, vol. i, p. 68. The masters 
 possess the advantage in discussion (1) because they can combine much more 
 easily ; (2) becaua, thanks to their superior funds, they can afford to wait while 
 " many workmen could not subsist a week, few could subsist a month, and scarce 
 any a year without employment." 
 
 1 Cf. supra, p. 78. 
 
 raid., Book IV, chap. 7, part ii, the beginning ; vol. ii, p. 67.
 
 ECONOMIC LIBERTY AND INTERNATIONAL TRADE 98 
 
 to extend to distribution as well as to production. As a matter 
 of fact he was too level-headed to entertain any such idea. Even 
 Say himself in the last edition of his Treatise expresses some doubts 
 as to the equity of the present system of distribution. 1 Smith 
 was not really concerned with the question at all. It is only at a 
 much later date, when the socialists had demonstrated the importance 
 of the problem, that we hear of this belief in the beneficence of 
 economic institutions. It really represents a reaction against the ., 
 socialistic teaching and an attempt at a justification of the present 
 methods of distribution. 
 
 We must beware of confusing Smith's optimism with that of 
 modern Hedonism, or of identifying it with Bastiat's answer to the 
 socialists. It lacks the scientific precision of the one and has none 
 of the apologetic tone of the other. It is little more than a reflection 
 prompted by the too naive confidence of the eighteenth century in 
 the bounty of " nature," and an expression of profound conviction 
 rather than the conclusion of a logical argument. 
 
 Ill : ECONOMIC LIBERTY AND 
 INTERNATIONAL TRADE 
 
 THE practical conclusion to which naturalism leads and to which 
 Smith's optimism points is economic liberty. So naturally does it 
 proceed from what we have just said that the reader finds himself 
 quite prepared for Smith's celebrated phrases : " All systems either 
 of preference or of restraint, therefore, being thus completely taken 
 away, the obvious and simple system of natural liberty establishes 
 itself of its own accord. Every man, as long as he does not violate 
 the laws of justice, is left perfectly free to pursue his own interest 
 his own way, and to bring both his industry and capital into com- 
 petition with those of any other man, or order of men." As to 
 the Government, or " sovereign," as Smith calls him, " he is com- 
 pletely discharged from a duty, in the attempting to perform which 
 he must always be exposed to innumerable delusions, and for the 
 proper performance of which no human wisdom or knowledge 
 could ever be sufficient ; the duty of superintending the industry 
 of private people, and of directing it towards the employments 
 most suitable to the interests of the society." 
 
 Smith, following the Physiocrats, but in a more comprehensive 
 
 1 Say, speaking of the working classes, remarks : " Are we quite certain that 
 the workman obtains that share of wealth which is exactly proportioned to the 
 amount which he has contributed to production ? " (Treatise, 6th ed., p. 110.)
 
 94 ADAM SMITH 
 
 and scientific fashion, finds himself driven to the same conclusion, 
 namely, the wisdom of non-intervention by the State in matters 
 economic. 1 
 
 But here, as elsewhere in his work, the sense of the positive and 
 the concrete, so remarkable in Smith, prevents his being content 
 with a general demonstration. He is not satisfied with proving the 
 inefficiency of intervention as compared with the efficiency of those 
 institutions which are spontaneously created by society itself, but 
 he attempts to show that the State, by its very nature, is unfitted 
 for economic functions. His arguments have been the arsenal from 
 which the opponents of State intervention have been supplied with 
 ammunition ever since. 
 
 Let us briefly recall them. 
 
 " No two characters seem more inconsistent than those of trader 
 and sovereign." f Governments are " always, and without any 
 exception, the greatest spendthrifts in the society." 3 The reasons for 
 this are numerous. In the first place, they employ money which has 
 been gained by others, and one is always more prodigal of the wealth 
 of others than of one's own. Moreover, the Government is too far 
 removed from the centres of particular industries to give them that 
 minute attention which they deserve if they are going to prosper. 
 " The attention of the sovereign can be at best but a very general and 
 vague consideration of what is likely to contribute to the better 
 cultivation of the greater part of his dominions. The attention of 
 the landlord is a particular and minute consideration of what is 
 likely to be the most advantageous application of every inch of 
 ground upon his estate." 4 
 
 This necessity for a thorough cultivation of the soil and for the 
 best employment of capital, for direct and careful superintendence, 
 is an idea to which he continually reverts. He regrets, among 
 other things, that the growth of public debts causes a portion of the 
 land and the national capital to pass into the hands of fund-holders, 
 who are doubtless interested in the good administration of a country, 
 but " are not interested in the good condition of any particular por- 
 tion of land, or in the good management of any particular portion 
 of capital stock." 6 
 
 1 Wealth of Nations, Book IV, chap. 9, in fine ; Caiman, vol. ii, p. 184. 
 
 1 Ibid., Book V, chap. 2, part i ; vol. ii, p. 304. He makes exception only 
 of the post-office, " perhaps the only mercantile project which has been success- 
 fu'ly managed by, I believe, every sort of government." (P. 303.) 
 
 Ibid., Book II, chap. 3 ; vol. i, p. 328. 
 
 Ibid., Book V. chap. 2, part ii, art. 1 ; vol. ii, p. 318. 
 
 Ibid., Book V, chap. 3 ; vol. ii, p. 413.
 
 ECONOMIC LIBERTY AND INTERNATIONAL TRADE 95 
 
 Lastly, the State is an inefficient administrator because its agents 
 are negligent and thriftless, not being directly interested in adminis- 
 tration, but paid out of public funds'. Should the administration 
 of the land pass into the hands of the State he exclaims that not a 
 fourth of the present produce would ever be raised, because of " the 
 negligent, expensive, and oppressive management of his factors and 
 agents." l On the contrary, he proposes that the remainder of the 
 common land should be distributed among individuals. On this 
 point European Governments have followed his advice somewhat 
 too closely.* For the same reason the necessity for stimulating 
 personal interest wherever possible he commends, instead of a 
 fixed salary for public officers, payment by those who benefit by 
 their services, such payment in every case to be in strict proportion 
 to the zeal and activity displayed. This was to apply, for example, 
 to judges and professors.* 
 
 State administration is accordingly a pis aller, and intervention 
 ought to be strictly limited to those cases in which individual action 
 is impossible. Smith recognises three functions only which the State 
 can perform, namely the administration of justice, defence, " and, 
 thirdly, the duty of erecting and maintaining certain public works and 
 certain public institutions, which it can never be for the interest 
 of any individual, or small number of individuals, to erect and 
 maintain ; because the profit could never repay the expence to any 
 individual or small number of individuals, though it may frequently 
 do much more than repay it to a great society." 4 
 
 We must beware, however, lest we exaggerate this point. 
 Although Smith, in the majority of cases, preferred individual action, 
 we must not conclude from this that he had unlimited confidence in 
 individuals. Smith's individualism was of a particular kind. It 
 was not a mere blind preference for every private enterprise, for he 
 knew that industry frequently falls a prey to the spirit of monopoly. 
 ** People of the same trade seldom meet together, even for merriment 
 and diversion, but the conversation ends in a conspiracy against the 
 public, or in some contrivance to raise prices." 6 In order that a 
 private enterprise may be useful for the community two conditions 
 are necessary. The entrepreneur must be : (1 ) actuated by personal 
 interest ; (2) his actions must by means of competition be kept 
 
 1 Wealth of Nations, Book V, chap. 2, part ii ; Caiman, vol. ii, p. 308. 
 1 Cf. particularly Burgin, Lea Communaux et la Revolution fran^aise, in 
 Nouvette Revue historique de Droit, Nov. -Dec. 1908. 
 
 Wealth of Nations, Book V, chap. 1, part iii, art. 2 ; Caiman, vol. ii, p. 250. 
 
 Ibid., Book IV, chap. 9 ; vol. ii, p. 185. 
 
 Ibid., Book I, chap. 10, part ii ; vol. i, p. 130.
 
 96 ADAM SMITH 
 
 within the limits of justice. Should either of these two conditions 
 be wanting, the public would run the risk of losing as much by 
 private as they would by State enterprise. 
 
 Thus Smith throughout remains very hostile to certain collective 
 enterprises of a private nature, such as joint-stock companies, 1 
 because of the absence of personal interest. The only exceptions 
 which he would tolerate are banks, insurance companies, and com- 
 panies formed for the construction or maintenance of canals or for 
 supplying great towns with water, for the management of such 
 undertakings can easily be reduced to a kind of routine, " or to such 
 a uniformity of method as admits of little or no variation." 2 
 
 His opposition to every kind of monopoly granted either to an 
 individual or to a company is even more pronounced. A whole 
 chapter is devoted to an attack upon the great trading companies 
 of the seventeenth and eighteenth centuries, which were created 
 with a view to the development of colonial trade, and of which the 
 East India Company was the most famous. 
 
 One other observation remains to be made. Non-intervention 
 for Smith was a general principle, and not an absolute rule. He was 
 no doctrinaire, and he never forgot that to every rule there are some 
 exceptions. An interesting list could be made, giving all the cases 
 in which, according to Smith, the legitimacy of State intervention 
 was indisputable legal limitation of interest, 3 State administration 
 of the post-office, compulsory elementary education, State exami- 
 nations as a condition of entry into the liberal professions or to 
 any post of confidence whatever, bank-notes of a minimum value 
 of 5, etc.* In a characteristic phrase he gave expression to his 
 feeling on the question of restricting the liberty of banks. " Such 
 regulations may, no doubt, be considered as in some respects 
 a violation of natural liberty. But those exertions of the natural 
 liberty of a few individuals, which might endanger the security of 
 the whole of society, are, and ought to be, restrained by the laws 
 of all governments ; of the most free, as well as of the most 
 
 1 Wealth of Nations, Book V, chap. 1, part iii, art. 1; Carman, vol. ii, p. 233. 
 
 * Ibid., Book V, chap. 1, part iii, art. 1; vol. ii, p. 246. 
 
 * Ibid., Book II, chap. 4, in fine. It is probable that his conversion to 
 belief in absolute liberty took place later as the result of his perusal of Bentham's 
 Defence of Usury, published in 1787, advocating the right of taking interest. 
 This seems to have been the case if we can credit the report of a conversation 
 which Smith had with one of Bentham's friends, mentioned in a letter written 
 to Bentham by another cf hi friends George Wilson. Cf. John Rae, Life of 
 Adam Smith, p. 423. 
 
 * Wealth of Nations. Book II, chap. 2 ; Cannan, vol. 5, p. 307.
 
 ECONOMIC LIBERTY AND INTERNATIONAL TRADE 97 
 
 despotical." 1 Despite these reservations it is still very evident that 
 the whole of Smith's work is a plea for the economic freedom of the 
 individual. It is an eloquent appeal against the Mercantilist policy 
 and a violent attack upon every economic system inspired by it. 
 
 On this point there is absolute agreement between the work done 
 by Smith in England and that carried on at the same time by the 
 Physiocrats in France. Both in foreign and domestic trade pro- 
 ducers, merchants, and workmen were hemmed in by a network of 
 restrictions either inherited from the traditions of the Middle Ages 
 or imposed by powerful party interests and upheld by false economic 
 theories. The corporations still existed in the towns ; although their 
 regulations could not be applied to industries born after the passing 
 of Elizabeth's famous law concerning apprenticeship. The Colbertian 
 system, with its mob of officials entrusted with the task of super- 
 intending the processes of production, of examining the weight, the 
 length, and the quality of the material employed, was still a grievance 
 with the woollen manufacturers. 2 The fixing of the duration of 
 apprenticeship at seven years, the limitation of the number of 
 apprentices in the principal industries, the obstacles put in the way 
 of the mobility of labour by the Poor Law and by the series of 
 statutes passed since the reign of Elizabeth, fettered the movement 
 of labour and the useful employment of capital. Smith opposed 
 these measures with the whole of his energy. England, unlike 
 France, had fortunately escaped internal restrictions upon trade, but 
 the restraints placed upon foreign trade still kept England and 
 Ireland commercially separated. These checks upon foreign trade 
 proved as irksome in England as they did everywhere else. Manu- 
 factured goods from foreign countries were heavily taxed or were 
 prohibited entrance altogether. Certain natural products, e.g. French 
 wine, were similarly handicapped ; the importation of a number of 
 commodities necessary for national industry was banned ; a narrow 
 and oppressive policy regarded the colonies as the natural purveyors 
 
 1 Wealth of Nations, Book II, chap. 2 ; Carman, vol. i, p. 307. He continues : 
 " The obligation of building party walls in order to prevent the communication 
 of fire, is a violation of natural liberty, exactly of the same kind with the regula- 
 tions of the banking trade which are here proposed." This passage proves that 
 Smith was in favour of public regulations which would further the material 
 security of the citizens. Elsewhere he shows his partiality for adopting hygienic 
 precautions against the spread of contagious diseases (Book V, chap. 1, part iii ; 
 rol. ii, p. 272). 
 
 * Cf. Mantoux, op. cit., pp. 65-66. This work gives most interesting details 
 bearing upon all the points mentioned here. Internal restrictions are criticised 
 by Smith in the second part of chap. 10 of Book I. 
 
 D'
 
 98 ADAM SMITH 
 
 of raw materials for the mother-country and the willing buyers of its 
 manufactured goods. Against all this mass of regulations, destined, 
 it was thought, to secure the supremacy of England among other 
 commercial nations, Smith directed his most spirited onslaughts. 
 The fourth book of the Wealth of Nations is an eloquent and vigorous 
 attack upon Mercantilism, admirable alike for the precision and the 
 extent of its learning. It was this section of his work that interested 
 his contemporaries most. For us it would have been the least 
 interesting but for its theory of international trade and its criticism 
 of Protection in general. On this account, however, it is of con- 
 siderable importance in the study of economic doctrines. 
 
 In the struggle for Free Trade, as on other points, Smith was 
 forestalled by the Physiocrats. But again has he shown himself 
 superior in the breadth of his outlook. Physiocratic Liberalism was 
 the result of their interest in agriculture, foreign trade being of quite 
 secondary importance. Smith, on the other hand, considered foreign 
 trade in itself advantageous, provided it began at the right moment 
 and developed spontaneously. 1 Although his point of view is far 
 superior to that of the Physiocrats, even Smith failed to give us a 
 satisfactory theory. It was reserved for Ricardo and his successors, 
 particularly John Stuart Mill, to find a solid scientific basis for the 
 theory of international trade. The doctrine of the Scotch economist 
 is somewhat lame. But the hesitancy of a great writer is often 
 interesting, and some of his arguments deserve to be recalled. 
 
 Already in our review of his theory of money we have become 
 familiar with Smith's criticism of the balance of trade theory. But 
 the balance of trade theory is not the whole of Protection, and we 
 find in Smith something more than its mere refutation. In the 
 first place, we have a criticism of Protectionism in general considered 
 in its Mercantilist^ aspect, followed by an attempt to demonstrate 
 the positive advantages of international commerce. 
 
 The first criticism that he offers might be summed up in the 
 well-known phrase : " Industry is limited by capital." " The general 
 industry of the society can never exceed what the capital of the 
 society can employ." But Protection, perhaps, increases the quantity 
 of capital ? No, " for it can only divert a part of it into a direction 
 into which it might not otherwise have gone." But the direction 
 spontaneously given to their capital by individuals is the most 
 
 1 " Each of those different branches of trade, however, is not only advan- 
 tageous, but necessary and unavoidable, when the course of things, without 
 any constraint or violence, naturally introduces it," says he, after giving an 
 exposition of the respective advantages of the various forms of economic activity. 
 (Wealth of Nations, Book II, chap. 5 ; Cannan, vol. i, p. 362.)
 
 favourable to a country's industry. Has not Smith demonstrated 
 this already ? Protection, consequently, is not merely useless ; it 
 may even prove injurious. 1 
 
 The argument does not appear decisive, especially when we recall 
 the criticism of Smith's optimism given above. To borrow an 
 expression of M. Pareto, it is the maximum of ophelimity and not 
 the maximum of utility that is realised by the capitalists under the 
 action of personal interest. 
 
 A second and a more striking argument shows the absurdity of 
 manufacturing a commodity in this country at a great expense, 
 when a similar commodity might be supplied by a foreign country 
 at less cost. " It is the maxim of every prudent master of a family, 
 never to attempt to make at home what it will cost him more to 
 make than to buy. . . . What is prudence in the conduct of every 
 private family, can scarce be folly in that of a great kingdom." a 
 It is foolish to grow grapes in hothouses in Scotland when better 
 and cheaper can be got from Portugal or France. Everybody is 
 convinced of that. But a similar stupidity prevails when we are 
 hindered by tariffs from profiting by the natural advantages which 
 foreign nations possess as compared with ourselves. All " the 
 mean rapacity and the monopolizing spirit of merchants and manu- 
 facturers " 3 was necessary to blind men to their true interests 
 on this point. According to Smith, there exists a natural distribu- 
 tion of products among various countries, resulting in an advantage 
 to all of them. It is Protection that hinders our sharing in the 
 advantages. This is the principle known as the " territorial division 
 of labour." 
 
 But the argument is inconclusive, for capital and labour do not 
 circulate from one nation to another in the same way as they do 
 within a country. The distribution of industry among the various 
 nations is regulated, not by absolute cost of production, but by 
 relative cost of production. The credit of having shown this belongs 
 to Ricardo. 
 
 Smith's demonstration of the inconveniences of Protection is 
 incomplete, and we feel the incompleteness all the more when he 
 attempts to prove the advantages of international trade. 
 
 The real and decisive argument in favour of free exchange turns 
 upon a consideration of the consumer's interests. Increased 
 utilities placed at his disposal mark the superiority of free exchange, 
 
 1 Wealth of Nations, Book IV, chap. 2 ; Cannan, vol. i, p. 419. 
 
 8 Ibid., Book IV, chap. 1; vol. i, p. 422. 
 
 ' Ibid., Book IV, chap. 3, part ii ; vol. i, pp. 457-458.
 
 100 ADAM SMITH 
 
 or as John Stuart Mill puts it, " the only direct advantage of foreign 
 commerce consists in the imports." l With Smith this is the point 
 of view developed least of all. True, he wrote that " consump- 
 tion is the sole end and purpose of all production. But, in the 
 mercantile system, the interest of the consumer is almost constantly 
 sacrificed to that of the producer." * This criticism, however, was 
 placed at the end of his examination of the Mercantilist system in 
 chap. 8 of Book IV. It is not found in the first edition of the 
 work, and was only added in the third. 3 
 
 It is the point of view of the producer that Smith invariably adopts 
 when attempting to illustrate the advantages of international trade. 4 
 
 Just now foreign trade seemed to afford a means of disposing of 
 a country's surplus products, and this extension of the market, it 
 was argued, would lead to further division of labour and increased 
 productivity. 6 But one is led to ask why, instead of producing the 
 superfluous goods which it must export, it does not produce those 
 things which it is obliged to import. 
 
 Smith, being now desirous of showing that international trade 
 necessarily benefits both countries, bases his argument upon the 
 fact that the merchants in both countries must make a profit i.e. get 
 an additional exchange value, which must be added to the others. 
 To this Ricardo justly replied that the profits of a merchant do not 
 necessarily increase the sum of utilities possessed by any country. 
 
 Here again, in striking contrast with the attitude of the Physio- 
 crats, Smith, despite himself, has championed his own adversaries. 
 As yet he is not sufficiently rid of Mercantilist prejudice not to be 
 concerned with the welfare of the producer, and in his great work 
 we find excellent argument and debatable points of view placed side 
 by side. It does not appear that he himself realised this incom- 
 patibility. An irresistible tide was sweeping everybody before it 
 in the direction of a more liberal policy. It proved too powerful for 
 
 1 Principles of Political Economy, Book III, chap. 17. 
 
 ! Wealth of Nations, Book IV, chap. 8 ; Carman, vol. ii, p. 159. 
 
 It is true that in Book IV, chap. 3, part 2, he declares : " In every country it 
 always is and must be the interest of the great body of the people to buy whatever 
 they want of those who sell it cheapest. The proposition is so very manifest, 
 that it seems ridiculous to take any pains to prove it." (Cannan, vol. i, p. 458.) 
 
 4 Speaking of duties on corn, he writes : " To prohibit by a perpetual law 
 the importation of foreign corn and cattle, is in reality to enact, that the popula- 
 tion and industry of the country shall at no time exceed what the true produce 
 of its own soil can maintain." (Ibid., Book IV, chap. 2 ; vol. i, p. 427.) He 
 always views the question from the standpoint of increased population and 
 labour, and not from that of the consumer. 
 
 Ibid., Book II, chap. 5. Cf. Book IV, chap. 1.
 
 ECONOMIC LIBERTY AND INTERNATIONAL TRADE 101 
 
 his contemporaries, who were not concerned to give a careful 
 consideration to every part of his thesis. Enough that they found 
 in him an ardent champion of an attractive cause. 
 
 We have already noticed more than once the hesitation which 
 Smith displays when he comes to apply his principle, and we must 
 again refer to it in this connection. 
 
 Theoretically a champion of absolutely free exchange, he miti- 
 gates his belief in practice, and mentions an exception to his policy 
 which seemed to him a mere matter of common sense. ** To expect, 
 indeed, that the freedom of trade should ever be entirely restored in 
 Great Britain, is as absurd as to expect that an Oceana or Utopia 
 should ever be established in it. Not only the prejudices of the 
 public, but what is more unconquerable, the private interests of 
 many individuals, irresistibly oppose it." J Facts have belied this 
 prophecy, like many others. England of the nineteenth century 
 succeeded in realising this Utopia of free exchange almost to 
 perfection. 
 
 Without any illusion as to the future, his condemnation of the 
 past was not altogether unqualified. He justified some of the. acts 
 that were inspired by Mercantilism. " The act of navigation 2 is 
 not favourable to foreign commerce," said he ; " as defence, 
 however, is of much more importance than opulence, the act of 
 navigation is, perhaps, the wisest of all the commercial regulations 
 of England." 8 In another instance he justifies an import duty 
 where a tax is levied upon goods similar to those imported. Here 
 an import duty merely restores that normal state of competition 
 which was upset by the imposition of the Excise. Retaliation as 
 a means of securing the abolition of foreign duties is not altogether 
 under his ban. 4 And he finally admits that liberty is best introduced 
 gradually into those countries in which industry has long enjoyed 
 Protection or where a great number of men are employed. 5 
 
 1 Wealth of Nations, Book IV, chap. 2, in fine ; Carman, vol. i, p. 435. 
 
 * The " Navigation Laws " is a generic term for a number of laws, the most 
 famous of them dating from the time of Cromwell. Their immediate object 
 was the destruction of the Dutch fleet, and English commerce was organised 
 with a view to securing this. There is no doubt but that they contributed very 
 considerably to the development of English maritime power. 
 
 1 Ibid., Book IV, chap. 2 ; vol. i, p. 429. 
 
 * But " when there is no probability that any euch repeal can be procured 
 it seems a bad method of compensating the injury done to certain classes of our 
 people, to do another injury ourselves, not only to those classes, but to almost 
 all the other classes of them." (Ibid., Book IV, chap. 2 ; vol. i, p. 433.) 
 
 1 The discussion of these various cases is to be found towards the end of 
 chap. 2 of Book IV.
 
 102 ADAM SMITH 
 
 His practical conclusion is somewhat as follows : Instead of 
 innumerable taxes which hinder importation and hamper production, 
 England ought to content herself with the establishment of a certain 
 number of taxes of a purely fiscal character, placed upon com- 
 modities such as wine, alcohol, sugar, tobacco, cocoa. Such a 
 system, though perfectly consonant with a great deal of free exchange, 
 would yield abundant revenue to the Treasury, and would afford 
 ample compensation for the losses resulting from the introduction of 
 Free Trade. 1 
 
 England has followed his advice, and her financial system is 
 to-day founded on these bases. Few economists can boast of such 
 a complete realisation of their projects. 
 
 IV: THE INFLUENCE OF SMITH'S THOUGHT 
 AND ITS DIFFUSION. J. B. SAY 
 
 THE eighteenth century was essentially a century of levelling down. 
 In Smith's conception of the economic world we have an excellent 
 example of this. Its chief charm lies in the simplicity of its outlines, 
 and this doubtless accounted for his influence among his contem- 
 poraries. The system of natural liberty towards which both their 
 political and philosophical aspirations seemed to point were here 
 deduced from, and supported by, evidence taken direct from a study 
 of human nature evidence, moreover, that seemed to tally so well 
 with known facts that doubt was out of the question. Smith's work 
 still retains its irresistible charm. Even if his ideas are some day 
 shown to be untenable a contingency we cannot well imagine his 
 book will remain as a permanent monument of one of the most 
 important epochs in economic thought. It must still be considered 
 the most successful attempt made at embracing within a single 
 purview the infinite diversity of the economic world. 
 
 But its simplicity also constituted its weakness. To attain this 
 simplicity more than one important fact that refused to fit in with 
 the system had to remain in the background. The evidence employed 
 was also frequently incomplete. None of the special themes price, 
 wages, profits, and rent, the theory of international trade or of 
 capital which occupy the greater portion of the work, but has 
 been in some way corrected, disputed, or replaced. But the structure 
 loses stability if some of the corner-stones are removed. And new 
 points of view have appeared of which Smith did not take sufficient 
 account. Instead of the pleasant impression of simplicity and 
 1 This system is expounded in Book V, chap 2, part ii, art. 5.
 
 INFLUENCE OF THOUGHT AND ITS DIFFUSION 103 
 
 security which a perusal of Smith's work gave to the economists of 
 the early nineteenth century, there has been gradually substituted 
 by his successors a conviction of the growing complexity of 
 economic phenomena. 
 
 To pass a criticism on the labours of Adam Smith would be to 
 review the economic doctrines of the nineteenth century. That is 
 the best eulogy one can bestow upon his work. The economic ideas 
 of a whole century were, so to speak, in solution in his writings. 
 Friends and foes have alike taken him as their starting-point. The 
 former have developed, extended, and corrected his work. The latter 
 have subjected his principal theories to harsh criticism at every point. 
 All with tacit accord admit that political economy commenced 
 with him. As Gamier, his French translator, put it, " he wrought 
 a complete revolution in the science." J To-day, even although the 
 Wealth of Nations may no longer appear to us as a truly scientific 
 treatise on political economy, certain of its fundamental ideas remain 
 incontestable. The theory of money, the importance of division of 
 labour, the fundamental character of spontaneous economic institu- 
 tions, the constant operation of personal interest in economic life, 
 liberty as the basis of rational political economy all these appear 
 to us as definite acquisitions to the science. 
 
 The imperfections of the work will be naturally demonstrated 
 in the chapters which follow. In order to complete our exposi- 
 tion of Smith's doctrines it only remains to show how they were 
 diffused. 
 
 The rapid spread of his ideas throughout Europe and their 
 incontestable supremacy remains one of the most curious phenomena 
 in the history of ideas. Smith persuaded his own generation and 
 governed the next. 2 History affords us some clue. To attribute 
 it solely to the influence of his book is sheer exaggeration. A great 
 deal must be set to the credit of circumstances more or less fortuitous. 
 
 M. Mantoux remarks with much justice that " it was the American 
 War rather than Smith's writings which demonstrated the decay of 
 the ancient political economy and compassed its ruin. The War 
 of Independence proved two things : (1) The danger lurking in 
 a colonial system which could goad the most prosperous colonies 
 to revolt ; (2) the uselessness of a protective tariff, for on the very 
 morrow of the war English trade with the American colonies was 
 more flourishing than ever before. " The loss of the American 
 colonies to England was really a gain to her." So wrote Say in 
 
 1 In the preface to his translation, 1821 ed., p. Ixix. 
 
 1 llae, Life of Smith, p. 103. The author of this famous phrase is not known.
 
 104 ADAM SMITH 
 
 1803, and he adds : " This is a fact that I have nowhere seen dis 
 puted." x To the American War other causes must be added : 
 (1) The urgent need for markets felt by English merchants at the 
 close of the Napoleonic wars ; they were already abundantly 
 supplied with excellent machinery. (2) Coupled with this was a 
 growing belief that a high price of corn as the result of agricultural 
 protection increased the cost of hand labour. These two reasons 
 were enough to create a desire for a general lowering of the customs 
 duties. 
 
 Subsequent events have justified Smith's attitude on the question 
 of foreign trade. In the matter of domestic trade he has been less 
 fortunate. 
 
 The French Revolution, which owed its economic measures to 
 the Physiocrats, gave a powerful impulse to the principle of liberty. 
 The influence of the movement was patent enough on the Continent. 
 Even in England, where this influence was least felt; everybody was 
 in favour of laissez-faire. Pitt became anxious to free Ireland from 
 its antiquated system of prohibitions, and he succeeded in doing 
 this by his Act of Union of 1800. The regulations laid down by the 
 Elizabethan Statute of Apprentices, with its limitation of the hours 
 of work and the fixing of wages by justices of the peace, became more 
 and more irksome as industry developed. Every historian of the 
 Industrial Revolution has described the struggle between workers 
 and masters and shown how the former clung in despair to the old 
 legislative measures as their only safeguard against a too rapid 
 change, while the latter refused to be constrained either in the 
 choice of workmen or the methods of their work. 2 They wished to 
 pay only the wages that suited them and to use their machines as 
 long as possible. These repeated attacks rendered the old Statute 
 of Apprentices useless, and Parliament abolished its regulations one 
 after another, so that by 1814 all traces of it were for ever effaced 
 from the Statute Book. 
 
 But Smith did not foresee these things. He did not write with 
 a view to pleasing either merchants or manufacturers. On the 
 contrary, he was never weary of denouncing their monopolistic 
 tendencies. But by the force of circumstances manufacturers 
 and merchants became his best allies. His book supplied them 
 with arguments, and it was his authority that they always 
 invoked. 
 
 > J. B. Say, Traite, 1st ed., p. 240. 
 
 1 Mantoux, La Revolution industriette, p. 83. M. Halevy gives expression 
 to a similar idea in his La Jeunesse de Bsnlham, p. 193 (Paris, 1901).
 
 INFLUENCE OF THOUGHT AND ITS DIFFUSION 105 
 
 His authority never ceased growing. As soon as the Wealth of 
 Nations appeared, men like Hume, and Gibbon, the historian, 
 expressed to Smith or to his friends their admiration of the new 
 work. In the following year the Prime Minister, Lord North, 
 borrowed from him the idea of levying two new taxes the tax on 
 malt and the tax on inhabited houses. Smith was yet to make 
 an even more illustrious convert in the person of Pitt. Pitt was a 
 student when the Wealth of Nations appeared, but he always declared 
 himself a disciple of Smith, and as soon as he became a Minister he 
 strove to realise his ideas. It was he who signed the first Free 
 Trade treaty with France the Treaty of Eden, 1786. 1 When 
 Smith came to London in 1787, Pitt met him more than once 
 and consulted him on financial matters. The story is told that 
 after one of these conversations Smith exclaimed : " What an 
 extraordinary person Pitt is 1 He understands my ideas better than 
 myself." 
 
 While Smith made converts of the most prominent men of his 
 time, his book gradually reached the public. Four editions in 
 addition to the first appeared during the author's lifetime. 2 The 
 third, in 1784, presents important differences in the way of additions 
 and corrections as compared with the first. From the date of his 
 death in 1790 to the end of the century three other editions were 
 published. 3 
 
 Similar success attended the appearance of the work on the Conti- 
 nent. In France he was already known through his Theory of Moral 
 Sentiments. The first mention of the Wealth of Nations in France 
 appears in the Journal des Savants in the month of February, 1777. 
 Here, after a brief description of the merits of the work, the critic 
 gives expression to the following curious opinion : ** Some of our 
 men of letters who have read it have come to the conclusion that it 
 is not a book that can be translated into our language. They point 
 out, among other reasons, that no one would be willing to bear the 
 expense of publishing because of the uncertain return, and a book- 
 seller least of all. They are bound to admit, however, that the work 
 is full of suggestions and of advice that is useful as well as curious, 
 and might prove of benefit to statesmen." In reality, despite the 
 opinion of those men of letters, several translations of the work 
 did appear in France, as well as elsewhere in Europe. In little more 
 than twenty years, between 1779 and 1802, four translations had 
 
 1 So called in honour of the leading English representative. Lord Eden. 
 1 In 1778, 1784, 1786, 1789. 
 * 1781, 1793, 1790.
 
 106 ADAM SMITH 
 
 appeared. This in itself affords sufficient proof of the interest which 
 the book had aroused. 1 
 
 Few works have enjoyed such complete and universal success. 
 But despite admiration the ideas did not spread very rapidly. 
 Faults of composition have been burdened with the responsibility 
 for this, and it is a reproach that has clung to the Wealth of Nations 
 from the first. Its organic unity is very pronounced, but Smith 
 does not seem to have taken the trouble to give it even the semblance 
 of outward unity. To discover its unity requires a real effort of 
 thought. Smith whimsically regarded it as a mere discourse, and 
 the reading occasionally gives the impression of conversation. The 
 general formulae which summarise or recapitulate his ideas are 
 indifferently found either in the middle or at the end of a chapter, 
 just as they arose. They represent the conclusions from what 
 preceded as they flashed across his mind. On the other hand, a 
 consideration of such a question as money is scattered throughout 
 the whole work, being discussed on no less than ten different occa- 
 sions. As early as April 1, 1776, Hume had expressed to Smith 
 some doubts as to the popularity of the book, seeing that its reading 
 demanded considerable attention. Sartorius in 1794 attributed to 
 this difficulty the slow progress made by Smith's ideas in Germany. 
 Germain Gamier, the French translator, gave an outline of the 
 book in order to assist his readers. It was generally agreed that 
 the work was a striking one, but badly composed and difficult to 
 penetrate owing to the confused and equivocal character of some 
 of the paragraphs. When Say referred to it as " a chaotic collection 
 of just ideas thrown indiscriminately among a number of positive 
 truths," 2 he expressed the opinion of all who had read it. 
 
 But a complete triumph, so far as the Continent at least was 
 concerned, had to be the work of an interpreter. Such an inter- 
 preter must fuse all these ideas into a coherent body of doctrines, 
 leaving useless digressions aside. 3 This was the task that fell into the 
 
 1 Professor Kraus, writing in 1796, declared that no book published since the 
 days of the New Testament would effect so many welcome changes when it 
 became thoroughly known (J. Rae, p. 360). By the beginning of the nineteenth 
 century its influence had become predominant. All the Prussian statesmen 
 who aided Stein in the preparation and execution of those important reforms 
 that gave birth to modern Prussia were thoroughly versed in Smith's doctrines, 
 and the Prussian tariff of 1821 is the first European tariff in which they 
 are deliberately applied. (Cf. Roscher, GeschicJite der Nationaldkonomik in 
 Deittschland.) 
 
 1 In his introduction to the Traitl, 1st ed. (The phrase was deleted in the 
 6th ed.) 
 
 J. B. Say, Traite, 1st ed., introduction, p. xxxiii
 
 INFLUENCE OF THOUGHT AND ITS DIFFUSION 107 
 
 hands of J. B. Say. Among his merits (and it is not the only one) is 
 that of popularising the ideas of the great Scotch economist on the 
 Continent, and of giving to the ideas a somewhat classical appearance. 
 The task of discrediting the first French school of economists and of 
 facilitating the expansion of English political economy fell, curiously 
 enough, to the hands of a Frenchman. 
 
 J. B. Say was twenty-three years of age in 1789. 1 At that time 
 he was Clavieres' secretary. Clavieres became Minister of Finance 
 in 1792, but at this period he was manager of an assurance company, 
 and was already a disciple of Smith. Say came across some stray 
 pages of the Wealth of Nations, and sent for a copy of the book. 2 
 The impression it made upon him was profound. " When we read this 
 work," he writes, " we feel that previous to Smith there was no 
 such thing as political economy." Fourteen years afterwards, in 
 1803, appeared Le Traiii d 'Economic politique. The book met with 
 immediate success, and a second edition would have appeared had 
 not the First Consul interdicted it. Say had refused to support the 
 Consul's financial recommendations, and the writer, in addition to 
 having his book proscribed, found himself banished from the Tribunate. 
 Say waited until 1814 before republishing it. New editions rapidly 
 followed, in 1817, 1819, and 1826. The treatise was translated into 
 several languages. Say's authority gradually extended itself; his 
 reputation became European; and by these means the ideas of 
 Adam Smith, clarified and logically arranged in the form of general 
 principles from which conclusions could be easily deduced, gradually 
 captivated the more enlightened section of public opinion. 
 
 * He was born at Lyons on January 5, 1767. After a visit to England 
 he entered the employment of an assurance company, and took part as a 
 volunteer in the campaign of 1792. From 1794 to 1800 he edited a review 
 entitled Dccad,e philosophique, litteraire et 'politique, par une Societe de Republicains. 
 He was nominated a member of the Tribunate in 1799. After the publication 
 of his Traitt, the First Consul, having failed to obtain a promise that the financial 
 proposals outlined in the first edition would be eliminated in the second, dis- 
 missed him from the Tribunate, offering him the post of director of the Droits 
 reunis as compensation. Say, who disapproved of the new rigime, refused, 
 and set up a cotton factory at Auchy-les-Hesdins, in the Pas-de-Calais. He 
 realised his capital in 1813, returned to Paris, and in 1814 published a second 
 edition of his treatise. In 1816 he delivered a course of lectures on political 
 economy at the Athenee, probably the first course given in France. These lec- 
 tures were published in 1817 in his Catichisme d'lSconomie politique. In 1819 
 the restoration Government appointed him to give a course on " Industrial 
 Economy " (the term " Political Economy " was too terrible). In 1831 he was 
 made Professor of Political Economy in the College de France. He died in 1832. 
 His Cours complet d'6conomie 'politique, was published, in six volumes, in 1828-29. 
 
 1 Cf. a letter to Louis Say in 1827 ((Euvres diverge*, p. 545).
 
 108 ADAM SMITH 
 
 It would, however, be unjust to regard Say as a mere popu- 
 lariser of Smith's ideas. With praiseworthy modesty, he has never 
 attempted to conceal all that he owed to the master. The master's 
 name is mentioned in almost every line, but he never remains 
 content with a mere repetition of his ideas. These are carefully 
 reconsidered and reviewed with discrimination. He develops some 
 of them and emphasises others. Amid the devious paths pursued 
 by Smith, the French economist chooses that which most directly 
 leads to the desired end. This path is so clearly outlined for his 
 successors that " wayfaring men, though fools, could not err therein." 
 In a sense he may be said to have filtered the ideas of the master, or 
 to have toned his doctrines with the proper tints. He thus imparted 
 to French political economy its distinctive character as distinguished 
 from English political economy, to which at about the same time 
 Malthus and Ricardo were to give an entirely new orientation. 
 What interests us more than his borrowing is the personal share 
 which he has in the work, an estimate of which we must now 
 attempt. 
 
 (1) In the first place, Say succeeded in overthrowing the work of 
 the Physiocrats. 
 
 The work of demolition was not altogether useless. In France 
 there were many who still clung to the " sect." Even Germain 
 Gamier, Smith's translator, considered the arguments of the Physio- 
 crats theoretically irrefutable. The superiority of the Scotch eco- 
 nomist was entirely in the realm of practice. 1 " We may," says 
 he, " reject the Economistes' theory [meaning the Physiocrats'] 
 because it is less useful, although it is not altogether erroneous." 
 Smith himself, as we know, was never quite rid of this idea, for he 
 recognised a special productiveness of land as a result of the co- 
 operation of nature, and doctors, judges, advocates, and artists were 
 regarded as unproductive. But Say's admission was the last straw. 
 Not in agriculture alone, but everywhere, " nature is forced to work 
 along with man," 2 and by the funds of nature was to be understood 
 in future all the help that a nation draws directly from nature, be 
 it the force of wind or rush of water. 3 As to the doctors, lawyers, 
 etc., how are we to prove that they take no part in production ? 
 Gamier had already protested against their exclusion. Such servicsa 
 must no doubt be classed as immaterial products, but products none 
 
 1 Garnier's translation of Adam Smith, 1802, vol. v, p. 283. 
 
 TtaM, 1803 ed., p. 30. 
 
 Ibid., p. 21. Later on he employs the more comprehensive term "natural 
 agents."
 
 INFLUENCE OF THOUGHT AND ITS DIFFUSION 109 
 
 the less, seeing that they possess exchange value and are the out- 
 come * of the co-operation of capital and industry. In other respects 
 also e.g., in the pleasure and utility which they yield services 
 are not very unlike commodities. Say's doctrine meets with some 
 opposition on this point, for the English economists were unwilling 
 to consider a simple service as wealth because of its unendurable 
 character, and the consequent fact that it could not be considered 
 as adding to the aggregate amount of capital. But he soon wins 
 over the majority of writers. 2 Finally Say, like Condillac, discovered 
 a decisive argument against Physiocracy in the fact that the produc- 
 tion of material objects does not imply their creation. Man never 
 can create, but must be content with mere transformation of matter. 
 Production is merely a creation of utilities, a furthering of that 
 capacity of responding to our needs and of satisfying our wants 
 which is possessed by commodities ; and all work is productive which 
 achieves this result, whether it be industry, commerce, or agri- 
 culture. 3 The Physiocratic distinction falls to the ground, and Say 
 refutes what Smith, owing to his intimacy with his adversaries, 
 had failed to disprove. 
 
 (2) On another point Say carries forward Smith's ideas, although 
 at the same time superseding them. He subjects the whole con- 
 ception of political economy and the role of the economist to a most 
 thorough examination. 
 
 We have already noticed that the conception of the " natural 
 order " underwent considerable modification during the period which 
 intervened between the writings of the Physiocrats and the appear- 
 ance of the Wealth of Nations. The Physiocrats regarded the " order" 
 as one that was to be realised, and the science of political economy 
 as essentially normative. For Smith it was a self-realising order. 
 This spontaneity of the economic world is analogous to the vitality 
 of the human body, and is capable of triumphing over the artificial 
 barriers which Governments may erect against its progress. Practical 
 
 1 Traitt, 1803 ed., Book I, chaps. 42 and 43. By " industry " Say understands 
 every kind of labour. Cf. 6th ed., pp. 70 et aeq. 
 
 * Malthus still appeared hostile to the doctrine of immaterial products, but 
 Lauderdale, Tooke, McCulloch, and Senior accepted it, and it seemed definitely 
 fixed when Stuart Mill confined the word " product " to material products only. 
 For Tooke's view see his letter to J. B. Say in the (Evvres diverses of the latter. 
 
 * Traite, Book I, chap. 2. Is it not strange that Say should have failed to 
 apply this idea to commerce ? He regards the latter as productive because it 
 creates exchangeable values. Nevertheless he criticises Condillac for having 
 said that mere exchange of goods increases wealth because it increases the 
 utility of objects. This is because Say is perpetually mixing up utility and 
 exchange value, a confusion that leads him into many serious mistakes.
 
 110 ADAM SMITH 
 
 political economy is based upon a knowledge of the economic consti- 
 tution of society, and its sole aim is to give advice to statesmen. 
 According to Say, this definition concedes too much to practice. 
 Political economy, as he thinks, is just the science of this " sponta- 
 neous economic constitution," or, as he puts it in 1814, it is a study 
 of the laws which govern wealth. 1 It is, as the title of his book 
 suggests, simply an exposition of the production, distribution, and 
 consumption of wealth. It must be distinguished from politics, 
 with which it has been too frequently confused, and also from 
 statistics, which is a simple description of particular facts and not a 
 science of co-ordinate principles at all. 
 
 Political economy in Say's hands became a purely theoretical 
 and descriptive science. The role of the economist, like that of the 
 savant, is not to give advice, but simply to observe, to analyse, and 
 to describe. " He must be content to remain an impartial spectator," 
 he writes to Malthus in 1820. " What we owe to the public is to 
 tell them how and why such and such a fact is the consequence of 
 another. Whether the conclusion be welcomed or rejected, it is 
 enough that the economist should have demonstrated its cause ; but 
 he must give no advice." * 
 
 In this way Say broke with the long tradition which, stretching 
 from the days of the Canonists and the Cameralists to those of the 
 Mercantilists and the Physiocrats, had treated political economy as 
 a practical art and a guide for statesmen and administrators. Smith 
 had already tried to approach economic phenomena as a scientist, but 
 there was always something of the reformer in his attitude. Say's 
 only desire was to be a mere student ; the healing art had no attrac- 
 tion for him, and so he inaugurates the true scientific method. He, 
 moreover, instituted a comparison between this science and physics 
 rather than between it and natural history, and in this respect also 
 he differed from Smith, for whom the social body was essentially a 
 living thing. Without actually employing the term " social physics," 
 he continually suggests it by his repeated comparison with Newtonian 
 physics. The principles of the science, like the laws of physics, are 
 not the work of men. They are derived from the very nature of 
 things. They are not established ; they are discovered. They 
 govern even legislators and princes, and one never violates them with 
 
 1 Traiti, 6th ed., p. 6. The word " laws " does not appear in the first edition. 
 Say merely speaks of general principles. It is found for the first time in the 
 edition of 1814 : " General facts or, if one wishes to call principles by that name, 
 general laws " (p. xxix). 
 
 1 Correspondence with Malthus, in (Euvres diverges, p. 466.
 
 INFLUENCE OF THOUGHT AND ITS DIFFUSION 111 
 
 impunity. 1 Like the laws of gravity, they are not confined within 
 the frontiers of any one country, and the limits of State administra- 
 tion, which are all-important for the student of politics, are mere 
 accidents for the economist. 2 Political economy is accordingly 
 based on the model of an exact science, with laws that are universal. 
 Like physics, it is not so much concerned with the accumulation of 
 particular facts as with the formulation of a few general principles 
 from which a chain of consequences of greater or smaller length may 
 be drawn according to circumstances. 
 
 A delight in uniformity, 3 love of universality, and contempt for 
 isolated facts, these are the marks of the savant. But the same 
 qualities in men of less breadth of view may easily become deformed 
 and result in faults of indifference or of dogmatism, or even con- 
 tempt for all facts. And are these very faults not produced by 
 the stress which he lays upon these principles ? Was not political 
 economy placed in a vulnerable position for the attacks of Sismondi, 
 of List, of the Historical school, and *of the Christian Socialists 
 by this very work of Say ? In his radical separation of politics 
 and economics, in avoiding the " practical " leanings of Adam 
 Smith, he has succeeded in giving the science a greater degree of 
 harmony. But it also acquired a certain frigidity which his less 
 gifted successors have mistaken for banality or crudity. Rightly 
 or wrongly, the responsibility is ascribed to Say. 
 
 (3) We have just seen the influence which the progress of the 
 physical sciences had upon Say's conception of political economy; 
 but he was also much influenced by the progress of industry. Between 
 1776, the date of the appearance of the Wealth of Nations, and the 
 year 1803, when Say's treatise appeared, the Industrial Revolution 
 had taken place. This is a fact of considerable importance for the 
 history of economic ideas. 
 
 When Say visited England a little before 1789, he found machine 
 production already in full swing there. In France at the same date 
 manufactures were only just beginning. They increased rapidly 
 under the Empire, and the progress after 1815 became enormous. 
 
 1 TraiU, Introd., 1st ed., p. ix ; 6th ed., p. 13. 
 
 Ibid., 1st ed., Book I, p. 404. 
 
 * There is no need for exaggeration, however, and no need to regard Say as 
 totally indifferent to suffering and misery. He declares, e.g., that '' for many 
 homes both in town and country life is one long privation," and that thrift in 
 general " implies, not the curtailment of useless commodities, such as expediency 
 and humanity would welcome, but a diminution of the real needs of life, which is a 
 standing condemnation of the economic system of many Governments." (Traitt, 
 lit ed., vol. i, pp. 97-98 ; 6th ed., p. 116.)
 
 112 ADAM SMITH 
 
 Chaptal in his work De I' Industrie francaise reckons that in 1819 
 there were 220 factories in existence, with 922,200 spindles consuming 
 13 million kilograms of raw cotton. This, however, only repre- 
 sented a fifth of the English production, which twenty years later 
 was quadrupled. Other industries were developing in a similar 
 way. Everybody was convinced that the future must be along those 
 lines an indefinite future it is true, but it was to be one of wealth, 
 work, and well-being. The rising generation was intoxicated at 
 the prospect. The most eloquent exposition of this debauchery will 
 be found in Saint-Simonism. 
 
 Say did not escape the infection. While Smith gives agriculture 
 the premier place, Say accords the laurels to manufactures. For 
 many years industrial problems had been predominant in political 
 economy, and the first official course of lectures given by Say himself 
 at the Conservatoire des Arts et Metiers was entitled " A Course 
 of Lectures on Industrial Economy." 
 
 In that hierarchy of activities which Smith had drawn up 
 according to the varying degree of utility each possessed for the 
 nation, Smith had placed agriculture first. Say preserved the order, 
 but placed alongside of agriculture " all capital employed in utilising 
 any of the productive forces of nature. An ingenious machine 
 may produce more than the equivalent of the interest on the capital 
 it has cost to produce, and society enjoys the benefit in lower prices." l 
 This sentence is not found in the edition of 1803, and appears only 
 in the second edition. Say in the meantime had been managing 
 his factory at Auchy-les-Hesdins, and he had profited by his expe- 
 rience. This question of machinery, which was merely touched 
 on by Smith in a short passage, finds a larger place in every succes- 
 sive edition of Say's work. The general adoption of machinery by 
 manufacturers both in England and France frequently incited the 
 workers to riot. Say does not fail to demonstrate its advantages. 
 At first he admits that the Government might mitigate the resulting 
 evils by confining the employment of machinery at the outset 
 to certain districts where labour is scarce or is employed in other 
 branches of production. 2 But by the beginning of the fifth edition 
 he changed his advice and declared that such intervention involved 
 interference with the inventor's property, 3 admitting only that the 
 Government might set up works of public utility in order to employ 
 those men who are thrown out of employment on account of the 
 introduction of machinery. 
 
 1 Traiti, 6th ed., p. 403. 2 Hid., 1st ed., vol. i, p. 48. 
 
 Ibid., 5th ed., vol. i, p. 67.
 
 INFLUENCE OF THOUGHT AND ITS DIFFUSION 113 
 
 The influence of these same circumstances must be accounted 
 responsible for the stress which is laid by Say upon the rdle of an 
 individual whom Smith had not even denned, but one who is hence- 
 forth to remain an important personage in the economic world, namely, 
 the entrepreneur. At the beginning of the nineteenth century the 
 principal agent of economic progress was the industrious, active, 
 well-informed individual, either an ingenious inventor, a progressive 
 agriculturist, or an experienced business man. This type became 
 quite common in every country where mechanical production and 
 increasing markets became the rule. It is he rather than the 
 capitalist properly so called, the landed proprietor, or the workman, 
 who is " almost always pasUve," who directs production and 
 superintends the distribution of wealth. " The power of industrial 
 entrepreneurs exercises a most notable influence upon the distri- 
 bution of wealth," says Say. "In the same kind of industry one 
 entrepreneur who is judicious, active, methodical, and willing makes 
 his fortune, while another who is devoid of these qualities or who 
 meets with very different circumstances would be ruined." 1 Is it 
 not the master spinner of Auchy-les-Hesdins who is speaking here ? 
 We are easily convinced of this if we compare the edition of 
 1803 with that of 1814, and we can trace the gradual growth and 
 development of this conception with every successive edition of 
 the work. 
 
 Say's classic exposition of the mechanism of distribution is based 
 upon this very admirable conception, which is altogether superior to 
 that of Smith or the Physiocrats. The entrepreneur serves as the 
 pivot of the whole system. The following may be regarded as an 
 outline of his treatment. 
 
 Men, capital, and labour furnish what Say refers to as produc- 
 tive services. These services, when brought to market, are given in 
 exchange for wages, interest, or rent. It is the entrepreneur, whether 
 merchant, manufacturer, or agriculturist, who requires them, and 
 it is he who combines them with a view to satisfying the demand 
 of consumers. ** The entrepreneurs, accordingly, are mere inter- 
 mediaries who set up a claim for those productive services which 
 are necessary to satisfy the demand for certain products." Accord- 
 ingly there arises a demand for productive services, and the demand 
 is " one of the factors determining the value of those services." 
 " On the other hand, the agents of production, both men and things, 
 whether land, capital, or industrial employees, offer their services 
 
 1 Critical examination of McCulloch's treatise (1826), in (Euvres diverset, 
 pp. 274-275.
 
 114 ADAM SMITH 
 
 in greater or less quantities according to various motives, and thus 
 constitute another factor which determines the value of these 
 same services." 1 In this fashion the law of demand and supply 
 determines the price of services, the average rate of interest, and 
 rent. Thanks to the entrepreneur, the value produced is again 
 distributed among these " various productive services," and the 
 various services allotted according to need among the industries.; 
 This theory of distribution is in complete accordance with the 
 theory of exchange and production. 
 
 Say's very simple scheme of distribution constitutes a real progress. 
 In the first place, it is much more exact than the Physiocrats', who 
 conceived of exchange as taking place between classes only, and not 
 between individuals. It also enables us to distinguish the remunera- 
 tion of the capitalist from the earnings of the entrepreneur, which 
 were confounded by Adam Smith. The Scotch economist assumed 
 that the entrepreneur was very frequently a capitalist, and confused 
 the two functions, designating his total remuneration by the single 
 word " profit," without ever distinguishing between net interest of 
 capital and profit properly so called. This regrettable confusion 
 was followed by other English authors, and remained in English 
 economic theory for a long time. Finally, Say's theory has another 
 advantage. It gave to his French successors a clear scheme of 
 distribution which was wanting in Smith's work, just at the time 
 when Ricardo was attempting to overcome the omission by outlining 
 a new theory of distribution. According to Ricardo, rent, by its very 
 nature and the laws which give rise to it, is opposed to other revenues, 
 and the rate of wages and of profits must be regarded as direct oppo- 
 sites, so that the one can only increase if the other diminishes an 
 attractive but erroneous theory, and one which led to endless dis- 
 cussion among English economists, with the result that they aban- 
 doned it altogether. Say, by showing this dependence, which 
 becomes quite clear if we regard wages and profits from the point 
 of view of demand for commodities, and by his demonstration 
 that rent is determined by the same general causes viz. demand 
 and supply as determine the exchange value of other productive 
 services, saved political economy in France from a similar disaster. 
 It was he, also, who furnished Walras with the first outlines of his 
 attractive conception of prices and economic equilibrium. This 
 explains why he never attached to the theory of rent the supreme 
 importance given to it by English economists. In this respect 
 he has been followed by the majority of French economists. On the 
 1 Traiti, 6th ed., p. 349.
 
 INFLUENCE OF THOUGHT AND ITS DIFFUSION 115 
 
 other hand, and for a similar reason, he never went to the opposite 
 extreme of denying the existence of rent altogether by regarding it 
 merely as the revenue yielded by capital sunk in land. In this way 
 he avoided the error which Carey and Bastiat attempted to defend 
 at a later period. 1 
 
 (4) So far it is Say's brilliant power of logical reasoning that we 
 have admired. But has he contributed anything which is entirely 
 new to the science ? 
 
 His theory of markets was for a long time considered first- 
 class work. " Products are given in exchange for products." It 
 is a happy phrase, but it is not in truth very profound. It 
 simply gives expression to an idea that was quite familiar to the 
 Physiocrats and to Smith, namely, that money is but an inter- 
 mediary which is acquired only to be passed on and exchanged for 
 another product. " Once the exchange has been effected it is 
 immediately discovered that products pay for products." f Thus 
 goods constitute a demand for other goods, and the interest of a 
 country that produces much is that other countries should produce 
 at least as much. Say thought that the outcome of this would be 
 the advent of the true brotherhood of man. " The theory of markets 
 will change the whole policy of the world," said he. 8 He thought 
 that the greater part of the doctrine of Free Trade could be based 
 upon this principle. But to expect so much from such a vague, self- 
 evident formula was to hope for the impossible. 
 
 Still more interesting is the way in which he applied this ** theory 
 of markets " to a study of over-production crises, and the light which 
 that sheds upon the nature of Say's thought. Garnier had already 
 pointed out that a general congestion of markets was possible. As 
 crises multiplied this fear began to agitate the minds of a number of 
 thinkers. " Nothing can be more illogical," writes Say. " The total 
 supply of products and the total demand for them must of necessity 
 be equal, for the total demand is nothing but the whole mass of 
 
 1 " Bent," he says, " doubtless is partly interest on capital buried in the soil, 
 for there are few properties which do not owe something to improvements made 
 in them. But their total value is seldom due to this alone. It might be if the 
 land were fertile but lacked the necessary facilities for cultivation. But this 
 is never the case in civilised countries." (Critical examination of McCullooh'a 
 treatise (1825), in (Euvres diverse*, p. 277.) 
 
 Traite, 1st ed., p. 154. 
 
 * " The theory of heat and of weight and the study of the inclined plane have 
 placed the whole of nature at the disposal of mankind. In the same way the 
 theory of exchange and of markets will change the whole policy of the world.** 
 [Jlid., 6th ed., p. 51.)
 
 116 ADAM SMITH 
 
 commodities which have been produced : a general congestion 
 would consequently be an absurdity." l It would simply mean a 
 genera] increase of wealth, and " wealth is none too plentiful among 
 nations, any more than it is among individuals." 2 We may have an 
 inefficient application of the means of production, resulting in the 
 over-production of some one commodity or other i.e. we may have 
 partial over-production. 8 Say wishes to emphasise the fact that 
 we need never fear general over-production, but that we may have 
 too much of some one product or other. He frequently gave 
 expression to this idea in the form of paradoxes. We might almost 
 be led to believe that he denies the existence of crises altogether in 
 the second edition of his work. 4 In reality he was very anxious to 
 admit their existence, but he wished to avoid everything that might 
 prove unfavourable to an extension of industry. 5 
 
 He thought that crises were essentially transient, and declared 
 that individual liberty would be quite enough to prevent them. He 
 was extremely anxious to get rid of the vague terrors which had 
 haunted those people who feared that they would not be able to 
 consume all this wealth, of a Malthus who thought the existence of 
 the idle rich afforded a kind of safety-valve which prevented over- 
 production, 6 of a Sismondi who prayed for a slackening of the pace 
 
 1 Traite, 1st ed., vol. ii, p. 175* 
 
 * Ibid., p. 179. 
 
 * Ibid., p. 178. 
 
 * " One kind of product would seldom be more plentiful than another and 
 goods would seldom be too many if everyone were given complete freedom." 
 Too much stress has possibly been laid on the phrase " Certain products are 
 superabundant just because others are wanting," and it has been taken as imply- 
 ing that even partial over-production is an impossibility. A note inserted on 
 the next page helps to clear up the matter and to prevent misunderstanding. 
 " The argument of the chapter," Bays he, " is not that partial over-production 
 is impossible, but merely that the production of one thing creates the demand 
 for another." He certainly seems unfaithful to his own position in the letters 
 he wrote to Malthus, in which he tries to defend his own point of view 
 by saying that " production implies producing goods that are demanded," and 
 that consequently if there is any excessive production it is not the fault of 
 production as such and cannot be regarded as over-production. In greater con- 
 formity with his own views and much nearer the truth is his reply to an article 
 by Sismondi published in 1824 in the Revue enc.yclopedique under the title Sur 
 la Balance des Consommations avec Its Productions ((Euvres diverges, p. 250). His 
 statements vary from one edition to another, and anything more unstable than 
 Say's views on this question would be difficult to imagine. The formula " Pro- 
 ducts exchange for products " is so general that it includes everything, but means 
 nothing at all ; for what is money, after all, if it is not a product ? 
 
 * Letters to Malthus (CEuvrta diverges, p. 466). 
 
 6 Malthus, Principles of Political Economy, Book II, chap. I, sect. 9.
 
 INFLUENCE OF THOUGHT AND ITS DIFFUSION 117 
 
 of industrial progress and a checking of inventions. Such thoughts 
 arouse his indignation, especially, as he remarks, when it is remem- 
 bered that even among the most flourishing nations " seven-eighths 
 of the population are without a great number of products which would 
 be regarded as absolute necessities, not by a wealthy family, but even 
 by one of moderate means." 1 The inconvenience and he is never 
 tired of repeating it is not the result of over-production, but is 
 the effect of producing what is not exactly wanted. 2 Produce, 
 produce all that you can, and in the natural course of events a lower- 
 ing of prices will benefit even those who at first suffered from the 
 extension of industry. 
 
 In this once famous controversy between Say, Malthus, Sismondi, 
 and Ricardo (the latter sided with Say) we must not expect to find 
 a clear exposition of the causes of crises. Indeed, that is nowhere 
 to be found. All we have here is the expression of a sentiment 
 which is at bottom perfectly just, but one which Say wrongly 
 attempted to state in a scientific formula. 
 
 J. B. Say plays a by no means negligible part in the history of 
 doctrines. Foreign economists have not always recognised him. 
 Duhring, who is usually perspicacious, is very unjust to him when he 
 speaks of " the labour of dilution " to which Say devoted his energies. 3 
 His want of insight frequently caused him to glide over problems 
 instead of attempting to fathom them, and his treatment of political 
 economy occasionally appears very superficial. Certain difficulties 
 are veiled with pure verbiage a characteristic in which he is very 
 frequently imitated by Bastiat. Despite Say's greater lucidity, it 
 is doubtful whether Smith's obscurity of style is not, after all, more 
 stimulating for the mind. Notwithstanding all this, he was faithful 
 in his transmission of the ideas of the great Scotch economist into 
 French. Happily his knowledge of Turgot and Condillac enabled 
 him to rectify some of the more contestable opinions of his master, 
 and in this way he avoided many of the errors of his successors. 
 He has left his mark upon French political economy, and had the 
 English economists adopted his conception of the entrepreneur earlier, 
 instead of waiting until the appearance of Jevons, they would have 
 spared the science many useless discussions provoked by the work 
 
 1 Sur la Balance des Consommations avec lea Productions, p. 52. 
 
 Ibid., p. 251. 
 
 ' Duhring, Kritische, Geschichte der Nalionalokonomie und des Socialismua, 
 2nd ed., 1875, p. 165. For the other side of the question one may profitably 
 peruse the interesting study of Say contributed by M. Allix to the Rtvue 
 d'Economie politique, 1910 (pp. 303-341), and the Revue d'Hinloire des Doctrines, 
 1911, p. 321.
 
 118 THE PESSIMISTS 
 
 of a thinker who was certainly more profound but much less judicious 
 than Say, namely, David Ricardo. 1 
 
 CHAPTER III: THE PESSIMISTS 
 
 A NEW point of view is presented to us by the economists of whom 
 we are now going to speak. Hitherto we have heard with admira- 
 tion of the discovery of new facts and of their beneficent effects both 
 upon nations and individuals. We are now to witness the enuncia- 
 tion of new doctrines which cast a deepening shadow across the 
 radiant dawn of economics, giving it that strangely sinister aspect 
 which led Carlyle to dub it " the dismal science." 
 
 Hence the term "Pessimists," although no reproach is implied 
 in our use of that term. On the contrary, we shall have to show 
 that the theories of the school are often truer than those of the 
 Optimists, which we must study at a later stage of our survey. While 
 nominally subscribing to their predecessors' doctrine concerning the 
 identity of individual and general interests, the many cogent reasons 
 which they have adduced against such belief warrants our classifica- 
 tion. The antagonism existing between proprietors and capitalists, 
 between capitalists and workmen, is a discovery of theirs. Instead 
 of the " natural " or " providential " laws that were to secure the 
 establishment of the " order " provided they were once thoroughly 
 understood and obeyed, they discovered the existence of other laws, 
 such as that of rent, which guaranteed a revenue for a minority of 
 idle proprietors a revenue that was destined to grow as the direct 
 result of the people's growing need ; or the " law of diminishing re- 
 turns," which sets a definite limit to the production of the necessaries 
 of life. That limit, they asserted, was already being approached, 
 and mankind had no prospect of bettering its lot save by the 
 voluntary limitation of its numbers. There was also the tendency 
 of profits to fall to a minimum until it seemed as if the whole of 
 
 1 Stanley Jevons (Theory of Political Economy, 3rd ed., 1888) has recognised 
 in too absolute a fashion, perhaps, the superiority of the French economists 
 over Ricardo. " The true doctrine may be more or less clearly traced through 
 the writings of a succession of great French economists, from Condillac, Baudeau, 
 and Le Trosne, through J. B. Say, Destutt de Tracy, Storch, and others, down 
 to Bastiat and Courcelle-Seneuil. The conclusion to which I am ever more 
 clearly coming is that the only hope of attaining a true system of economics 
 is to fling aside, once and for ever, the mazy and preposterous assumptions of the 
 E-icardian School." (Preface, p.
 
 THE PESSIMISTS 119 
 
 human industry would sooner or later be swallowed up by the 
 stagnant waters of the stationary State. 
 
 Lastly, they deserve to be classed as pessimists because ot their 
 utter disbelief in the possibility of changing the course of these 
 inevitable laws either by legislative reform or by organised voluntary 
 effort. In short, they had no faith in what we call progress. 
 
 But we must never imagine that they considered themselves 
 pessimists or were classed as such by their contemporaries. This 
 verdict is posterity's, and would have caused them no little surprise. 
 As for themselves, they seem to stand aloof from their systems with 
 an insouciance that is most disconcerting. The " present order of 
 things " possessed no disquieting features for them, and they never 
 doubted the wisdom of " Nature's Lord." They believed that 
 property had been put upon an immovable basis when they demon- 
 strated the extent of its denotation, and that the spirit of revolt had 
 been disarmed by impressing upon the poor a sense of responsibility 
 for their own miseries. 1 
 
 The best known representatives of the school are Malthus and 
 Ricardo. They claimed to be philanthropists and friends of the 
 people, and we have no reason to suspect their sincerity. 2 Their 
 contemporaries, also, far from being alarmed, received the new 
 political economy with the greatest enthusiasm. A warm welcome 
 was extended to its apostles by the best of English society, 3 and 
 ladies of distinction contended with one another for the privilege 
 of popularising the abstract thoughts of Ricardo in newspaper 
 articles and popular tales. 4 
 
 1 "The people must comprehend that they are themselves the cause of their 
 own poverty." (Malthus, p. 458.) Doubtless this is the reason why M. Hal6vy, 
 among others, in his book Le Radicalisme philosophique, remarks that Ricardo, 
 Malthus, and their disciples were regarded as the exponents of optimism and 
 quietism. But in what sense were they optimists T Of course they believed 
 that the existing economic order is the best possible, and that it would be impossible 
 to change it for a better. That may be. But we prefer to think of them as 
 " contented pessimists." 
 
 1 " Every reader of candour must acknowledge that the practical design 
 uppermost in the mind of the writer, with whatever want of judgment it may 
 have been executed, is to improve the condition and increase the happiness of the 
 lower classes of society." It is with this declaration that Malthus brings his book 
 on population to a close. 
 
 1 Miss Edgeworth, a contemporary of Ricardo, states in her letters that 
 political economy was so much the fashion that distinguished ladies before 
 engaging a governess for their children inquired about her competence to teach 
 political economy. 
 
 * Conversations on Political Economy, by Mrs. Marcet (1816). Illustrations of 
 Political Economy, by Miss Martineau (9 vols., containing thirty stories, 1832-34).
 
 120 THE PESSIMISTS 
 
 Neither should we omit to pay them full homage for the eminent 
 services rendered to the science, and among these not the least 
 important was the antagonism which their theories aroused in the 
 minds of the working classes. Pessimists unwittingly often do 
 more for progress than optimists. To these two writers fell the task 
 of criticising economic doctrines and institutions, a task that has 
 been taken up by other writers in the course of the century, but 
 which seems as far from completion as ever. Karl Marx, another 
 critic, is intellectually a scion of the Ricardian family. It would 
 be a mistake to imagine that all their theories savour of pessimism, 
 but their reputation has always been more or less closely linked with 
 the gloomier aspect of their teaching. 
 
 I : MALTHUS * 
 
 MALTHUS is best known for his " law of population." That he was 
 a great economist, even apart from his study of that question, might 
 easily be proved by reference to his treatise on political economy, 
 or by a perusal of the many miscellaneous articles which he wrote 
 on various economic questions. A consideration of many of these 
 theories, notably the theory of rent, must be postponed until we 
 come to study them in connection with the name of Ricardo. 
 
 1 Thomas Robert Malthus was born in 1766. His father, a country gentle- 
 man, was a man of learning and a friend of most of the philosophers of his time, 
 especially Hume, and, it also seems, J. J. Rousseau. He was the youngest 
 son of the family, and was intended for the Church and given an excellent 
 education. After leaving Cambridge he took a living in the country, but in 
 1807 was appointed professor at a college founded by the East India Com- 
 pany at Haileybury, in Hertfordshire, where he remained until his death in 
 1834. He married when thirty -nine years of age, and had three sons and a 
 daughter. 
 
 Malthus was a young unmarried clergyman living in a small country parish 
 when, at the age of thirty-two, he in 1798 published anonymously his famous 
 Essay on the Principle of Population as it affects the Future Improvement of Society. 
 His critics were legion. In order to devote more study to the subject, he 
 took a three years' tour (1799-1802) on the Continent avoiding France, because 
 France at this period was anything but inviting to an Englishman. In 1803 he 
 published under his own name this time a second edition, much modified and 
 amplified, and with a slightly different title : An Essay on the Principle of 
 Population, or a View of its Past and Present Effects on Human Happiness. Four 
 other editions were published during his lifetime. 
 
 We must not forget his other works, although they were all eclipsed by his 
 earliest effort. These were: The Principles of Political Economy considered 
 with a View to their Practical Application (1820) ; A Series of Short Studies dealing 
 with the Corn Laws (1814-15) ; On Rent (1815) ; The Poor Law (1817) ; and 
 finally his Definitions in Political Economy (1827).
 
 MALTHUS 121 
 
 THE LAW OF POPULATION 
 
 Twenty years had elapsed since the publication of Smith's im- 
 mortal work, without economics making any advance, when the 
 appearance of a small, anonymous volume, known to be the work of 
 a country clergyman, caused a great sensation. Even after the 
 lapse of a century the echo of the controversy which it aroused 
 has not altogether passed away. At first sight one might be led to 
 think that the book touches only the fringe of economics, seeing 
 that it is chiefly a statistical study of population, or demography, 
 as the science is called to-day. But this new science, of which 
 Malthus must be regarded as the founder, was separated from the 
 main trunk of economics at a much later date. Furthermore, we 
 shall find that the influence of his book upon all economic theories, 
 both of production and distribution, was enormous. The essay 
 might even be considered a reply to that of Adam Smith. The same 
 title with slight modification would have served well enough, and 
 James Bonar wittily remarks that Malthus might have headed it 
 An Essay on the Causes of the Poverty of Nations. 
 
 The attempt to explain the persistence of certain economic 
 phenomena by connecting them with the presence of a new factor, 
 biological in its character and differing in its origin both from personal 
 interest and the mere desire for profit, considerably expanded the 
 economic horizon and announced the advent of sociology. We know 
 that Darwin himself acknowledged his indebtedness to the work of 
 Malthus for the first suggestion of what eventually became the most 
 celebrated scientific doctrine of the nineteenth century, namely, the 
 conception of the struggle for existence and the survival of the fittest 
 as one of the mainsprings of progress. 
 
 There is no necessity for thinking that the dangers which might 
 result from an indefinite growth of population had not engaged the 
 attention of previous writers. In France Buffon and Montesquieu 
 bad already shown some concern in the matter. But a numerous 
 population was usually regarded as advantageous, and fear of excess 
 was never entertained inasmuch as it was believed that the number 
 of people would always be limited by the available means of sub- 
 sistence. 1 This was the view of the Physiocrat Mirabeau, stated in 
 his own characteristic fashion in his book IS Ami des Hommes, which 
 has for its sub-title Traiti de la Population. Such a natural fact as 
 the growth of population could possess no terrors for the advocates 
 of the " natural order." But in the writings of Godwin this " natural " 
 optimism assumed extravagant proportions. His book on Political 
 1 Se Stangeland, Pre-Malthuaian Doctrines (New York, 1904). 
 
 8.D E
 
 122 THE PESSIMISTS 
 
 Justice appeared in 1793 and greatly impressed the public. Godwin, 
 it has been well said, was the first anarchist who was also a doctrinaire. 
 At any rate he seems to have been the first to employ that famous 
 phrase, " Government even in its best state is an evil." His illimit- 
 able confidence in the future of society and the progress of science, 
 which he thought would result in such a multiplicity of products 
 that half a day's work would be sufficient to satisfy every need, 
 and his belief in the efficacy of reason as a force which would 
 restrain personal interest and check the desire for profit, really en- 
 titles him to be considered a pioneer. But life having become so 
 pleasant, was there no possibility that men might then multiply 
 beyond the available means of subsistence ? Godwin was ignorant 
 of the terrible intricacies of the problem he had thus raised, and he 
 experienced no difficulty in replying that such a result, if it ever 
 came to pass, must take several centuries, for reason may prove as 
 powerful in controlling the sexual instinct as in restraining the 
 desire for profit. Godwin even goes so far as to outline a social State 
 in which reason shall so dominate sense that reproduction will cease 
 altogether and man will become immortal. 1 
 
 Almost at the same time there appeared in France a volume 
 closely resembling Godwin's, entitled Esquisse d'un Tableau his- 
 torique des Progres de VEsprit humain, written by Condorcet (1794). 
 It displays the same confidence in the possibility of achieving 
 happiness through the all-powerful instrumentality of science, which, 
 if not destined actually to overcome death, was at least going to 
 postpone it indefinitely. 2 This optimistic book, written by a man 
 who was about to poison himself in order to escape the guillotine, 
 cannot leave us quite unmoved. But, death abolished, Condorcet 
 finds that he has to face the old question propounded to Godwin : 
 " Can the earth always be relied upon to supply sufficient means of 
 subsistence ? " To this question he gives the same answer : either 
 science will be able to increase the means of subsistence or reason 
 will prevent an inordinate growth of population. 
 
 It was inevitable, in accordance with the law of rhythm which 
 characterises the movements of thought no less than the forces of 
 nature, that such hasty optimism should provoke a reaction. It 
 was not long in coming, and in Malthus's essay we have it developed 
 in fullest detail. 
 
 To the statement that there are no limits to the progress of 
 
 Godwin, Political Justice, Book VIII, chap. 7 (reprinted, London, 1890). 
 1 " Man doubtless will never become immortal, but it is possible that the 
 span of human life may be indefinitely prolonged."
 
 MALTHUS 123 
 
 mankind either in wealth or happiness, and that the fear of over- 
 population is illusory, or at any rate so far removed that it need 
 cause no apprehension, Malthus replied that, on the contrary, we 
 have in population an almost insurmountable obstacle, not merely 
 looming in the distant future, but pressing and insistent l the stone 
 of Sisyphus destined to be the cause of humanity's ceaseless toil 
 and final overthrow. Nature has planted an instinct in man which, 
 left to itself, must result in starvation and death, or vice. This is the 
 one fact that affords a clue to men's suffering and a key to the history 
 of nations and their untold woes. 
 
 Everyone, however little acquainted with sociological study, 
 knows something of the memorable formula by which Malthus endea- 
 voured to show the contrast between the frightful rapidity with which 
 population grows when it is allowed to take its own course and the 
 relative slowness in the growth of the means of subsistence. The 
 first is represented by a geometrical series where each successive 
 number is a multiple of the previous one. The second series increases 
 in arithmetical progression, that is, by simple addition, the illustra- 
 tion being simply a series of whole numbers : 
 
 1 2 4 8 16 32 64 128 256 
 12345678 9 
 
 Every term corresponds to a period of twenty-five years, and a 
 glance at the figures will show us that population is supposed to 
 double every twenty- five years, while the means of subsistence 
 merely increases by an equal amount during each of these periods. 
 Thus the divergence between the two series grows with astonishing 
 rapidity. In the table given above, containing only nine terms, 
 the population figure has already grown to twenty-seven times the 
 means of subsistence in a period of 225 years. Had the series been 
 extended up to the hundredth term a numerical representation of 
 the divergence would have required some ingenuity. 
 
 The first progression may be taken as correct, representing as it 
 does the biological law of generation. The terms " generation " and 
 '* multiplication " are not used as synonyms without some purpose. 
 It is true that doubling supposes four persons to arrive at the 
 marriageable age, and this means five or six births if we are to allow 
 
 1 Chap. 8 is entitled " The Error of Thinking that the Danger resulting from 
 Population is Remote." " There are few States in which there is not a constant 
 effort in the population to increase beyond the means of subsistence. This 
 constant effort as constantly tends to subject the lower classes of society to 
 distress, and to prevent any great permanent amelioration of their condition." 
 (P. 10.)
 
 124 THE PESSIMISTS 
 
 for the inevitable wastage from infant mortality. This figure appears 
 somewhat high to those who live in a society where limitation of the 
 birth-rate is fairly usual. But it is certain that among living beings 
 in general, including humankind, who are least prolific, the number 
 of births where no restraint of any kind exists is really much higher. 
 Women have been known to give birth to twenty or even more 
 children. And there are no signs of diminishing capacity among the 
 sexes, for population is still growing. In taking two as his coefficient 
 Mai thus has certainly not overstepped the mark. 1 
 
 The period of twenty-five years as the interval between the two 
 terms is more open to criticism. 2 The practice of reckoning three 
 generations to a century implies that an interval of about thirty- 
 three years must elapse between one generation and another. 
 
 But these are unimportant details. It is immaterial whether 
 we lengthen the interval between the two terms from twenty-five 
 to thirty- three years, or reduce the ratio from 2 to 1 , or even to some- 
 thing between 1 J and 1^. The movement will be a little slower, 
 but it is enough that its geometrical character should be admitted, 
 for however slow it moves at first it will grow by leaps and bounds 
 until it surpasses all limits. These corrections fail to touch the real 
 force of Malthus's reasoning concerning the law of reproduction. 
 
 The series representing the growth of the means of subsistence is 
 also open to criticism. It is evidently of a more arbitrary character, 
 and we cannot say whether it is simply supposed to represent a 
 possible contingency like the first, or whether it pretends to represent 
 reality. At least it does not correspond to any known and certain 
 law, such as the law of reproduction. As a matter of fact it rather 
 
 1 If two children were the normal issue of every marriage, population would 
 evidently diminish, for all the children will not reach the marriageable age. Of 
 those that do all will not become parents. Experience seems to show that with 
 a birth-rate of less than three per family population does not increase, or if 
 it does grow at all it is almost imperceptibly. This is the case in France, where 
 on an average there are 2-70 births to every marriage. 
 
 To justify multiplying by two, Malthus regards a family of six as being a normal 
 one. Of the six, two will die before attaining marriageable age, or will remain 
 celibates, so that we are left with four, who will in turn become parents, and so we 
 have the series 2, 4, etc. 
 
 - The statement that population doubles every twenty-five years might 
 appear to be confirmed by the growth of population in the United States. It 
 is curious to find that the population there during the nineteenth century 
 conforms exactly to Malthus's formula. In 1800 it was 5 millions. Doubling 
 four times (4 periods of 25 years = 100) gives us a population of 80 millions, 
 which is actually the figure for 1905, five years after the end of the century. 
 But of course this is pure chance, the increase resulting from immigration rather 
 than a rising birth-rate.
 
 MALTHUS 125 
 
 seems to give it the lie ; for, in short, what is meant by means of 
 subsistence unless we are to understand the animal and vegetable 
 species that reproduce themselves according to the same laws as 
 human beings, only at a much faster rate ? The power of reproduc- 
 tion among plants, like corn or potatoes, or among animals, like 
 fowls, herrings, cattle even, or sheep, far surpasses that of man. To 
 this criticism Malthus might have replied as follows. This virtual 
 power of reproduction possessed by these necessaries of life is in 
 reality confined to very limited areas of the habitable globe. It is 
 further restricted by the difficulty of obtaining the proper kind of 
 nourishment, and by the struggle for existence. But if we admit 
 exceptions in the one case why not also in the other ? It certainly 
 seems as if there were some inconsistency here. As a matter of fact 
 we have two different theses. The one attempts to show how 
 multiplication or reproduction need not of necessity be less rapid 
 among plants or animals than it is among men. The other ex- 
 presses what actually happens by showing that the obstacles to 
 the indefinite multiplication of men are not less numerous than the 
 difficulties in the way of an indefinite multiplication of vegetables 
 or animals, or, in other words, that the former is a function of the 
 latter. 
 
 In order to grasp the true significance of the second formula it 
 must be translated from the domain of biology into the region of 
 economics. Malthus evidently thought of it as the amount of corn 
 yielded by a given quantity of land. The English economists could 
 think of nothing except in terms of corn ! What he wished to 
 point out was that the utmost we can expect in this matter is that 
 the increase in the amount of the harvest should be in arithmetical 
 progression say, an increase of two hectolitres every twenty-five 
 years. This hypothesis is really rather too liberal. Lavoisier 
 in 1789 calculated that the French crop yielded on an average 
 about 7f hectolitres per hectare. During the last few years it 
 has averaged about 16, and if we admit that the increment has been 
 regular throughout the 120 years which have since elapsed we have 
 an increase of 2 hectolitres per 25 years. This rate of increase has 
 proved sufficient to meet the small increase which has taken place in 
 the population of France. But would it have sufficed for a popula- 
 tion growing as rapidly as that of England or Germany ? Assuredly 
 not, for these countries, despite their superior yields, are forced to 
 import from outside a great proportion of the grain which they con- 
 sume. The question arises whether France can continue indefinitely 
 on the same basis during the course of the coming centuries. This
 
 126 THE PESSIMISTS 
 
 is, indeed, unlikely, for there must be a physical limit to the earth's 
 capacity on account of the limited number of elements it contains. 
 The economic limit will be reached still earlier because of the in- 
 creasing cost of attempting to carry on production at these extreme 
 limits. Thus it seems as if the law of diminishing returns, which we 
 must study later, were the real basis of the Malthusian laws, although 
 Malthus himself makes no express mention of it. 
 
 It is a truism that the number of people who can live in any place 
 cannot exceed the number of people who can gain subsistence there. 
 Any excessive population must, according to definition, die of 
 hunger. 1 This is just what happens in the animal and vegetable 
 kingdoms. Germs are extraordinarily prolific, but their undue 
 multiplication is pitilessly retarded by a law which demands the 
 death of a certain proportion, so that life, like a well-regulated 
 reservoir, always remains at a mean level, the terrible gaps made 
 by death being replenished by a new flow. Among savages, just as 
 among animals, which they much resemble, a large proportion 
 literally dies of hunger. Malthus devoted much attention to the 
 study of primitive society, and he must be regarded as one of the 
 pioneers of prehistoric sociology a subject that has made much 
 headway since then. 
 
 He proceeds to show how insufficient nourishment always brings 
 a thousand evils in its train, not merely hunger and death, but also 
 epidemics and such terrible practices as cannibalism, infanticide, and 
 slaughter of the old, as well as war, which, even when not undertaken 
 with a definite view to eating the conquered, always results in robbing 
 them of their land and the food which it yielded. These are the 
 " positive " or " repressive " checks. 
 
 But it may be replied that both among savages and animals the 
 cause of this insufficiency of food is an incapacity for production 
 rather than an excess of population. 
 
 Malthus has no difficulty in answering this objection by showing 
 how savage customs prevailed among such civilised people as the 
 Greeks. And even among the most modern nations the repressive 
 
 1 It was in this connection that Malthus penned those famous words which 
 have been so frequently brought up against him, although they were omitted 
 from a later edition. "A man who is born into a world already posssssed, it 
 he cannot get subsistence from his parents on whom he has a just demand, and 
 if the society do not want his labour, has no claim of rigid to the smallest portion 
 of food, and, in fact, has no business to be where he is. At Nature's mighty feast 
 there is no vacant cover for him. She tells him to ba gone. . . ," On the other 
 hand, let us remember his services in reorganising public aesistance in England 
 in 1832.
 
 MALTHUS 12? 
 
 checks, somewhat mitigated it is true, are never really absent. 
 Famine in the sense of absolute starvation is seldom experienced 
 nowadays, except in Russia and India, perhaps, but it is by no 
 means a stranger even to the most advanced communities. Tuber- 
 culosis, which involves such terrible bodily suffering, is nothing but 
 a deadly kind of famine. Lack of food is also responsible for the 
 abnormally high rate of infant mortality and for the premature 
 death of the adult worker. As for war, it still demands its toll. 
 Malthus was living during the wars of the Revolution and the First 
 Empire bloody catastrophes that caused the death of about ten 
 million men, all in the prime of life. 
 
 In civilized communities equilibrium is possible through humaner 
 methods, in the substitution of the preventive check with its reduced 
 birth-rate for the repressive check with its abnormal death-rate. 
 Here is an expedient of which only the rational and the provident 
 can avail themselves, an expedient open only to man. Knowing 
 that his children are doomed to die perhaps at an early age he may 
 abstain from having any. In reality this is the only efficacious way 
 of checking the growth of population, for the positive check only 
 excites new growth, just as the grass that is mown grows all the 
 more rapidly afterwards. The history of war furnishes many a 
 striking illustration of this. The year following the terrible war of 
 1870-71 remains unique in the demographic annals of France on 
 account of the sudden upward trend of the declining curve of 
 natality. 
 
 It was in the second edition of his book that Malthus expanded 
 his treatment of the preventive checks, thus softening the somewhat 
 harsher aspects of his first edition. It is very important that we 
 should grasp his exact meaning. We therefore make no apology for 
 frequently quoting his views on one point which is in itself very 
 important, but upon which the ideas of the reverend pastor of 
 Haileybury have been so often misrepresented. 
 
 The preventive check must be taken to imply moral restraint. 
 But does this mean abstaining from sexual intercourse during the 
 period of marriage after the birth, say, of three children, which may 
 be taken as sufficient to keep the population stationary or moderately 
 progressive ? We cannot find that Malthus ever advocated such 
 abstention. We have already seen that he considered six children 
 a normal family, implying the doubling of the population every 
 twenty-five years. Neither is it suggested that six should be 
 the maximum, for he adds : " It may be said, perhaps, that even 
 this degree of prudence might not always avail, as when a man
 
 128 THE PESSIMISTS 
 
 marries he cannot tell what number of children he shall have, and 
 many have more than six. This is certainly true." (P. 536.) 
 
 But where does moral restraint come in ? This is how he defines 
 it : " Restraint from marriage which is not followed by irregular 
 gratifications may properly be termed moral restraint " (p. 9) ; and to 
 avoid any possible misunderstanding he adds a note : " By moral 
 restraint I would be understood to mean a restraint from marriage 
 from prudential motives with a conduct strictly moral during the 
 period of this restraint, and I have never intentionally deviated from 
 this sense." All this is perfectly explicit. He means abstention 
 from all sexual intercourse outside the bonds of marriage, and 
 the postponement of marriage itself until such time as the man can 
 take upon himself the responsibility of bringing up a family and 
 even the complete renunciation of marriage should the economic 
 conditions never prove favourable. 
 
 Malthus unceremoniously rejected the methods advocated by those 
 who to-day bear his name, and expressly condemned all who favoured 
 the free exercise of sexual connection, whether within or without 
 the marriage bond, through the practice of voluntary sterilization. 
 All these preventive methods are grouped together as vices and their 
 evil effects contrasted with the practice of moral restraint. Malthus is 
 equally explicit on this point. " Indeed, I should always particularly 
 reprobate any artificial and unnatural modes of checking population. 
 The restraints which I have recommended are quite of a different 
 character. They are not only pointed out by reason and sanctioned 
 by religion, but tend in the most marked manner to stimulate 
 industry." (P. 572. ) And he adds these significant words, so strangely 
 prophetic so far as France is concerned : "It might be easy to fall 
 into the opposite mistake and to check the growth of population 
 altogether." 
 
 It is quite needless to add that if Malthus thus made short work 
 of conjugal frauds he all the more strongly condemned that other 
 preventive method, namely, the institution of a special class of 
 professional prostitutes. 1 He would similarly have condemned the 
 practice of abortion, of which scarcely anything was heard in his day, 
 but which now appears like a scourge, taking the place of infanticide 
 and the other barbarous practices of antiquity. Criminal law seems 
 
 " The effect of anything like a promiscuous intercourse which prevents the 
 birth of children is evidently to weaken the best affections of the heart and in 
 a very marked manner to degrade the female character. And any other inter- 
 course would, without improper arts, bring as many children into the society as 
 marriage, with a much greater probability of their becoming a burden to it." 
 (P. 460.)
 
 MALTHUS 129 
 
 powerless to suppress it, and it has already received the sanction of a 
 new morality. 
 
 But apart from the question of immoral practices, did Malthus 
 really believe that moral restraint as he conceived of it would 
 constitute an effective check upon population ? 
 
 He doubtless was anxious that it should be so, and he tried to 
 rouse men to a holy crusade against this worst of all social evils. 
 " To the Christian I would say that the Scriptures most clearly and 
 precisely point it out to us as our duty to restrain our passions within 
 the bounds of reason. . . . The Christian cannot consider the 
 difficulty of moral restraint as any argument against its being his 
 duty." (P. 452.) And to those who wish to follow the dictates of 
 reason rather than the observances of religion he remarks : " This 
 virtue [chastity] appears to be absolutely necessary in order to avoid 
 certain evils which would otherwise result from the general laws of 
 nature." (P. 452.) l 
 
 At bottom he was never quite certain as to the efficacy of moral 
 restraint. The threatening hydra always peered over the fragile 
 shield of pure crystal with which he had hoped to do battle.* He also 
 felt that celibacy might not merely be ineffective, but would actually 
 
 1 "These considerations show that the nature of chastity is not, as some 
 have supposed, a forced produce of artificial society ; but that it has the most 
 real and solid foundation in nature and reason ; being apparently the only 
 virtuous means of avoiding the vice and misery which result so often from the 
 principle of population." (P. 450.) 
 
 He also notes that this virtue has usually been especially commended to 
 women, but that " there is no reason for supposing that the violation of the laws 
 of chastity are not equally dishonourable for both sexes." Malthus evidently 
 believed in one moral law for both sexes. 
 
 Consequently whenever the reverend gentleman is reproached with encourag- 
 ing blasphemy, a point upon which he is particularly sensitive for example, 
 when it is pointed out that God's injunction to man was to increase and multiply 
 he has no difficulty in showing that if procreation is the will of Providence, 
 chastity is dictated by Christianity, and that the glorious work of chastity is to 
 aid Providence in keeping even the balance of life. 
 
 1 " Of the other branch of the preventive check, which comes under the 
 head of vice, though its effect appears to have been very considerable, yet upon 
 the whole its operation seems to have been inferior to the positive checks." (P. 140. ) 
 
 " I have said what I conceive to be strictly true, that it is our duty to defer 
 marriage till we can feed our children ; and that it is also our duty not to indulge 
 ourselves in vicious gratifications ; but I have never said that I expected either, 
 much less both, of these duties to be completely fulfilled. In this and a number of 
 other cases, it may happen that the violation of one of two duties will enable a 
 man to perform the other with greater facility. . . . The moralist is still bound 
 to inculcate the practice of both duties, and each individual must be left to act as his 
 conscience shall dictate." (P. 560.) 
 
 >.D. *
 
 130 THE PESSIMISTS 
 
 prove dangerous by provoking the vices it was intended to check. 
 Its prolongation, or worse still its perpetuation, could never be favour- 
 able to good morals. 
 
 Malthus was faced with a terrible dilemma, and the uncom- 
 promising ascetic is forced to declare himself a utilitarian philosopher 
 of the Benthamite persuasion. He has now to condone those prac- 
 tices which satisfy the sexual instinct without involving maternity, 
 although at an earlier stage he characterised them as vices. It 
 seemed to him to be the lesser of two evils, for over-population 1 is 
 itself the cause of much immorality, with its misery, its promiscuous 
 living and licence. All of which is very true. 1 At the same time the 
 rule of conduct now prescribed is no longer that of " perfect purity." 
 It is, as he himself says, the grand rule of utility. " It is clearly our 
 duty gradually to acquire a habit of gratifying our passion, only in 
 that way which is unattended with evil." (P. 500. ) These concessions 
 only served to prepare the way for the Neo-Malthusians. 
 
 Malthus gives us a picture of man at the cross-roads. Straight 
 in front of him lies the road to misery, on the right the path of virtue, 
 while on the left is the way of vice. Towards the first man is im- 
 pelled by a blind instinct. Malthus warns him to rein in his desires 
 and seek escape along either by-road, preferably by the path on his 
 right. But he fears that the number of those who will accept his 
 advice and choose " the strait road of salvation " will be very small. 
 On the other hand, he is unwilling to admit, even in the secrecy of his 
 own soul, that most men will probably follow the road that leads on to 
 vice, and that masses will rush down the easy slope towards perdition. 
 In any case the prospect is anything but inviting. 
 
 No doctrine ever was so much reviled. Imprecations have been 
 
 " I should be extremely sorry to say anything which could either directly or 
 remotely be construed unfavourably to the cause of virtue ; but I certainly cannot 
 think that the vices which relate to the sex are the only vices which are to be 
 considered in a moral question." (P. 462.) Malthus omits to mention the 
 particular vice which he has in mind. " I have not the slightest hesitation in 
 saying that the prudential check [note the word no longer " moral restraint "] 
 to marriage is better than premature mortality." (P. 560. ) We are far removed 
 from the first edition, where there is no mention of a third alternative between 
 chastity and vice. 
 
 " Abject poverty is a state the most unfavourable to chastity that can 
 well be conceived. . . . There is a degree of squalid poverty in which if a girl 
 was brought up I should say that her being really modest at twenty was an 
 absolute miracle." (P. 464.) And elsewhere he writes : " I maintain that the 
 diminution of the vice which results from poverty would afford a sufficient 
 compensation for any other evil that might follow."
 
 MALTHUS 181 
 
 showered upon it ever since Godwin's memorable description of it as 
 " that black and terrible demon that is always ready to stifle the 
 hopes of humanity." 
 
 Critics have declared that all Malthus's economic predictions have 
 been falsified by the facts, that morally his doctrines have given 
 rise to the most repugnant practices, and not a few French writers 
 are prepared to hold him responsible for the decline in the French 
 birth-rate. What are we to make of these criticisms ? 
 
 History certainly has not confirmed his fears. No single country 
 has shown that it is suffering from over-population. In some cases 
 that of France, for example population has increased only very 
 slightly. In others the increase has been very considerable, but 
 nowhere has it outstripped the increase in wealth. 
 
 The following table, based upon the decennial censuses, gives 
 the per capita wealth of the population of the United States, the 
 country from which Malthus obtained many of his data : 
 
 Year Dollars 
 
 1850 . . .308 
 
 1860 . . .514 
 
 1870 . . .780 
 1880 . 870 
 
 Year Dollars 
 
 1890 . . . 1036 
 
 1900 . . . 1227 
 1905 1370 
 
 In fifty years the wealth of every inhabitant has more than 
 quadrupled, although the population in the same interval also shows 
 a fourfold increase (23 millions to 92 millions). 1 
 
 Great Britain, i.e. England and Scotland, at the time Malthus 
 wrote (1800-5), had a population of 10 millions. To-day it has 
 a population of 40 millions. Such a figure, had he been able to 
 foresee it, would have terrified Malthus. But the wealth and 
 prosperity of Great Britain have in the meantime probably quad- 
 rupled also. 
 
 Does this prove the claim that is constantly being made, that 
 Malthus's laws are not borne out by the facts ? We think that it is 
 correct to say that the laws still remain intact, but that the conclu- 
 sions which he drew from them were unwarranted. No one can 
 deny that living beings of every kind, including the human 
 species, multiply in geometrical progression. Left to itself, with 
 no check, such increase would exceed all limits. The increase of 
 
 1 These figures only give the values expressed in money by capitalising them 
 at the market rate of interest, which gives a rather fictitious result. It does 
 not warrant the belief that an American citizen of to-day, however much his 
 consumption may have increased, is any better off than his ancestors.
 
 182 THE PESSIMISTS 
 
 industrial products, on the other hand, must of necessity be limited 
 by the numerous conditions which regulate all production that is, 
 by the amount of space available, the quantity of raw material, of 
 capital and labour, etc. If the growth of population has not out- 
 stripped the increase in wealth, but, as appears from the figures 
 we have given, has actually lagged behind it, it is because population 
 has been voluntarily limited, not only in France, where the preven- 
 tive check is in full swing, but also in almost every other country. 
 This voluntary limitation which gave Malthus such trouble is one 
 of the commonest phenomena of the present time. 
 
 Malthus's apprehensions appear to involve some biological con- 
 fusion. The sexual and the reproductive instincts are by no means 
 one and the same ; 1 they are governed by entirely different motives. 
 Only to the first can be attributed that character of irresistibility 
 which he wrongly attributes to the second. The first is a mere 
 animal instinct which rouses the most impetuous of passions and is 
 common to all men. The second is frequently social and religious 
 in its origins, assuming different forms according to the exigencies of 
 time and place. 
 
 To the religious peoples who adopted the laws of Moses, of Manu, 
 or of Confucius to beget issue was to ensure salvation and to realise 
 true immortality. 2 For the Brahmin, the Chinese, or the Jew not to 
 have children meant not merely a misfortune, but a life branded with 
 failure. Among the Greeks and Romans the rearing of children was 
 a sacred duty laid upon every citizen and patriot. An aristocratic 
 caste demanded that the glories of its ancestors and founders should 
 never be allowed to perish for the want of heirs. Even among the 
 working classes, whose lot is often miserable and always one of 
 economic dependence, there are some who are buoyed up by the 
 hope that the more children they have the larger will be their weekly 
 earnings and the greater their power of enlisting public sympathy. 
 
 1 These differ, again, from the desire for marriage, which is influenced by other 
 considerations. French people marry in order to have a home, but a desire for a 
 home and a desire for love or for children are very different things. 
 
 1 " By a son a man obtains victory over all people ; by a son's son he enjoya 
 immortality ; and afterwards by the son of that grandson he reaches the solar 
 abode." " The son delivers his father from hell." " A son of a Brahmin if 
 he performs virtuous acts redeems from sin his ten ancestors." (P. 105.) 
 
 This is Manu's law, which Malthus quotes in support of his contention. But 
 he failed to see that as soon as one begins to doubt Manu's teaching the argument 
 is the other way. One of the reasons why sterility was considered a dishonour by 
 Jewish women was that each of them secretly hoped that she might become the 
 mother of the promised Messiah. But when the Jews ceased to hope for the 
 Deliverer that was to oome, then the incentive to childbirth was gone.
 
 MALTHUS 133 
 
 And in every new country there is a demand for labourers to 
 cultivate its virgin soil and to build up a new people. 
 
 The reproductive instinct, on the other hand, may be thwarted 
 by antagonistic forces by the selfishness of parents who shun their 
 responsibilities, or of mothers who dread the pains and perils of 
 child-bearing ; by the greed of parents who would endow old age 
 rather than foster youth ; by the desire of women to enjoy inde- 
 pendence rather than seek marriage ; by the too early emancipation 
 of children, which leaves to the parents no gains and no joys beyond 
 the cost and trouble of upbringing ; by insufficient house-room or 
 exorbitant taxation, or by any one of a thousand causes. 
 
 Thus the considerations that influence reproduction are infinitely 
 varied, and being of a social character they are neither necessary nor 
 permanent, nor yet universal. They may very well be defeated by 
 motives that belong to the social order, and this is just what happens. 
 And it is at least possible to conceive of a state of society where 
 religious faith has vanished and patriotism is dead, where the family 
 lasts only for one generation, and where all land has been appropriated 
 so that the calling of the father is denied to the son ; where existence 
 has again become nomadic and suffering unbearable, and where 
 marriage, easily annulled by divorce, has become more or less of a 
 free union. In such a community, with all incentives to reproduction 
 removed and all antagonistic forces in full operation, the birth-rate 
 would fall to zero. And if all nations have not yet arrived at this 
 stage they all seem to be tending towards it. It is true that a new 
 social environment may give rise to new motives. We believe 
 that it will, but as yet we are ignorant of the nature of these 
 promptings. 
 
 Paradoxical as it may seem, the sexual instinct plays quite a 
 secondary role in the procreation of the human species. Nature 
 doubtless has united the two instincts by giving them the same organs, 
 and those who believe in final causes can admire the ruse which 
 Nature has adopted for securing the preservation of the species by 
 coupling generation with sexual attraction. But man has displayed 
 ingenuity even greater than Nature's by separating the two functions. 
 He now finds that (since he has known how to get rid of reproduction) 
 he can gratify his lust without being troubled by the consequences. 
 The fears of Malthus have vanished : the other spectre, race suicide, 
 is new casting a gloom over the land. 
 
 Malthus's condemnation of such practices was of little avail. 
 Other moralists more indulgent than the master have given them 
 their sanction by endeavouring to show that this is the only way in
 
 184 THE PESSIMISTS 
 
 which men can perform a double function, on the one hand giving 
 full scope to sexual instinct in accordance with the physiological and 
 psychological laws of their being, and on the other taking care not 
 to leave such a supreme duty as that of child-bearing to mere chance 
 and not to impose upon womankind such an exhausting task as 
 that of maternity save when freely and voluntarily undertaken. 
 This is quite contrary to the pastor's teaching concerning moral 
 restraint. The Neo-Malthusians, on the other hand, consider his 
 teaching very immoral, as being contrary to the laws of physiology, 
 infected with ideas of Christian asceticism, and altogether worse 
 than the evil it seeks to remedy. His rule of enforced celibacy 
 might, in their opinion, involve more suffering even than want of 
 food, and late marriages simply constitute an outrage upon morality 
 by encouraging prostitution and increasing the number of illegitimate 
 births. The Neo-Malthusians x persist in regarding themselves as 
 his disciples because they think that he clearly demonstrated, despite 
 himself perhaps, that the exercise of the blind instinct of reproduc- 
 tion must result in the multiplication of human beings who are 
 faced by want and disease and liable to sudden extinction or slow 
 degradation, and that the only way of avoiding this is to check the 
 instinct. 
 
 There is reason to believe, however, that were Malthus now alive 
 he would not be a Neo-Malthusian. He would not have willingly 
 pardoned his disciples the perpetration of sexual frauds which enable 
 man to be freed from the responsibilities which Nature intended 
 him to bear. Nevertheless we must recognise that the concessions 
 which he made prepared the way for this further development. 
 
 Malthus did not seem to realise the full import of these delicate 
 questions which contributed so powerfully to the overthrow of his 
 doctrine. Especially is this true of the emphasis which he laid upon 
 chastity, involving as he thought abstention from the joys of mar- 
 riage. Such celibacy he would impose only upon the poor. 2 The 
 
 1 Neo-Malthusianism dates from the publication of Dr. Drysdale's book, 
 Elements of Social Science, in 1854, but the Malthusian League came into 
 existence only in 1877. During the last few years the movement seems to 
 have taken hold everywhere, especially in France, where we would least have 
 expected it. 
 
 He categorically declares that " we must suppose the general prevalence 
 of such prudential habits among the poor as would prevent them from marrying 
 when the actual price of labour joined to what they might have saved in their 
 single state would not give them the prospect of being able to support a wife 
 and five or six children without assistance." (P. 638.) Marriage seems pro- 
 hibited to every worker whose wages are not enough to keep eight persons, 
 which practically would mean that no workman could many.
 
 MALTHUS 185 
 
 rich are obviously so circumstanced that children cannot be a 
 hindrance. We know well enough that it was in the interests of the 
 poor themselves that Malthus imposed his cruel law " not to bring 
 beings into the world for whom the means of support cannot be 
 found." But that does not prevent its emphasising in the most 
 heartless fashion imaginable the inequality of their conditions, forcing 
 the poor to choose between want of bread and celibacy. Malthus 
 gave a quietus to the old song which eulogises love in a cottage as the 
 very acme of happiness. It is only just to remark, however, that he 
 does not go so far as to put an interdict upon marriage altogether, 
 which is actually the case in some countries. The old liberal econo- 
 mist asserts himself here. He sees clearly enough that, leaving aside 
 all humanitarian considerations, the remedy offered would be worse 
 than the evil, for its only result would be a diminution in the number 
 of legitimate children and an increase in the number of those born 
 out of wedlock. 1 
 
 When telling the poor that they themselves were the authors of 
 their misery, 2 because of their improvident habits, their early 
 marriages, and their large families, and that no written law, no 
 institution, and no effort of charity could hi any way remedy it, he 
 failed to realise that he was furnishing the propertied classes with a 
 good pretext for dissociating themselves from the fate of the working 
 classes. 3 And during the century which has passed since he wrote 
 
 1 " I have been accused of proposing a law to prohibit the poor from marrying. 
 This is not true. ... I am, indeed, most decidedly of opinion that any positive 
 law to limit the age of marriage would be both unjust and immoral." (P. 357.) 
 
 * It is worth while recalling the passage to which we have already incidentally 
 drawn attention : " The poor are themselves the cause of their own poverty." 
 (P. 458.) 
 
 * His views concerning charity are exceedingly interesting, and are directly 
 connected with his theory of population. This was the practical question about 
 which he was most concerned, and his influence in this direction has been very 
 considerable. He showed himself an uncompromising opponent of the English 
 Poor Law as it then existed. Speaking of the famous 43rd of Elizabeth, he 
 declares that one of its clauses is " as arrogant and as absurd as if it had enacted 
 that two ears of wheat should in future grow where one only had grown before. 
 Canute, when he commanded the waves not to wet his princely foot, did not in 
 reality assume a greater power over the laws of nature." Since public assistance 
 cannot create wealth, it cannot either keep alive a single pauper. " It may 
 at first appear strange, but I believe it is true, that I cannot by means of money 
 raise the condition of a poor man . . . without proportionally depressing others 
 in the same class." But it may be pointed out that although charity cannot 
 beget wealth it does transfer a certain portion of wealth from the pockets of the 
 rich to fill the mouths of the hungry poor. The consumption of the one is 
 inoreased just as much as the other's is decreased. 
 
 Not only does he condemn charity in the way of almsgiving, but also the
 
 136 THE PESSIMISTS 
 
 the way to every comprehensive scheme of socialistic or communistic 
 organisation has been barred and every projected reform which 
 claimed to ameliorate the condition of the poor effectively thwarted 
 by the argument that the only result would be to increase the 
 number of participators as well as the amount to be distributed, 
 and that consequently no one would be any the better off. 
 
 Whatever opposition Malthus's doctrines may have aroused, his 
 teaching has long since become a part and parcel of economic science. 
 Occasionally it has thwarted legitimate claims, while at other times 
 it has been used to buttress some well-known Classical doctrine, such 
 as the law of rent or the wages fund theory. On more than one 
 occasion it has done service in the defence of family life and private 
 property, two institutions which are supposed to act as effective 
 checks upon the growth of population, because of the responsibilities 
 which they involve. 1 
 
 practice of giving work for charity's sake. He admits an exception in the 
 case of education, of which everybody can partake without making anyone 
 else the poorer. Such arguments would seem to imply the prohibition of 
 all charity, whether public or private, and as a matter of fact he demands 
 the gradual abolition of the Poor Laws and of every kind of systematic 
 assistance which offers to the poor any kind of help upon which they can 
 always reckon. But he recognises the " good results of private charity, dis- 
 criminately and occasionally exercised." Though he failed to remove the Poor 
 Laws, the effect of his teaching is clearly seen in the Poor Law Amendment Act 
 of 1834. 
 
 Malthus's doctrine is just the reverse of the social teaching on the question in 
 France at the present time. There you have an attempt to substitute solidarity for 
 Christian charity. That means that the poor should be able to demand assistance, 
 not as a gift, but as a right, and that the place of individual or private charity 
 should be taken by a public institution with a view to giving effect to this. Hia 
 teaching concerning the preventive obstacle has been so thoroughly taken to 
 heart that there is not much fear of legal assistance resulting in a growth of 
 population. 
 
 1 It is not proved, however, that such were Malthus's views. Private property, 
 at least peasant proprietorship, acts as a stimulus to population. And it is very 
 curious to think that he should have taken his illustration from Prance, where 
 the multiplication of small farms is considered one of the causes of the falling 
 birth-rate. " At all times the number of small farmers and proprietors in France 
 was great, and though such a state of things is by no means favourable to the 
 clear surplus produce or disposable wealth of a nation, yet sometimes it is not 
 unfavourable to the absolute produce, and it has always a strong tendency to 
 encourage population." And again : " Even in France, with all her advantages 
 of situation and climate, the tendency of population is so great and the want of 
 foresight among the lower classes so remarkable . . ." Godwin and Young 
 express similar opinions. The latter is quoted by Malthus : " The predominant 
 evil of the kingdom is the having so great a population that she can neither 
 employ nor feed it." (P. 509.) 
 
 Marriage, Malthus thought, had a restraining influence upon population. H*
 
 MALTHUS 137 
 
 The population question has lost none of its importance, although 
 it has somewhat changed its aspect. What Malthus called the 
 preventive check has got such a hold of almost every country that 
 modern economists and sociologists are concerned not so much 
 with the question of an unlimited growth of population as with the 
 regular and universal decline of the birth-rate. Everyone is further 
 agreed that the causes must be social. 
 
 It is not enough to say that the cause is a deliberate determina- 
 tion of parents to have no children or to have only a limited number. 
 The question is, Why do they decide to have none or to limit their 
 family to a certain number only ? Why is this limitation more 
 marked in France than elsewhere, and why is it more pronounced 
 there to-day than it was say two or three generations ago ? The 
 special causes which apply to the France of to-day must somehow 
 be discovered, and such causes may be expected to be less active 
 elsewhere. It may be that Paul Leroy-Beaulieu is right when he 
 claims that the progress of civilisation must always mean a declining 
 birth-rate, because the fresh needs and desires and the extra expendi- 
 ture which it necessarily involves are incompatible with the duties 
 and responsibilities of maternity. It is possible that it diminishes 
 as democracy advances, because the latter strengthens the tele- 
 scopic faculty and quickens the desire to rise in the social scale as 
 rapidly and as effectively as possible. M. Dumont, who advocates 
 this view, has happily named it the law of capillarity. More 
 precise causes are sometimes invoked, but they vary according 
 to the particular school that formulates them. Le Play thinks 
 that it is due to the practice of social inheritance. Paul Bureau 
 takes it as a sign of the weakening of moral and religious belief, and 
 of the growth of intemperate habits of every kind alcoholism, 
 debauchery, etc. Unfortunately none of the explanations given seem 
 quite satisfactory, and a second Malthus is required to open up a new 
 chapter in the history of demography. * 
 
 admits that the simplest and most natural obstacle is to oblige every father 
 to rear his own children. He also admits that the shame which the mother of 
 a bastard and her child have to endure is a matter of social necessity. He does 
 not approve of forcing the man who has betrayed a woman to many, but he 
 declares that seduction ought to be seriously punished. This is the view 
 commonly adopted to-day, but it was very novel then. 
 
 1 There are some sociologists who, like Malthus, would seek an explanation 
 both of depopulation and of over -population in biological causes. Fourier and 
 Doubleday, for example, are among the number. Doubleday, who wrote forty 
 years before Malthus, believed that fecundity varied inversely with subsistence, 
 and that this acted as a kind of natural check upon the growth of population. 
 There are others, again, who think that reproductive capacity varies inversely
 
 THE PESSIMISTS 
 
 II : RICARDO 
 
 NEXT to Smith, Ricardo is the greatest name in economics, and 
 fiercer controversy has centred round his name than ever raged 
 around the master's. Smith founded no school, and his wisdom and 
 moderation saved him from controversy. Hence every economist, 
 whatever his views, is found sitting at his feet straining to catch the 
 divine accents as they fall from his lips. 
 
 But Ricardo was no dweller in ethereal regions. He was in the 
 thickest of the fight the butt of every shaft. In discussions on the 
 question of method the attack is always directed against Ricardo, 
 who is charged with being the first to lead the science into the fruitless 
 paths of abstraction. The Ricardian theory of rent affords a target 
 for every Marxian in his general attack upon private property. The 
 Ricardian theory of value is the starting-point of modern socialism 
 a kinship that he could never have disavowed, however little to his 
 taste. The same thing is true of controversies concerning banks 
 of issue and international trade : Ricardo's place was ever with 
 the vanguard. 
 
 His defects are as interesting as his merits, and have been equally 
 influential. Of his theories, especially his more characteristic ones, 
 there is now little left, unless we recall what is after all quite as im- 
 portant the criticisms they aroused and the adverse theories which 
 they begot. The city banker was a very indifferent writer, and his 
 work is adorned with none of those beautiful passages so charac- 
 teristic of Smith and Stuart Mill. No telling phrase or striking 
 epithet ever meets the eye of the reader. His principal work is 
 devoid of a plan, its chapters being mere fragments placed in 
 juxtaposition. His use of the hypothetical method and the con- 
 stant appeal to imaginary conditions makes its reading a task of 
 some difficulty. This abstract method has long held dominion over 
 the science, and it is still in full activity among the Mathematical 
 economists. His thoughts are penetrating, but his exposition is 
 frequently obscure, and a remark which he makes somewhere in 
 speaking of other writers, namely, that they seldom know their own 
 strength, may very appropriately be applied to him. But obscurity 
 
 with intellectual activity. Both explanations seem to suggest a kind of oppo- 
 sition between the development of the individual and the progress of the race 
 which is very suggestive. But their views have not gained many adherents. 
 If they are ever proved, which is not very likely, the prospect is not an attractive 
 one. It would mean that those nations and classes who have risen to a position 
 of ease through their superior culture would disappear, while the poorer, uncul- 
 tured masses would continue to incr.aio.
 
 RlCARDO 189 
 
 of style has not clouded his fame. Indeed, it has stood him in good 
 stead, as it did Marx at a later date. We hardly like to say that a 
 great writer is unintelligible a feeling prompted partly by respect 
 and partly arising out of fear lest the lack of intelligence should really 
 be on our side. The result is an attempt to discover a profound 
 meaning in the most abstruse passage an attempt that is seldom 
 fruitful, especially in the case of Ricardo. 
 
 It is clearly impossible to outline the whole of this monumental 
 work. We shall content ourselves with an attempt to place the 
 leading conceptions clearly before our readers. 1 
 
 Speaking generally, Ricardo's chief concern is with the distribu- 
 tion of wealth. He was thus instrumental in opening up a new 
 field of economic inquiry, for his predecessors had been largely 
 engrossed with production. " To determine the laws which regulate 
 
 1 David Ricardo was descended from a Jewish family originally domiciled in 
 Holland. He was born in 1772 in London, where his father had settled as a stock- 
 broker. He entered business at an early age, and soon became thoroughly con- 
 versant with the intricacies of banking and exchange. On the occasion of his 
 marriage he changed his religion, and thus incurred the displeasure of his 
 family. Setting up as a broker on his own account, he was not long in amassing 
 a huge fortune, estimated at about 2,000,000 an enormous sum for those 
 days. 
 
 Naturally enough, his earliest interest in economics centred round banking 
 questions. The French wars had caused a depreciation in the value of the 
 bank-note, and this aroused the interest not only of the specialists, but also of 
 the public. His first essay, published in 1810, when he was thirty-eight years of 
 age, was entitled The High Price of Bullion a Proof of the Depreciation of Bank- 
 notes. It was soon followed by other studies dealing with banks and with the 
 credit system. But these short polemical efforts gave scarcely any indication 
 of the great attention which he was bestowing upon the principles of the science. 
 His interest was primarily personal, for it appears that he had no intention 
 of publishing anything on the subject. In 1817, however, the results were seen 
 in a volume entitled The Principles of Political Economy. Ricardo the business 
 man could hardly have guessed that it would shake the capitalistic edifice to 
 its very foundations. 
 
 In 1819 he was elected a member of the House of Commons, but he was as 
 indifferent a speaker as he was a writer. He was always listened to, however, with 
 the greatest respect. " I have twice attempted to speak," he writes, " but I 
 proceeded in the most embarrassed manner : and I have no hope of conquering 
 the alarm with which I am assailed the moment I hear the Bound of my own 
 voice." In 1821 he founded the Political Economy Club, the earliest of those 
 numerous societies for the study of economic subjects which have since been 
 established in every country. In 1822 he published a work on Protection to Agri- 
 culture. The following year he died, at the comparatively early age of fifty-one. 
 
 Since his death all his writings have been carefully collected, and his corre- 
 spondence with the chief economists of his day, with Malthus, McCulloch, and 
 Say, published. The correspondence is extremely important for an understanding 
 of his doctrinea.
 
 140 THE PESSIMISTS 
 
 this distribution is the principal problem in political economy." 
 We have already some acquaintance with the tripartite division of 
 revenues corresponding with the threefold division of the factors of 
 production the rent of land, the profits of capital, and the wages 
 of labour. Ricardo wanted to determine the way in which this 
 division took place and what laws regulated the proportion which 
 each claimant got. Although unhampered by any preconceptions 
 concerning the justice or injustice of distribution, we can easily 
 understand how he ushered in the era of polemics and of socialistic 
 discussion, seeing that the natural laws pale into insignificance 
 when contrasted with the influence wielded by human institutions 
 and written laws. The latter override the former, and individual 
 interests which may co-operate in production frequently prove 
 antagonistic in distribution. 
 
 We shall follow him in his exposition of the laws of rent, wages, 
 and profits, but especially rent, for according to him the share given 
 to land determines the proportions which the other factors are going 
 to receive. 
 
 One would imagine that an indispensable preliminary to this study 
 would be an examination of the Ricardian theory of value, especially 
 when we recall the importance of his theory of labour-value in the 
 history of economics doctrine and how it prepared the way for the 
 Marxian theory of surplus value, which is the foundation-stone of 
 contemporary socialism. Despite all this we shall only refer to his 
 theory of value incidentally, and chiefly in connection with the laws of 
 distribution. We have Ricardo's own authority for doing this : 
 " After all, the great problem of rent, of wages, or of profits might 
 be elucidated by determining the proportions in which the total 
 product is distributed between the proprietors, the capitalists, and the 
 workers, but this is not necessarily connected with the doctrine of 
 value." * 
 
 It is, moreover, probable that Ricardo himself did not begin with 
 an elaborate theory of value from which he deduced the laws of 
 distribution, but after having discovered, or having convinced 
 himself that he had discovered, the laws of distribution he attempted 
 to deduce from them a theory of value. One idea had haunted 
 him his whole life long, namely, that with the progress of time nature 
 demanded an ever-increasing application of human toil. No doubt 
 it was this that suggested to him that labour was the foundation, 
 the cause, and the measure of value. But he never came to a final 
 decision on the question, and his statements concerning it are fre- 
 
 Letter to McCulIoch, July 13, 1820, quoted by H. Denis, vol. ii, p. 171.
 
 RlCARDO 141 
 
 quently contradictory. We must also confess that his theory of value 
 is far from being his most characteristic work. In the elucidation of 
 that difficult question, vigorous thinker though he was, he has not 
 been much more fortunate than his predecessors. He himself 
 acknowledged this on more than one occasion, and shortly before his 
 death, with a candour that does him honour, he recognised his 
 failure to explain value. 1 
 
 1. THE LAW OF RENT 
 
 Of all Ricardian theories that of rent is the most celebrated, and 
 it is also the one most inseparably connected with Ricardo's name. 
 So well known is it that Stuart Mill spoke of it as the economic pons 
 asinorum, and it has always been one of the favourite subjects of 
 examiners. 
 
 The question of rent that is, of the return which land yields 
 had occupied the attention of others besides Ricardo. It was the 
 burning question of the day. The problem of rent dominated 
 English political economy during the first half of the nineteenth 
 century, and a later period has witnessed a revival of it in the land 
 nationalisation policy of Henry George. In France there was but 
 a feeble echo of the controversy, for France even long before the 
 Revolution had been a country of small proprietors. Landlordism 
 was far less common there, and where it existed its characteristics 
 were very different. That threefold hierarchy which consisted of 
 a worker toiling for a daily wage in the employ of a capitalist farmer 
 who draws his profits towered over by a landlord in receipt of rents 
 formed a kind of microcosmic picture of the universal process of 
 distribution, but it was seldom as clearly seen in France as it was 
 in England. 
 
 The first two incomes presented no difficulties. But how are we 
 to explain that other income that revenue which had created English 
 aristocracy and made English history ? The Physiocrats had named 
 it the " net product," and they argued a liberality of nature and a 
 gift of God. Adam Smith, although withholding the title of creator 
 from nature and bestowing it upon labour, nevertheless admits that 
 
 1 In his correspondence with McCulloch, under date December 18, 1819, he 
 writes : " I am not satisfied with the explanation which I have given of the 
 principles which regulate value. I wish a more able pen would undertake it." 
 
 In a letter to Malthua written on August 15, 1820, speaking of his own 
 theory of value and of McCulloch's, he despairingly adds : " Both of us 
 have failed." See Halevy, Le Eadicalisme philosophique, and Hector Denis, 
 op. cit.
 
 142 THE PESSIMISTS 
 
 a notable portion perhaps as much as a third of the revenue of land 
 is due to the collaboration of nature. 1 
 
 Malthus had already produced a book on the subject, 1 and 
 Ricardo hails him as the discoverer of the true doctrine of rent. 
 Malthus takes as his starting-point the explanation offered by the 
 Physiocrats and Adam Smith, namely, that rent is the natural 
 outcome of some special feature possessed by the earth and given it 
 by God that is, the power of enabling more people to live on it 
 than are required to till it. Rent is the result, not of a merely physical 
 law, but also of an economic one, for nature seems to have a unique 
 power of creating a demand for its products, and consequently of 
 maintaining and even of increasing indefinitely both its own revenue 
 and value. The reason for this is that the population always tends 
 to equal and sometimes to surpass the means of subsistence. In 
 other words, the number of people born is seldom less than the 
 maximum number that the earth can feed. This new theory of 
 rent is a simple deduction from Malthus's law concerning the constant 
 pressure of population upon the means of subsistence. 
 
 Malthus emphasised another important feature of rent, and it was 
 this characteristic that especially attracted Ricardo. Seeing that 
 different parts pf the earth are of unequal fertility, the capitals em- 
 ployed in cultivation must of necessity yield unequal profits. The 
 difference between the normal rate of profit on mediocre lands and 
 the superior rate yielded by the more fertile land constitutes a special 
 kind of profit which is immediately seized by the owner of the more 
 fertile land. This extra profit r afterwards became known as dif- 
 ferential rent. 
 
 To Malthus, as well as to the Physiocrats, this kind of rent seemed 
 perfectly legitimate and conformed to the best interests of the public. 
 It was only the just recompense for the " strength and talent " 
 exercised by the original proprietors. The same argument applies 
 to those who have since bought the land, for it must have been 
 bought with the " fruits of industry and talent." Its benefits 
 are permanent and independent of the proprietor's labour, and in 
 this way the possession of land becomes a much-coveted prize, the 
 otium cum dignitate which is the just reward of meritorious effort. 
 
 Ricardo enters upon an entirely new track. He breaks the 
 connection with Smith and the Physiocrats a connection that 
 Malthus had been most anxious to maintain. All suggestion of 
 
 1 Smith had likened industry to a household with two children wages and 
 profits ; agriculture to a household with three wages, profits, and rent. 
 * An Inquiry into the Nature ana Progress of Rent (1815).
 
 RICARDO 148 
 
 co-operation on the part of nature is brushed aside with contempt. 
 Business-man and owner of property as he was, he had no super- 
 stitious views concerning nature, whose work he contemplated 
 without much feeling of reverence. As against the celebrated phrase 
 of Adam Smith he quotes that of Buchanan : " The notion of 
 agriculture yielding a produce and a rent in consequence because 
 nature concurs with human industry in the process of cultivation 
 is a mere fancy." l He proceeds to defend the converse of Smith's 
 view and to show how rent implies the avarice rather than the 
 liberality of nature. 
 
 The proof that the earth's fertility, taken by itself, can never- 
 be the cause of rent is easily seen in the case of a new country. In 
 a newly founded colony, for example, land yields no rent, however 
 fertile, if the quantity of land is in excess of the people's demand. 
 " For no one would pay for the use of land when there was an abun- 
 dant quantity not yet appropriated, and therefore at the disposal of 
 whosoever might choose to cultivate it." 2 Rent only appears " when 
 the progress of population calls into cultivation land of an inferior 
 quality or less advantageously situated." Here we have the very 
 kernel of Ricardo's theory. Instead of being an indication of 
 nature's generosity, rent is the result of the grievous necessity of 
 having recourse to relatively poor land under the pressure of popula- 
 tion and want. 3 " Rent is a creation of value, not of wealth," says 
 Ricardo a profound saying, and one that has illuminated many a 
 mystery attaching to the theory of rent. In that sentence he 
 
 1 It is necessary to remember, however, that the old theory survived and 
 appears here under the very name of Ricardo, for he was unsuccessful in freeing 
 himself altogether from its influence. He defines rent as " that portion of the 
 produce of the earth which is paid to the landlord for the use of the original and 
 indestructible powers of the soil." He continually refers to these powers of the 
 soil, which are described as " natural," " primitive," " indestructible," i.e. as 
 independent of all labour. 
 
 1 " Nothing is more common than to hear of the advantages which the land 
 possesses over every other source of useful produce on account of the surplus 
 which it yields in the form of rent. Yet when land is most abundant, when most 
 productive and most fertile, it yields no rent, and it is only when its powers 
 decay . . . that rent appears." (Principles, ed. Conner, p. 52.) 
 
 " The labour of Nature is paid, not because she does much, but because 
 she does little. In proportion as she becomes niggardly in her gifts she exacts a 
 greater price for her work." (Ibid., p. 63, note.) 
 
 " The comparative scarcity of the most fertile lands is the cause of rent." 
 (Ibid., p. 395.) 
 
 Adam Smith had already offered this as an explanation in the case of the 
 products of the mine, but he failed to see that arable land is really nothing but a 
 sort of mine.
 
 144 THE PESSIMISTS 
 
 draws a distinction between wealth born of abundance and satisfac- 
 tion and value begotten of difficulty and effort, and he declares 
 that rent is of the second category and not of the first. 
 
 Still, this cannot be accepted as the final explanation. It is 
 difficult to understand how a purely negative condition such as the 
 absence of fertile land could ever create a revenue. It were better 
 to say that the want of suitable land supplies the occasion for the 
 appearance of rent, although it is not its cause. The cause is the 
 high price of agricultural products say corn due to the increased 
 difficulty of cultivating the less fertile lands. 1 In short, the cause 
 and the measure of the rent of corn-land are determined by the 
 quantity of labour necessary to produce corn under the most un- 
 favourable circumstances, " meaning by the most unfavourable 
 circumstances the most unfavourable under which the quantity of 
 produce required renders it necessary to carry on production." 2 
 
 Let us assume, as Ricardo did, that first-class land yields a bushel 
 of corn as the result of ten hours' work, the corn selling for ten 
 shillings a bushel. 8 In order to supply a population that is increasing 
 in accordance with the Malthusian formula, land of the second class 
 has to be cultivated, when the production of a bushel requires 
 fifteen hours' work. The value of corn will rise proportionately to 
 fifteen shillings, and landed proprietors of the first class will draw 
 a surplus value or a bonus of five shillings per bushel. So rent 
 emerges. Presently the time for cultivating lands of the third 
 class will approach, when twenty hours' labour will be necessary for 
 the production of a bushel. The price of corn goes up to twenty 
 shillings, and proprietors of the first class see their gift increased or 
 their rent raised from five to ten shillings per bushel, while the owners 
 of the second-class land obtain a bonus of five shillings per bushel. 
 This marks the advent of a new class of rent- receivers, who modestly 
 take their place a little below the first class. The third class of land- 
 owner will receive a rent whenever the cultivation of fourth-class land 
 becomes a necessity. 4 
 
 1 To-day we simply say that it is determined by increased demand. But 
 this is quite contrary to Ricardo's views, for in his opinion it is labour and not 
 demand that creates value. 
 
 * " The value of corn is regulated by the quantity of labour bestowed on its 
 production on that quality of land [or with that portion of capital] which pays no 
 rent." (Principles, ed. Gonner, p. 51.) 
 
 1 The illustration as given by Ricardo is somewhat more complicated. 
 
 4 " When land of an inferior quality is taken into cultivation the exchange- 
 able value of raw produce will rise because more labour is required to produce it." 
 (Ibid., p. 49.)
 
 RiCARDO 145 
 
 It has been said in criticism of the theory that the hierarchy of 
 lands has simply been invented for the purpose of illustrating the 
 theory. But what Ricardo has really done is to put in scientific 
 language what every peasant knows what has been handed down to 
 him from father to son in unbroken succession, namely, that all land 
 is not equally fertile. 
 
 Ricardo, so often represented as a purely abstract thinker, was 
 in reality a very practical man and a close observer of those facts that 
 were then occupying the attention of both public and Parliament. 
 High rents, following upon high prices, constituted the most important 
 phenomenon in the economic history of England towards the end 
 of the eighteenth and the beginning of the nineteenth centuries. 
 Right through the eighteenth century that is, up to 1794 the 
 highest price paid for corn was only a few pence above 60s. per 
 quarter. But in 1796 the price rose to 92s., and in 1801 it reached 
 177s. nearly three times the old price. The exceptionally high 
 price, due to extraordinary causes, chief among them being the 
 Napoleonic wars and the Continental blockade, could not last long, 
 although the average during the years 1810-13 remained as high 
 as 106s: 1 
 
 This high price of corn was not entirely due to accidental causes. 
 Something must be attributed to the fact that the available land was 
 insufficient for the upkeep of the population, and that new land 
 had to be cultivated irrespective of situation or degree of fertility. 
 The pastures which had formerly covered England were daily dis- 
 appearing before the plough. It was the period of the iniquitous 
 Enclosure Acts, when landlords set their hearts upon enclosing the 
 common lands. Professor Cannan has drawn up an interesting 
 chart to show the close correspondence between the progress of the 
 enclosure movement and the high price of corn. 2 
 
 1 See Carman's delightful volume The Theories of Production and Distribution, 
 p. 150, where the average decennial price works out as follows : 
 
 s. d. 
 1770-1779 45 
 
 1780-1789 
 1790-1799 
 1800-1809 
 1810-1813 
 
 45 9 
 
 55 11 
 
 82 2 
 
 106 2 
 
 1 The number of Enclosure Acts which Parliament, acting with the sanction 
 of public opinion, passed during the latter part of the eighteenth and the beginning 
 of the nineteenth centuries increased very rapidly. Between 1700 and 1845 no 
 fewer than 3835 such Acts were passed, involving the enclosure of 7,622,664 acres, 
 most of it. common land. Not until 1845 do we find a change either in the attitude 
 of public opinion or in the action of Parliament.
 
 146 THE PESSIMISTS 
 
 In 1813 a Commission appointed by the House of Commons to 
 inquire into the price of corn for the proprietors dreaded the day 
 when the return of peace would allow of importation came to the 
 conclusion that new lands could not produce corn at a less cost than 
 80s. a quarter. What an argument for Ricardo's theory ! l 
 
 But is there no possible means of avoiding the cultivation of lands 
 of the second and third order ? Intensive cultivation might doubt- 
 less do something to swell the returns on the older lands, but only 
 up to a certain point. It would be absurd to imagine that on a 
 limited area of land an unlimited quantity of subsistence can be pro- 
 duced. There must be a limit somewhere an elastic limit perhaps, 
 and one which the progress of science will push farther and farther 
 away, even beyond our wildest hopes. But the cultivator stops 
 long before this ideal limit is reached, for practice has taught him 
 that the game is not worth the candle, because the outlay of capital 
 and labour exceeds the profits on the return. This practical limit 
 is determined for him by the law of diminishing returns. 2 
 
 That law is indispensable to an understanding of the Ricardian 
 theory, and is implied in Malthus's theory of population. Its discovery 
 is still earlier, and we have an admirable statement of it in Turgot's 
 writings : "It can never be imagined that a doubling of expenditure 
 would result in doubling the product." Malthus, unconsciously no 
 doubt, repeated Turgot's dictum. 8 It is evident, says he, that 
 
 1 It is not quite clear whether the high price of corn is due to the cultivation of 
 new lands or whether this high price is the cause of the cultivation of new lands. 
 The second interpretation appears to us to be the most natural, but it involves 
 the abandonment of the Ricardian theory. 
 
 1 Some critics, e.g. Fontenay, Bastiat's disciple, suggested that land No. 4 
 might very well become No. 1, if, instead of being employed in the cultivation 
 of corn, an intelligent husbandman were to put it to viticulture or rose-growing. 
 But this is to beg the question. The law of rent implies products of the same 
 kind, for it is this identity of quality that enables them to be sold at the same 
 price. If bad corn-land could become good rose-growing ground, then of course it 
 would take its place among rose-growing areas, yielding rent as soon as less fertile 
 lands were employed for the same purpose. 
 
 1 Turgot, Observation* sur un M emoire de M. de Saint-Peravy ((Euvres, vol. i, 
 p. 420). " It can never be imagined that a doubling of expenditure would result 
 in doubling the product. ... It is more than probable that by gradually in- 
 creasing the expenditure up to the point where nothing would be gained on the 
 return, such items would successively become less fruitful. The earth's fertility 
 resembles a spring that is being pressed downwards by the addition of successive 
 weights. If the weight is small and the spring not very flexible, the first attempts 
 will leave no results. But when the weight is enough to overcome the first 
 resistance then it will giye to the pressure. After yielding a certain amount it will 
 again begin to resist the extra force put upon it, and weights that formerly would
 
 RlCARDO 147 
 
 as cultivation extends, the annual addition made to the average 
 product must continually diminish. 1 Ricardo witnessed the operation 
 of the law under his very eyes, and he frequently hinted at the decreas- 
 ing returns yielded by capital successively applied to the same land. 
 Even in cases of that kind, where recourse to new lands was impos- 
 sible, rents were bound to increase. 
 
 Taking again land No. 1, which yields corn at 10s. a bushel, let 
 us imagine that there .is an increased demand for wheat. Instead of 
 breaking up land No. 2 an attempt might be made to increase the 
 yield on No. 1, but nothing will be gained by it because the new 
 bushel produced on No. 1 will cost 15s., which is just what it would 
 cost if raised on second-class land. Furthermore, the price will now 
 rise to 15s., and the two bushels will be disposed of for 80s., thus 
 giving the proprietor a rent of 5s., because they have only cost 25s. 
 to produce. 2 
 
 There is still another possibility, however. Resort might be had 
 to emigration and colonists might be encouraged to cultivate the 
 
 have caused a depression of an inch or more will now scarcely move it by a hair's 
 breadth. And so the efiect of additional weights will gradually diminish. 
 
 " The comparison is not very exact, but it is near enough to enable us to 
 understand that when the earth is producing nearly all it can, a great deal of 
 expense is necessary to obtain very little more produo.e." 
 
 Turgot, with his usual perspicacity, has noted a fact which the Classical writers 
 generally failed to perceive, namely, that at the beginning of the process of 
 cultivation there may be a period when the return shows no signs of diminishing. 
 
 1 We must note the fact that the law of diminishing returns was already 
 implied in the second of the famous progressions given by Malthus, for an arith- 
 metical progression that shows an increase of one every twenty-five years 
 implies an addition slower than the growth of the series itself, i.e. slower than 
 the movement of time. Let us take land that yields one ; in twenty -five years it 
 will yield two, an increase of 100 per cent. But this is only the first step. At the 
 end of another twenty -five years it will yield three, the increase being always one. 
 But the increase from two to three means an increase of only 50 per cent., from 
 three to four of only 33 per cent., and so on to 25 per cent, and 20 per cent. When 
 the hundredth place has been reached, the increase will only be 1 per cent., and 
 it will continue to fall farther, only more slowly. 
 
 1 Ricardo gives a slightly different explanation. " If with a capital of 1000 
 a tenant obtains 100 quarters of wheat from his land, and by the employment of 
 a second capital of 1000 he obtains a further return of eighty -five, his landlord 
 would have the power at the expiration of his lease of obliging him to pay fifteen 
 quarters, or an equivalent value for additional rent, for there cannot be two rates 
 of profit." (Principles, ed. Conner, p. 48.) He means to say that if profits fall 
 because new capital is less productive than old, rent must necessarily appear, 
 because by definition rent is what remains of the produce after deducting profits 
 and wages. This explanation closely resembles that one given by West in his 
 Application of Capital to Land, published in 1815, and Ricardo was not above 
 acknowledging his indebtedness to West.
 
 148 THE PESSIMISTS 
 
 best soils of distant lands, soils equal in fertility to those in the first 
 class. The products of such lands would be got in exchange for 
 the manufactured goods of the home country, to which the law of 
 diminishing returns does not apply. But some account of the cost 
 of transport, which increases the cost of production, must be taken, 
 and this leads to the same result, namely, a rent for those nearest the 
 market, because of the advantages of a superior situation. Distance 
 and sterility, as J. B. Say remarks, are the same thing. If land in 
 America yields corn at 10s. a bushel and freightage equals 5s., it is clear 
 that corn imported into England must sell for 15s. exactly the same 
 condition of things as if land of the second order had been cultivated, 
 and English landlords of the first class will still draw a rent of 5s. 
 This third possibility was scarcely mentioned by Rieardo, and he 
 could hardly have foreseen the wonderful developments in trans- 
 portation that took place during the next fifty years, which resulted 
 in a reversal of the law of diminishing returns 'and the confuting 
 of the prophets. 1 
 
 The great Ricardian theory, prima facie self-evident, is in reality 
 based upon a number of postulates to which we must pay more 
 attention. Some of them must be regarded as economic axioms, but 
 the validity of others is somewhat more doubtful. 
 
 In the first place there is the assumption that the produce of lands 
 unequally fertile and representing unequal amounts of labour will 
 always sell at the same price, or, in other words, will always possess 
 the same exchange value. Is this proposition demonstrably sound ? 
 It is true when the product in question for example, corn is of 
 uniform quality and kind. When the goods offered on the same 
 market are so much alike that it is a matter of indifference to the 
 buyer whether he takes the one or the other, then it is true that he 
 will not pay a higher price for the one than he will for the other. 
 This is what Jevons called the "law of indifference." 2 
 
 1 Shortly afterwards a German landowner published a book dealing with just 
 that side of the problem of rent which had been neglected by Rieardo, namely, 
 the influence of distance from a market upon cultivation and the price of pro- 
 ducts. We are referring to Thiinen, who in his book Der Isolerte Stoat (vol. i, 
 1826) draws a picture of a town surrounded by a belt of land, and shows how 
 cultivation will be distributed in concentric zones around that centre, and how 
 the kind of cultivation adopted will be a function of the distance. 
 
 1 But the honour of discovering this law, which is so important for an under- 
 standing of exchange value, does not belong entirely to Rieardo. Forty years 
 before a humble Scotch farmer named Anderson had observed the phenomenon 
 and given a very satisfactory analysis of it in his book Observations on the Means 
 of Exciting a Spirit of National Industry (1777). " Now as the expense of cultivat- 
 ing the least fertile soil is as great or greater than that of the most fertile field,
 
 RlCARDO 149 
 
 In the second place it is implied that this exchange value, uniform 
 for all identical products, is determined by the maximum amount 
 of labour required for its production, or, in other words, by the 
 amount of labour necessary for the production of the more costly 
 portion. 
 
 This brings us to the Ricardian theory of value. We know that 
 he considered that the value of everything was determined by the 
 amount of labour necessary for its production. 1 Adam Smith had 
 already declared that value was proportional to the amount of labour 
 employed, but that this was the case only in primitive societies. " In 
 civilised society, on the contrary, there is a still smaller number [of 
 cases] in which it consists altogether in the wages of labour." Labour 
 was regarded by Smith as one of the factors determining value 
 though by no means the only one, land and capital being obviously 
 the others. 
 
 But Ricardo simplified matters, as abstract thinkers frequently 
 do, by neglecting the last-named factors. This leaves us only labour. 
 Land is dismissed because rent contributes nothing to the creation of 
 value, but is itself entirely dependent upon value. 2 Corn is not dear 
 because land yields rent, but land yields rent because corn is dear. 
 " The clearly understanding this principle is, I am persuaded, of the 
 utmost importance to the science of political economy." As for 
 capital, why should we make a special factor of it, seeing that it is 
 only labour ? Its connotation might be extended so as to include 
 " the labour bestowed not on their immediate production only, but 
 on all those implements or machines required to give effect to the 
 particular labour to which they were applied." 3 But Ricardo was 
 
 it necessarily follows that if an equal quantity of corn, the produce of each field, 
 can be sold at the same price, the profit on cultivating the most fertile soil must 
 be much greater than that of cultivating the other, and as this continues to 
 decrease as the sterility increases, it must at length happen that the expense of 
 cultivating some of the inferior soils will equal the values of the whole produce." 
 (Quoted by Jevons, Theory of Political Economy, p. 229.) Anderson's name was 
 forgotten until quite recently, when it attracted a certain amount of attention 
 among the pioneers of Ricardo. Ricardo himself does not seem to be aware of 
 his existence ; at least he never quotes him. The only two writers mentioned 
 by Ricardo are Malthus and West. 
 
 1 " In speaking, however, of labour as being the foundation of all value, and 
 the relative quantity of labour as almost exclusively determining the relative 
 value of commodities, I must not be supposed to be inattentive to the different 
 qualities of labour." (Principles, ed. Gonner, p. 15.) 
 
 1 Hume had already pointed out the objection to this view. Cf. p. 64, foot- 
 not*. 
 
 * " If fixed capital be not of a durable nature it will require a great quantity of 
 labour annually to keep it in its original state of efficiency, but the labour
 
 150 THE PESSIMISTS 
 
 not thoroughly satisfied with this identification of capital and labour, 
 and, great capitalist that he was, it must have caused him much 
 searching of heart. Furthermore, it was not very easy to apply the 
 conception to such commodities as timber and wine, which increase 
 in value as they advance in age. In a letter to McCulloch he admits 
 the weakness of his theory. After all the study that he had given to 
 the matter, he had to confess that the relative value of commodities 
 appeared to be determined by two causes : (1) the relative quantity of 
 labour necessary for its production ; (2) the relative length of time 
 required to bring the commodity to market. He seems to have had 
 a presentiment of the operation of a new and distinct factor, to which 
 Bohm-Bawerk was to ascribe such importance. 
 
 The usual method of stating the Ricardian theory of value is to 
 say that value is determined by cost of production. It is also the 
 correct way, inasmuch as he stated it thus himself. It is, however, 
 quite a different thing to say on the one hand that value is deter- 
 mined by labour and on the other that it depends upon the sum of 
 wages and profits (supposing we omit rent). 1 On this point, as 
 on several others, obscurity of thought alone saves Ricardo from 
 the reproach of self-contradiction. 
 
 Suppose we proceed a step farther. The statement that value is 
 determined by labour is not enough to account for the phenomenon 
 of rent. Let us imagine a market where three sacks of corn are 
 available for sale. Let us further suppose that the production of each 
 involved a different quantity of labour, one being produced on land 
 that was very fertile, the other on soil that was less generous, etc. 
 Every sack will sell at the same price, but the question is, which of 
 those different quantities of labour is the one that determines the 
 price ? Ricardo replies that it is the maximum quantity, and the 
 value of the corn is determined by the value of that sack which is 
 produced under the greatest disadvantages. But why should it 
 not be determined by the value of the sack grown under the most 
 favourable circumstances, or by the value of that other sack raised 
 under conditions of average difficulty ? 
 
 That is impossible. Let us imagine that the three sacks of corn 
 came from three different kinds of land, A, B, and C, where the 
 
 so bestowed may be considered as really expended on the commodity manufac- 
 tured, which must bear a value hi proportion to such labour." (Principles, ed. 
 Conner, p. 32.) 
 
 1 In a note on Section VI, chap. 1, he adds : " Malthus appears to think 
 that it is a part of my doctrine that the cost and value of a thing should be 
 the same it is, if- he means by cost, cost of production including profits." 
 (Ibid., p. 39.)
 
 RlCARDO 151 
 
 necessary quantities of labour were respectively 10, 15, and 20. It 
 is inconceivable that the price should fall below 20, the cost ef 
 production of corn grown on C, for if it did C would no longer be 
 cultivated ; but the produce of C is ex hypothtsi indispensable. The 
 market price cannot rise above 20, for in that case lands of the fourth 
 class would be brought under cultivation, and their yield would be 
 added to the quantity already on the market. The supposition 
 is that the quantity of corn on the market is already sufficient to 
 meet the demand, and the increase in supply would soon cause the 
 price to fall again to the irreducible minimum of 20. 
 
 We cannot but admire the ingenuity of a demonstration that 
 seeks to explain a phenomenon like rent which is a revenue ob- 
 tained independently of all labour by the aid of a generalisation 
 which regards labour as the one source of value. But the explanation 
 is ingenious rather than convincing, for it is quite clear that only in 
 the case of one of the sacks do value and amount of labour actually 
 coincide. In the two other instances the quantity of labour and 
 exchange value are absolutely and indefinitely divergent. 
 
 Most contemporary economists, while denying that value is 
 solely the product of labour and preferring to regard it as a reflection 
 of human preferences, would willingly recognise the element of 
 truth contained in the Ricardian view. But it must be understood 
 in the sense that competition, although tending to reduce price to the 
 level of cost of production, cannot reduce it below the maximum 
 cost of production, or the price necessary to repay the expenses of 
 producing the most costly portion of the total amount demanded 
 by the market. 1 In this sense it is true not only of agricultural 
 but also of all other products, and it has a wider scope than was at 
 first ascribed to it by its authors. Rent is nowadays recognised as 
 an element which enters into all incomes. But with an extension of 
 sway has gone attenuation, and the term has lost something of its 
 original significance and precision. To-day rent is treated as the 
 outcome of certain favourable conjunctures, which are to be found 
 in all stations in life, and it is no uncommon thing to speak of 
 consumer's rent even. 
 
 The Ricardian theory, moreover, presupposed the existence of 
 a class of land which yielded no rent, the returns which it gave 
 being only just sufficient to cover cost of production. In other 
 
 1 Still we must note that Ricardo and Karl Marx, like everyone who has 
 tried to base a theory of value upon labour, tacitly assume the operation of the 
 law of demand and supply in order that their theories may fit in with the 
 fact*.
 
 152 THE PESSIMISTS 
 
 words, Ricardo only recognised the existence of differential rents, 
 and dismissed the other cases mentioned by Malthus. 
 
 It really seems as if Malthus were in this instance more correct 
 than Ricardo. It is quite possible that in the colonies, for example, 
 there may be lands which yield no rent because of the superabundance 
 of fertile land. Or the same thing may occur in an old country 
 because of the extreme poverty of the land. But it is quite evident 
 that in a society having a certain density of population the mere 
 fact that there exists only a limited amount of land is enough to 
 give to all lands and to their products a scarcity value independent 
 of unequal returns. Nor would the case be materially different if 
 all lands were supposed to be of equal fertility, for who would be 
 willing to cultivate land which only yielded the bare equivalent of 
 the expenses of production ? 
 
 Ricardo's unwillingness to recognise this other class of rent, which 
 depends solely upon the limited quantity of land, was due to the 
 fact that it would have contradicted his other theory that there is no 
 value except labour. It is true that he made an exception of some 
 rare " products," such as valuable paintings, statuary, books, 
 medals, first-class wines, etc., the quantity of which could not be 
 increased by labour. Nobody would have taken any notice of such 
 a slight omission as that, but had he left out such an important 
 item of wealth as the earth itself there would be great danger of the 
 whole theory crumbling to dust. 1 
 
 Such is the theory of rent, celebrated above all economic doc- 
 trines, and concerning which it might be said that no doctrine, not 
 even that of Malthus, has ever excited such impassioned criticism. 
 For this there are several reasons. 
 
 In the first place, it led to an overthrow of the majesty of the 
 " natural order " by simply depicting some of its gloomier aspects. 
 Men had been led to believe that the " order " was for ever beyond 
 challenge. Now, however, it seemed that if the new doctrine was 
 true then the interests of the landed proprietors were opposed not 
 only to those of every other class in the community for sharing 
 always begets antagonism but also to the general interest of society 
 as a whole. 
 
 For what are the real interests of proprietors ? First, that 
 population and its demands should increase as rapidly as possible 
 
 1 But how was it that he never realised that land at least in any given country, 
 and indeed for that matter over the whole world, is simply a kind of wealth " of 
 which no labour could increase the quantity " ?
 
 RlCARDO 153 
 
 in order that men may be forced to cultivate new lands, and that 
 these new lands should be as sterile as possible, requiring much 
 toil and thus causing an increase in rents. Exhaustive labour 
 bestowed upon the cultivation of land that is gradually becoming 
 poorer and poorer would soon make the fortune of every landlord. 
 
 As a class, proprietors have every interest in retarding the pro- 
 gress of agricultural science, a paradox which the slightest reflection 
 will show to be true. Every advance in agricultural science must 
 mean more products from the same amount of land and a check upon 
 the law of diminishing returns, resulting in lower prices and reduced 
 rents, since it would no longer be necessary to cultivate the poorer 
 soils. In a word, since rent is measured by reference to the obstacles 
 which thwart cultivation, just as the level of water in a pond is 
 determined by the height of the sluice, everything that tends to 
 lower this obstacle must reduce the rent. In mitigation of this charge 
 it must, however, be noted that, taken individually, every proprietor 
 is of necessity interested in agricultural improvement, because he 
 may have an opportunity of benefiting by larger crops before the 
 improvements have become general enough to lower prices and to 
 push back the margin of cultivation. If every proprietor argued in 
 this way, individual interest would finally cheat itself, to the advan- 
 tage of the general public. But this is nothing to be very proud of. 
 
 Ricardo set out to demonstrate the antagonism, 1 and with what 
 a vigorous pen does he not picture it ! The study of this question of 
 rent made of him a Free Trader stauncher than Adam Smith, more 
 firmly convinced than the Physiocrats. Free Trade was for them 
 founded upon the conception of a general harmony of interests, while 
 
 1 " The dealings between the landlord and the public are not like dealings in 
 trade, whereby both the seller and the buyer may equally be said to gain, but 
 the loss is wholly on one side and the gain wholly on the other." (Principle*, ed. 
 Conner, p. 322.) And so when a proprietor sells corn to a consumer it is not of 
 the nature of an ordinary bargain where both parties gain something. The 
 consumer gets nothing in return for what he gives, i.e. for what he gives over 
 and above what it has cost to produce the corn. To get nothing in return for 
 something given is the kind of transaction that generally goes by the name of theft. 
 
 Ricardo soon finds a reply to the comfortable doctrine of Smith, that the 
 interests of the landlords are nowhere opposed to those of the rest of the com- 
 munity. " The interest of the landlord is always opposed to that of the con- 
 sumer and manufacturer. Corn can be permanently at an advanced price only 
 because additional labour is necessary to produce it, because its cost of production 
 is increased. It is therefore for the interest of the landlord that the cost attend- 
 ing the production of corn should be increased. This, however, is not the 
 interest of the consumer. . . . Neither is it the interest of the manufacturer 
 that corn should be at a high price, for the high price of corn will occasion high 
 wage?, but will not raise the price of his commodity." (Ibid., p. 322.) 
 
 K.D. *
 
 154 THE PESSIMISTS 
 
 Ricardo built his faith upon one clearly demonstrated fact the high 
 price of corn and its concomitant, high rents. Free Trade seemed to 
 be the means of checking this disastrous movement. The free 
 importation of corn implied the cultivation of distant lands as rich 
 as or even richer than any in Britain. All this meant avoiding the 
 cultivation of inferior lands and reducing the high price of corn. 
 
 He was also desirous of proving to the proprietors that the practice 
 of free exchange, even though it might involve some loss of revenue 
 to them, was really to their interest. Their opposition, he thought, 
 was very short-sighted. " They fail to see," he writes, " that com- 
 merce everywhere tends to increase production, and that as a result 
 of this increased production general well-being is also improved, 
 although there may be partial loss as the result of it. To be con- 
 sistent with themselves they ought to try to arrest all improvement 
 in agriculture and manufacture and all invention of machinery." J 
 
 The theory of rent, in the second place, endangered the reputation 
 of landowners by showing that their income is not the product of 
 labour, and is consequently anti-social. No wonder that it has been 
 so severely criticised by conservative economists. Ricardo himself, 
 however, seemed quite unconscious of the nature of the blow thus 
 aimed at the institution of private property. His indifference, 
 which appears to us so surprising, is partly explained by the fact that 
 the theory absolved the proprietor from all responsibility in the 
 matter. Unlike profits and wages, rent does not figure in cost of 
 production because it makes no contribution to the price of corn, 
 but is itself wholly determined by that price. 2 The landed proprietor 
 thus appears as the most innocent of the co-partners, playing a purely 
 passive role. He does not produce rent, but simply accepts it. 
 
 That may be ; but the fact that the proprietor plays no part 
 in the production of rent, whilst exonerating him from complicity 
 
 1 " Wealth increases most rapidly in those countries where the disposable 
 land is most fertile, where importation is least restricted, and where, through 
 agricultural improvements, productions can be multiplied without any increase 
 in the proportional quantity of labour, and where consequently the progress of 
 rent is slow." (Principles, ed. Conner, p. 54.) The contrast between fertile 
 lands, free exchange, and the development of agricultural science on the one 
 hand, and the growth of rent on the other, is very strikingly brought out in this 
 paragraph. 
 
 1 " Rent does not and cannot enter in the least degree as a component part 
 of its price." (Tbid., p. 55.) And he adds : " The clearly understanding of this 
 principle is, I am persuaded, of the utmost importance to the science of political 
 economy." It is true that Smith, writing long before this time, had declared 
 that the " high rate of rent is the effect of price," but he does not seem to hava 
 attached any great importance to the remark.
 
 RlCARDO 155 
 
 in its invidious consequences, spells ruin to his title of proprietor 
 that is, if we consider labour to be the only title to proprietorship. 
 It was just this aspect of the question that drew the attention of 
 Ricardo's contemporary James Mill. Mill advocated the confiscation 
 of rent or its socialisation by means of taxation. 1 He thus became a 
 pioneer in the movement for land nationalisation, a cause that has 
 since been championed by such writers as Colins, Gossen, Henry 
 George, and Walras. 
 
 Finally, the theory of rent seems to give colour to certain theories 
 which predict an extremely dark future for the race, corroborating the 
 gloomy forebodings of Malthus. As society grows and advances it will 
 be forced to employ lands that are less fertile and means of production 
 that are more onerous. It seems as if the curse uttered in Genesis has 
 been scientifically verified. " Thorns also and thistles shall it bring 
 forth to thee ; ... in the sweat of thy face shalt thou eat bread." 
 
 True, he did not carry his pessimism so far as to say that as the 
 result of this fatal exhaustion of this most precious instrument of 
 production the progress of mankind would for ever be arrested by 
 the ravages of famine. Other beneficent forces, thje progress of 
 agricultural science and a larger employment of capital, would sur- 
 mount the difficulty. " Although the lands that are actually being 
 cultivated may be inferior to those which were in cultivation some 
 years ago, and consequently production is becoming more difficult, 
 can anyone doubt that the quantity of products does not greatly 
 exceed that formerly produced ? " 
 
 Ricardo's theory does not involve a denial of progress. But it 
 shows how the struggle is becoming more and more difficult, and how 
 scarcity and want, if not actual famine, must lie in the path along 
 which we are advancing. Suppose Great Britain were now to 
 attempt to feed her 45 million inhabitants from her own soil, would 
 there be much doubt as to the correctness of Ricardo's prophecy ? 
 
 1 Ricardo wisely admits the possibility ot confiscating this rent by means of 
 taxation, the reason for this being that " a tax on rent would affect rent only , 
 it would fall wholly on landlords and could not be shifted to any class of con- 
 sumers." (Principles, ed. Conner, p. 164.) And the argument which he 
 advances in proof of this, namely, that the tax could not be shifted, seems to 
 indicate that this particular kind of revenue is not quite as intangible as that of 
 some other classes in society. But his advocacy is somewhat restrained, for, as 
 he points out, it would be unjust to put all the burden of taxation upon the 
 nhoulders of one class of the community. Rent is often the property of people 
 who, after years of toil, have invested their earnings in land. The original 
 injustice, if any, would thus be got rid of in the process of selling the land. This 
 might be a sufficient reason for indemnifying the expropriated, but it is not 
 enough to condemn expropriation altogether.
 
 156 THE PESSIMISTS 
 
 It is an easy matter to reproach Ricardo * with his failure to fore- 
 see the remarkable development in the methods of transport and 
 cheap importation which resulted in the arrest, if not the reversal, of 
 the upward movement of the rent curve. The complaints of landlords 
 both in England and Europe seem to belie the Ricardian theory. 2 
 But who can tell whether the peril is finally removed or not ? 
 The inevitable day will arrive when new countries will consume 
 the corn which to-day they export. This may not come about 
 in the history of England and Europe for some centuries yet, 
 but when it does happen, rent, instead of being stationary and 
 retrogressive, as it has been so long, will again resume its upward 
 trend. 
 
 It is true that we may reckon upon the aid of agricultural science 
 even if foreign importation should fail us. Ricardo was ever mind- 
 ful of the great possibilities of human industry. Other economists, 
 notably Carey and Fontenay, one of Bastiat's disciples, have pro- 
 pounded a theory which is the exact antithesis of the Ricardian, 
 namely, that human industry hi its utilisation of natural forces 
 always begins t with the feeblest as being more easily tamed, the more 
 powerful and recalcitrant forces only coming in for attention later 
 on. The earth is no exception to the rule, and agricultural industry 
 might well become not less but more productive. 
 
 1 "Malthus and Ricardo have both proved false prophets and mistaken 
 apostles. The much-vaunted Ricardian law is a pure myth." (Article by 
 M. de Foville on Lea Variations de la Valeur du Sol en Angleterre au XIX' Si&de, 
 in L'Hconomiste fran$aia, March 21, 1908. 
 
 1 Mr. Robert Thompson, in a paper read before the Royal Statistical Society 
 on December 17, 1907, has shown how the average rent per acre, valued at 11s. 2cL 
 in 1801-5, reached the figure of 20s. in 1841-45, and despite the abolition of 
 protection continued to rise up to 1872-77, when it reached a maximum of 
 29s. 4d. It then continued to fall until it reached the present amount of 20s. 
 The present figure is double what it was in Ricardo's time, but considerable 
 deductions are necessary in view of the improvements made in the character of 
 the soil. Thompson, after making these deductions, puts the amount at 15s. 5d., 
 leaving just 4s. 7d. for rent pure and simple. The 11s. for rent at the beginning 
 of the century covered something besides economic rent. Considerable deduc- 
 tions are again necessary, but the amount of capital employed in agriculture was 
 much less then. 
 
 One seems justified in saying that in England and even in France and other 
 Protective countries the land has lost both in revenue and value during the 
 last quarter of the nineteenth century almost all that it had gained from the 
 time of Ricardo up till then. But is the recoil sufficient to justify Foville's 
 description of Ricardo's vaunted law as a pure myth ? We think not. It has 
 the experience of seventy-five years behind it and of twenty-five years against it, 
 that is all. Anyone who would predict a further fall in rent would certainly be 
 running the risk of becoming a false prophet.
 
 RlCARDO 157 
 
 This thesis, which implies a negation of the law of diminishing 
 returns, is based upon a very debatable analogy. 
 
 When speaking of the future of industry it is well to remember 
 that forces now seldom used, and perhaps seldom thought of, such 
 as the energies liberated by chemical and intennolecular action, may 
 hold infinite resources in reserve for mankind. But agriculture is 
 different. Admitting that with nitrogen got from the atmosphere, or 
 with phosphorus extracted from the subsoil, we may enrich the land 
 indefinitely, still we are continually confronted with the limitations 
 of time and space, which must determine the development of living 
 things, and of agricultural products among them. When albumen 
 can be scientifically produced then will the Ricardian theory become 
 obsolete. Until then it holds the field. 
 
 2. OF WAGES AND PROFITS 
 
 Let us now approach these two laws of Malthus and Ricardo 
 the law of population and the law of rent and ask what effect they 
 are likely to have upon the condition of the worker and the amount of 
 his wages. The answer is not very reassuring. On the one hand 
 there is an indefinite increase in the numbers of the proletariat 
 the result of unchecked procreation, for " the moral restraint " can 
 hardly be said to have influence at all. The inevitable result is the 
 degradation of human labour. On the other hand, the law of 
 diminishing returns causes a continuous rise in the price of necessaries. 
 Between low wages on the one hand and high prices on the other, the 
 worker feels himself crushed as between the hammer and the anvil. 
 
 Turgot had long since given utterance to the tragic thought 
 that the wages of the worker are only just sufficient to keep him alive. 
 His contemporary Necker gave expression to the view in terms still 
 more melancholy. " Were it possible," writes Necker, " to discover 
 a kind of food less agreeable than bread but having double its sus- 
 tenance, people would then be reduced to eating only once in two 
 days." These must be looked upon as mere isolated statements, 
 sufficiently well attested by contemporary facts, perhaps, but laying 
 no claim to be considered general, permanent, and inevitable laws 
 such as Ricardo and Malthus would have regarded them. 
 
 And Ricardo still more emphatically declares that " the natural 
 price of labour is that price which is necessary to enable the labourers 
 one with another to subsist and to perpetuate their race without 
 either increase or diminution." Note the last words, " without in- 
 crease or diminution " ; that is, if a working man has more children 
 than are necessary for replacing their parents, then their wages will
 
 158 THE PESSIMISTS 
 
 fall below the normal rate until increased mortality shall have again 
 established equilibrium. 
 
 This is not tantamount to saying that nominal wages measured in 
 terms of money cannot increase. Indeed, it is absolutely necessary 
 that they should increase, seeing that the price of commodities is 
 continually rising. If they were to remain the same the workman 
 would soon be reduced to starvation. Wages accordingly will show a 
 tendency to rise in sympathy with the rising price of corn, so that 
 the workman will always be able to procure just the same quantity 
 of bread, no more and no less. It is his real wages measured in 
 corn that remain stationary, and upon this depends the well-being 
 of the working class. 
 
 But do they really remain stationary ? Ricardo does not seem 
 to think so. " In the natural advance of society the wages of labour 
 will have a tendency to fall, as far as they are regulated by supply 
 and demand ; for the supply of labourers will continue to increase at 
 the same rate, whilst the demand for them will increase at a slower 
 rate." 
 
 It is even possible that an increase in nominal wages may hide a 
 decrease in real wages. In that case, of course, wages will appear to 
 rise, but " the fate of the labourer will be less happy ; he will receive 
 more money wages it is true, but his corn wages will be reduced." 
 Only when the working classes are sufficiently thoughtful to limit 
 the number of their children will it be possible to hope for a preserva- 
 tion of the status quo. " It is a truth which admits not a doubt, that the 
 comforts and well-being of the poor cannot be permanently secured 
 without some regard on their part or some effort on the part of the 
 legislature to regulate the increase of their numbers, and to render 
 less frequent among them early and improvident marriages." 
 
 In other words, there will always be a demand for a certain number 
 of individuals in order to supply the needs of industry. So long as 
 this indispensable minimum is not exceeded the wages even of the 
 very lowest order must be sufficient to maintain existence, for they 
 must all be kept alive at any rate. But should the working popu- 
 lation exceed this demand nothing can prevent wages falling even 
 below the minimum necessary for existence, for there will no longer 
 be any necessity for keeping them all alive. 
 
 It must be remarked here that on this question, as on that of 
 rent, Malthus is less pessimistic than Ricardo. Far from maintaining 
 that every rise in wages of necessity involves an excess of population 
 
 1 " The condition of the labourer will generally decline, and that of the land- 
 lord will always be improved." (Principles, ed. Gonner, p. 79.)
 
 RlCARDO 159 
 
 and a consequent lowering of wages, Malthus believed that a 
 capacity for forethought, which constitutes the most efficacious check 
 upon the operation of blind instinct, may be engendered even among 
 the working classes, and that a high standard of life once secured 
 may become permanent. All this may be very true, but the 
 reasoning involves us in a vicious circle. In order that a high rate of 
 wages may produce its beneficial effects it must first of all be estab- 
 lished, but how can it possibly be established as long as the working 
 classes remain steeped in the misery caused by not exercising this 
 forethought ? 
 
 An exit from the circle is only possible by recalling the fact that 
 the market wage incessantly oscillates about the natural wage 
 according to the exigencies of demand and supply. If this accidental 
 rise could be prolonged a little it might become permanent and 
 modify the workman's standard of life. 1 
 
 Such is the law of wages, which has long since passed into an 
 axiom, and whose authority is invoked in every discussion on social 
 reform. To every socialistic scheme, to every proposal for social 
 reform, there is always one answer : " There is no means of im- 
 proving the lot of the worker except by limiting the number of his 
 children. His destiny is in his own hands." 2 Latter-day socialism, 
 commencing with Lassalle, makes a careful study of the law, and 
 returns to the charge against the existing economic order by affirming 
 that in no respect is it a natural law, but merely a result of the 
 capitalist regime, upon which it supplies an eloquent commentary. 
 
 We must not fail to note that in the Ricardian theory there is 
 not what we can exactly call antagonism between the landed pro- 
 prietor and the proletarian. To the latter it is a matter of in- 
 difference whether rents be high or low, for his money wages move 
 in sympathy with the price of corn, but his real wages never change. 
 The proprietor on his side is equally indifferent to rising or falling 
 wages, for they never affect his receipts. His rent, as a matter of 
 fact, is determined by the quantity of labour employed on the 
 least fertile lands, but this quantity of labour has nothing to do with 
 
 1 " It generally happens, indeed, that when a stimulus has been given to 
 population an effect is produced beyond what the case requires. . . . The in- 
 creased wages are not always immediately expended on food, but are first made 
 to contribute to the other enjoyments of the labourer. His improved condition, 
 however, induces and enables him to marry." (Principles, ed. Conner, p. 96.) 
 
 1 " Every suggestion which does not tend to the reduction in number of the 
 working people is useless, to say the least of it. All legislative interference must 
 be pernicious." (Quoted by Graham Wallas, Life of Francis Place. Place was 
 the author of a Look on population which appeared in 1822. >
 
 160 THE PESSIMISTS 
 
 the rate of wages. The landlords are the grandees of a different 
 order. 1 
 
 The real struggle lies between capitalist and worker. Once the 
 value of corn has been determined by the cost of producing it on 
 the least favoured land, the proprietor seizes whatever is over and 
 above this, saying to both worker and capitalist, " You can divide the 
 rest between you." This clearly is Ricardo's view.* ** Whatever 
 raises the wages of labour lowers the profits of stock." Wages can 
 only rise at the expense of profits, and vice versa a terrible prophecy 
 that has been abundantly illustrated by the fortunes of the labour 
 movement, but never more clearly than at the present moment. 
 
 But the mere statement of the fatal antagonism between capitalist 
 and workman must have caused both grief and surprise to those 
 economists who had endeavoured to demonstrate the solidarity of 
 interests between them as between brothers. Bastiat was one of 
 these, and he tried to show that in the course of economic evolution 
 the share of each factor tends to grow, but that labour's shows the 
 greatest increase. 
 
 There can be no objection to Ricardo's method of stating the 
 law. The whole thing is so evident that it is almost a truism. A 
 cake is being shared between two persons. If one gets more than 
 his due share is it not evident that the other must get less ? It may 
 be pointed out, on the other hand, that the amount available for 
 distribution is continually on the increase, so that the share which 
 each participant gets may really be growing bigger. But that is 
 
 1 This is a fundamental distinction upon which Ricardo is always insisting. 
 The greater or smaller quantity of labour employed in the production of corn 
 bears no necessary relation to the worker's wages. The one is merely a question 
 of production, the other of distribution. The one is the task, the other the reward. 
 But some might ask if the Ricardian theory of value does not state that the 
 value of the product is determined by the quantity of labour necessary for 
 its production, that this value will be subsequently divided between capitalist 
 and worker, and that the greater this quantity the greater will be the share of each. 
 Labour's share may increase, but not the labourer's, for we must not forget that 
 when the price of corn goes up from 10s. to 20s. it is because the cultivation of 
 poorer lands requires twice the number of labourers demanded by the better kind 
 of land. Besides, it would be a strange thing to pay a man more as the woi k 
 becomes less remunerative. All that one could hope for would be that the workers 
 under the new conditions might be able to retain their old standard of life that 
 is, might be able to purchase the same quantity of bread despite the rise in price. 
 * " Thus, then, I have endeavoured to show that a rise of wages would in- 
 variably lower profits." 
 
 " Thus in every case . . , profits are lowered ... by a rise of wages." 
 On the inexactness of the term " high rate of profits " as a synonym for a 
 proportionally larger share of the produce see note, p. 162.
 
 RlCARDO 161 
 
 hardly the problem to be solved. 1 Increase the cake tenfold, even 
 a hundredfold, but if one person gets more than half of it the other 
 must have less. Ricardo's implication is just that. His law deals 
 with proportions and not with quantities. 
 
 Admitting that the proportion which one of the two factors 
 receives can be increased only if the other is lessened, the problem is 
 to discover which of the two, capital or labour, has the bigger 
 portion. It really seems as if it were labour, for Ricardo speaks 
 of another law of profits, namely, " the tendency of profits to a 
 minimum." Here is another thesis which has had a long career in the 
 history of economics, but what are the reasons that can be adduced in 
 support of it ? The natural tendency of profits, then, is to fall ; " for 
 in the progress of society and wealth the additional quantity of food 
 required is obtained by the sacrifice of more labour." It is deter- 
 mined by the same cause as determined rent the system is a solid 
 piece of work at any rate. 
 
 But how does the cultivation of inferior land affect the rate of 
 profits ? We have already seen how the worker's share, the minimum 
 necessary for keeping body and soul together, goes to swell the high 
 price of corn. 2 But the manufacturer cannot transfer the cost of 
 high wages to the consumer, for the rate of wages has no effect on 
 prices. (Labour has, but wages have none.) As a consequence, 
 the capitalist's share must be correspondingly reduced. We must 
 remember that the workman gains nothing by the high rate of 
 wages, for his consumption of food is limited by nature, but this does 
 not hinder the capitalist losing a great deal by it. 
 
 And so there must come a time when the necessary wage will 
 have absorbed everything and nothing will remain for profit. There 
 will be a new era in history, for every incentive to accumulate capital 
 will disappear with the extinction of profit. Capital will cease 
 growing, no new lands will be cultivated, and population will be 
 brought to a sudden standstill. 3 The stationary state with its 
 
 1 Ricardo does not deny this. Indeed, he lays stress upon the fact that he 
 is arguing on the assumption that the value produced remains the same. "I 
 have therefore made no allowance for the increasing price of the other necessaries, 
 besides food of the labourer ; an increase which would be the consequence of the 
 increased value of the raw materials from which they are made, and which 
 would of course further increase wages and lower profits." 
 
 1 But this only means a rise in the nominal or money wage. It does not 
 mean that the worker gets more corn ; he only gets the same amount as before, 
 because the price of corn has gone up and it makes no difference whether the 
 man is paid in money or in kind. 
 
 1 " For as soon as wages should be equal to the whole receipts of the farmer, 
 there must be an end of accumulation ; for no capital can then yield any profit 
 K.D. r*
 
 162 THE PESSIMISTS 
 
 melancholy vistas will be entered upon. Mill has described it in such 
 eloquent terms that we are almost reconciled to the prospect. But 
 it could hardly have been a pleasant matter for Ricardo, who was 
 primarily a financier and had but little concern with philosophy. He 
 was very much attached to his prophecies, and there is a delicate 
 piece of irony in the thought that the tendency of profits towards a 
 minimum should have been first noted by this great representative of 
 capitalism. At the same time he felt a little reassured when he 
 thought of the opposing forces which might check its downward 
 trend and arrest the progress of rent. In both instances the best 
 corrective seemed to lie in the freedom of foreign trade. 
 
 The general lines of distribution are presented to us in a strikingly 
 simple fashion. The demonstration is neater even than the famous 
 Tableau Sconomique, and it has the further merit of being nearer 
 the actual facts as they appeared in Ricardo's day, for they are no 
 longer quite the same. It may be represented by means of a diagram 
 consisting of three lines. 
 
 At the top is an ascending line representing rent the share of 
 Mother Earth. The proprietor's rent reveals a double increase both 
 of money and kind, for as population and its needs grow it requires 
 an increasing quantity of corn at an increased price. Still, the high 
 price cannot be indefinitely prolonged, for beyond a certain point a 
 high price of corn would arrest the growth of population and at the 
 same time the growth of rent ; then it would no longer be neces- 
 sary to cultivate new lands. 
 
 In the middle is a horizontal line representing wages labour's 
 share. The real wages of labour remain stationary, for it simply 
 receives the quantity of corn necessary to keep it alive. It is true 
 that as the corn is gradually becoming dearer the worker's nominal 
 wages increase, but with no real benefit to him. 
 
 Below this is a descending line representing profits capital's 
 share. 1 It shows a downward trend for the simple reason that it 
 
 whatever, and no additional labour can be demanded, and consequently popula- 
 tion will have reached its highest point." (Principles, ed. Gonner, p. 67.) 
 
 1 When speaking of a reduction of capital's share Ricardo frequently employs 
 the phrase " a lowering of the rate of profits," or " a fall in the rate of profits." 
 A fall in the rate is not necessarily synonymous with a reduction of capital's 
 share, however. The rate of profit simply implies a certain proportion between 
 revenue and capital 5 per cent., for example ; there is no suggestion of com- 
 parison between the quantities drawn by capitalist and workers respectively. 
 Doubtless we must admit that when the rate of profit is diminished, ceteris paribus, 
 the part drawn by capital relatively to labour's share also diminishes, but it is 
 clear that if the quantity of capital employed in any industry were to be doubled, 
 or the product halved, capital, even at the rate of 3 instead of 5 per cent., would
 
 RlCARDO 163 
 
 finds itself squeezed between the proprietor's share, which tends to 
 increase, and the labourer's, which is stationary. The capitalist is 
 brought to our notice in the guise of an English farmer who is obliged 
 to raise his servants' wages as the corn becomes dearer, but who 
 gains nothing by this rise because the extra revenue is taken by the 
 proprietor in the form of higher rent. But profits cannot fall in- 
 definitely, for beyond a certain point it would involve an end to the 
 employment of old capital and the formation of new capital. This 
 would hinder the cultivation of new lands, and would arrest the high 
 price of corn and lower rent. 
 
 8. THE BALANCE OF TRADE THEORY AND THE QUANTITY 
 THEORY OF MONEY 
 
 Such are the more characteristic of Ricardo's doctrines at any 
 rate, those that left the deepest impression upon his successors and 
 caused the greatest stir among his contemporaries. There are other 
 doctrines besides which, regarded as contributions to the science, 
 are much more important and more definite ; but just because they 
 figured almost directly in the category of universally accepted truths 
 whose validity and authorship have never been questioned they 
 have contributed less to his fame. Such are his theories of inter- 
 national trade and banking, where the theorist becomes linked to a 
 first-rate practical genius. Here at any rate there is no note of 
 pessimism and no suggestion of conflicting interests. On the con- 
 trary, he was able to point out that " under a system of perfectly free 
 commerce the pursuit of individual advantage is admirably con- 
 nected with the universal good of the whole." 
 
 In the matter of international trade he showed himself a more 
 resolute Free Trader than either Smith or the Physiocrats. It seemed 
 to him that the only way of arresting the terrible progress of rent 
 and of checking the rising price of com and the downward tendency 
 of profits was by the freest importation of foreign corn. 1 
 
 In addition to this twofold argument in favour of Free Trade, 
 
 be drawing a more considerable share and leaving labour with less. Bastiat, as 
 we shall have to note, made the same mistake. 
 
 1 In a letter to Malthas, December 18, 1814, he admits with a sigh of regret 
 that even if a belt of fertile land were added to this island of ours profits would still 
 keep up. Free Trade has added the illimitable zone of fertile land which Ricardo 
 dreamed of, with the result that both profits and rente have fallen. 
 
 In his essay On Protection to Agriculture (1822) he shows how Protection, by 
 forcing the cultivation of less fertile lands at home, raises the price of corn and 
 increases rents ; and his demand was not for free importation, but for a redaction 
 of the duty to 10s. a quarter.
 
 164 THE PESSIMISTS 
 
 Ricardo brings forward another which is of considerable importance 
 even at the present time. This argument is based upon the ad- 
 vantages which accrue from the territorial division of labour. " By 
 stimulating industry, by rewarding ingenuity, and by using most 
 efficaciously the peculiar powers bestowed by Nature, it distributes 
 labour most effectively and most economically." 
 
 It may be worth while remarking that his illustrious contemporary 
 Malthus remained more or less of a Protectionist. 1 It might seem 
 strange that Malthus, continually haunted as he was by the spectre 
 of famine, should refuse to welcome importation. But his point 
 of view was doubtless largely that of the modern agricultural Pro- 
 tectionist, who believes that the surest way of preserving a country 
 from famine is not to abandon its agriculture to the throes of foreign 
 competition, but, on the contrary, to strengthen and develop the 
 home industry by securing it a sufficiently high price for its products. 
 We must also remember that Malthus' s theory of rent differed some- 
 what from Ricardo's, and that he was not so violently opposed to 
 State intervention. 2 
 
 But Ricardo's principal contribution to the science was his dis- 
 covery of the laws governing the movements of commodities and 
 the counter-movements of money from one place to another, and the 
 admirable demonstration which he has given us of this remarkable 
 ebb and flow. 
 
 As soon as the balance of commerce becomes unfavourable to 
 France, let us say that is, as soon as importation exceeds exporta- 
 tion say by 1,000,000 money is exported to pay for this excessive 
 importation. Money becomes scarce, its value rises, and prices fall. 
 But a fall in price will check foreign importation and will encourage 
 exportation, so that imports will show signs of falling off while exports 
 will grow. Money will no longer be sent abroad, and the current 
 will begin to run the other way, until the 1,000,000 sent abroad is 
 returned again. Moreover, the 1,000,000 sent abroad will cause a 
 movement in the opposite direction superabundance and a deprecia- 
 tion in the value of money, high prices, a premium on importation 
 and a check upon exportation. Accordingly economic forces on 
 both sides will conspire to bring back the balance of commerce to a 
 position of equilibrium that is, to that position where each country 
 will possess just the quantity of money that it needs. 
 
 1 See An Inquiry into the Nature and Progress of Rent. 
 
 2 Cf . this unexpected remark to which H. Denis has recently drawn attention : 
 " It is evidently impossible for any Government to let things just take their 
 natural course." (Malthus, introduction to the Principles.)
 
 RlCARDO 165 
 
 It might be pointed out, on the other hand, that this somewhat 
 complicated mechanism can only operate very slowly, and that 
 considerable time must elapse before the prices of goods begin to 
 respond to the change in the quantity of money. But as a matter of 
 fact it is not necessary to wait until this phenomenon becomes 
 established, for another striking feature precedes it and announces 
 its approach so to speak, and this is, as Smith had already noted, a 
 change in the value of bills drawn on foreign countries. The foreign 
 exchanges are so sensitive that the slightest rise is enough to stimulate 
 exportation and to check importation. 
 
 Accordingly money seldom leaves a country, or only leaves it for 
 a short time. In other words, contrary to the generally accepted 
 opinion, silver and gold in international trade do little more than 
 oil the wheels of commerce. The trade is carried on as if the 
 metals were non-existent. In short, it is essentially of the nature 
 of barter. 1 
 
 The explanation is very schematic. Every incidental phenomenon 
 is omitted, and the whole theory implies the validity of the quantity 
 theory of money, which is now open to considerable criticism as being 
 altogether inadequate for an explanation of the facts involved. But 
 this theory of the automatic regulation of the balance of trade by 
 means of variations in the value of money, although already hinted 
 at by Hume and Smith, is none the less a discovery of the first order, 
 and one that has done service as a working hypothesis for a whole 
 century. 2 
 
 Its explanation turns upon a particular theory of international 
 trade which we can only mention in passing, but which we shall find 
 more fully developed in Stuart Mill's theory of international values. 
 
 4. PAPER MONEY, ITS ISSUE AND REGULATION 
 
 The enunciation of the principles which should govern the conduct 
 of bankers in issuing paper money is another debt that we owe to the 
 
 1 " Gold and silver having been chosen for the general medium of circulation, 
 they are by the competition of commerce distributed in such proportions among 
 the different countries of the world as to accommodate themselves to the natural 
 traffic which would take place if no such metals existed and the trade between 
 countries were purely a trade of barter." 
 
 1 Ricardo also points out that " if, which is a much stronger case, we agreed 
 to pay a subsidy to a foreign Power, money would not be exported whilst there 
 were any goods which could more cheaply discharge the payment." (McCul- 
 loch's edition, p. 269.) As a matter of fact, the European Powers who were 
 leagued against Napoleon were subsidised in this fashion, the exports exceeding 
 the imports by many millions. The indemnity of 6 milliards of francs paid by 
 France to Germany affords another illustration of the samo truth.
 
 166 THE PESSIMISTS 
 
 genius of Ricardo. The Bank Act of 1822, and that of 1844 especially, 
 which laid down the future policy of the Bank of England, represent 
 an attempt on the part of the Government to put his principles into 
 practice. 
 
 Ricardo was an eye-witness of the great panic of February 26, 
 1797, when the reserves of the Bank of England fell from ten millions 
 to a million and a half, necessitating an Order in Council suspending 
 cash payments. The suspension, which was supposed to be a 
 temporary expedient, extended right up to 1821. The depreciation 
 in the value of the bank-note averaged about 10 per cent., but at 
 one period towards the end of the Napoleonic wars it rose as high 
 as 80 per cent. He also witnessed the suffering which such depre- 
 ciation caused. Landlords demanded the payment of their rents 
 in gold, or claimed an increase in the rent equal to the fall in the 
 value of the note. 
 
 Ricardo tried to unravel the causes of this depreciation in his 
 pamphlet entitled The High Price of Bullion, published in 1809, 
 and came to the conclusion that there was only one cause, namely, 
 an excessive supply of paper. At this distance of time it might not 
 be thought such an extraordinary discovery after all. Still, he had 
 the greatest difficulty in getting people to admit this, and in refuting 
 the absurd explanations which had previously been suggested. He 
 showed how a depreciation in the value of the note necessarily resulted 
 in the exportation of gold, although most of his contemporaries, on 
 the contrary, believed that the exportation of gold was the cause of 
 all the mischief which they sought to check by an Act of Parliament. 
 " The remedy which I propose for all the evils in our currency is 
 that the Bank should gradually decrease the amount of their notes 
 in circulation until they shall have rendered the remainder of equal 
 value with the coins which they represent, or in other words till the 
 prices of gold and silver bullion shall be brought down to their Mint 
 price." 1 
 
 But if that is the case why not cut the Gordian knot and suppress 
 paper money altogether ? The reply shows how well Ricardo had 
 studied Smith : " A well-regulated paper currency is so great an 
 improvement in commerce that I should greatly regret if prejudice 
 should induce us to return to a system of less utility." " The intro- 
 duction of the precious metals for the purposes of money may with 
 truth be considered as one of the most important steps towards the 
 improvement of commerce and the arts of civilised life ; but it is 
 no less true that with the advancement of knowledge and science 
 1 Rioardo's works, McCulloch's edition, p. 287.
 
 RICARDO 167 
 
 we discover that it would be another improvement to banish them 
 again from the employment to which, during a less enlightened 
 period, they had been so advantageously applied." l 
 
 Proceeding, he points out that where you have only metallic 
 money it might happen that the production of gold fails to keep 
 pace with the growth of population, in which case you have a rise 
 in the value of gold accompanied by a fall in prices. This danger 
 might be obviated by a careful issue of notes in accordance with 
 the demands of society. In short, Ricardo is so little disposed to 
 abandon the system of paper money and to return to the previous 
 system of metallic money that, on the contrary, he would prefer to 
 abolish the metallic system altogether, taking good care that paper 
 money did not become superabundant. 
 
 So convinced was he of the superiority of paper money that he 
 had no desire to see the Bank resume cash payment. The result of 
 the resumption would be a demand on the part of the public for a 
 conversion of their paper money, " and thus, to indulge a mere 
 caprice, a most expensive medium would be substituted for one of 
 little value." 
 
 But if the notes are not convertible into cash, what is there to 
 guarantee their value or to regulate their issue and prevent deprecia- 
 tion ? This can be done merely by keeping a reserve of gold at the 
 bank, not necessarily in the form of money, but in the form of ingots. 
 The bank would not be allowed to issue any notes beyond the value 
 of these ingots. This regulation would have the effect of keeping 
 the value of the note at par, for bankers and money-dealers would 
 immediately proceed to convert these notes into gold as soon as 
 they showed any signs of depreciation. This would not mean, 
 however, that the public at large would again return to the use 
 of metallic money, for these ingots would be of little use for purposes 
 of everyday life. 
 
 It is a curious system. One would hardly expect the great 
 champion of Liberal political economy to outline a banking system 
 which could only operate through a State bank. This was clearly 
 his opinion, however. He declared himself utterly opposed to the 
 free banking system, and doubted the ability of such a system to 
 regulate the currency. " In that sense there can be no excess 
 whilst the bank does not pay in specie, because the commerce of the 
 country can easily employ and absorb any sum which the bank may 
 send into circulation." * This shows what little confidence a 
 Liberal individualist like Ricardo had in the liberty of individuals 
 
 1 Ricardo 's works, HcCullocL's edition, p. 404. * Ibid., p. 349.
 
 )68 THE PESSIMISTS 
 
 and their ability to judge of the kind of money that is most service- 
 able. 
 
 Ricardo's disciples are legion, and among them is every economist 
 of standing of the earlier part of the nineteenth century. The 
 best known among these are the three writers who immediately 
 follow him in chronological order : James Mill, the father of John 
 Stuart Mill (Elements of Political Economy, 1821),his friend McCulloch 
 (Principles of Political Economy, 1825), and Nassau Senior (Political 
 Economy, 1836). 
 
 The two first-named writers contented themselves with a vigorous 
 defence of the master's views without contributing anything very 
 new. We have already referred to the very different conclusions 
 which James Mill draws from the theory of rent, and how he became 
 an advocate of land nationalisation. McCulloch also was one of 
 the earliest advocates of the right to strike. 
 
 Senior deserves a few pages to himself, for his work in systema- 
 tising the Classical doctrines. We shall deal with him in our chapter 
 on John Stuart Mill.
 
 BOOK II : THE ANTAGONISTS 
 
 WITH the completion of the work of Say, Malthus, and Ricardo it 
 really seemed as if the science of political economy was at last 
 definitely constituted. 
 
 It would, of course, be extravagant to imagine that these three 
 writers were unanimous on all questions. There were several points 
 that still remained obscure, and more than one theory that was 
 open to discussion. Despite its apparent rigidity, it would not have 
 required much critical ability to detect flaws in the symmetrical 
 doctrine so recently elaborated and to predict its ultimate discredit. 
 
 Hardly, indeed, was their task completed before the new doctrine 
 found itself subjected to a most formidable attack, which was 
 simultaneously directed against it from all points of the compass. 
 The criticisms and objections advanced against the new science of 
 political economy form the subject-matter of this second book. 
 
 First comes Sismondi, a purely critical mind, with a haunting 
 catalogue of the sufferings and miseries resulting from free competi- 
 tion. Spirits still more daring will essay the discovery of new prin- 
 ciples of social organisation. The Saint-Simonians will demand 
 the suppression of private property, the extinction of inheritance, and 
 the centralised control of industry by the arm of an omniscient 
 government. The voluntary socialists Owen, Fourier, Louis Blanc 
 will claim the substitution of voluntary co-operation for per- 
 sonal interest. Proudhon will dream of the reconciliation of liberty 
 and justice in a perfect system of exchange from which money shall 
 be excluded. Finally, the broad cosmopolitanism of the Classical 
 writers is to find a formidable antagonist in Friedrich List, and a 
 new Protectionism, based on the sentiment of nationality, is to 
 regild the old Mercantilism which seemed so hopelessly battered 
 under the blows of Adam Smith and the Physiocrats. 
 
 These very diverse doctrines, along wLh much that is fanciful and 
 erroneous, contain many just ideas, many original conceptions. 
 They never succeeded in supplanting the doctrine of the founders ; 
 but they demonstrated, once for all, that the science, apparently com- 
 plete, was in reality far from perfection. To the Orthodox school 
 they flung the taunt which Hamlet cast at Horatius : " There 
 are more things in heaven and earth than are dreamt of in your 
 philosophy." In this way fruitful discussions were frequently 
 
 169
 
 170 SlSMONDI AND ORIGINS OF CRITICAL SCHOOL 
 
 raised, and the public proved sympathetic listeners. The economists 
 who were still faithful to the Classical creed began to doubt the 
 validity of their deductions and were forced to modify their methods 
 and to overhaul their conclusions. 
 
 Let us now attempt to realise the importance of the part which 
 these critics played. 
 
 CHAPTER I : SlSMONDI AND THE ORIGINS 
 OF THE CRITICAL SCHOOL 
 
 THE first thirty years of the nineteenth century witnessed profound 
 transformations in the structure of the economic world. 
 
 Economic Liberalism had everywhere become triumphant. 
 In France the corporation era was definitely at an end by 1791. 
 Some manufacturers, it is true, demanded its re- establishment 
 under the First Empire; but they were disappointed, and their 
 demands were never re-echoed. In England the last trace of the 
 Statute of Apprentices, that shattered monument of the Parlia- 
 mentary regime, was removed from the Statute Book in 1814. 
 Nothing remained which could possibly check the advent of laissez- 
 faire. Free competition became universal. The State renounced 
 all rights of interference either with the organisation of production 
 or with the relations between masters and men, save always the right 
 of prohibiting combinations in restraint of trade, and this restriction 
 was upheld with a view to giving free play to the law of demand and 
 supply. In France the Penal Code of the Empire proved as tyrannous 
 as the old regime or the Revolution; and although freedom of 
 combination was granted in England by an Act of 1825, the defined 
 limits were so narrow that the privilege proved quite illusory. The 
 general opinion of the English legislator is well expressed in the 
 report of a Commission appointed by the House of Commons in 
 1810, quoted by Mr. and Mrs. Webb. 1 " No interference of the 
 legislature with the freedom of trade, or with the perfect liberty of 
 every individual to dispose of his time and of his labour in the way 
 and on the terms which he may judge most conducive to his own 
 interest, can take place without violating general principles of the 
 first importance to the prosperity and happiness of the community." 
 In both countries in England as well as in France a regime of 
 individual contract was introduced into industry, and no legal 
 1 S. and B. Webb, History of Tradt Unionism, p. 54.
 
 SlSMONDI AND ORIGINS OF CRITICAL SCHOOL 171 
 
 intervention was allowed to limit this liberty a liberty, however, 
 which really existed only on the side of the employers. 
 
 Under this regime the new manufacturing industry, born of 
 many inventions, was wonderfully developed. In Great Britain 
 Manchester, Birmingham, and Glasgow, in France Lille, Sedan, 
 Rouen, Elbeuf, Mulhouse, became the chosen centres of large-scale 
 production. 
 
 Alongside of these brilliant successes we have two new pheno- 
 mena which were bound to draw the attention of observers and to 
 invite the reflection of the thoughtful. First we have the concentra- 
 tion in the great centres of wealth of a new and miserable class the 
 workers ; and, secondly, we have the phenomenon of over-produc- 
 tion. 
 
 Factory life during the earlier half of the nineteenth century 
 has been the subject of countless treatises, and attention has fre- 
 quently been drawn to the practice of employing children of all ages 
 under circumstances that were almost always unhealthy and often 
 cruel, 1 to the habit of prolonging the working day indefinitely, to 
 the inadequate wages paid, to the general ignorance and coarseness 
 of the workers, as well as to the deformities and vices which resulted 
 under such unnatural conditions. In England, medical reports, 
 House of Commons inquiries, and the speeches and publications of 
 Owen aroused the indignation of the public, and in 1819 an Act 
 of Parliament was passed limiting the hours of work of children in 
 cotton factories. This, the first rudiment of factory legislation, 
 was to be considerably extended during the course of the century. 
 J. B. Say, who in 1815 was travelling in England, declared that a 
 worker with a family, despite efforts often of an heroic character, 
 could not gain more than three-quarters and sometimes only a half 
 of what was needed for his upkeep. 2 
 
 In France we must wait until 1840 to find in the great work of 
 Dr Villerme a complete description of the heartrending life of the 
 workers and the martyrdom of their children. Here, for example, 
 we learn that " in some establishments in Normandy the thong 
 used for the punishment of children in the spinner's trade appears 
 as an instrument of production." 8 Even before this, in an inquiry 
 
 1 In 1835 Andrew \Jre (Philosophy of Manufactures, p. 481) reckoned that in 
 the manufacture of cotton, wool, linen, and silk in England there were employed 
 4800 boys and 5308 girls below 11 years of age, 67,000 boys and 89,000 girLi 
 between 11 and 18 years of age, and 88,000 men and 102,000 women above 
 18 years ; a total of 159,000 boys and men against 196,000 girls and women. 
 
 1 J. B. Say, De, I'Angleterre et des Anglais, in (Euvres, vol. iv, p. 213. 
 
 * Villerm6's report in M&moires de VAcadimie des Science* muralet, vol. ii f
 
 172 SlSMONDI AND ORIGINS OF CRITICAL SCHOOL 
 
 into the state of the cotton industry in 1828, the Mulhouse masters 
 expressed their belief that the growing generation was gradually 
 becoming enervated under the influence of the exhaustive toil of a 
 day of thirteen or fifteen hours. 1 The Bulletin of the Industrial 
 Society of Mulhouse of the same year states that in Alsace, among 
 other places, the general working day averaged from fifteen to 
 sixteen hours, and sometimes extended even to seventeen hours. 2 
 And all evidence goes to show that things were equally bad, if not 
 worse, in other industrial towns. 3 
 
 Crises supplied phenomena no less disquieting than the sufferings 
 of the proletariat. In 1815 a first crisis shook the English market, 
 throwing a number of workmen on to the street and resulting in 
 riots and machine- breaking. It arose from an error of the English 
 manufacturers, who during the war period had been forced to 
 accumulate the stocks which they could not export, so that on the 
 return of peace their supplies far exceeded the demands of the 
 Continent. In 1818 a new commercial panic, followed by fresh 
 riots, again paralysed the English market. In 1825 a third and more 
 serious crisis, begot probably of the extensive credit given to the 
 newly opened markets of South America, caused the failure of about 
 seventy English provincial banks, bringing much ruin in its train, 
 as well as a shock to several neighbouring countries. During the 
 whole of the nineteenth century similar phenomena have recurred 
 with striking regularity, involving ruin to ever- widening areas, as 
 production on a large scale has extended its sway. No wonder some 
 people were driven to inquire whether the economic system beneath 
 all its superficial grandeur did not conceal some lurking flaw or 
 whether these successive shocks were merely the ransom of industrial 
 progress. 
 
 Poverty and economic crises were the two new facts that attracted 
 immediate attention in those countries where economic liberty had 
 secured its earliest triumphs ; and no longer could attention be 
 diverted from them. Henceforth they were incessantly employed 
 by writers of the most various schools as weapons against the new 
 regime. In many minds they gradually engendered a want of 
 
 p. 414, note. Villerme's observations were made in 1835 and 1836, although 
 his celebrated work, Tableau de I' Slat physique et moral des Ouvriers, was not 
 published till 1840. This book is a reproduction of his report to the Academy. 
 
 1 Enquite sur V Industrie du Colon, 1829, p. 87. Evidence of Messrs. Witz and 
 Son, manufacturers. 
 
 1 Vide Bulletin de la Societe, etc., 1828, p. 326-329. 
 
 * Of. Rist, Duree du Travail dans V Industrie fran^aise de 1820 a 1870, in tho 
 Revue d' Economic volitt-que, 1897, pp. 371 et seq.
 
 AIM AND METHOD OF POLITICAL ECONOMY 173 
 
 confidence in the doctrines of Adam Smith. With some philanthropic 
 and Christian writers they provoked sentimental indignation and 
 aroused the vehement protest of humanity against an implacable 
 industrialism which was the source of so much misery and ruin. 
 With others, especially with the socialists, who pushed criticism to 
 much greater lengths, even to an examination of the institution of 
 private property itself, they resulted in a demand for the complete 
 overthrow of society. All critics whatsoever rejected the idea of a 
 spontaneous harmony between private and public interests as being 
 incompatible with the circumstances which we have just mentioned. 
 Among such writers no one has upheld the testimony of these 
 facts more strongly than Sismondi. 1 All his interest in political 
 economy, so far as theory was concerned, was summed up in the 
 explanation of crises, so far as practice, in the amelioration of the 
 condition of the workers. No one has sought the explanation or 
 striven for the remedy with greater sincerity. He is thus the chief 
 of a line of economists whose works never ceased to exercise influence 
 throughout the whole of the nineteenth century, and who, without 
 being socialists on the one hand or totally blind to the vices of 
 laissez-faire on the other, sought that happy mean which permits 
 of the correction of the abuses of liberty while retaining the prin- 
 ciple. The first to give sentiment a prominent place in his theory, 
 his work aroused considerable enthusiasm at the time, but was 
 subjected to much criticism at a later period. 
 
 I : THE AIM AND METHOD OF POLITICAL ECONOMY 
 
 SISMONDI began his career as an ardent supporter of economic 
 Liberalism. In 1803, the year that witnessed the production of 
 Say's treatise, he published an exposition of the ideas of Adam 
 Smith in a book entitled La Richesse commerciale, a volume which 
 achieved a certain measure of success. During the following years 
 he devoted himself to work exclusively historical, literary, or 
 political, and he only returned to the study of political economy 
 in 1818. " At this period," he writes, " I was keenly interested in 
 the commercial crises which Europe had experienced during the 
 
 1 Sismondi was a native of Geneva. His family was originally Italian, but 
 took refuge in France in the sixteenth century, and migrated to Geneva after 
 the Revocation of the Edict of Nantes. Here Sismondi was born in 1773. He 
 is even better known for his two great works UHistoire des Ripubliques italiennei 
 and L'Histoire des Fraryaia than for his economic studies. He was a frequent 
 guest of Mme. de Stael at the Chateau Coppet, and among the other viaitors 
 whom he met there was Robert Owen. He died in 1842.
 
 174 SlSMONDI AND ORIGINS OF CRITICAL SCHOOL 
 
 past years, and in the cruel sufferings of the factory hands, which 
 I myself had witnessed in Italy, Switzerland, and France ; and which, 
 according to public reports, were at least equally bad in England, 
 Belgium, and Germany." 1 It was at this moment that he was asked 
 to write an article on political economy for the Edinburgh Encyclo- 
 paedia. Upon a re- examination of his ideas in the light of these new 
 facts he found to his surprise that his conclusions differed entirely 
 from those of Adam Smith. In 1819 he travelled in England, 
 " that wonderful country, which seems to have undergone a great 
 experience in order to teach the rest of the world." 2 This seemed 
 to confirm his first impressions. He took the article which he had 
 contributed to the Encyclopaedia and developed it. From this work 
 sprang the treatise which appeared in 1819 under the significant 
 title of Nouveaux Principes d'ficonomie politique and made him 
 celebrated as an economist. His path was already clear. His 
 want of agreement with the predominant school in France and 
 England was further emphasised by the appearance of his studies 
 in economics, s in which he illustrates and confirms the ideas already 
 expounded in the Nouveaux Principes by means of a great number 
 of descriptive and historical studies bearing more especially upon 
 the condition of the agriculturists in England, Scotland, Ireland, 
 and Italy. 
 
 Sismondi's disagreement was not upon the theoretical principles 
 of political economy. So far as these were concerned he declared 
 himself a disciple of Adam Smith. 4 He merely disagreed with the 
 method, the aim, and the practical conclusions of the Classical 
 school. We will examine his arguments on each of these points. 
 
 First of all as regards method. He draws an important distinc- 
 tion between Smith and his followers, Ricardo and J. B. Say. 
 " Smith," says he, " attempted to study every fact in the light of 
 its own social environment," and " his immortal work is, indeed, 
 the outcome of a philosophic study of the history of mankind." 6 
 
 1 Nouveaux Principes, vol. ii, p. xxii. Our quotations are taken from the 
 second edition, published in 1827. 
 
 1 Ibid., p. iv. 
 
 Two volumes, Paris, 1837 and 1838. 
 
 * Nouveaux Principes, vol. ii, pp. 50-51. "Adam Smith's doctrine is also 
 ours, but the practical conclusion which we draw from the doctrine borrowed from 
 him frequently appears to us to be diametrically opposed to his." 
 
 8 Ibid., p. 56. "Adam Smith recognised the fact that the science of govern- 
 ment was largely experimental, that its real foundation lay in the history of 
 various peoples, and that it is only by a judicious observation of facts that we can 
 deduce the general principles. His immortal work is, indeed, the outcome of a 
 philosophic study of the history of mankind." Cf. abo vol. i, pp. 47, 389.
 
 AIM AND METHOD OF POLITICAL ECONOMY 175 
 
 Towards Ricardo, who is accused of having introduced the abstract 
 method into the science, his attitude is quite different, and much as 
 he admired Malthus, who, " possessed of a singularly forceful and 
 penetrative mind, had cultivated the habit of a conscientious study 
 of facts," * still his spirit shrank from admitting those abstractions 
 which Ricardo and his disciples demanded from him. 1 Political 
 economy, he thought, was best treated as a " moral science where all 
 facts are interwoven and where a false step is taken whenever 
 one single fact is isolated and attention is concentrated upon 
 it alone." 8 The science was to be based on experience, upon 
 history and observation. Human conditions were to be studied 
 in detail. Allowance was to be made for the period in which a man 
 lived, the country he inhabited, and the profession he followed, 
 if the individual was to be clearly visualised and the influence 
 of economic institutions upon him successfully traced. " I am 
 convinced," says he, *' that serious mistakes have ensued from 
 the too frequent generalisations which have been made in social 
 science." * 
 
 This criticism was levelled not only at Ricardo and McCulloch, 
 but it also included J. B. Say within its purview, for Say had treated 
 jx>litical economy as an exposition of a few general principles. It 
 also prepared the way for that conception of political economy 
 upon the discovery of which the German Historical school so prided 
 itself at a later date. Sismondi, himself an historian and a publicist 
 interested in immediate reforms, could not fail to see quite clearly 
 the effects that social institutions and political organisation were 
 bound to have upon economic prosperity. A good illustration of 
 his method is furnished by his treatment of the probable effects of 
 a complete abolition of the English Corn Laws. The question, he 
 remarks, could not be decided by theoretical arguments alone 
 without taking some account of the various methods of cultivating 
 the soil. A country of tenant farmers such as England would find it 
 difficult to meet the competition of feudal countries such as Poland 
 
 1 Nouveaux Principes, vol. ii, p. 268. Cf. also pp. 388, 389. 
 
 * Ibid., p. 56. In several other passages he takes Ricardo to task (vol. i, 
 pp.- 257, 300, 336, 366, 423 ; vol. ii, pp. 184, 190, 218, 329). 
 
 Ibid., p. 86. 
 
 4 Etudes sur Economic politique, preface, p. v. Already in his first work, 
 La Richesse commerciale, he had declared : " Political economy is based upon 
 the study of man or of men. We must know human nature, the character and 
 destiny of nations in different places and at different times. We must consult 
 Historians, question travellers, etc. . . . The philosophy of history . . . the 
 study of travels, etc., arc parallel studies."
 
 176 SlSMONDI AND ORIGINS OF CRITICAL SCHOOL 
 
 or Russia, where corn only costs the proprietor " a few hundred 
 lashes judiciously bestowed upon the peasants." J 
 
 Sismondi's conception of economic method is incontestably 
 just so long as the economist confines himself to the discussion of 
 practical problems or attempts to gauge the probable effects of a 
 particular legislative reform or is unravelling the causes of a par- 
 ticular event. But should the economist wish to picture to himself 
 the general aspect of the economic world, he cannot afford to neglect 
 the abstract method, and Sismondi himself was forced to have 
 recourse to it. It is true that he used it with considerable awkward- 
 ness, and his failure to construct or to discuss abstract theories 
 perhaps explains his preference for the other method. At any rate 
 it does partly explain the keen opposition which his book aroused 
 among the partisans of what he was the first to call by the happy title 
 of the " Orthodox " school. 
 
 But to imagine anything more confused than the reasonings 
 by which he attempts to demonstrate the possibility of a general 
 crisis of over-production is difficult. 2 For his point of departure he 
 takes the distinction between the annual revenue and the annual 
 production of a country. According to him the revenue of one 
 year pays for the production of the following. 3 Accordingly, if the 
 production of any one year exceeds the revenue of the previous year 
 a portion of the produce will remain unsold and producers will be 
 ruined. Sismondi reasons as if the nation were composed of agri- 
 
 1 Nouveaux Principes, vol. i, p. 257. 
 
 * Sismondi's awkwardness in the manipulation of abstract reasoning is 
 clearly visible in a host of other passages, especially in the vagueness of his 
 definitions. Labour in one place is defined as the source of all revenues (ibid,, 
 vol. i, p. 85) ; elsewhere, as the workers' revenue as contrasted with interest and 
 rent (vol. i, pp. 96, 101, 110, 113, 114; vol. ii, p. 257, etc.). He never distin- 
 guishes between national and private capital, and wages are sometimes treated 
 as capital, sometimes as revenue (p. 379). He constantly uses such vague terms 
 as " rich " and " poor " to designate capitalist and worker (vol. ii, chap. 5). In 
 his explanation of how the rate of interest is fixed he says that the strength of 
 the lenders of capital just balances the strength of the borrowers, and, as in all 
 other markets, they hit upon a proportional mean (vol. ii, p. 36). In a similar 
 fashion he is constantly confusing revenue in kind with money revenue. 
 
 1 " Last year's revenue pays for the production of this." (Ibid., vol. i, 
 p. 120.) Farther on he adds : " After all, what we do is to exchange the 
 total product of this year against the total product of the preceding one " (p. 121 ). 
 Sismondi attached great importance to the distinction between the national 
 revenue and the annual product. " The confusion of the annual revenue with 
 the annual product casts a thick veil over the whole science. On the other hand, 
 all becomes clear and facts fall in with the theory as soon as one is separated from 
 the other." (Ibid., pp. 366-367.) It is he himself, on the contrary, who creates 
 the confusion.
 
 AIM AND METHOD OF POLITICAL ECONOMY 177 
 
 culturists who buy the manufactured goods they need with the 
 revenue received from the sale of the present year's crop. Conse- 
 quently if manufactured products are superabundant, the agri- 
 cultural revenue will not be enough to pay a sufficient price. 
 
 But within the argument there lurks a twofold confusion. At 
 bottom a nation's annual revenue is its annual produce, and the one 
 cannot be less than the other. Moreover, it is not the produce of two 
 different years that is exchanged, but the various products of the 
 same year, or rather (for this subdivision of the movements of the 
 economic world into annual periods has no counterpart in actual 
 life) it is the different products created at every moment that are 
 being continually exchanged, thus constituting a reciprocal demand 
 for one another. At any one moment there may be too many or 
 too few products of a certain kind, resulting in a severe crisis in one 
 or more industries. But of every product, at one and the same 
 time, there can never be too much. McCulloch, Ricardo, and Say 
 victoriously upheld this view against Sismondi. 1 
 
 It is not only on the question of method, but still more on the 
 question of aim, that Sismondi finds himself in opposition to the 
 Classical school. To them political economy was the science 
 of wealth, or chrematistics, as Aristotle called it. But the real object 
 of the science should be man, or at least the physical well-being of 
 man. To consider wealth by itself and to forget man was a sure 
 way of making a false start. 2 This is why he gave such prominence 
 to a theory of distribution alongside of the theory of production, 
 which had received the exclusive attention of the Classical writers. 
 The Classical school, it is true, might have retorted that they gave 
 first place to production because the multiplication of products 
 
 1 McCulloch criticised Sismondi in an article in the Edinburgh Review of 
 October 1819. For J. B. Say see pp. 115-117. 
 
 With regard to Ricardo, Sismondi relates that in the very year of his death he 
 had two or three conversations with him on this subject at Geneva. In the end 
 he seems to have accepted Ricardo's point of view, but not without several 
 reservations. " We arrive then at Ricardo's conclusion and find that when 
 circulation is complete (and having nowhere been arrested) production does 
 give rise to consumption " ; but he adds : " This involves making an abstraction of 
 time and place, and of all those obstacles which might arrest this circulation." 
 
 Sismondi defended his point of view against his three critics in two articles 
 reprinted at the end of the second edition of the Nouveaux Principe*. 
 
 1 " The accumulation of wealth in abstracto is not the aim of government, but 
 the participation by all its citizens in the pleasures of life which the wealth repre- 
 sents. Wealth and population in the abstract are no indication of a country'^ 
 prosperity : they must in some way be rented to one another before being 
 employed as the basis of comparison." (Nouveaux Principe*, voL i, p. 9.)
 
 178 SlSMONDI AND ORIGINS OF CRITICAL SCHOOL 
 
 was a sine qua non of all progress in distribution. But Sismondi 
 regarded it otherwise. Wealth only deserves the name when it is 
 proportionately distributed. He could not conceive of an abstract 
 treatment of distribution, and consequently could not appreciate it. 
 In his own treatment of distribution he devoted a special section to 
 the " poor," who live by their labour and toil from morn till eve in 
 field or workshop. They form the bulk of our population, and the 
 changes wrought in their way of life by the invention of machinery, 
 the freedom of competition, and the regime of private property was 
 what interested him most. " Political economy at its widest," 
 he says, " is a theory of charity, and any theory that upon last 
 analysis has not the result of increasing the happiness of mankind 
 does not belong to the science at all." l 
 
 What really interested Sismondi was not so much what is called 
 political economy, but what has since become known as economic 
 soeiale in France and Sozialpolitik in Germany. His originality, 
 so far as the history of doctrines is concerned, consisted in his having 
 originated this study. J. B. Say scorned his definitions, so different 
 were they from his own. " M. de Sismondi refers to political 
 economy as the science charged with guarding the happiness of 
 mankind. What he wishes to say is that it is the science a know- 
 ledge of which ought to be possessed by all those who are concerned 
 with human welfare. Rulers who wish to be worthy of their positions 
 ought to be acquainted with the study, but the happiness of mankind 
 would be much jeopardised if, instead of trusting to the intelligence 
 and industry of the ordinary citizen, we trusted to governments." 2 
 And he adds : " The greater number of German writers, by following 
 the false notions spread by the Colbertian system, have come to 
 regard political economy as being purely a science of administra- 
 tion." 
 
 II : SISMONDI'S CRITICISM OF OVER-PRODUCTION 
 AND COMPETITION 
 
 DECEIVED as to the best method to follow, mistaken in its 
 conception of the nature of the object to be kept in view, it is not 
 surprising that the " Chrematistic school " should have gone astray 
 in its practical conclusions. The teaching of the school gave an 
 
 1 Nouveaux Principes, vol. ii, p. 250. Elsewhere he adds : " Should the 
 Government ever propose to further the interests of one class at the expense of 
 another that class should certainly be the workers." (Ibid,, vol. i, p. 372.) 
 
 * Court complel, vol. ii, p. 551.
 
 OVER-PRODUCTION AND COMPETITION 179 
 
 undoubted incentive to unlimited production, for it was loud in its 
 praise of free competition. It preached the doctrine of harmony of 
 interests, and considered that the best form of government was no 
 government at all. These were the three essential points to which 
 Sismondi took exception. 
 
 First as regards its immoderate enthusiasm for production. 
 According to the Classical writers, the general growth of pro- 
 duction presented no inconvenience, thanks to that spontaneous 
 mechanism which immediately corrected the errors of the entrepreneur 
 if he in any way under-estimated the necessities of demand. Fall- 
 ing prices warned him against a false step and influenced him in 
 directing his efforts towards other ends. In a similar way rising 
 prices proved to the producers that supplies were insufficient and 
 that more must be manufactured. Hence the evils committed 
 would always be momentary and transient. 
 
 To this Sismondi replied : If instead of reasoning in this abstract 
 fashion economists had considered the facts in detail, if instead of 
 paying attention to products they had shown some regard for man, 
 they would not have so lightheartedly supported the producers in 
 their errors. An increased supply, if supply were already insufficient 
 to meet a growing demand, would injure no one, but would be 
 profitable for all. That is true. But the restriction of an over- 
 abundant supply when the needs grow at a less rapid rate is not so 
 easily accomplished. Does anyone think that capital and labour 
 could on the morrow, so to speak, leave a declining industry in order 
 to engage in another ? The worker cannot quickly leave the work 
 he lives by, to which he has served a long and costly apprenticeship, 
 and wherein he is distinguished for a professional skill that will be 
 lost elsewhere. Rather than consent to leave it, he will let his wages 
 fall, he will prolong the working day, remaining at work for fourteen 
 hours, and will toil during those hours that would otherwise be spent 
 in pleasure or debauchery ; so that the produce raised by the same 
 number of workmen will be very much increased. 1 As for the manu- 
 facturer, he will not be less loath than the worker to quit an industry 
 into the management and construction of which he has put half or 
 even three-quarters of his fortune. Fixed capital cannot be trans- 
 ferred from one use to another, for even the manufacturer is bound by 
 custom a moral force whose strength is not easily calculated. 2 Like 
 the worker, he is tied to the industry which he has created and from 
 which he draws a living. Consequently production, far from bein 
 
 1 Nouveaux Principet, vol. i, p. 333. 
 * Ibid., p. 336.
 
 180 SlSMONDI AND ORIGINS OF CRITICAL SCHOOL 
 
 spontaneously restrained, will remain the same or will even perhaps 
 tend to increase. In the end, however, he must yield, and adaptation 
 will take place, but only after much ruin. " Producers will not 
 withdraw from that industry entirely, and their numbers will 
 diminish only when some of the workshops have failed and a number 
 of workmen have died of misery." "Let us beware," says he in 
 conclusion, *' of this dangerous theory of equilibrium which is sup- 
 posed to be automatically established. A certain kind of equili- 
 brium, it is true, is re-established in the long run, but it is only after a 
 frightful amount of suffering." J The dictum which was to some 
 extent true in Sismondi's day controls the policy of every trust and 
 Kartel of the present day. 
 
 Nowadays production chiefly grows as the result of the multipli- 
 cation of machinery, and Sismondi's most telling attacks were 
 directed against machinery. Consequently he has been regarded 
 as a reactionary and treated as an ignoramus, and for half a century 
 was refused a place among the economists. 
 
 On the question of machinery the Classical writers were unani- 
 mous. 8 Machinery they considered to be very beneficial, furnishing 
 commodities at reduced rates and setting free a portion of the con- 
 sumer's revenue, which accordingly meant an increased demand for 
 other products and employment for those dismissed as a result 
 of this introduction. Sismondi does not deny that theoretically 
 equilibrium is in the long run re-established. " Every new product 
 must in the long run give rise to some fresh consumption. But let 
 us examine things as they really are. Let us desist from our habit 
 of making abstraction of time and place. Let us take some account 
 of the obstacles and the friction of the social mechanism. And 
 what do we see ? The immediate effect of machinery is to throw 
 some of the workers out of employment, to increase the competition 
 of others, and so to lower the wages of all. This results in diminished 
 consumption and a slackening of demand. Far from being always 
 beneficial, machinery produces useful results only when its intro- 
 duction is preceded by an increased revenue, and consequently by 
 the possibility of giving new work to those displaced. No one will 
 
 1 Nouveaux Principes, vol. i, pp. 220-221. 
 
 * The unanimity is not quite absolute, however. Ricardo in the third edition 
 of his Principles added a chapter on machinery in which he admitted that he was 
 mistaken in the belief that machines after a short period always proved favourable 
 to the interests of the workers. He recognised that the worker might suffer, 
 for though the machine increases the net product of industry it frequently 
 diminishes the total product. He seemed to think that this might happen 
 frequently, but in reality it is quite exceptional.
 
 OVER-PRODUCTION AND COMPETITION 181 
 
 deny the advantage of substituting a machine for a man, provided 
 that man can obtain employment elsewhere." l 
 
 Neither Ricardo nor Say denies this ; they affirmed that the 
 effect of machinery is just to create some part of this demand for 
 labour. But Sismondi's argument is vitiated by the same false idea 
 that, as we have seen above, made him admit the possibility of 
 general over-production the idea that increased production, if it is 
 going to be useful, must always be preceded by increased demand. 
 He was unwilling to admit that the growth of production itself created 
 this demand. On the other hand, what is true in Sismondi's attitude 
 and we cannot insist too much on this is the protest he makes 
 against the indifference of the Classical school in the face of the evils 
 of these periods of transition. 
 
 The Classical school regarded the miseries created by large-scale 
 production with that sang-froid which was to characterise the fol- 
 lowers of Marx amid the throes of the " inevitable Revolution." 
 Among many similarities which may be pointed out between the writ- 
 ings of Marx and the doctrines of the Classical school, this is one of the 
 most characteristic. The grandeur of the new regime is worthy of some 
 sacrifice. But Sismondi was an historian. His interest lay primarily in 
 those periods of transition which formed the exit from one regime and 
 the entrance into another, and which involved so much suffering for 
 the innocent. He was anxious to mitigate the hardships in order that 
 the process of transition might be eased. Nothing can be more legiti- 
 mate than a claim of this kind. J. B. Say recognised its validity to a 
 certain extent, and this is precisely the role of social economics. 
 
 1 We may here recall the celebrated winch argument. Suppose, says 
 Sismondi, that England succeeded in tilling her fields and doing all the work 
 of her towns by means of steam power, so that her total products and revenue 
 remain the same as they are to-day, though her population is only equal to that 
 of the republic of Geneva. Is she to be regarded as being richer and more 
 prosperous ? Ricardo would reply in the affirmative. Wealth is everything, 
 men nothing. Really, then, a single king, dwelling alone on the island, by merely 
 turning a winch might conceivably automatically perform all the work done in 
 England to-day. One can only reply to this argument by saying that long before 
 arriving at this state the community itself would have devised some machinery 
 for distributing the product between all its members. To suppose that a portion 
 of the population dies of hunger through want of employment while the other part 
 continues to manufacture the same quantity of goods as before is sufficiently 
 contradictory. But at bottom, disregarding the paradoxical form given it by 
 Sismondi, the question set by him is insoluble. What is the best equilibrium 
 between production and population ? Are we to prefer a population rapidly 
 increasing in numbers, but making no advance in wealth, to a population which 
 is stationary or even decreasing, but rapidly advancing in wealth ? Everyone IB 
 Jree to choose for himself. Science gives us no criterion.
 
 182 SlSMONDI AND ORIGINS OF CRITICAL SCHOOL 
 
 Sismondi makes another remark which is no less just. What dis- 
 gusted him was not merely that workmen should be driven out by 
 machinery, but that the workers who were retained only had a 
 limited share of the benefits which they procured. 1 For the Classical 
 school it was enough that workers and consumers should have a share 
 in the general cheapening of production. But Sismondi demanded 
 more. So long as toil is as laborious as it is to-day, is it not just that 
 the workman should benefit by the introduction of machinery in the 
 way of increased leisure ? In the social system as at present exist- 
 ing, owing to the competition among workers as the result of exces- 
 sive population, machinery does not increase leisure, but it rather 
 strengthens competition, diminishes wages, provokes a more intense 
 effort on the part of the workman, and forces him to extend his 
 working day. Here again Sismondi appears correct. We cannot 
 see why the consumer alone should reap all the profit of improved 
 machinery, which never benefits the workman unless it affects articles 
 which enter into his consumption. There would be nothing very 
 striking if the benefits of progress, at least during a short time, were 
 to be shared between consumer and worker just as to-day they are 
 shared between inventor, entrepreneur, and society. This idea is the 
 inspiring motive of certain trade unions to-day, which only accept a 
 new machine in exchange for less work and more pay. 
 
 Sismondi's method when applied to production and machinery 
 leads to conclusions very different from those of the Classics. This 
 is also true of his treatment of competition. 
 
 Adam Smith had written : "In general, if any branch of trade, 
 or any division of labour, be advantageous to the public, the freer 
 and more general the competition it will always be the more so." 2 
 Sismondi considered this doctrine false, and invoked two reasons of 
 unequal value in support of his view. 
 
 The first is a product of the inexact idea already mentioned 
 
 1 " We have said elsewhere, but think it essential to repeat it, that it is not the 
 perfection of machinery that is the real calamity, but the unjust distribution 
 of the goods produced. The more we are able to increase the quantity of goods 
 produced with a given quantity of labour, the more ought we to increase our 
 comforts or our leisure. Were the worker his own master, after accomplishing 
 in two hours with a machine a task which formerly took him twelve he would 
 then desist from toil, unless he had some new need or were able to make use 
 of a larger amount of products. It is our present organisation and the work- 
 man's servitude that has forced him to work not less but more hours, at the same 
 wage, and this despite the fact that machinery- has increased his productive 
 powers." (Nouveaux Principes, vol. ii, p. 318. ) In this passage we have Sismondi's 
 real opinion on the subject of machinery most clearly expressed. 
 
 * Wealth of Nations, Book II, chap. 2, in fine.
 
 OVER-PRODUCTION AND COMPETITION 183 
 
 above, which regards any progress in production as useless unless 
 preceded by more intensive demand. Competition is beneficial if 
 it excites the entrepreneur to multiply products in response to an 
 increased demand. In the opposite case it is bad, for if consumption 
 be stationary, its only effect will be to enable the more adroit entre- 
 preneur or the more powerful capitalist to ruin his rivals by means of 
 cheap sales, thus attracting to himself their clientele, but giving no 
 benefit to the public. This is the spectacle that in reality is too often 
 presented to us. The movements of our captains of industry are 
 directed, not by any concern for the presumed advantage of the 
 public, but solely with a view to increased profits. 
 
 Sismondi's argument is open to the same objection as was made 
 above. Cheapened production dispenses with a portion of the in- 
 come formerly spent, and creates a demand for other products, thus 
 repairing the evil it has created. Concentration of industry gives 
 to society the same advantage as is afforded by machinery, and the 
 same arguments may be used in its defence. 
 
 But against competition Sismondi directs a still more serious argu- 
 ment. Pursuit of cheapness, he remarks, has forced the entrepreneur to 
 economise not only in the matter of stuff, but also of men. Competi- 
 tion has everywhere enticed women and children to bear the burden 
 of production instead of adults. Certain entrepreneurs, in order to 
 secure a maximum return from human energy, have enforced day 
 and night toil with only a scanty wage in return. What is the use 
 of cheapness achieved under such circumstances ? The meagre 
 advantage enjoyed by the public is more than counterbalanced by 
 the loss of vigour and health experienced by the workers. Competi- 
 tion impairs this most precious capital the life-energy of the race. 
 He points to the workmen of Grenoble earning six or eight sous for 
 a day of fourteen hours, children of six and eight years working for 
 twelve or fourteen hours in factories " in an atmosphere loaded with 
 down and dust " and perishing of consumption before attaining the 
 age of twenty. He concludes that the creation of an unhappy and 
 a suffering class is too great a price to pay for an extension of 
 national commerce, and in an oft-quoted phrase he says, " The 
 earnings of an entrepreneur sometimes represent nothing but the 
 spoliation of the workmen. A profit is made not because the 
 industry produces much more than it costs, but because it fails to 
 give to the workman sufficient compensation for his toil. Such an 
 industry is a social evil." l 
 
 It is futile to deny the justice of the argument. When cheapness 
 1 Nouveaux Principes, voL i, p. 92.
 
 184 SlSMONDI AND ORIGINS OF CRITICAL SCHOOL 
 
 is only obtained at the cost of permanent deterioration in the health 
 of the workers, competition evidently is a producer of evil rather than 
 of good. The public interest is no less concerned with the preserva- 
 tion of vital wealth than it is with facilitating the production of 
 material wealth. Sismondi showed that competition was a double- 
 edged sword, and in doing so he prepared the way for those who very 
 justly demand that the State should place limits upon its use and 
 prescribe rules for its employment. 
 
 We might be tempted to go farther and see in the passage just 
 cited an unreserved condemnation of profits even. That would 
 involve placing Sismondi among the socialists, and this is sometimes 
 done, although, as we think, wrongly. 
 
 In certain passages he doubtless expresses himself in a manner 
 similar to Owen, the Saint-Simonians, and Marx. Thus in his studies 
 on political economy we come across phrases such as the following : 
 " We might almost say that modern society lives at the expense of 
 the proletariat, seeing that it curtails the reward of his toil. 1 And 
 elsewhere : " Spoliation indeed we have, for do we not find the rich 
 robbing the poor ? They draw in their revenues from the fertile, 
 easily cultivated fields and wallow in their wealth, while the culti- 
 vator who created that revenue is dying of hunger, never allowed 
 to enjoy any of it." * We might even say that Sismondi enunciated 
 the theory of surplus value, which was worked out by Marx, when he 
 makes use of the term mieux value. 3 But the similarity is simply a 
 matter of words. Sismondi, speaking of surplus value, means to 
 imply the value that is constantly growing or being created every 
 year in a progressive country, not by the effort of labour alone, but 
 by the joint operation of capital and labour. 4 Marx's idea that 
 
 1 Etudes sur V Economic politique, vol. i, p. 35. 
 
 Ibid., pp. 274-275. 
 
 1 Nouveaux Principes, vol. i, p. 103. 
 
 * On this point we must dissociate ourselves from the interpretation placed 
 upon the passage by M. Aftalion in his otherwise excellent monograph, L'CSuvre 
 economique de Simonde de Sismondi (Paris, 1899), as well as from the view ex- 
 pressed by M. Denis (Eistoire des Systemes economiques, vol. ii, p. 306). But Sis- 
 mondi's text appears to us to leave no room for doubt. " As against land we might 
 combine the other two sources of wealth, life which enables a man to work and 
 capital which employs him. These two powers when united possess an expansive 
 characteristic, so that the labour which a worker puts in his work one year will 
 be greater than that put in the preceding year upon the product of which the 
 worker will have supported himself. It is because of this surplus value [mieux 
 value], which increases as the arts and sciences are progressively applied to 
 industry, that society obtains a constant increment of wealth," (Nouveaux 
 Principes, vol. i, p. 103.)
 
 OVER-PRODUCTION AND COMPETITION 185 
 
 labour alone created value, and that consequently profit and interest 
 constituted a theft, is entirely foreign to Sismondi. Sismondi, 
 indeed, recognised that the revenues of landed proprietors and 
 capitalists were due to efforts which they themselves had never put 
 forth. He rightly distinguished between the wages of labour and 
 the revenues of proprietors, but to him the latter were not less 
 legitimate than the former, for, says he, " the beneficiaries who enjoy 
 such revenues without making any corresponding effort have acquired 
 a permanent claim to them in virtue of toil undertaken at some 
 former period, which must have increased the productivity of labour." x 
 When Sismondi says that the worker is robbed he merely means to 
 say that sometimes the worker is insufficiently paid ; in other words, 
 that he does not always receive enough remuneration to keep him 
 alive, and were it only for the sake of humanity that he ought 
 to be better paid. But he does not consider that appropriation by 
 proprietors or capitalists of a portion of the social product is in 
 itself unjust. 2 His point of view is not unlike that adopted at a 
 later period by the German socialists when they sought to justify 
 their social policy. 
 
 But although Sismondi's criticism does not amount to socialism, 
 he causes considerable consternation among Liberals by the telling 
 manner in which he shows the falsity of the theory affirmed by the 
 Physiocrats and demonstrated by Smith, namely the natural identity 
 of individual and general interests. It is true that Smith hesitated 
 to apply it except to production. But Sismondi's peculiar merit lies 
 in the fact that he examined its content in relation to distribution. 
 Sismondi finds himself forced by mere examination of the facts to 
 dispute the very basis of economic Liberalism. Curiously enough, 
 he seems surprised at his own conclusions. A priori the theory of 
 
 1 Nouveaux Principes, vol. i, pp. 111-112. Cf. also p. 87 : " Wealth, however, 
 co-operates with labour. And its possessor withholds from the worker the part 
 which the worker has produced beyond his cost of maintenance as compensation 
 for the help which he has given him." It is true that this proportion is a con- 
 eiderable one. " The entrepreneur is bound to leave to the worker just enough to 
 keep him alive, reserving for himself all that the worker has produced over and 
 above this." (P. 103.) But this is not a matter of necessity a deduction from 
 the laws of value, as it is with Marx. 
 
 * " The poor man, by his labour and his respect for the property of others, 
 acquires a right to his home, to warm, proper clothing, to ample ncur's! mont 
 sufficiently varied to maintain health and strength. . . . Only when all these 
 things have been secured to the poor as the fruit of their labour does the claim 
 of the rich come in. What is superfluous, after supplying the needs of everyone, 
 that should constitute the revenue of opulence." (fitiules sur VSconomie polilique, 
 vol. i, p. 273.) Here we see quite clearly the sense in which Sismondi uses the 
 term " spoliation." 
 
 E.D. f-
 
 186 SlSMONDI AND ORIGINS OF CRITICAL SCHOOL 
 
 identity of interests appeared to him true, for does it not, in fact, rest 
 upon the two ideas, (1) that " each knows his own interest better 
 than an ignorant or a careless Government ever can," and (2) that 
 " the sum of the interests of each equals the interests of all " ? 
 " Both axioms are true." 1 Why then is the conclusion false ? 
 
 Here we touch the central theme of Sismondi's system, the 
 point where he leaves the purely economic ground to which the 
 Classical writers had stuck and approaches new territory the 
 question of the distribution of property. Sismondi discovered the 
 explanation of the contradiction which exists between private and 
 general interests in the unequal distribution of property among 
 men and the resulting unequal strength of the contracting parties. 2 
 
 Ill : THE DIVORCE OF LAND FROM LABOUR AS THE 
 CAUSE OF PAUPERISM AND OF CRISES 
 SISMONDI was the first writer to give expression to the belief that 
 industrial society tends to separate into two absolutely distinct 
 classes those who work and those who possess, or, as he often put 
 it, the rich and the poor. Free competition hastens this separation, 
 causing the disappearance of the intermediate ranks and leaving only 
 the proletariat and the capitalist. 3 "The intermediate classes," 
 says he somewhere, " have all disappeared : the small proprietor and 
 the peasant farmer of the plain, the master craftsman, the small 
 manufacturer, and the village tradesmen, all have failed to withstand 
 the competition of those who control great industries. Society no 
 longer has any room save for the great capitalist and his hireling, 
 and we are witnessing the frightfully rapid growth of a hitherto un- 
 known class of men who have absolutely no property." 4 " We 
 are living under entirely new conditions of which as yet we have no 
 
 1 Nouveaux Principes, vol. i, p. 407. Cf. also pp. 200, 201. 
 
 2 " Everyone's interest if checked by everybody else's would in reality 
 represent the common interest. But when everyone is seeking his own interest 
 at the expense of others as well as developing his own means, it does not always 
 happen that he is opposed by equally powerful forces. The strong thus find 
 it their interest to seize and the weak to acquiesce, for the least evil as well as 
 the greatest good is a part of the aim of human policy." (Ibid., p. 407.) Cf. 
 also infra, p. 188, note *. 
 
 1 " There is one fundamental change which is still possible in society, amid 
 thia universal struggle created by competition, and that is the introduction of the 
 proletariat into the ranks of human beings the proletariat, whose name, bor- 
 rowed from the Romans, is so old, but who is himself so new." (Studes sur 
 rficonomie politique, vol. i, p. 34.) 
 
 * Revue merutueile d'Economie politiqiie, 1834, vol. ii, p. 124.
 
 CAUSE OF PAUPERISM AND OF CRISES 187 
 
 experience. All property tends to be divorced from every kind of 
 toil, and therein is the sign of danger." l 
 
 This law of the concentration of capital which plays such an 
 important role in the Marxian system, though true of industry, seems 
 hardly applicable to property, for a considerable concentration of 
 labour is not incompatible with a fairly even distribution of property. 
 It was a memorable exposition that Sismondi gave of this law, 
 showing how it wrought its ravages in agriculture, in industry, and 
 in commerce all at the same time. " The tillage of the 34,250,000 
 acres under cultivation in England was, in 1831, accomplished by 
 1,046,982 cultivators, and now it is expected that the number may 
 be still further reduced. Not only have all the small farmers been 
 reduced to the position of labourers, but a great number of the day 
 labourers have been forced to abandon field work altogether. The 
 industry of the towns has adopted the principle of amalgamation of 
 forces, and capital has been added to capital with a vigour greater 
 than that which has joined field unto field. The manufacturer with 
 a capital of 1000 was the first to disappear. Soon those who 
 worked with 10,000 were considered small too small. They 
 were reduced to ruin and their places taken by larger employers. 
 To-day those who trade with a capital of 100,000 are considered 
 of an average size, and the day is not far distant when these will 
 have to face the competition of manufacturers with a capital of 
 1,000,000. The refining mills of the Gironde dispensed with 
 millers ; the cask mills of the Loire ruined the coopers ; the building 
 of steamboats, of diligences, of omnibuses and railways with the aid 
 of vast capitals have replaced the unpretentious industries of the in- 
 dependent boatman, carriage- or wagon-maker. Wealthy merchants 
 have entered the retail trade and have opened their immense shops 
 in the great capitals, where, in virtue of the improved means of 
 transit, they are able to offer their provisions even to consumers who 
 live at the very extremities of the empire. They are well on the 
 way towards suppressing the wholesale trader as well as the retail 
 dealer, and the petty shopkeeper of the provinces. The places of 
 these independent tradesmen will soon be taken over by clerks, 
 hirelings, and proletarians." 2 
 
 And now for the consequences of such a condition of things. In 
 this opposition existing between these two social classes which 
 formerly lived together harmoniously we shall find an explanation 
 of the workman's misery and of economic crises. 
 
 1 Nouveaux Principea, vol. ii, p. 434. 
 
 1 Etudes sur V Economic, politique, introd., pp. 39 ei seq.
 
 188 SlSMONDI AND ORIGINS OF CRITICAL SCHOOL 
 
 The sufferings of workmen, whence do they spring, if not from the 
 fact that their numbers are in excess of the demand for their labour, 
 thus forcing them to be content with the first wage that is offered 
 them, even though it be opposed to their own interests and the 
 interest of the whole class? 1 But "whence the necessity of sub- 
 mitting to these onerous conditions and of tolerating a burden that 
 is ever becoming heavier under pain of hunger and death? " The 
 explanation lies in the separation of property and toil. 2 Formerly 
 the workman, an independent artisan, could gauge his revenue and 
 limit his family accordingly, for population is always determined by 
 revenue. 3 Robbed of his belongings, all his revenue is to-day got 
 from the capitalist who employs him. Ignorant of the future demand 
 for his products, as well as of the quantity of labour that may be 
 necessary, he has no longer any excuse for exercising forethought, 
 and accordingly he discards it. Population grows or diminishes in 
 accordance with the will of the capitalist. " Let there be an in- 
 creased demand for labour and a sufficient wage offered it and work- 
 men will be born. If the demand fails, the workmen will perish." * 
 
 This theory of population and wages is really Smith's, who tried 
 to prove that men, like commodities, extended or limited their 
 numbers according to the needs of production. Sismondi, rather 
 than accept it as a proof of the harmonious adaptation of demand 
 
 1 " That everyone understands his own interest better than any Government 
 ever can is a maxim that has been considerably emphasised by economists. But 
 they have too lightly affirmed that the interest of each to avoid the greatest evil 
 coincides with the general interest. It is to the interest of the man who wishes 
 to impoverish his neighbour to rob him, and it may be the latter 's interest to 
 let him do it provided he can escape with his life. 
 
 " But it is not in the interest of society that the one should exercise the force 
 and that the other should 'yield. The interest of the day labourer undoubtedly 
 is that the wages for a day of ten hours should be sufficient for his upkeep and 
 the upbringing of his children. It is also the interest of society. But the 
 interest of the unemployed is to find bread at any price. He will work fourteen 
 hours a day, will send his children to work in a factory at ten years of age, will 
 jeopardise his own health and life and the very existence of his own class in order 
 to escape the pressure of present need." (Nouveaux Principes, vol. i, pp. 200-201.) 
 
 2 Ibid., p. 201. 
 
 * " Population will then regulate itself simply in accordance with the revenue. 
 Where it exceeds this proportion it is always just because the fathers are deceived 
 as to what they believe to be their revenue, or rather because they are deceived 
 by society." (Ibid., p. 254.) "The more the poor is deprived of all right 
 of property the greater is the danger of its mistaking its revenue and con- 
 tributing to the growth of a population which, because it does not correspond 
 to the demand for labour, will never find sufficient means of subsistence." 
 (Ibid., p. 264.) 
 
 Ibid., p. 286.
 
 CAUSE OF PAUPERISM AND OF CRISES 189 
 
 to supply, emphasises the lamentable effects of the separation of 
 wealth from labour. 1 Smith and Sismondi both fell into the error of 
 Malthus and Ricardo, who imagined that high wages of necessity 
 increased population. To-day facts seem to show that a higher 
 standard of well-being, on the contrary, tends to limit it, and the 
 proletarians, who constitute the majority of the nation, can no 
 longer be treated as mere tools in the hands of the capitalists, to be 
 taken up or thrown aside according to fancy or interest. 
 
 What is true of industrial employees is no less true of the toilers 
 of the field. In this connection Sismondi introduces the celebrated 
 distinction between net and gross production which has occupied the 
 attention of many economists since then. If the peasants collectively 
 owned all the land they would at least of a certainty find both the 
 security and the support of their life in the soil. They would never 
 let the gross produce fall below what was sufficient to support them. 2 
 But with great landed proprietors, and with the peasant transformed 
 into the agricultural labourer, things have changed. The large 
 proprietors have the net product only in view that is, the difference 
 between the cost of production and the sale price. It matters little 
 to them if the gross produce is sacrificed for the sake of increasing the 
 net produce. Here you have land which, when well cultivated, 
 brings gross produce of the value of 1000 shillings to the farmer and 
 yields 100 shillings in rent to the proprietor. But the proprietor 
 thinks that he would gain 110 shillings if he left it fallow or let it as 
 unprofitable pasture. " His gardener or vinedresser is dismissed, 
 but he gains 10 shillings and the nation loses 890. By and by the 
 capital employed in producing this plentiful supply will no longer 
 be so employed, and there will be no profit. The workers whose 
 
 1 We note that Sismondi does not accept Malthus'e theory of population. He 
 never admits that population depends upon the means of subsistence ; he holds 
 that it varies according to the will of the proprietor, who stimulates or retards it 
 according to his demand, but who is interested in its limitation in order to secure 
 for himself the maximum net product. " Population has never reached the limits 
 of possible subsistence, and probably it never will. But all those who desire the 
 subsistence have neither the means nor the right to extract it from the soil. 
 Those, on the contrary, to whom the laws give the monopoly of the land have 
 no interest in obtaining from it all the subsistence it might produce. In all 
 countries proprietors are opposed, and must be opposed, to any system of culti- 
 vation which would tend merely to multiply the means of subsistence while 
 not increasing the revenue. Long before being arrested by the impossibility of 
 finding a country which produced more subsistence population would be checked 
 by the impossibility of finding the people to buy those means or to work and 
 bring them into being." (Nouveaux Principes, vol. ii, pp. 269-270.) 
 
 Ibid., pp. 263, 264.
 
 190 SlSMONDI AND ORIGINS OF CRITICAL SCHOOL 
 
 former toil produced these products will no longer be employed 
 and no wages will be paid." 1 Examples are plentiful enough. A 
 number of the great Scotch proprietors, in order to replace the 
 ancient system of cultivation by the open pasture system, sent the 
 tenants from their dwellings and drove them into the towns or 
 huddled them on board ships for America. In Italy a handful of 
 speculators called the Mercantl di tenute, animated by similar motives, 
 have hindered the repopulation and cultivation of the Roman 
 Campagna, " that territory formerly so very fertile that five acres 
 were sufficient to provide sustenance for a whole family as well as 
 sending a recruit to the army. To-day its scattered homesteads, its 
 villages, the whole population, together with the farm enclosures, 
 the vineyards, and the olive plantations products that require the 
 continual loving attention of mankind have all disappeared, giving 
 place to a few flocks of sheep tended by a few miserable shepherds." a 
 The criticism is just, but is directed rather against the abuse of 
 private property than against the principle of the net product, for 
 this principle is incident to peasant proprietorship as well. It is 
 inevitable wherever production for a market takes place. 3 
 
 It is just this opposition between proprietorship and labour that 
 supplies an explanation of economic crises. 
 
 Sismondi holds the view that crises are partly due to the difficulty 
 of acquiring exact knowledge of a market that has become very 
 extensive, and partly to the fact that producers are guided in their 
 actions by the amount of their capital rather than by the demand of 
 the market. 4 But above all he thinks that they are due to the unequal 
 distribution of revenues. The consequence of the separation of 
 
 1 Nouveaux Princiyes, vol. i, p. 153. 
 
 1 Ibid., p. 235. This problem of the net and gross produce occupied 
 Sismondi's attention for a long time. We find a suggestion of it in his first 
 work, Le Tableau de V Agriculture toscane (Geneva, 1801), and though he does 
 not definitely take the side of the gross produce, he shows some leanings that 
 way. " Why is the gain of a single rich fanner considered more profitable for 
 a State than the miserable earnings of several thousand workers and peasants T " 
 The book, however, is a treatise on practical agriculture, and includes only a few 
 economic dicta. It is here that we have his beautiful description of his farm at 
 Val Chiuso (p. 219). 
 
 * It is true that Sismondi wished to get rid of the practice of producing 
 corn for a market, so as to free the nation's food from the fluctuations of that 
 market. Neither is he over-enthusiastic in his praise of the gross produce. He 
 recognises that the gradual growth of the gross produce might, in its way, be the 
 consequence of a state of suffering if population were to progress too rapidly 
 (Nouveaux Principes, vol. i, p. 153). This shows what a hesitating mind we are 
 dealing with. 
 
 Ibid., p. 368.
 
 CAUSE OF PAUPERISM AND OF CRISES 191 
 
 property from labour is that the revenues of those who possess lands 
 increase while the incomes of the workers always remain strictly at 
 the minimum. The natural result is a want of harmony in the 
 demand for products. With property uniformly divided and with an 
 almost general increase in the revenue there would result a certain 
 degree of uniformity in the growth of demand. Those industries 
 which supply our most essential and most general wants would 
 experience a regular and not an erratic expansion. But as a matter 
 of fact at the present time it is the revenue of the wealthy alone that 
 increases. Hence there is a growing demand for the more refined 
 objects in place of a regular demand for the ordinary things of life ; 
 a neglect of the more fundamental industries, and a demand for the 
 production of luxuries. If the latter do not multiply quickly 
 enough, then the foreigner will be called in to satisfy the demand. 
 What is the result of these incessant changes ? The old, neglected 
 industries are obliged to dismiss their workmen, while the new 
 industries can only develop slowly. During the interval the work- 
 men who have suffered dismissal are forced to reduce their con- 
 sumption of ordinary goods, and permanent under-consumption, 
 attended by a crisis, immediately follows. " Owing to the concen- 
 tration of wealth in the hands of a few proprietors, the home market 
 is contracted and industry must seek other outlets for its products 
 in foreign markets, where even more considerable revolutions are 
 possible." l Thus " the consumption of a millionaire master who 
 employs 1000 men all earning but the bare necessities of life is of 
 less value to the nation than a hundred men each of whom is much 
 less rich but who employ each ten men who are much less poor." 2 
 Sismondi's explanation of crises, though adopted by many 
 writers since then, is not one of the best. The difficulty of adapta- 
 tion would in all probability not disappear even if wealth were to be 
 more equally distributed. Moreover, what he attempts to explain is an 
 evil that is chronic in certain industries and not the acute periodical 
 crises. But the theory has the merit of attempting to explain 
 
 1 Nouveaux Principes, vol. i, p. 361. 
 
 1 Elsewhere he remarks : " The petty merchants, the small manufacturers, 
 disappear, and a great entrepreneur replaces hundreds of them whose total wealth 
 was never equal to his. Taken altogether, however, they consumed more than he 
 does. His costly luxury gives much less encouragement to industry than the 
 honest ease of the hundred homes which it has replaced." (Ibid., p. 327). The 
 theory is more than doubtful. What we want to know is whether the demand 
 will remain the same in amount, not whether there will be no change in its 
 character a contingency that need not result in a general crisis, but simply in a 
 passing inconvenience.
 
 192 SlSMONDI AND ORIGINS OF CRITICAL SCHOOL 
 
 what still remains obscure, and what J. B. Say and Ricardo pre- 
 ferred to pass over in silence or regarded as of secondary importance 
 under pretext that in the long run equilibrium would always be 
 re-established. 
 
 IV: SISMONDI'S REFORM PROJECTS. HIS INFLUENCE 
 UPON THE HISTORY OF DOCTRINES 
 
 THE principal interest of Sismondi's book does not lie in his 
 attempt to give a scientific explanation of the facts that occupied 
 his attention. Indeed, these attempts have little that is altogether 
 satisfactory, for the analysis is frequently superficial, and even 
 commonplace. His merit rather lies in having placed in strong relief 
 certain facts that were consistently neglected by the dominant school 
 of economists. Taken as a whole, his doctrine must be regarded as 
 pessimistic. He deliberately shows us the reverse of the medal, of 
 which others, even those whom we have classed as Pessimists 
 Ricardo and Malthus wished only to see the brighter side. It is no 
 longer possible to speak of the spontaneous harmony of interests, or 
 to forget the misery and suffering which lies beneath an appearance 
 of economic progress. Crises cannot be slipped over and treated as 
 transient phenomena of no great moment. No longer is it possible 
 to forget the important effects of an unequal division of property and 
 revenues, which frequently results in putting the contracting parties 
 in a position of fundamental inequality that annuls freedom of 
 bargaining. In a word, it is no longer possible to forget the social 
 consequences of economic transformations. And herein lies the 
 sphere of social politics, of which we are now going to speak. 
 
 The new point of view occupied by Sismondi enables him to 
 see that the free play of private interests often involves injury to 
 the general interest, and that the laissez-faire doctrine preached 
 by the school of Adam Smith has no longer any raison d'etre. 
 On the contrary, there is room for the intervention of society, 
 which should set' a limit to individual action and correct its abuses. 
 Sismondi thus becomes the first of the interventionists. 
 
 State action, in the first place, ought to be employed in curbing 
 production and in putting a drag upon the too rapid multiplication 
 of inventions. Sismondi dreams of progress accomplished by easy 
 stages, injuring no one, limiting, no income, and not even lowering the 
 rate of interest. 1 His sensitiveness made him timid, and critics smile 
 
 1 Sismondi applies the same principles to a consideration of a fall in the rate 
 of interest as he does to the growth of production or the increase of machinery,
 
 SISMONDI'S REFORM PROJECTS 193 
 
 at his philanthropy. Even the Saint-Simonians, too sympathetic 
 to certain of his views, reproach him with having allowed himself 
 to be misled by it. 1 This state of mind was reflected by his habits 
 in private life. Sainte-Beuve 2 relates of him how he used to employ 
 an old locksmith who had become so useless and awkward that every- 
 body had left him. Sismondi remained faithful to the old man even 
 to the very end, despite his inefficiency, lest he should lose his last 
 customer. He wished society to treat the older industries in a 
 similar fashion. He has been compared to Gandalin, the sorcerer's 
 apprentice in the fable, who, having unlocked the water-gate with the 
 magic of his words, sees wave succeed wave, and the house inundated, 
 without ever being able to find the word which could arrest its flow. 
 
 Governments ought to temper their " blind zeal " instead of 
 urging on production. 3 Addressing himself to the savants, he begs 
 them to desist from invention and recall the sayings of the econo- 
 mists, laissez-faire, laissez-passer, by giving to the generations which 
 their inventions render superfluous at least time to pass away. For 
 the old regime, with its corporations and wardens, he had the sincerest 
 regard, while condemning them as being harmful to the best interests 
 of production. Still he wondered whether some lesson could not 
 be gleaned from them which might help us in fixing limits to the 
 abuses of competition. * 
 
 Sismondi never seems to have realised that any restriction placed 
 upon production with a view to alleviate suffering might hinder the 
 progress and well-being of the very classes that interested him most. 
 The conviction that the production of Europe was enough to satisfy 
 all demands supported these erroneous views. 6 Sismondi never 
 suspected the relative poverty of industrial society, a fact that 
 struck J. B. Say very forcibly. Moreover, he felt that on this point 
 the policy of Governments was not so easily modified, a feeling that 
 undermined his previous confidence. v 
 
 Since the causes of the evils at present existing in society are 
 
 " An increase of capital is desirable only when its employment can be increased 
 at the same time. But whenever the rate of interest is lowered it is a certain 
 sign that the employment of capital has proportionally diminished as compared 
 with the amount available ; and this fall in the rate, which is always advan- 
 tageous to some people, is disadvantageous to others some will have to be 
 content with smaller incomes and others with none at all." (Nouveaux Principes, 
 vol. i, p. 393.) 
 
 1 Compare the Saint-Simonian review, Le Producteur, vol. iv, pp. 887-888. 
 
 1 Nouveaux Lundis, vol. vi, p. 81. 
 
 * Etude* aw rconomie politique, vol. i, pp. 60, 61. 
 
 * Nouveaux Principes, vol. i, p. 341 ; vol. ii, p. 459. 
 
 * Ibid., vol. ii, pp. 415, 435. See also Eludes, vol. i, p. 25. 
 
 E.D. o'
 
 194 SlSMONDI AND ORIGINS OF CRITICAL SCHOOL 
 
 (1) the absence of property, (2) the uncertainty of the earnings of 
 the working classes, all Government action ought to be concentrated 
 on these points. 
 
 The first object to be aimed at, wherever possible, was the union 
 of labour and property, and Sismondi eulogises the movement 
 towards a new patriarchal state that is, towards a revival of 
 peasant proprietorship. The Nouveaux Principes contains a cele- 
 brated description of the idyllic happiness of such a state. In 
 industry he wished for a return of the independent artisan. " I am 
 anxious that the industries of the town as well as country pursuits 
 should be carried on by a great number of independent workers in- 
 stead of being controlled by a single chief who rules over hundreds 
 and even thousands of workers. I hope to see manufactures in the 
 hands of a great number of capitalists of average means, and not 
 under the thumb of one single individual who constitutes himself 
 master over millions. I long to see the chance nay, even the 
 certainty of being associated with the master extended to every 
 industrious workman, so that when he gets married he may feel that 
 he has a stake in the industry instead of dragging on through the 
 declining years of life, as he too often does, without any prospect 
 of advancement." * This for an end. 
 
 But the means ? On this point Sismondi shows extraordinary 
 timidity. Appeal to the legislator is not followed up by a plan of 
 campaign, and in moments of scepticism and despair he even doubts 
 whether reform is ever possible. He declares himself an opponent 
 of communism. He rejects the Utopias of Owen, of Thompson, 
 and of Fourier, although he recognises that their aim was his also. 
 He failed to perceive that his " breaking up " process was quite as 
 illusory as the communistic Utopias which he shunned. He rejected 
 Owen's system because he saw the folly of attempting to substitute 
 the interest of a corporation for that of the individual. But he 
 never realised that it had nothing to do with a corporation, and it 
 is possible that were he alive at the present time he would be an 
 ardent champion of co-operation. 
 
 But until the union of property and labour is realised Sismondi 
 is content with a demand for a simpler reform, which might alleviate 
 the more pressing sufferings of the working classes. First of all he 
 appeals for the restoration, or rather the granting, of the right of 
 combination. 2 Then follows a limitation of child labour, the aboli- 
 tion of Sunday toil, and a shortening of the hours of labour. 3 He 
 
 1 Nouveaux Principes, vol. ii, pp. 365, 366. 
 - Ibid., p. 451. Ibid., p. 338.
 
 SISMONDI'S REFORM PROJECTS 195 
 
 also demanded the establishment of what he called a " professional 
 guarantee," whereby the employer, whether agriculturist or capitalist, 
 would be obliged to maintain the workman at his own expense during 
 a period of illness or of lock-out or old age. This principle once 
 admitted, the employers would no longer have any interest in 
 reducing the wages of the workman indefinitely, or in introducing 
 machinery or in multiplying production unduly. Having become 
 responsible for the fate of the workers, they would then take some 
 account of the effect which invention might have on their well-being, 
 whereas to-day they simply regard them from the point of view of 
 their own profits. 1 One might be tempted to regard this as an antici- 
 pation of the great ideal which has to a certain extent been realised 
 by the social insurance Acts passed during the last thirty years. But 
 this is only partly so. Sismondi placed the charge of maintenance 
 upon the master and not upon society, and his criticism of methods 
 of relief, especially of the English Poor Law, was that they tended 
 to decrease wages and to encourage the indifference of masters by 
 teaching the workers to seek refuge at the hands of the State rather 
 than at the hands of the masters. 
 
 In short, his reform projects, like his criticism of the economists, 
 reveal a certain degree of hesitation, due, no doubt, to the perpetual 
 conflict between reason and sentiment. Too keen not to see the 
 benefits of the new industrial rSgime, and too sensitive not to be 
 moved by some of its more painful consequences, too conservative 
 and too wise to hope for a general overthrow of society, he is content 
 to remain an astonished but grieved spectator of the helplessness 
 of mankind in the face of this eviL He did not feel himself competent 
 to suggest a remedy. He himself has confessed to this in touching 
 terms : 
 
 " I grant that, having indicated what in my opinion is the prin- 
 ciple of justice in this matter, I do not feel myself equal to the task 
 of showing how it can be realised. The present method of distributing 
 the fruits of industry among those who have co-operated in its 
 production appears to me to be curious. But a state of society 
 absolutely different from that with which we are now acquainted 
 appears to be beyond the wit of man to devise." 2 
 
 It is a striking fact that most of the important movements hi 
 the nineteenth century can be traced back to Sismondi's writings. 
 He was the first critic whom the Classical school encountered in its 
 march, and he treats us to a full rksumi of its many heresies. In the 
 
 1 Nouveaux Principes, vol. ii, p. 661. Ibid., p. 364.
 
 196 SlSMONDI AND ORIGINS OF CRITICAL SCHOOL 
 
 bitter struggle which ensued the heretics won the day, their nostrums 
 taking the place of the Classical doctrines in the public favour. But 
 it seems hardly possible that Sismondi's work should have determined 
 the course of these newer tendencies. His immediate influence was 
 extremely limited. It scarcely told at all except upon the socialists. 
 His book was soon forgotten, and not until our own day was its 
 importance fully realised. It would be truer to say that in the 
 course of the nineteenth century there was a spontaneous revival of 
 interest in the ideas promulgated by Sismondi. None the less he 
 was the first writer to raise his voice against certain principles 
 which were rapidly crystallising into dogmas. He was the earliest 
 economist who dared resist the conclusions of the dominant school, 
 and to point to the existence of facts which refused to tally with 
 the large and simple generalisations of his predecessors. If not the 
 founder of the new schools that were about to appear, he was their 
 precursor. They are inspired by the same feelings and welcome 
 the same ideas. His method is an anticipation of that of the His- 
 torical school. His definition of political economy as a philosophy 
 of history l works wonders in the hands of Roscher, Knies, and 
 Hildebrand. His plea for a closer observation of facts, his criticism 
 of the deductive process and its hasty generalisations, will find an 
 echo in the writings of Le Play in France, of Schmoller in Germany, 
 and of Cliffe Leslie and Toynbee hi England. The founders of the 
 German Historical school, in their ignorance of foreign writers, 
 regarded him as a socialist, 2 but the younger representatives of 
 that school have done full justice to his memory, and recognise him 
 as one of their earliest representatives. 
 
 By his appeal to sentiment and his sympathy for the working 
 classes, by his criticism of the industrial regime of machines and 
 competition, by his refusal to recognise personal interest as the only 
 economic motive, he foreshadows the violent reaction of humam- 
 tarianism against the stern implacability of economic orthodoxy. 
 We can almost hear the eloquence of Ruskin and Carlyle, and the 
 pleading of the Christian Socialists, who in the name of Christian 
 charity and human solidarity protest against the social consequences 
 of production on a large scale. Like Sismondi, social Christianity 
 will direct its attack, not against the science itself, but against the 
 easy bourgeois complacency of its advocates. A charge of selfishness 
 will be brought, not against economic science as such, but against its 
 representatives and the particular form of society which it upholds. 
 
 1 See section I of present chapter. 
 
 1 Knies, strangely enough, classes him with the socialists.
 
 SISMONDI'S REFORM PROJECTS 197 
 
 Finally, by his plea for State intervention Sismondi inaugurated 
 a reaction against Liberal absolutism, a reaction that deepened in 
 intensity and covered a wider area as the century wore on, and 
 which found its final expression in State socialism, or " the socialism 
 of the chair." He was the first to advocate the adoption of factory 
 legislation in France and to seek to give the Government a place in 
 directing economic affairs. The impossibility of complete abdica- 
 tion on the part of the State would, he thought, become clearer every 
 day. But it was little more than an aspiration with him ; it never 
 reached the stage of a practical suggestion. 
 
 Thus in three different ways Sismondi's proposals were destined 
 to give rise to three powerful currents of thought, and it is not sur- 
 prising that interest in his work should have grown with the develop- 
 ment of the new tendencies which he had anticipated. 
 
 His immediate influence upon contemporary economists was very 
 slight. Some of them allowed themselves to be influenced by his 
 warmheartedness, his tenderness for the weak, and his pity for the 
 workers, but they never found this a sufficient reason for breaking off 
 their connections with the Classical school. Blanqui x in particular 
 was a convert to the extent that he admitted some exceptions to the 
 principle of laissez-faire. Theodore Fix and Droz 2 seemed won over 
 for a moment, and Sismondi might rightly have expected that the 
 Revue mensuelle d 1 Economic politique, started by Fix in 1833, would 
 uphold his views. But the days of the Revue were exceedingly few, 
 and before finally disappearing it had become fully orthodox. Only 
 one author, Buret, in his work on the sufferings of the working classes 
 in England and France, 8 has the courage to declare himself a whole- 
 hearted disciple of Sismondi. The name of Villeneuve-Bargemont, 
 author of Economic politique chretienne, must be added to these. 
 His work, which was published in three volumes in 1834, bears 
 frequent traces of Sismondi's influence. 
 
 Sismondi, though not himself a socialist, has been much read and 
 
 1 A. Blanqui, in his Histoirc de Vficonomie politique en Europe (1837), con- 
 siders him a writer of the modern school, which he describes as follows : " Writers 
 of this school are no longer willing to treat production as a pure abstraction apart 
 from its influence upon the workers. To produce wealth is not enough ; it must be 
 equitably distributed." (Introd., 3rd ed., p. xxi.) 
 
 a Droz (1773-1850) published in 1829 his Economie politique, on Principes 
 de, la Science, des Richesses. It is in this work that we find the famous phrase, 
 " Certain economists seem to think that products are not made for men, but that 
 men are made for the products." 
 
 3 Paris, 1841, two volumes. Buret died in 1842, when thirty -two years of 
 age.
 
 198 SAINT-SIMON AND THE SAINT-SIMONIANS 
 
 carefully studied by socialists. It is among them that his influence is 
 most marked. This is not very surprising, for all the critical portion 
 of his work is really a vigorous appeal against competition and the 
 inequalities of fortune. Louis Blanc read him and borrowed from 
 him more than one argument against competition. The two German 
 socialists Rodbertus and Marx are still more deeply indebted to him. 
 Rodbertus borrowed from him his theory of crises, and owes him the 
 suggestion that social progress benefits only the wealthier classes. 
 Rodbertus quotes him without any mention of his name, but Marx 
 in his Manifesto has rendered him full justice, pointing out all 
 that he owed to his penetrative analysis. The most fertile idea 
 borrowed by Marx was that which deals with the concentration of 
 wealth in the hands of a few powerful capitalists, which results in 
 the increasing dependence of the working classes. This concep- 
 tion is the pivot of the Manifesto, and forms a part of the very 
 foundation of Marxian collectivism. The other idea of exploitation 
 does not seem to have been borrowed from Sismondi, although he 
 might have discovered a trace of the surplus value theory in his 
 writings. Marx endeavours to explain profit by drawing a distinc- 
 tion between a worker selling his labour and parting with some of his 
 labour force. Sismondi employs terms that are almost identical, 
 and says that the worker when selling his labour force is giving his 
 life. Elsewhere he speaks of a demand for " labour force." Sis- 
 mondi never drew any precise conclusion from these ideas, but they 
 may have suggested to Marx the thesis he took such pains to 
 establish. 
 
 Many a present-day socialist, without acknowledging the fact, 
 perhaps without knowing it, loves to repeat the arguments which 
 Sismondi was the first to employ, to stir up his indifferent con- 
 temporaries. 
 
 CHAPTER II : SAINT-SIMON, THE SAINT- 
 SIMONIANS, AND THE BEGINNINGS OF 
 COLLECTIVISM 
 
 SISMONDI, by supplementing the study of political economy by 
 a study of social economics, had already much enlarged the area 
 traced for the science by its founders. But while giving distribu- 
 tion the position of honour in his discussion, he never dared carry 
 his criticism as far as an examination of that fundamental institution 
 of modern society private property. Property, at least, he thought
 
 SAINT-SIMON AND THE SAINT-SIMONIANS 199 
 
 legitimate and necessary. Every English and French economist 
 had always treated it as a thing apart a fact so indisputable and 
 inevitable that it formed the very basis of all their speculations. 
 
 Suddenly, however, we come upon a number of writers who, while 
 definitely rejecting all complicity with the earlier communists and 
 admitting neither equality of needs nor of faculties, but tending to 
 an agreement with the economists in claiming the maximum of 
 production as the one aim of economic organisation, dare lay their 
 hands upon the sacred ark and attack the institution of property 
 with whole-hearted vigour. Venturing upon what had hitherto been 
 holy ground, they displayed so much skill and courage that every 
 idea and every formula which became a commonplace of the socialistic 
 literature of the later nineteenth century already finds a place in 
 their system. Having definite ideas as to the end which they had in 
 view, they challenged the institution of private property because 
 of its effects upon the distribution and production of wealth. They 
 cast doubt upon the theories concerning its historical evolution, and 
 concluded that its abolition would help the perfection of the scientific 
 and industrial organisation of modern society. The problem of 
 private property was at last faced, and a recurrence of the discussion 
 was henceforth to become a feature of economic science. 1 
 
 1 It was not intended that any reference should be made in this volume to 
 the doctrine of socialism before the opening of the nineteenth century, but the 
 question whether the French Revolution of 1789 was socialist in character or 
 simply middle -class, as the socialists of to-day would put it, has been so frequently 
 discussed that we cannot ignore it altogether. 
 
 There is no doubt that the leaders of the Revolution including Marat 
 even, who is wrongly regarded as a supporter of that agrarian law which he 
 condemned as fatal and erroneous always showed unfailing respect for the 
 institution of private property. The confiscation of the property of the Church 
 and of the emigre nobles was a political and not an economic measure, and in 
 that respect is fairly comparable with the historic confiscation of the property 
 of Jews, Templars, Huguenote, and Irish, which in no case was inspired by merely 
 socialist motives. The confiscation of endowments of goods belonging to legal 
 persons was regarded as a means of defending individual or real property against 
 the encroachments of merely fictitious persons and the tyranny of the dead hand. 
 When it came to the abolition of feudal rights great care was taken to distinguish 
 the tenant's rights of sovereignty, which were about to be abolished, from his pro- 
 prietary rights, which deserved the respect of everyone who recognised the legiti- 
 macy of compensation. In practice the distinction proved of little importance. 
 Scores of people were ruined during those unfortunate months some through mere 
 misfortune, others because of the muddle over the issue of assignats, and others, 
 ngain, because of the confiscation of rents; but the intention to respect the 
 rights of property remains indisputable still. It would seem that in this matter 
 the revolutionary leaders had come under the influence of the Physiocrats, whose 
 cult of property has already engaged our attention. And how easy it would be to
 
 200 SAINT-SIMON AND THE SAINT-SIMONIANS 
 
 Not that it had hitherto been neglected. Utopian communists 
 from Plato and More up to Mably, Morelly, Godwin, and Babeuf, the 
 eighteenth-century equalitarians, all rest their case upon a criticism 
 of property. But hitherto the question had been treated from the 
 point of view of ethics rather than of economics. 1 The originality 
 
 imagine a Physiocrat penning Article 17 of the Declaration of the Rights of Man 
 when it speaks of property as an inviolable, sacred right ! But, on the other hand, 
 it is true that Rousseau in his article Economic politique speaks of the rights of 
 property as the most sacred of the citizen's rights. 
 
 It was not only on the question of property that the revolutionists of 1789 
 showed themselves anti-socialist. They were also anti-socialist in the sense 
 that they paid no attention to class war and ignored the antagonism that exists 
 between capitalists and workers. All were to be treated as citizens and brothers, 
 all were equal and alike. 
 
 However, those who claim the most intimate connection with the spirit of the 
 Revolution remain undismayed by such considerations. They endeavour to 
 show that the Revolution was not quite so conservative nor so completely 
 individualistic as is generally supposed, and after diligent search they claim to 
 have discovered certain decrees bearing unmistakable traces of socialism. But 
 a much more general practice is to plead extenuating circumstances. " Are we 
 to demand that the social problems which appeared fifty years afterwards, when 
 industry had revolutionised the relations of capital and labour, should have 
 been solved at the end of the eighteenth century ? It would have been worse 
 than useless for the men of 1789 and 1793 to try to regulate such things in 
 advance." (Aulard, Address to Students, April 21, 1893. Cf . his Histoire politique 
 de la Revolution, chap. 8, paragraph entitled " Le Socialism^.") 
 
 We must not lose sight of the communist plot hatched by Franois Babeuf 
 during the period of the Revolution. But in this case, at any rate, the exception 
 proves the rule, for, despite the fact that Babeuf had assumed the suggestive 
 name of Gaius Gracchus, he found little sympathy among the men of the Con- 
 rention, even in La Montagne, and he was condemned and executed by order 
 of the Directory. Babeuf's plot is interesting, if only as an anticipatory 
 protest of revolutionary socialism against bourgeois revolution. Cf. Aulard, 
 loc. cit., p. 627. 
 
 1 Not to speak of celebrated Utopians like Plato, More, and Campanella, a 
 number of writers who have been minutely studied by Lichtenberger undertook 
 to supply such criticism in the eighteenth century. Morelly, Mably, Brissot, 
 and Meslier the curb in France, and Godwin in England, attacked the institution 
 of property with becoming vigour. Babeuf, who in 1797 suffered death for his 
 attempt to establish a community of equals, has left us a summary of their 
 theories. But the Saint-Simonians owe them nothing in the way of inspiration. 
 Eighteenth-century socialism was essentially equalitarian. What aroused the 
 anger of the eighteenth-century writers most of all was the inequality of pleasure 
 and of well-being, for which they held the institution of private property respon- 
 sible. " If men have the same needs and the same faculties they ought to be 
 given the same material and the same intellectual opportunities," says the 
 Manifeste des Sgaux. But the Saint-Simonians recognise neither equality of 
 needs nor of faculties, and they are particularly anxious not to be classed 
 along with the Babeuvistes the champions of the agrarian law. Their 
 socialism, which is founded upon the right to the wholo produce of labour
 
 SAINT-SIMON AND THE SAINT- SIMONIANS . 201 
 
 of the Saint-Simonian treatment is that it is the direct outcome 
 of the economic and political revolution which shook France and 
 the whole of Europe towards the end of the eighteenth and the 
 beginning of the nineteenth centuries. The socialism of Saint-Simon 
 is not a vague aspiration for some pristine equality which was largely 
 a creation of the imagination. It is rather the nai've expression of 
 juvenile enthusiasm in the presence of the new industrial regime 
 begotten of mechanical invention and scientific discovery. The 
 modern spirit at its best is what it would fain reveal. It sought to 
 interpret the generous aspirations of the new bourgeois class, freed 
 through the instrumentality of the Revolution from the tutelage 
 of baron and priest, and to show how the reactionary policy of the 
 Restoration threatened its triumph. Not content, however, with 
 confining itself to the intellectual orbit of the bourgeoisie, it sought 
 also to define the sphere of the workers in future society and to lay 
 down regulations for their benefit. But its appeal was chiefly to 
 the more cultured classes engineers, bankers, artists, and savants. 
 It was to these men all of them members of the better classes 
 that the Saint-Simonians preached collectivism and the suppression 
 of inheritance as the easiest way of founding a new society upon 
 the basis of science and industry. Hence the great stir which the 
 new ideas caused. 
 
 Consequently Saint-Simonism appears to be a somewhat unexpected 
 
 and would apportion wages according to capacity, aims neither at equality nor 
 uniformity. 
 
 The Sa'int-Simonians seem to have remained in ignorance of the socialist 
 theories of their contemporaries, the French Fourier and the English Thompson 
 and Owen. Fourier's work only became known to Enfantin after his own 
 economic doctrine had been formulated. Saint-Simon and Bazard appear never 
 to have read him. It is probable that Enfantin only became aware of Fourier'a 
 writings after 1829, and when he did he interested himself merely in those that 
 dealt with free love and the theory of passions. As Bourgin put it : "If Fourier 
 did anything at all, he has rather hastened the decomposition of Saint-Simonism." 
 (Henry Bourgin, Fourier, p. 419 ; Paris, 1905.) 
 
 The English socialists are never as much as mentioned. The Bicardian 
 doctrine of labour-value, which is the basis of Thompson's theory and of Owen's, 
 and later still of that of Marx, seems never to have become known to them. " Ques- 
 tions of value, price, and production, which demand no fundamental knowledge 
 either of the composition or the organisation of society," are treated as so many 
 details (Le Producteur, vol. iv, p. 388). Their doctrine is primarily social, con- 
 taining only occasional allusions to political economy. Enfantin is careful to 
 distinguish between Quesnay and his school and Smith or Say. The Physiocrat* 
 gave a social character to their doctrine, which the economists wrongfully neglected 
 to develop. Aug. Comte, in the fourth volume of the Cours de Philosophic, has 
 criticised political economy in almost identical terms, which affords an additional 
 proof of his indebtedness to Saint-Simonism.
 
 202 SAINT-SIMON AND THE SAINT-SIMONIANS 
 
 extension of economic Liberalism rather than a tardy renewal of 
 ancient socialistic conceptions. 
 
 We must, in fact, distinguish between two currents in Saint- 
 Simonism. The one represents the doctrine preached by Saint- 
 Simon himself, the other is that of his disciples, the Saint-Simonians. 
 Saint-Simon's creed can best be described as " industrialism " plus 
 a slight admixture of socialism, and it thus naturally links itself 
 with economic Liberalism, of which it is simply an exaggerated 
 development. The disciples' doctrine, on the other hand, can only 
 be described as collectivism. But it is a collectivism logically 
 deduced from two of the master's principles which have been extended 
 and amplified. For a history of economic ideas it is the theories 
 of the disciples that matter most, perhaps. But it would be impos- 
 sible to understand these without knowing something of Saint- 
 Simon's theory. We shall give an explanation of his doctrine, first 
 attempting to show the links which surely, though strangely enough, 
 affiliate the socialism of Saint-Simon with economic Liberalism. 
 
 I : SAINT-SIMON AND INDUSTRIALISM 
 
 SAINT-SIMON was a nobleman who led a somewhat dissolute, 
 adventurous life. At the early age of sixteen he took part in the 
 American War of Independence. The Revolution witnessed the 
 abandonment of his claim to nobility, but by successful speculation 
 in national property he was enabled to retrieve his fortune to some 
 extent. Imprisoned as a suspect at Sainte-Pelagie, set free on 
 the 9th Thermidor, he attained a certain notoriety as a man of 
 affairs interested chiefly in travels and amusements and as a dilet- 
 tante student of the sciences. From the moment of his release 
 he began to regard himself as a kind of Messiah. 1 He was profoundly 
 impressed by what seemed to him to be the birth of a new society 
 at which he had himself assisted, in which the moral and political and 
 even physical conditions of life were suddenly torn up by the roots, 
 when ancient beliefs disappeared and nothing seemed ready to take 
 their place. He himself was to be the evangelist of the new gospel, 
 and with this object in view on the 4th Messidor, An. VI, he called 
 together the capitalists who were already associated with him and, 
 pointing out the great necessity for restoring public confidence, 
 proposed the establishment of a gigantic bank whose funds might 
 
 1 Cf. especially Dumas, Psychologie de deux Messies positivistes, Saint-Simon 
 tt A. ComU (Paris, 1905), and for biographical details Weill, Saint-Simon et son 
 Ci'uvre[lS94).
 
 SAINT- SIMON AND INDUSTRIALISM 203 
 
 be employed in setting up works of public utility a proof of the 
 curious way in which economic and philosophic considerations were 
 already linked together in his thoughts. 1 An ill-considered marriage 
 which was hastily broken off, however, was followed by a period of 
 much extravagance and great misery. By the year 1805 so reduced 
 were his circumstances that he was glad to avail himself of the 
 generosity of one of his old servants. After her death he lived partly 
 upon the modest pension provided him by his family and partly upon 
 the contributions of a few tradesmen, but he was again so miserable 
 that in 1823 he attempted suicide. A banker of the name of Olinde 
 Rodrigues came to the rescue this time and supplied him with the 
 necessary means of support. He died in 1825, surrounded by a 
 number of his disciples who had watched over the last moments of 
 his earthly life. During all these years, haunted as he was by the 
 need for giving to the new century the doctrine it so much required, 
 he was constantly engaged in publishing brochures, new works, or 
 selections from his earlier publications, sometimes alone and some- 
 times in collaboration with others, 2 in which the same suggestions 
 are always revived and the same ideas keep recurring, but in slightly 
 different forms. 
 
 Saint-Simon's earlier work was an attempt to establish a scientific 
 synthesis which might furnish mankind with a system of positive 
 morality to take the place of religious dogmas. It was to be a kind 
 of " scientific breviary " where all phenomena could be deduced 
 from one single idea, that of " universal gravitation." He him- 
 self has treated us to a full account of this system, which is as 
 deceptive as it is simple, and which shows us his serious limitations 
 as a philosopher whose ambition far outran his knowledge. Auguste 
 Comte, one of his disciples, attempted a similar task in his Cours 
 de Philosophic positive and in the Politique positive, so that Saint- 
 Simon, who is usually considered the father of socialism, finds himself 
 also the father of positivism. 
 
 1 Weill, Saint-Simon et son (Euvre, p. 15. 
 
 1 In 1814 De la Reorganisation de la Sociite europeenne, by Saint-Simon 
 and A. Thierry, his pupil; 1817-18, Industrie, in 4 vols. (the 3rd vol. and the 
 first book of the 4th vol. are the work of A. Comte) ; 1819, La Politique ; 1821, 
 Le Systeme industriel ; 1823-24, Le Catechisme des Industriels (the third book, 
 by A. Comte, bears the title Systeme de Politique positive) ; 1 825, Le Nouveau 
 Christianisme. Our quotations from Saint-Simon are taken from the OEuvrea 
 de Saint-Simon et d'Enfantin, published by members of the committee insti- 
 tuted by Enfantin for carrying out the master's last wishes (Paris, Dentu, 1865), 
 and from the (Euvres choisies de Saint-Simon, published in 3 vols. by Lemonnier 
 of Brussels (1859).
 
 204 SAINT-SIMON AND THE SAINT-SIMONIANS 
 
 From 1814 up to his death in 1825 he partly relinquished his 
 interest in philosophy and devoted himself almost exclusively to the 
 exposition of his social and political ideas, which are the only ones 
 that interest us here. 
 
 His economics might be summed up as an apotheosis of industry, 
 using the latter word in the widest sense, much as Smith had employed 
 the term as synonymous with labour of all kind. 
 
 His leading ideas, contained within the compass of a few striking 
 pages, have since become known as "Saint-Simon's Parable." 
 
 " Let us suppose," says he, " that France suddenly loses fifty 
 of her first-class doctors, fifty first-class chemists, fifty first-class 
 physiologists, fifty first-class bankers, two hundred of her best 
 merchants, six hundred of her foremost agriculturists, five hundred 
 of her most capable ironmasters, etc. [enumerating the principal 
 industries]. Seeing that these men are its most indispensable 
 producers, makers of its most important products, the minute that 
 it loses these the nation will degenerate into a mere soulless body 
 and fall into a state of despicable weakness in the eyes of rival 
 nations, and will remain in this subordinate position so long as 
 the loss remains and their places are vacant. Let us take another 
 supposition. Imagine that France retains all her men of genius, 
 whether in the arts and sciences or in the crafts and industries, 
 but has the misfortune to lose on the same day the king's brother, 
 the Duke of Angouleme, and all the other members of the royal 
 family ; all the great officers of the Crown ; all ministers of State, 
 whether at the head of a department or not ; all the Privy Coun- 
 cillors ; all the masters of requests ; all the marshals, cardinals, 
 archbishops, bishops, grand vicars and canons ; all prefects and 
 sub-prefects ; all Government employees ; all the judges ; and on 
 top of that a hundred thousand proprietors the cream of her nobility. 
 Such an overwhelming catastrophe would certainly aggrieve the 
 French, for they are a kindly-disposed nation. But the loss of a 
 hundred and thirty thousand of the best-reputed individuals in the 
 State would give rise to sorrow of a purely sentimental kind. It 
 would not cause the community the least inconvenience." J 
 
 In other words, the official Government is a mere facade. Its 
 action is wholly superficial. Society might exist without it and 
 life would be none the less happy. But the disappearance of the 
 
 1 L'Organisateur, Part I, 1819, pp. 10-20. This passage was republished by 
 Olinde Rodiigues in 1832 under the title of UneParabolepolitiquein a volume of 
 miscellaneous writings by Saint-Simon, with the result that Saint-Simon was 
 prosecuted before the Cour d'Assises. He was acquitted, however.
 
 SAINT-SIMON AND INDUSTRIALISM 205 
 
 savants, industrial leaders, bankers, and merchants would leave the 
 community crippled. The very sources of wealth would dry up, 
 for their activities are really fruitful and necessary. They are the 
 true governors who wield real power. Such was the parable. 
 
 According to Saint-Simon, little observation is needed to realise 
 that the world we live in is based upon industry, and that anything 
 besides industry is scarcely worth the attention of thinking people. 
 A long process of historical evolution, which according to Saint- 
 Simon commenced in the twelfth century with the enfranchisement 
 of the communes and culminated in the French Revolution, had 
 prepared the way for it. 1 At least industry is the one cardinal 
 feature of the present day. 
 
 The political concerns of his contemporaries were regarded with 
 some measure of despair. The majority of them were engaged either 
 in defending or attacking the Charter of 1814. The Liberals were 
 simply deceiving themselves, examining old and meaningless for- 
 mulae such as " the sovereignty of the people," " liberty," and 
 " equality " conceptions that never had any meaning, 2 but were 
 simply metaphysical creations of the jurists, 3 and they ought to 
 have realised that this kind of work was perfectly useless now that 
 the feudal regime was overthrown. Men in future will have something 
 better to do than to defend the Charter against the " ultras." The 
 parliamentary regime may be very necessary, but it is just a passing 
 phase between the feudalism of yesterday and the new order of 
 to-morrow. 4 That future order is Industrialism a social organisa- 
 
 1 " With the enfranchisement of the communes we shall witness the middle 
 classes at last in enjoyment of their liberty, setting up as a political power. The 
 essence of that power will consist in freedom from being imposed upon by 
 others without consent. Gradually it will become richer and stronger, at the 
 same time growing in political importance and improving its social position in 
 every respect, with the result that the other classes, which may be called the 
 theological or feudal classes, will dwindle in estimation as well as in their 
 real importance. Whence I conclude that the industrial classes must continue 
 to gain ground, and finally to include the whole of society. Such seems to be 
 the trend of things the direction in which we are moving." (Lettres d un 
 Ambricain, (Euvres, vol. ii, p. 166.) 
 
 * " Industry is the basis of liberty. Industry can only expand and grow 
 strong with the growth of liberty. Were this doctrine, so old in fact but so new 
 to many people, once fully grasped instead of those fictitious dreams of antiquity, 
 we should have heard the last of such sanguinary phrases as ' equality or death.' " 
 ((Euvres, vol. ii, pp. 210-211.) 
 
 * " Lawyers and metaphysicians are wont to take appearance for reality, 
 the name for the thing." (Syst. indust., (Euvres, vol. v. p. 12.) 
 
 * "Parliamentary government must be regarded as an indispensable step 
 in the direction of industrialism." ((Euvres, vol. iii, p. 22.) " It is absolutely
 
 206 SAINT-SIMON AND THE SAINT-SIMONIANS 
 
 tion having only one end in view, the further development of industry, 
 the source of all wealth and prosperity. 
 
 The new regime implies first of all the abolition of all class dis- 
 tinction. There will be no need for either nobles, bourgeois, or 
 clergy. There will be only two categories, workers and idlers or 
 the bees and the drones, as Saint-Simon puts it. Sometimes he 
 refers to them as the national and anti-national party. In the new 
 society the second class x is bound to disappear, for there is only 
 room for the first. This class includes, besides manual workers, 2 
 agriculturists, artisans, manufacturers, bankers, savants, and artists. 8 
 Between these persons there ought to be no difference except that 
 which results from their different capacities, or what Saint-Simon 
 calls their varying stakes in the national interest. " Industrial 
 equality," he writes, " consists in each drawing from society benefits 
 exactly proportionate to his share in the State that is, in proportion 
 to his potential capacity and the use which he makes of the means 
 at his disposal including, of course, his capital." 4 Saint-Simon 
 
 necessary if the transition from the essentially arbitrary regime which haa existed 
 hitherto is to be replaced by the ideal liberal regime which is bound to come 
 into being by and by." (Ibid. p. 21.) 
 
 1 Writing in 1803 in his Lettres tfun Habitant de Geneve, he uses the follow- 
 ing words : " Everyone will be obliged to do some work. The duty of 
 employing one's personal ability in furthering the interests of humanity is an 
 obligation that rests upon the shoulders of everyone." (CEuvres, vol. i, 
 p. 65.) 
 
 " I find it essential to give to the term ' labour ' the widest latitude possible. 
 The civil servant, the scientist, the artist, the manufacturer, and the agriculturist 
 are all working as certainly as the labourer who tills the ground or the porter 
 who shoulders his burden." (Introduction to Travaux acientifiques, CEuvres 
 choisies, vol. i, p. 221.) 
 
 The national or industrial party includes the following classes : 
 
 1. All who till the land, as well as any who direct their operations. 
 
 2. All artisans, manufacturers, and merchants, all carriers by land or by sea, 
 as well as everyone whose labour serves directly or indirectly for the production 
 or the utilisation of commodities ; all savants who have consecrated their talents 
 to the study of the positive sciences, all artists and liberal advocates ; " the small 
 number of priests who preach a healthy morality ; and, finally, all citizens who 
 willingly employ either their talents or their means in freeing producers from 
 the unjust supremacy exercised over them by idle consumers." 
 
 " In the anti-national party figure the nobles who labour for the restoration 
 of the old regime, all priesta who make morality consist of blind obedience 
 to the decrees of Pope or clergy, owners of real estates, noblemen who do nothing, 
 judges who exercise arbitrary jurisdiction, as well as soldiers who support them 
 in a word, everyone who is opposed to the establishment of the system that is 
 most favourable to economy or liberty." (Le Parti national, in Le Politique t 
 (Euvres, vol. iii, pp. 202-204.) 
 
 Syst. indust., (Euvres, vol. vi, p. 17, note.
 
 SAINT-SIMON AND INDUSTRIALISM 207 
 
 evidently has no desire to rob the capitalists of their revenues ; his 
 hostility is reserved for the landed proprietors. 
 
 Not only must every social distinction other than that founded 
 upon labour and ability disappear, but government in the ordinary 
 sense of the term will largely become unnecessary. " National 
 association " for Saint-Simon merely meant " industrial enter- 
 prise." " France was to be turned into a factory and the nation 
 organised on the model of a vast workshop " ; but " the task of 
 preventing thefts and of checking other disorders in a factory is 
 a matter of quite secondary importance and can be discharged by 
 subordinates." l In a similar fashion, the function of government 
 in industrial society must be limited to " defending workers from the 
 unproductive sluggard and maintaining security and freedom for 
 the producer." 2 
 
 So far Saint-Simon's ** industrialism " is scarcely distinguishable 
 from the " Liberalism " of Smith and his followers, especially J. B. 
 Say's. Charles Comte and Dunoyer, writing in their review, Le 
 Censeur, were advancing exactly similar doctrines, 8 sometimes even 
 using identical terms. " Plenty of scope for talent " and laissez- 
 faire were some of the favourite maxims of the Liberal bourgeois. 
 Such also were the aspirations of Saint-Simon. 
 
 But it is just here that the tone changes. 4 
 
 Assuming that France has become a huge factory, the most 
 important task that awaits the nation is to inaugurate the new 
 manufacturing regime and to seek to combine the interests of the 
 
 1 Syst. indust., (Euvres, vol. vi, pp. 91-92. 
 
 * (Euvres, vol. iii, pp. 35-36. 
 
 * On this point see Halevy's article in the Revue du Mots for December 1907, 
 Les Idies iconomiques de Saint-Simon, and Allix, article mentioned supra, p. 117. 
 
 * In the following passage the opposition is very marked : " One must 
 recognise that nearly all Government measures which have presumed to influence 
 social prosperity have simply proved harmful. Hence people have come to the 
 conclusion that the best way in which a Government can further the well-being 
 of society is by letting it alone. But this method of looking at the question, 
 however just it may seem when we consider it in relation to the present political 
 system, is evidently false when it is adopted as a general principle. The impres- 
 sion will remain, however, until we succeed in establishing another political 
 order." (L'Organisateur, (Euvres, vol. iv, p. 201.) 
 
 Later on the Saint-Simonians abandoned this idea and demanded Govern- 
 mental control of all social relations. " Far from admitting that the directive 
 control of Government in social matters ought to be restricted, we believe that 
 it ought to be extended until it includes every kind of social activity. Moreover, 
 we believe that it should always be exercised, for society to us seems a veritable 
 hierarchy." (Doctrine de Saint-Simon, Exposition, Deuxieme Annee, p. 108 1 
 Paris, 18SO.)
 
 208 SAINT-SIMON AND THE SAINT-SIMONIANS 
 
 entrepreneurs with those of the workers on the one hand and of the 
 consumers on the other. There is thus just enough room for govern- 
 ment of a kind. What is required is the organising of forces rather 
 than the governing of men. 1 Politics need not disappear altogether, 
 but " must be transformed into a positive science of productive 
 organisation." 2 " Under the old system the tendency was to 
 increase the power of government by establishing the ascendancy 
 of the higher classes over the lower. Under the new system the 
 aim must be to combine all the forces of society in such a fashion 
 as to secure the successful execution of all those works which tend 
 to improve the lot of its members either morally or physically." * 
 
 Such will be the task of the new government, where capacity 
 will replace power and direction will take the place of command. 4 
 Applying itself to the execution of those tasks upon which there is 
 complete unanimity, most of them requiring some degree of delibe- 
 ration and yet promptness of action, it will gradually transform 
 the character of politics by concentrating attention upon matters 
 affecting life or well-being the only things it need ever concern 
 itself with. 6 
 
 In order to make his meaning clearer, Saint-Simon proposes to 
 confine the executive power to a Chamber of Deputies recruited from 
 the representatives of commerce, industry, manufacture, and agricul- 
 ture. These would be charged with the final acceptance or refusal 
 of the legislative proposals submitted to them by the other two 
 Chambers, composed exclusively of savants, artists, and engineers. 
 The sole concern of all legislation would, of course, be the develop- 
 ment of the country's material wealth. 6 
 
 1 " Under the old regime men were considered inferior to things," accord- 
 ing to a brochure entitled Des Bourbons et des Stuarts (1822 ; (Euvres choisiea, 
 vol. ii, p. 447). " The object of the new system will be to extend man's hold 
 over things." ((Euvres, vol. iv, p. 81.) " In the present state of education what 
 the nation wants is not more government, but more cheap administration." 
 (Syst. indust., (Euvres, vol. v, p. 181.) Engels, in his book written in reply 
 to Eugen Diihring, makes use of identical terms in speaking of the socialist 
 regime. " When the administration of things and the direction of the processes 
 of production take the place of the governing of persons the State will not merely 
 be abolished : it will be dead." (Philosophic, Economic politique, Socialisme, 
 French translation by Laskine, p. 361 ; Paris, 1911.) 
 
 * Lettres d un Americain, (Euvres, vol. ii, p. 189. 
 
 8 Des Bourbons et des Stuarts, (Euvres cJioisies, vol. ii, pp. 437-438 
 
 * UOrganisateur, (Euvres choisies, vol. iv, pp. 86 and 150-151. 
 8 Lettres d un Americain, (Euvres, vol. ii, p. 188. 
 
 6 This is not the only plan of government proposed by Saint-Simon, although 
 it is the one most characteristic of him. It is to be found in L'Organisa- 
 teur immediately after the Parable. We have to remember that Saint -Simon
 
 SAINT-SIMON AND INDUSTRIALISM 209 
 
 An economic rather than a political form of government, adminis- 
 tering things instead of governing men, with a society modelled on 
 the workshop and a nation transformed into a productive association 
 having as its one object " the increase of positive utility by means of 
 peaceful industry " 1 such are the ruling conceptions which dis- 
 tinguish Saint-Simon from the Liberals and serve to bring him into 
 the ranks of the socialists. His central idea will be enthusiastically 
 welcomed by the Marxian collectivists, and Engels speaks of it as 
 the most important doctrine which its author ever propounded. 2 
 Proudhon accepts it, and as a practical ideal proposes the absorption 
 of government and its total extinction in economic organisation. 
 The same idea occurs hrMenger's Neue Staatslehre, 3 and in Sorel's 
 writings, where he speaks of " reorganising society on the model of a 
 factory." 4 
 
 It is this novel conception of government that most clearly 
 distinguishes Saint-Simon's industrialism from economic Liberalism. 6 
 
 But, despite the fact that he gave to socialism one of its most 
 fruitful conceptions, we hardly know whether to class Saint-Simon 
 as a socialist or not, especially if we consider that the essence of 
 socialism consists in the abolition of private property. It is true 
 
 was very hostile to a Government of savants. Power was to be placed in the 
 hands of the industrial leaders the savants were simply to advise. " Should 
 we ever have the misfortune to establish a political order in which adminis- 
 tration was entrusted to savants we should soon witness the corruption of the 
 scientists, who would readily adopt the vices of the clergy and become astute, 
 despotic quibblers." (Syst. indust., CEuvres, vol. v, p. 161.) 
 
 1 Syst. indust., CEuvres, vol. vi, p. 96. 
 
 1 F. Engels, Herrn Eugen Dilhrings Umwdlzung der Wissenschaft, 4th ed., 
 p. 277. French translation, Paris, 1911, p. 334. The whole of this chapter in 
 Engels' book is from the pen of Karl Marx. 
 
 * French translation under the title L'Stat socialiste, Paris, 1906. 
 
 4 This is the full text : " The object of socialism is to set up a new system of 
 society based upon the workshop as a model. The rights of the society will be 
 the customary rights of the factory. Not only will socialism stand to benefit 
 by the existence of the industrial system which has been built up by capital 
 and science upon the basis of technical development, but it will gain even more 
 from that spirit of co-operation which has long been a feature of factory life, 
 drawing out the best energy and the best skill of the workman." Earlier in the 
 same volume he writes: "Everything will proceed in an orderly, economical 
 fashion, just like a factory." (G. Sorel, Le Syndicalisms revolutionnaire, in Le 
 Mouvement aocialisle, November 1 and 15, 1905.) 
 
 * Saint-Simon often quotes Say and Smith with distinct approval. But he 
 charges Say with the separation of politics from economics instead of merging 
 the former in the latter, and with inability to realise to the full extent what he 
 " dimly saw, as it were, in spite of himself, namely, that political economy 
 is the one true foundation of politics." (Lettres d un Amiricain, (Euvrts, vol. ii, 
 p. 185.)
 
 210 SAINT-SIMON AND THE SAINT-SIMONIANS 
 
 that in one celebrated passage he speaks of the transformation of 
 private property. 1 But it is quite an isolated exception. Capital 
 
 1 Saint-Simon is classed among the socialists for two reasons : (1) the interest 
 he takes in the condition of the poor ; (2) his opinions concerning the necessity 
 for reforming the institution of private property. But none of the texts that 
 are generally quoted seem to have the significance that is occasionally given 
 them. With regard to the first point, a celebrated passage from the Nouveau 
 Christianisme is the one usually quoted : " Society should be organised in such 
 a fashion as to secure the greatest advantage for the greatest number. The 
 object of all its labours and activities should be the promptest, completest amelio- 
 ration possible of the moral and physical condition of the most numerous class." 
 ( CEuvres, vol. vii, pp. 108-109. ) Already in his Systeme industriel Saint-Simon had 
 said that the direct object which he had in view was to better the lot of that 
 class that had no other means of existence than the labour of its own right arm. 
 (Ibid., vol. vi, p. 81.) But is this not just the old Benthamite formula the 
 greatest good of the greatest number T Besides, how does Saint-Simon propose 
 to secure all this ? By giving the workers more power ? Not at all. " The 
 problem of social organisation must be solved for the people. The people them- 
 selves are passive and listless and must be discounted in any consideration of the 
 question. The best way is to entrust public administration to the care of the 
 industrial chiefs, who will always directly attempt to give the widest possible 
 scope to their undertakings, with the result that their efforts in this direction 
 will lead to the maximum expansion of the amount of work executed by the 
 mass of the people." (Ibid., vol. vi, pp. 82-83.) A Liberal economist would 
 hardly have expressed it otherwise. 
 
 As to the question of private property, Saint-Simon certainly regarded its 
 transformation as at least possible. This is seen in a number of passages. 
 " Property should be reconstituted and established upon a foundation that 
 might prove more favourable for production," says he in L'Organisateur. 
 (Ibid., vol. iv, p. 59.) Elsewhere, in a letter written to the editor of the Journal 
 general de la France, he mentions the fact that he is occupied with the develop- 
 ment of the following ideas : (1 ) That the law establishing the right of private 
 property is the most important of all, seeing that it is the basis of our social 
 edifice ; (2) the institution of private property ought to be constituted in such a 
 fashion that the possessors may be stimulated to make the best possible use 
 of it. (Ibid., vol. iii, pp. 43-44.) In his Lettres a un Americain he gives the 
 following resume of the principles which underlie the work of J. B. Say (an 
 incidental proof of his attachment to the Liberal economists) : " The production 
 of useful objects is the only positive, reasonable aim which political societies can 
 propose for themselves, and consequently the principle of respect for production 
 and producers is a much more fruitful one than the other principle of respect for 
 property and proprietors." (CEuvres, vol. ii, pp. 186-187.) But all that this 
 seems to us to imply is that the utility of property constitutes its legality and that 
 it should be organised with a view to social utility. Admitting that he did con- 
 ceive of the necessity of a reform of property, it does not appear that he intended 
 this to mean anything beyond a reform of landed property. We have already 
 seen how he regarded capital as a kind of social outlay which demanded remunera- 
 tion. The following passage bears eloquent testimony to his respect for movable 
 property : " Wealth, generally speaking, affords a proof of the manufacturers' 
 ability even where that wealth is derived from inherited fortune, whereas in 
 the other classes of society it is apparently true to say that the richer are inferior
 
 CRITICISM OF PRIVATE PROPERTY 211 
 
 as well as labour, he thought, were entitled to remuneration. The 
 one as well as the other involved some social outlay. He would 
 probably have been quite content with a purely governmental 
 reform. 
 
 It would not be difficult, however, to take the ideal of indus- 
 trialism as outlined by Saint-Simon as the basis of a demand for a 
 much more radical reform and a much more violent attack upon 
 society. Such was the task which the Saint-Simonians took upon 
 themselves, and our task now is to show how collectivism was 
 gradually evolved out of industrialism. 
 
 II : THE SAINT-SIMONIANS AND THEIR CRITICISM OF 
 PRIVATE PROPERTY 
 
 SAINT-SIMON'S works were scarcely ever read. His influence was 
 essentially personal, and the task of spreading a knowledge of his 
 ideas devolved upon a number of talented disciples whom he had 
 succeeded in gathering round him. Augustin Thierry, who was his 
 secretary from 1814 to 1817, became his adopted son. Auguste 
 Comte, who occupied a similar post, was a collaborator in all his 
 publications between 1817 and 1824. Olinde Rodrigues and his 
 brother Eugene were both among his earliest disciples. Enfantin, 
 an old student of the Polytechnic, and Bazard, an old Carbonaro 
 who had grown weary of political experiments, were also of the 
 number. Soon after the death of Saint-Simon his following founded 
 a journal called Le Producteur with a view to popularising his ideas. 
 Most of the articles on economics were contributed by Enfantin. 
 The paper lasted only for one year, although the number of converts 
 to the new doctrine was rapidly increasing. All of them were 
 persuaded that Saint-Simon's ideas furnished the basis of a really 
 modern faith which would at once supplant both decadent Catho- 
 licism and political Liberalism, the latter of which, in their opinion, 
 was a purely negative doctrine. 
 
 In order to strengthen the intellectual ties which already united 
 them, this band of enthusiasts set up among themselves a sort of 
 hierarchy having at its summit a kind of college or institution 
 composed of the more representative members of the group, upon 
 whom the title " fathers " was bestowed. The next lower grade 
 was composed of " sons," who were to regard one another as 
 
 in capacity to those who have received less education but have a smaller fortune. 
 This ia a truth that must play an important part in positive politics." (Syst. 
 indust., Ofiuvrea, vol. v, p. 49, note.)
 
 212 SAINT-SIMON AND THE SAINT-SIMONIANS 
 
 " brothers." It was in 1828, under the influence of Eugene Rodrigues, 
 that the Saint-Simonians assumed this character of an organised sect. 
 About the same time Bazard, one of their number, was giving an 
 exposition of the creed in a series of popular lectures. These lectures, 
 delivered during the years 1828-30, and listened to by many men 
 who were afterwards to play an important part in the history of 
 France, such as Ferdinand de Lesseps, A. Carrel, H. Carnot, the 
 brothers Pereire, and Michel Chevalier, were published in two 
 volumes under the title Exposition de la Doctrine de Saint-Simon. 
 The second volume is more particularly concerned with philosophy 
 and ethics. The first includes the social doctrine of the school, and 
 according to Menger forms one of the most important expositions 
 of modern socialism. 1 
 
 Unfortunately, under the influence of Enfantin the philosophical 
 and mystical element gained the upper hand and led to the downfall 
 of the school. 
 
 The Saint-Simonians considered that it was not enough to take 
 modern humanity into its confidence and reveal to it its social 
 destiny. It must be taught to love and desire that destiny with 
 all the ardour of romantic youth. For the accomplishment of this 
 end there must exist a unity of action and thought such as a common 
 religious conviction alone can confer. And so Saint-Simonism 
 became a religion, a cult with a moral code of its own, with meetings 
 organised and churches founded in different parts of the country, 
 and with apostles ready to carry the good tidings to distant lands. 
 A striking phenomenon surely, and worthy the fullest study. It 
 was a genuine burst of religious enthusiasm among men opposed to 
 established religion but possessed of fine- scientific culture the 
 majority of whom, however, as it turned out, were better equipped 
 for business than for the propagation of a new gospel. 
 
 Enfantin and Bazard were to be the popes of this new Catholicism. 
 But Bazard soon retired and Enfantin became " supreme Father." 
 He withdrew, with forty of the disciples, into a house at Menil- 
 montant, where they lived a kind of conventual life from April to 
 December 1831. Meanwhile the other propagandists were as active 
 as ever, the work being now carried on in the columns of Le Globe, 
 
 1 The exact title is Doctrine de Saint-Simon, Exposition, Premiere Annie, 
 1829. Our quotations are taken from the second edition (Paris, 1830). One 
 ought to mention, in addition to these, the articles contributed by Enfantin to 
 Le Globe, and republished under th title of Sconomie politique et Politique, in 
 one volume (2nd ed., 1832). But none of these articles is as interesting as the 
 Doctrine, and they only reproduce the ideas already discussed by Enfantin in 
 his articles in Le Producttur.
 
 CRITICISM OF PRIVATE PROPERTY 213 
 
 which became the property of the school in July 1831. This strange 
 experiment was cut short by judicial proceedings, which resulted in 
 a year's imprisonment for Enfantin, Duverger, and Michel Chevalier, 
 all of whom were found guilty of forming an illegal association. This 
 was the signal for dispersion. 
 
 The last phase was the most extravagant in the whole history 
 of the school, and naturally it was the phase that attracted most 
 attention. The simple social doctrine of Saint-Simon was over- 
 whelmed by the new religion of the Saint-Simonians, much as the 
 Positivist religion for a while succeeded in eclipsing the Positive 
 philosophy. Our concern, of course, is chiefly with the social 
 doctrine as expounded in the first volume of the Exposition. 
 That doctrine is sufficiently new to be regarded as an original 
 development and not merely as a risumi of Saint-Simon's ideas. 
 Both Bazard and Enfantin had some hand in it. But it is almost 
 certain that it was the latter who supplied the economic ideas, 1 
 and that to the formation of those ideas Sismondi's work contributed 
 not a little. The work is quite as remarkable for the vigorous logical 
 presentation of the doctrine as it is for the originality of its 
 ideas. The oblivion into which it has fallen is not easily explicable, 
 especially if we compare it with the many mediocre productions 
 that have somehow managed to survive. There are not wanting 
 signs of a revived interest in the doctrines, and for our own part 
 we are inclined to give them a very high place among the economic 
 writings of the century. 
 
 The Doctrine de Saint-Simon resolves itself into an elaborate 
 criticism of private property. 
 
 The criticism is directed from two points of view that of dis- 
 tribution and that of the production of wealth, that of justice and 
 
 1 Despite the fact that the oral exposition of the doctrine was the work 
 of Bazard and was prepared for the press by his disciples Hippolyte Carnot 
 among others most of the economic ideas contained in it must be attributed to 
 Enfantin. Enfantin also was responsible for the majority of the economic 
 articles that appeared in Lt, Producteur. But the doctrine set forth in L 
 Producteur differs considerably from that expounded in the Exposition. Interest 
 and rent are subjected to severe criticism as tributes paid to idleness by industry. 
 Inheritance, on the other hand, though treated with scant sympathy, is not 
 condemned. A lowering of the rate of interest would, Enfantin thinks, help 
 to enfranchise the workers, and a sound credit system would solve the greatest 
 of modern problems that is, it would reconcile workers and idlers, " whose 
 interests will never again be confused with the general interest, inasmuch as 
 the possession of the fruits of past labour will no longer constitute a claim to 
 the enjoyment of the benefits of labour in the present or future." (Le Producteur, 
 Tol. ii, p. 124.) These ideas are more fully developed in the Exposition.
 
 214 SAINT-SIMON AND THE SAINT-SIMONIANS 
 
 that of utility. The attack is carried on from both sides at once, 
 and most of the arguments used during the course of the century 
 are here hurled indiscriminately against the institution of private 
 property. The doctrines of Saint-Simon contributed not a little to 
 the success of the campaign. 
 
 (a) Saint-Simon had already emphasised the impossibility of 
 workers and idlers coexisting in the new society. Industrialism 
 could hold out no promise for the second class. Ability and labour 
 only had any claim to remuneration. By some peculiar miscon- 
 ception, however, Saint-Simon had regarded capital as involving 
 some degree of personal sacrifice which entitled it to special remunera- 
 tion. It was here that the Saint-Simonians intervened. Was it 
 not perfectly obvious that private property in capital was the worst 
 of all privileges ? The Revolution had swept away caste distinctions 
 and suppressed the right of primogeniture, which tended to perpetuate 
 inequality among members of the same family, but had failed to 
 touch individual property and its privilege of " laying a toll upon 
 the industry of others." This right of levying a tax is the funda- 
 mental idea in all their definitions of private property. 1 " Property, 
 according to the generally accepted meaning of the term to-day, 
 consists of wealth which is not destined to be immediately consumed, 
 but which entitles its owner to a revenue. Within this category are 
 included the two agents of production, land and capital. These are 
 primarily instruments of production, whatever else they may be. 
 Property-owners and capitalists two classes that need not be 
 distinguished for our present purpose have the control of these 
 instruments. Their function is to distribute them among the 
 workers. The distribution takes place through a series of operations 
 which give rise to the economic phenomena of interest and rent. 2 
 Consequently the worker, because of this concentration of property 
 in the hands of a few individuals, is forced to share the fruits of his 
 labour. Such an obligation is nothing short of the exploitation of 
 one man by another, 3 an exploitation all the more odious because 
 the privileges are carefully preserved for one section of the com- 
 munity. Thanks to the laws of inheritance, exploiter and exploited 
 never seem to change places. 
 
 To the retort that proprietors and capitalists are not necessarily 
 idle that many of them, in fact, work hard in order to increase their 
 incomes the Saint-Simonians reply that all this is beside the point. 
 A certain portion of the income may possibly result from personal 
 
 1 Doctrine de Saint-Simon, p. 182. 
 
 Ibid., p. 190. Ibid., p. 93.
 
 CRITICISM OF PRIVATE PROPERTY 215 
 
 effort, but whatever they receive either as capitalists or proprietors 
 can obviously only come from the labour of others, and that clearly 
 is exploitation. 
 
 It is not the first time we have encountered this word " exploita- 
 tion." We are reminded of the fact that Sismondi made use of it, 1 
 and the same term will again meet us in the writings of Marx and 
 others. None of them, however, uses it in quite the same sense, and 
 it might be useful to distinguish here between the various meanings 
 of a term which plays such an important role in socialist literature 
 and which leads to so much confusion. 
 
 Sismondi, we know, regarded interest as the legitimate income of 
 capital, but at the same time admitted that the worker may be 
 exploited. 
 
 Such exploitation, he thought, took place whenever the wages 
 were barely sufficient to keep the wage-earner alive, although 
 at the same time the master might be living in luxurious ease. 
 In other words, there is exploitation whenever the worker gets less 
 than a " just " wage. It is merely a temporary defect and not 
 an ineradicable disease of the economic system. It certainly does 
 occur occasionally, although there is no reason why it ever should, 
 and it may be removed without bringing the whole system to ruin. 
 Conceived of in this vague fashion, what is known as exploitation 
 is as difficult to define as the '* just price " itself. It appears under 
 several aspects, and is by no means peculiar to the master-servant 
 relation. An individual is exploited whenever advantage is taken 
 of his ignorance or timidity, his weakness or isolation, to force 
 him to part with his goods or his services at less than the " just 
 price " or to pay more for the goods or services of others than they 
 are really worth. 
 
 The Saint-Si monians, on the other hand, considered that exploita- 
 tion was an organic defect of our social order. It is inherent in 
 private property, of which it is an invariable concomitant. It is not 
 simply an incidental abuse, but the most characteristic trait of the 
 whole system, for the fundamental attribute of all property is just 
 this right to enjoy the fruits of labour without having to undergo the 
 irksome task of producing. Such exploitation is not confined to 
 manual labourers ; it applies to every one who has to pay a tribute to 
 the proprietor. The entrepreneur, in his turn, becomes a victim 
 because of the interest which he pays to the capitalist, who supplies 
 him with the funds which he needs. 2 
 
 1 Sismondi 's term was rather " spoliation." See supra, p. 185. 
 
 1 " The mass of workers are to-day exploited by those people whose property
 
 216 SAINT-SIMON AND THE SAINT-SIMONIANS 
 
 The entrepreneur's profit, on the other hand, is not the result of 
 exploitation. It represents payment for the work of direction. 
 The master may doubtless abuse his position and reduce the wages 
 of the workers excessively. The Saint-Simonians would then agree 
 with Sismondi in calling this exploitation. But this is not a necessity 
 of the system. And the Saint-Simontans look forward to a future 
 state of society in which exceptional capacity will always be able 
 to enjoy exceptional reward. 1 This is one of the most interesting 
 elements in their theory. 
 
 Marx conceives of exploitation as an organic vice inherent in 
 capitalism. But with him the term has quite a different connotation 
 from that given it by the Saint-Simonians. Following the lead of 
 certain English socialists, Marx comes to the conclusion that the 
 origin of exploitation must be sought in the present method of 
 exchanging wealth. Labour, in his opinion, is the source of all value, 
 and consequently interest and profit must be of the nature of theft. 
 The entrepreneur's revenue is quite as unjust as the capitalist's or 
 landlord's. 2 
 
 This last theory, with its wholesale condemnation of income of 
 every kind save the worker's wage, seems much more logical than 
 any of the others. But as a matter of fact it is much more open to 
 criticism. If it can be demonstrated that the value of products is 
 not the mere result of manual labour, then Marx's idea falls to 
 the ground. The Saint-Simonians were never embarrassed by 
 any theory of value. Their whole contention rests upon the dis- 
 
 they use. Captains of industry in their dealings with proprietors have to submit 
 to a similar kind of treatment, only to a much less degree. But they occa- 
 sionally share in the privilege of the exploiters, for the full burden of exploitation 
 falls upon the working classes that is, upon the vast majority of mankind." 
 (Doctrine de Saint-Simon, p. 176.) 
 
 1 " It is our belief that profits diminish while wages increase ; but the term 
 ' wages ' as we use it includes the profits that accrue to the entrepreneur, whose 
 earnings we regard as the price of his labour." (Le Producteur, vol. i, p. 245. 
 The article is by Enfantin.) 
 
 * We might sum up the different senses of the word " exploitation " as used 
 by Sismondi, the Saint-Simonians, and Marx respectively as follows : 
 
 (1) Sismondi thinks that the worker is exploited whenever he is not paid a 
 wage sufficient to enable him to lead a decent existence. Unearned income seems 
 quite legitimate, however. 
 
 (2) Exploitation exists, in the opinion of the Saint-Simonians, whenever a 
 part of the material produce raised by labour is devoted to the remuneration of 
 proprietors through the operation of ordinary social factors. 
 
 (3) Marx speaks of exploitation whenever a portion of the produce of labour 
 is devoted to the remuneration of capital either through the existence of social 
 institutions or the operation of the laws of exchange.
 
 CRITICISM OF PRIVATE PROPERTY 217 
 
 tinction between the income which is got from labour and the 
 revenue which is derived from capital, which every one can appre- 
 ciate. It was a distinction which had already been emphasised 
 by Sismondi, and no conclusion other than the illegitimacy of all 
 revenue not derived from labour can be drawn from the premises 
 thus stated. Some basis other than labour must be discovered if 
 this revenue is ever to be justified, and a new defence of private" 
 property must somehow be attempted. 
 
 The exigencies of production itself may supply such justification. 
 Private property and the special kind of revenue which is derived 
 from its possession justifies itself, in the opinion of a growing number 
 of economists, on account of the stimulus it affords to production 
 and the accumulation of wealth. This seems the most advantageous 
 method of defence, and it is one of the grounds chosen by the 
 Physiocrats. 1 
 
 But the Saint-Simonians from the very first set this argument 
 aside and attacked the institution of private property in the interests 
 of social utility no less than in the interest of justice. Production 
 as well as distribution, in their opinion, demanded its extinction. 
 
 (6) This brings us to the second point, which Saint-Simon did 
 little more than suggest, namely, whether the institution of private 
 property as at present existing is in the best interests of producers. 
 The Saint-Simonians hold that it clearly is not, so long as the present 
 method of distributing the instruments of production continues. At 
 the present moment capital is transmitted in accordance with the 
 Jaws of inheritance. Individuals chosen by the accident of birth 
 are its depositors, and they are charged with the most difficult of all 
 tasks, namely, the best utilisation of the agents of production. 
 Social interest demands that they should be placed in more capable 
 hands and distributed in those places and among those industries 
 in which the need for those particular instruments is most keenly 
 felt, without any fear of a scarcity in one place or a glut in another. 1 
 To-day it is a blind chance that picks out the men destined to carry 
 out this infinitely difficult task. And all the efforts of the Saint- 
 Simonians are concentrated just on this one point inheritance. 
 
 Their indignation is easily explained. There is certainly some- 
 thing paradoxical in the fact to which they draw attention. If we 
 accept Smith's view, that government " is in reality instituted for 
 the defence of those who have some property against those who have 
 none at all " a very narrow conception of the function of govern- 
 ment 8 inheritance is simply inevitable. On tlie other hand, 
 
 1 See p. 25. * Doctrine, p. 191, See p. 79, note. 
 
 K U. H
 
 218 SAINT-SIMON AND THE SAINT-SIMONIANS 
 
 if we put ourselves at the point of view of the Saint-Simonians, 
 who lived in an industrial society where wealth was regarded, not 
 as an end, but as a means, not merely as the source of individual 
 income, but as the instrument of social production, it seems utterly 
 wrong that it should be left at the disposal of the first comer. The 
 practice of inheritance can only be justified on the ground that it 
 provides a stimulus to the further accumulation of wealth, or that 
 in default of a truly rational system the chances of birth are not 
 much more open to criticism than any other. 
 
 Such scepticism was little to the taste of the Saint-Simonians. 
 But they were firmly convinced that all the disorders of production, 
 whether apparent or real, were due to the dispersion of property 
 according to the chances of life and death. 
 
 " Each individual devotes all his attention to his own immediate 
 dependents. No general view of production is ever taken. There 
 is no discernment and no exercise of foresight. Capital is wanting 
 here and excessive there. This want of a broad view of the needs 
 of consumers and of the resources of production is the cause of those 
 industrial crises whose origin has given rise to so much fruitless 
 speculation and so many errors which are still circulating in our 
 midst. In this important branch of social activity, where so much 
 disturbance and such frequent disorder manifests itself, we see the 
 evil result of allowing the distribution of the instruments of produc- 
 tion to be in the hands of isolated individuals who are at once 
 ignorant of the demands of industry, of other men's needs, and of 
 the means that would satisfy them. This and nothing else is the 
 cause of the evil." l 
 
 Escape from such economic anarchy, which has been so frequently 
 described, can only become possible through collectivism at least 
 so the Saint-Simonians thought. 2 The State is to become the sole 
 inheritor of all forms of wealth. Once in possession of the instru- 
 ments of production, it can distribute them in the way it thinks 
 best for the general interest. Government is conceived on the 
 model of a great central bank where all the wealth of the country 
 will be deposited and again distributed through its numerous branches. 
 The uttermost ends of the kingdom will be made fertile, and the 
 necessaries of life will be supplied to all who dwell therein. The 
 best of the citizens will be put to work at tasks that will call forth 
 their utmost efforts, and their pay will be as their toil. This social 
 
 1 Doctrine, pp.^191-192. 
 
 1 The Saint-Simonians never make use of the term, but they describe the 
 doctrine admirably.
 
 CRITICISM OF PRIVATE PROPERTY 219 
 
 institution would be invested with all the powers which are so blindly 
 wielded by individuals at the present moment. 1 
 
 We need not insist too much on this project or press for further 
 details, which the Saint-Simonians would have some difficulty in 
 supplying. 
 
 Who, for example, is to undertake the formidable task of judging 
 of the capacity of the workmen or of paying for their work ? They 
 are to be the " generals " the superiors who are to be set free from 
 the trammels of specialisation and whose instinctive feelings will 
 naturally urge them to think only of the general interest. The 
 chief will be he who shows the greatest concern about the social 
 destiny of the community. 2 It is not very reassuring, especially 
 when we remember that even with the greatest men there is occa- 
 sionally a regrettable confusion of general and private interests. 
 
 But admitting the incomparable superiority of the "generals," 
 what of obeying them ? Will the inferiors take kindly to submission 
 or will they have to be forced to it ? The first alternative was the 
 one which they seemed to favour, for the new religion, " Saint- 
 Simonism," would always be at hand to inspire devotion and to 
 deepen the respect of the inferiors for their betters. 3 One is tempted 
 
 1 " We may provisionally speak of this system as a general system of banking, 
 ignoring for the time being the somewhat narrow interpretation usually placed 
 upon that word. In the first place, the system would comprise a central bank, 
 which would directly represent the Government. This bank would be the 
 depository for every kind of wealth, of all funds for productive purposes and 
 all instruments of labour in a word, it would include everything that is to-day 
 comprised within the term 'private property.' Depending upon this central 
 bank would be other banks of a secondary character, which would be, as it were, 
 a prolongation of the former and would supply it with the means of coming into 
 touch with the principal localities, informing the central institution as to their 
 particular needs and their productive ability. Within the area circumscribed 
 for these banks would be other banks of a more specialised character still, covering 
 a less extensive field and including within their ambit the tenderer branches of 
 the industrial tree. All wants would be finally focused in the central bank and 
 all effort would radiate from it." (Doctrine, pp. 206-207.) The idea is prob- 
 ably Enfantin's, for there is an exposition of the same idea in Le Producteur, 
 vol. iii, p. 385. 
 
 1 Doctrine, p. 210, note. Elsewhere (p. 330) : " We are weary of every poli- 
 tical principle that does not aim directly at putting the destiny of the people in 
 the hands of the most able and devoted among them." 
 
 * " We come back with real joy to this great virtue, so frequently miscon- 
 ceived, not to say misrepresented, at the present time that virtue which is so 
 easy and so delightful in persons who have a common aim which they want to 
 attain, but which is so painful and revolting when combined with egoism. This 
 virtue of obedience is one to which our thoughts return ercr with lovo," (Fkid., 
 p. 330.)
 
 220 SAINT-SIMON AND THE SAINT-SIMONIANS 
 
 to ask what would become of the heretics if ever there happened to 
 be any. 
 
 Further criticism of this kind can serve no useful purpose, and 
 it applies to every collective system, differing only in matters of 
 detail. Whenever it is proposed to set up an elaborate plan of 
 economic activity, directed and controlled by some central authority, 
 with a view to supplanting the present system of individual initiative 
 and social spontaneity, we are met at the threshold with the difficulty 
 of setting up a new code of morality. Instead of the human heart 
 with its many mixed motives, its insubordination and weaknesses, 
 in place of the human mind with all its failings, ignorance, and error, 
 is to be substituted a heart and mind altogether ideal, which only 
 serve to remind us how far removed they are from anything we have 
 ever known. The Saint-Simonians recognised that a change so 
 fundamental could only be accomplished through the instrumentality 
 of religion. In doing this they have shown an amount of foresight 
 which is rare among the critics who treat their ideas with such disdain. 
 
 It is more important that we should insist upon another fact, 
 namely, that the Saint-Simonian system is the prototype of all the 
 collectivist schemes that were proposed in the course of the century. 
 
 The whole scheme is very carefully thought out, and rests upon 
 that penetrative criticism of private property which differentiates 
 it from other social Utopias. The only equality which the Saint- 
 Simonians demanded was what we call equality of opportunity an 
 equal chance and the same starting-point for every one. Beyond 
 that there is to be inequality in the interests of social production 
 itself. To each according to his capacity, and to every capacity 
 according to the work which it has accomplished such is the rule 
 of the new society. 1 
 
 An interesting risum& of the Saint-Simonians' programme, given 
 in a series of striking formulae which they addressed to the President 
 of the Chamber of Deputies, 2 is worth quoting : 
 
 " The Saint-Simonians do not advocate community of goods, 
 for such community would be a manifest violation of the first moral 
 law, which they have always been anxious to uphold, and which 
 
 1 The formula in the third edition of the Doctrine is a little different. " Each 
 one," it runs there, " ought to be endowed according to his merits and rewarded 
 according to his work." We know that the first part of the formula refers 
 to the distribution of capital, i.e. to the instruments of labour, while the 
 second refers to individual incomes. The word " classed " was substituted for 
 " endowed " in the second edition. 
 
 ' Published as an appendix to the second edition of the Doctrine dr. Saint' 
 Simon, Exposition, Premiere Annie, 1820.
 
 CRITICISM OF PRIVATE PROPERTY 221 
 
 demands that in future every one shall occupy a situation becoming 
 his capacity and be paid according to his labour. 
 
 " In view of this law they demand the abolition of all privileges 
 of birth without a single exception, together with the complete 
 extinction of the right of inheritance, which is to-day the greatest 
 of all privileges and includes every other. The sole effect of this 
 system is to leave the distribution of social advantages to a chance 
 few who are able to lay some pretence to it, and to condemn the 
 numerically superior class to deprivation, ignorance, and misery. 
 
 " They ask that all the instruments of production, all lands and 
 capital, the funds now divided among individual proprietors, should 
 be pooled so as to form one central social fund, which shall be 
 employed by associations of persons hierarchically arranged so 
 that each one's task shall be an expression of his capacity and his 
 wealth a measure of his labour. 
 
 " The Saint-Simonians are opposed to the institution of private 
 property simply because it inculcates habits of idleness and fosters 
 a practice of living upon the labour of others." 
 
 (c) Critics of private property, generally speaking, are not content 
 with its condemnation merely from the point of view either of 
 distribution or production. They almost invariably employ a third 
 method of attack, which might be called the historical argument. 
 The argument generally takes the form of a demonstration of the 
 path which the gradual evolution of the institution of private property 
 has hitherto followed, coupled with an attempt to show that its 
 further transformation along the lines which they advocate is simply 
 the logical outcome of that process. The argument has not been 
 neglected by the Saint-Simonians. 
 
 The history of this kind of demonstration is exceedingly interest- 
 ing, and the rdle it has played in literature other than that of a 
 socialist complexion is of considerable importance. Reformers of 
 every type, whether the immediate objective be a transformation of 
 private property or not, always base their appeals upon a philosophy 
 of history. 
 
 Marx's system is really a philosophy of history in which com- 
 munism is set forth as the necessary consummation of all industrial 
 evolution. Many modern socialists, although rejecting the Marxian 
 socialism, still appeal to history. M. Vandervelde builds his faith 
 upon it. 1 The authors of that quite recent work Socialisme en Action 
 rely upon it, and so do Mr. and Mrs. Sidney Webb and all the Fabian 
 Socialists. Dupont-White's State Socialism is inspired by similar 
 1 In bis small volume Lt. CoUeclivismf. (Paris, 1900).
 
 222 SAINT-SIMON AND THE SAINT-SIMONIANS 
 
 ideas, and so is the socialism of M. Wagner. Friedrich List has a 
 way of his own with history ; and the earliest ambition of the His- 
 torical school was to transform political economy into a kind of 
 philosophy of history. If we turn to the realm of philosophy itself 
 we find somewhat similar conceptions the best known, perhaps, 
 being Comte's theory of the three estates, which was borrowed directly 
 from Saint-Simon. 1 
 
 This is not the place to discuss historical parallels. The point 
 will come up in a later chapter in connection with the Historical 
 school. What we would remark here is the good use which the Saint- 
 Simonians made of the argument. All the past history of property 
 was patiently ransacked, and the arguments of other writers who have 
 extolled the merits of collectivism were thus effectually forestalled. 
 
 " The general opinion seems to be," says the Doctrine de Saint- 
 Simon^ " that whatever revolutions may take place in society, 
 this institution of private property must for ever remain sacred and 
 inviolable ; it alone is from eternity unto eternity. In reality 
 nothing could be less correct. Property is a social fact which, along 
 with other social facts, must submit to the laws of progress. Accord- 
 ingly it may be extended, curtailed, or regulated in various ways at 
 different times." This principle, once it was formulated, has never 
 failed in winning the allegiance of every reformer. Forty years later 
 the Belgian economist Laveleye, who has probably made the most 
 thoroughly scientific study of the question, used almost identical 
 words in summing up his inquiry into the principal forms of property. 3 
 
 1 Littre has disputed Comte'a indebtedness to Saint-Simon in his Augustc 
 Comte et le Positivisme. Saint-Simon, however, in his preface to Systeme indus- 
 triel remarks that in political matters the jurists form a connecting link between 
 feudal government on the one hand and industrial government on the other, 
 just as the metaphysicians are intermediate between the theological and the 
 scientific regimes. In a note which he adds he states his position still more 
 clearly (CEuvree, vol. v, p. 9). It is true that the Systeme indiistriel dates from 
 1821, and is consequently subsequent to the beginning of the friendly relation* 
 between Comte and Saint-Simon. But textual evidence, however precise, 
 cannot decide the question of the reciprocal influence which these two Messiahs 
 exercised upon one another. A similar idea had already found expression in 
 Turgot's work. 
 
 1 P. 179. 
 
 1 " Another mistake that is also very general is to speak of property as if it 
 were an institution with a fixed, unchangeable form, while as a matter of fact 
 it has assumed various aspects and is still capable of further modification as 
 yet undreamt of." (Laveleye, De la Propriete et de ses Formes primitives, 1st ed., 
 1874, p. 381.) Stuart Mill, in a letter addressed to Laveleye on November 17, 
 1872, congratulated him on the demonstration he had given of this. (Ibid., 
 preface, p. xiii.)
 
 CRITICISM OF PRIVATE PROPERTY 223 
 
 The Saint-Simonians feel confident that a glance at the progress 
 of this evolution is enough to convince anyone that it must have 
 followed the lines which they have indicated. The conception of 
 property was at first broad enough to include men within its conno- 
 tation. But the right of a master over his slaves gradually under- 
 went a transformation which restricted its exercise, and finally 
 caused its disappearance altogether. Reduced to the right of 
 owning things, this right of possession was at first transmissible 
 simply according to the proprietor's will. But the legislature 
 intervened long ago, and the eldest son is now the sole inheritor. 
 The French Revolution enforced equal distribution of property 
 between all children, and so spread out the benefits which the 
 possession of the instruments of production confers. To-day the 
 downward trend of the rate of interest is slowly reducing the 
 advantages possessed by the owners of property, and goes a long 
 way towards securing to each worker a growing share of his 
 product. 1 There remains one last step which the Saint-Simonians 
 advocate, which would secure to all workers an equal right to the 
 employment of the instruments of production. This reform would 
 consist in making everybody a proprietor, but the State the sole 
 inheritor. " The law of progress as we have outlined it would tend 
 to establish an order of things in which the State, and not the family, 
 would inherit all accumulated wealth and every other form of what 
 economists call the funds of production." 2 
 
 These facts might be employed to support a conclusion of an 
 entirely different character. That equality of inheritance which 
 was preserved rather than created by the French Revolution might 
 be taken as a proof that modern societies are tending to multiply the 
 number of individual proprietors by dividing the land between an 
 increasing number of its citizens. But such discussion does not 
 belong to a work of this kind. We are entitled to say, however, 
 that the Saint-Simonian theory is a kind of prologue to all those 
 doctrines that ransack the pages of history for arguments in 
 favour of the transformation, or even the suppression, of private 
 property. 
 
 1 Note this argument, which has so frequently been employed by Liberal 
 economists, and which we shall come across in Basliat's work. The Saint- 
 Simonians are constantly running with the hare as well as hunting with the 
 hounds. 
 
 * Doctrine, p. 182. The historical argument of which we have just given a 
 short summary is developed in the Doctrine, pp. 179-193. It is open to a still 
 more fundamental criticism, inasmuch as it does not seem to be historically 
 accurate.
 
 224 SAINT-SIMON AND THE SAINT-SIMONIANS 
 
 Here again the Saint-Simonians have merely elaborated a view 
 which their master had only casually outlined. Saint-Simon, also 
 believed that in history we have an instrument of scientific precision 
 equal to the best that has yet been devised. 
 
 Saint-Simon, who owes something in this matter to Condorcet. 
 regarded mankind as a living being having its periods of infancy 
 and youth, of middle and old age, just like the individuals who 
 compose it. Epochs of intellectual ferment in the history of the 
 race are exactly paralleled by the dawning of intellectual interests 
 in the individual, and the one may be foretold as well as the other. 
 *' The future," says Saint-Simon, " is just the last term of a series 
 the first term of which lies somewhere in the past. When we have 
 carefully studied the first terms of the series it ought not to be 
 difficult to tell what follows. Careful observation of the past should 
 supply the clue to the future." 1 It was while in pursuit of this 
 object that Saint-Simon stumbled across the term "industrialism" 
 as one that seemed to him to express the end towards which the 
 secular march of mankind appeared to lead. From family to city, 
 from city to nation, from nation to international federation such 
 is the sequence which helps us to visualise the final term of the series, 
 which will be some kind of " a universal association in which all 
 men, whatever other relations they may possess, will be united." s 
 In a similar fashion the Saint-Simonians interpret the history of 
 individual property and predict its total abolition through a process 
 of its gradual extension to all individuals combined with the extinction 
 of private inheritance. 
 
 The doctrine of the Saint-Simonians may well be regarded as a 
 kind of philosophy of history. 3 Contemplation of the system fills 
 them with an extraordinary confidence in the realisation of their 
 dreams, to which they look forward not merely with confidence, but 
 with feelings of absolute certainty. " Our predictions have the same 
 origins and are based upon the same kind of foundations as are 
 
 1 Saint-Simon, Memoire introductif sur aa Contestation avec M. de. Bedern 
 (1812) ((Euvres, vol. i, p. 122). 
 
 1 Doctrine, p. 144. 
 
 The philosophy of history might be said to consist of attempts to show 
 that history ia made up of alternating periods of organic growth and destructive 
 criticism. The former periods are marked by unity of thought and aim, of feeling 
 and action in society ; the latter by a conflict of ideas and sentiments, by political 
 and social instability. The former periods are essentially religious, the latter 
 selfish. Reform and revolution are the modern manifestations of the critical 
 nature of the period in which we live. Saint-Simonism would lead us into a 
 definitely organic epoch. Historical evolution seems to point to a religious and 
 universal association.
 
 THE IMPORTANCE OF SAINT-SIMONISM 225 
 
 common to all scientific discoveries." * They look upon themselves 
 as the conscious, voluntary agents of that inevitable evolution 
 which has been foretold and defined by Saint-Simon. 2 This is one 
 trait which their system has in common with that of Marx. But 
 there are two important differences. The Marxians relied upon 
 revolution consummating what evolution had begun, while the 
 Saint-Simonians relied upon moral persuasion.* The Saint-Simo- 
 nians, true children of the eighteenth century that they were, 
 believed that ideas and doctrines were sufficiently powerful agents 
 of social transformation, while the Marxians preferred to put their 
 hope in the material forces of production, ideas, in their opinion, 
 being nothing better than a pale reflection of such forces.* 
 
 Ill : THE IMPORTANCE OF SAINT-SIMONISM IN 
 THE HISTORY OF DOCTRINES 
 
 THE doctrine of the Saint-Simonians consists of a curious mixture of 
 realism and Utopianism. Their socialism, which makes its appeal 
 to the cultured classes rather than to the masses, is inspired, not 
 by a knowledge of working-class life, but by close observation and 
 
 1 Doctrine, p. 119. 
 
 1 Ibid., p. 121. "Man is not without some intuitive knowledge of his 
 destiny, but when science has proved the correctness of his surmises and demon- 
 strated the accuracy of his forecasts, when it has assured him of the legitimacy 
 of his desires, he will move on with all the greater assurance and calmness towards 
 a future that is no longer unknown to him. Thus will he become a free, intelligent 
 agent working out his own destiny, which he himself cannot change, but which 
 he may considerably expedite by his own efforts." 
 
 * This is developed at great length in the seventh lecture, Doctrine, pp.211 
 et seq. 
 
 * " Politics," says Saint-Simon, " have their roots in morality, and a peopled 
 institutions are just the expression of their thoughts." (CEuvres, vol. iii, p. 31.) 
 " Philosophy," he remarks elsewhere, " is responsible for the creation of all the 
 more important political institutions. No other power would have the strength 
 necessary to check the action of those that have already become antiquated 
 or to set up others more in conformity with a new doctrine." (Syst. induat., 
 (Euvrea, vol. v, p. 167.) He further insists upon the part which philanthropists 
 may play in the creation of a new society. " One truth," he writes, " that has 
 been established in the course of human progress is this : a disinterested desire 
 for the general well-being of the community is a more effective instrument of 
 political improvement than the conscious self-regarding action of the classes 
 for which these changes will prove most beneficial. In a word, experience seems 
 to show that those who should naturally be most interested in the establishment 
 of a new order of things are not those who show the greatest desire to bring it 
 about." (CEuvres, vol. vi, p. 120.) It would be difficult to imagine a neater 
 refutation of Marxian ideas, especially the contention that the emancipation of 
 the workers can only come from the workers themselves.
 
 226 SAINT-SIMON AND THE SAINT-SIMONIANS 
 
 remarkable intuition concerning the great economic currents of their 
 time. 
 
 The dispersion of the school gave the leaders an opportunity of 
 taking an active part in the economic administration of their own 
 country, and we find them throwing themselves whole-heartedly 
 into various schemes of a financial or industrial character. In 1863 
 the brothers Pereire founded a credit association which became the 
 prototype of the financial institutions of to-day. Enfantin took a 
 part in the founding of the P.L.M. Railway, which involved an 
 amalgamation of the Paris-Lyons, Lyons-Avignon, and Avignon- 
 Marseilles lines. Enfantin was also the first to float a company 
 for the purpose of making a canal across the isthmus of Suez. At 
 the College de France Michel Chevalier defended the action of the 
 State in undertaking certain works of a public character. It was he 
 also who negotiated the treaty of 1860 with England, which was the 
 means of inaugurating the era of commercial liberty for France. 
 Other examples might be cited to show the important part which the 
 Saint-Simonians played in nineteenth-century economic history. 1 
 
 More especially did they realise the enormous place which banks 
 and institutions of a similar nature were bound to have in modern 
 industrial organisation. And whatever views we may hold as to the 
 rights of property, we are bound to recognise how these deposit banks 
 have already become great reservoirs of capital from which credit 
 is distributed in a thousand ways throughout the whole realm 
 of industry. Some writers, all of them by no means of the socialist 
 way of thinking, would reproach the banks, especially in France, 
 with their lack of courage in regulating and stimulating industry, 
 which, as the Saint-Simonians foresaw, is a legitimate part of their 
 duty. 2 The important part which they saw international financiers 
 playing in the domestic affairs of almost every European nation 
 during the Restoration period, coupled with their personal knowledge 
 of bankers, helped the Saint-Simonians in anticipating the all- 
 important role which credit was to play in modern industry. 
 
 Equally remarkable was the foresight they displayed in demand- 
 ing a more rigorous control of production, and in emphasising the 
 
 Cf. on these points Weill, L'Ecole Saint- Simoniennt (1896), and Charlety, 
 Histoire du Saint- Simonisme (1896). 
 
 1 " The object of credit," says Enfantin (ficonomie politiqw et Politique. p. 53), 
 " in a society where one eet of people possess the instruments of production but 
 lack capacity or desire to employ them, and where another have the desire to 
 work but are without the means, is to help the passage of these instruments from 
 the former's possession into the hands of the latter." No better definition was 
 ever given.
 
 THE IMPORTANCE OF SAINT-SIMONISM 227 
 
 need for some better method of adapting that production to meet 
 the exigencies of demand than is possible under a competitive 
 system. The State obviously has neither the ability nor the inclina- 
 tion to discharge such functions, but so great are the inconveniences 
 of competition that manufacturers are forced to enter into agree- 
 ments with one another in order to exercise some such control. 
 This is nothing less than a partial application of the doctrine of 
 Saint-Simon. 
 
 In addition to the considerable personal influence which they 
 were able to exercise over economic development, we have to recog- 
 nise that in their writings we have the beginnings both of the critical 
 and of the constructive contribution made by socialists to nine- 
 teenth-century economics. Their doctrine is, as it were, little 
 more than an index to later socialist literature. 
 
 In the first place one must be struck by the number of formulae 
 to be met with in their work which have since become the common- 
 places of socialism. " The exploitation of man by man " was 
 a phrase that was exceedingly popular up to 1848. The term 
 " class war," which has taken its place since the time of Marx, 
 expresses the same idea. They spoke of " the organisation of 
 labour " even before Louis Blanc, and employed the term " instru- 
 ment of labour " as a synonym for land and movable capital long 
 before it was so used by Marx. Although we have not considered it 
 necessary to group them with the Associationists, they have been as 
 assiduous as any in proclaiming the superior merits of producers' 
 associations. Moreover, they anticipated the use which the socialists 
 would make of the theory of rent. In a curious passage written 
 long before the time of Henry George they refer to the possibility of 
 applying the doctrines of Ricardo and Malthus to justify the devotion 
 of the surplus produce of good land to the general needs of society, 
 thus anticipating the theory of another prominent socialist thinker. 1 
 Other ideas might be mentioned, though not of a specifically socialist 
 character. Thus the theory of profit-sharing, as far as our knowledge 
 goes, was first developed in an article in Le Producteur.* 
 
 The more one examines the doctrines of the Saint-Simonians 
 the more conscious does one become of the remarkable character 
 of these anticipations and of the injustice of the oblivion which has 
 
 1 Doctrine, p. 226. Cf . p. 223 for an eloquent passage denouncing Ricardo and 
 Malthus, who, as the result of their " profound researches into the question of 
 rent," undertake to defend the institution of private property. 
 
 * The article is entitled De la Clause ouvri&re, and may be found in vol. iT 
 of Le Producteur. See particularly pp. 308 et aeq.
 
 228 SAINT-SIMON AND THE SAINT-SIMONIANS 
 
 since befallen them. Marx's friend Engels called attention to the 
 *' genial perspicacity of Saiifc-Simon, which enabled him to antici- 
 pate all the doctrines of subsequent socialists other than those of a 
 specifically economic character." 1 The specifically economic idea of 
 which Engels speaks and which Saint-Simon, in his opinion, did 
 wrong to neglect was the Marxian theory of surplus value. We are 
 inclined to the opinion that it was more of a merit than a fault to 
 place socialism on its real foundation, which must necessarily be a 
 social one, rather than to found it upon an erroneous theory of 
 value. 
 
 But new formulae are not their only contribution. Due note 
 was taken of that fundamental opposition which exists between 
 economists and socialists and which has caused all the conflicts and 
 misunderstandings that disfigure the history of the century and 
 resulted in their speaking an entirely different language. We shall 
 try to define the nature of the conflict, in order, if possible, to help 
 the reader over the difficulties that arise just where the bifurcation 
 of economic thought takes place. 
 
 No attempt was made either by Adam Smith, Ricardo, or J. B. 
 Say to make clear the distinction between the science of political 
 economy and the fact of social organisation. 2 Property, as we have 
 already had occasion to remark, was a social fact that was accepted by 
 them without the slightest demur. The methods of dividing property 
 and of inheriting it, the causes that determined its rise and the conse- 
 quences that resulted from its existence, were questions that remained 
 outside the scope of their discussions. By division or distribution 
 of wealth they meant simply the distribution of the annual revenue 
 between the various factors of production. Their interest centres 
 round problems concerning the rate of interest or the rate of wages 
 or the amount of rent. Their theory of distribution is simply a 
 theory concerning the price of services. No attention was paid to 
 individuals, the social product being supposed to be divided between 
 impersonal factors land, capital, and labour according to certain 
 necessary laws. For convenience of discussion the impersonal occa- 
 sionally becomes personal, as when they speak of proprietors, capi- 
 talists, and workers, but that is not allowed to affect the general trend 
 of the argument. 
 
 1 Engels, Herrn Eugen Dtihrings Umwdhung der Wissenschaft, p. 277. 
 
 * " The majority of economists, and especially Say, whose work we have lust 
 reviewed, regard property as a fixed factor whose origin and progress is no concern 
 of theirs, but whose social utility alone concerns them. The conception of a 
 distinctively social order is more foreign still to the English writers." (Doctrine, 
 pp. 221 and 223.) No exception is made in favour of Sismondi or Turgot,
 
 THE IMPORTANCE OF SAINT-SIMONISM 229 
 
 For the Saint-Simonians, on the other hand, and for socialists 
 in general the problem of distribution consists especially in knowing 
 how property is distributed. The question is to determine why 
 some people have property while others have none ; why the instru- 
 ments of production, land, and capital should be so unevenly dis- 
 tributed, and why the revenues resulting from this distribution 
 should be unequal. For a consideration of the abstract factors 
 of production the socialists are anxious to substitute the study of 
 actual living individuals or social classes and the legal ties which 
 bind them together. These differing conceptions of distribution 
 have given rise to two different problems, the one primarily economic, 
 the other social, and sufficient care has not always been taken to 
 distinguish between these two currents, which have managed to 
 coexist, much to the confusion of social thinking in the nineteenth 
 century. 
 
 Another essential difference between their respective points of 
 view consists of the different manner in which economists and 
 socialists conceive of the opposition that exists between the general 
 interest and the interests of individuals. 
 
 Classical writers envisaged it as a conflict between the interests 
 of consumers, i.e. everybody, and the interests of producers, which 
 are more or less the interests of a particular class. 
 
 The Saint-Simonians, on the other hand and in this mattei 
 their distinction has met with the hearty approval of every socialist 
 think it better to regard it as between workers on the one hand and 
 idlers on the other, or between workers and capitalists, to adopt the 
 cramped formula of a later period. The worker's is the general 
 interest ; the particular interest is that of the idler who lives at 
 the former's expense. " We have on several occasions,"' writes 
 Enfantin, " pointed out some of the errors in the classification 
 adopted by most present-day economists. The antithesis between 
 producer and consumer gives a very inadequate idea of the magni- 
 tude of the gap that lies between the various members of society, 
 and a better differentiation would be 'that which would treat them 
 as workers and idlers." l The difference in the point of view naturally 
 results in an entirely different conception of social organisation. 
 Economists think that society ought to be organised from the point 
 of view of the consumer and that the general interest is fully 
 realised when the consumer is satisfied. Socialists, on the contrary, 
 believe that society should be organised from the standpoint of the 
 worker, and that the general interest is only fully achieved when the 
 1 Le Producttur, vol. iii, p. 385.
 
 230 SAINT-SIMON AND THE SAINT-SIMONIANS 
 
 workers draw their full share of the social product, which is as great 
 as it possibly can be. 1 
 
 There is one last element of difference which is very important. 
 Classical writers made an'attempt to reduce the apparent disorder 
 of individual action within the compass of a few scientific laws. 
 By the time the task was completed so struck were they with 
 the profound harmony which they thought they had discovered 
 that they renounced all attempts at amelioration. They were so 
 satisfied with the demonstration which they had given of the way 
 in which a spontaneous social force, such as competition, for example, 
 tended to limit individual egoism and to complete the triumph of 
 the general interest that they never thought of inquiring whether 
 the action of these forces might not be rendered a little less harmful 
 or whether the mechanism might not with advantage be lubricated 
 and made to run somewhat more smoothly. 
 
 The Saint-Simonians, on the other hand and in this matter it 
 is necessary to couple with theirs the name of Sismondi are con- 
 vinced of the slowness, the awkwardness, and the cruelty with which 
 spontaneous economic forces often go to work. Consequently they 
 are concerned with the possibility of substituting a more conscious, 
 carefully thought-out effort on the part of society. Instead of a 
 spontaneous reconciliation of conflicting interests they suggest an 
 artificial reconciliation, which they strive with all their might to 
 realise. Hence the innumerable attempts to set up a new mechanism 
 which might take the place of the spontaneous mechanism, and the 
 childish efforts to co-ordinate or combine economic forces. These 
 attempts, most of them of necessity unsuccessful, furnished the 
 adversaries of socialism with their best weapons of attack. All of 
 them, however, did not prove quite fruitless, and some of them were 
 destined to exercise a notable influence upon social development. 
 
 It is in the Saint-Simonian doctrine that we find these contrasts 
 between political economy and socialism definitely marked and in 
 full detail. It matters little to us to-day that the school was ridi- 
 
 1 In the preface to Sconomie politique et Politique, Enfantin again writes I 
 " All questions of political economy should be linked together by a common 
 principle, and in order to judge of the social utility of a measure or idea in 
 economics it is absolutely necessary to consider whether this idea or measure is 
 directly advantageous to the workers or whether it indirectly contributes to the 
 amelioration of their lot by discrediting idleness." It is a pleasure to be able to 
 concur in the opinion expressed by M. Halevy in his article on Saint-Simon 
 (Revue du Mois for December 1907), in which he maintains that this idea is the 
 distinctive trait of Saint-Simon's socialism. We have already called attention 
 to another feature that seems to us equally important, namely, the suggested 
 substitution of industrial administration for political government.
 
 THE ASSOCIATIVE SOCIALISTS 231 
 
 culed or that the eccentricities of Enfantin destroyed his propaganda 
 work just when Fourier was pursuing his campaign with great 
 success. Ideas are the things that stand out in a history of doctrines. 
 To us, at any rate, Saint-Simonism appears as the first and most 
 eloquent as well as the most penetrating expression of the sentiments 
 and ideals that inspire nineteenth-century socialism. 1 
 
 CHAPTER III: THE ASSOCIATIVE SOCIALISTS 
 
 THE name " Associative Socialists " is given to all those writers who 
 believe that voluntary association on the basis of some preconceived 
 plan is sufficient for the solution of all social questions. Unfor- 
 tunately the plans vary very considerably, according to the particular 
 system chosen. 
 
 They differ from the Saint-Simonians, who sought the solution 
 in socialisation rather than in association, 2 and thus became 
 the founders of collectivism, which is quite another thing. The 
 advocates of socialisation always thought of " Society " with a 
 capital S, and of all the members of the nation as included in one 
 collective organisation. The term " nationalisation " much better 
 describes what they sought. Associationism, on the other hand, 
 more individualistic in character and fearing lest the individual 
 should be merged in the mass, would have him safeguarded by 
 means of small autonomous groups, where federation would be 
 entirely voluntary, and any unity that might exist would be prompted 
 from within rather than imposed from without. 
 
 On the other hand, the Associationists must be carefully distin- 
 guished from the economists of the Liberal school. Fortunately this 
 
 1 It is impossible not to make a special mention of Anton Menger's excellent 
 little book. Das Recht auf den votten Arbeitsertrag (1886) (the English translation, 
 with an excellent introduction by Professor Foxwell, is unfortunately out of 
 print). It is indispensable in any history of socialism. We must also mention, 
 with deep acknowledgments, P&Teto'sLesSystemessocialisles (Paris, 1902, 2 vols.) 
 the most originally critical work yet published on this subject, though not 
 always the most impartial and Bour gum's Les Systemes socialists et revolution 
 tconomique (Paris, 1 906), as containing t he most scientific criticism of the economic 
 theories of socialism. 
 
 * " Association, which is destined to put an end to antagonism, has not yet 
 found its true form. Hitherto it has consisted of separate groups which have 
 been at war with one another. Accordingly antagonism has not yet become 
 extinct, but it certainly will as soon as association has become universal." 
 (Doctrine de Saivi-Sinm, Exposition, Premiere Annte., p. 177.)
 
 232 THE ASSOCIATIVE SOCIALISTS 
 
 is not very difficult, for by means of these very associations they 
 claim to be able to create a new social milieu. They are as anxious 
 as the Liberals for the free exercise of individual initiative, but they 
 believe that under existing conditions, except in the case of a few 
 privileged individuals, this very initiative is being smothered. They 
 believe that liberty and individuality never can expand unless trans- 
 planted into a new environment. But this new environment will 
 not come of itself. It must be created, just as the gardener must 
 build a conservatory if he is to secure a requisite environment. 
 Each one has his own particular recipe for this, and none of them is 
 above thinking that his own is the best. 1 It is this conception of an 
 artificial society set up in the midst of present social conditions, 
 bound by strict limitations which to some extent isolate it from its 
 surroundings, that has won for the system its name of Utopian 
 Socialism. 
 
 Had the Associationists only declared that the social environment 
 can and ought to be modified, despite the so-called permanent and 
 immutable laws, just as man himself is capable of modification, they 
 would have enunciated an important truth and would have forestalled 
 all those who are to-day seeking a solution of the social question in 
 syndicalism, in co-operation, and in the garden-city ideal. 
 
 On the other hand, had they succeeded in carrying out their 
 plans on an extensive scale, if we may judge by the desire to evade 
 them on the part of those experimented on, it seems probable that 
 the new kind of liberty would have proved less welcome than the 
 liberty which is enjoyed under the present constitution of society. 
 
 They would have been very indignant, however, if anyone had 
 charged them with desiring to create an artificial society. On the 
 contrary, their claim was that the present social environment is 
 artificial, and that their business was not to create but merely to 
 discover that other environment which is already so wonderfully 
 adapted to the true needs of mankind in virtue of its providential, 
 natural harmony. At bottom it is the same idea as the " natural 
 order " of the Physiocrats, much as their conception differs from 
 that of the Physiocrats an incidental proof that the order is 
 anything but " natural," seeing that it varies with those who 
 
 1 In Owen's paper, the Economist, for August 11, 1821, we meet with the 
 following words : " The secret is out ! . . . The object sought to bs obtained 
 is not equality in rank or possessions, is not community of goods, but full, com- 
 plete, unrestrained co-operation on the part of all the members for every purpose 
 of social life." Fourier writes in a similar strain : " Association holds the secret 
 of the union of interests." (Assoc. dom,estique, vol. i, p. 133.) Elsewhere he 
 writes : " To-day, Good Friday, I discovered the secret of association."
 
 THE ASSOCIATIVE SOCIALISTS 233 
 
 define it. Some of their sayings, however, might very well have 
 been borrowed directly from Quesnay or Mercier de la Riviere for 
 example, that of Owen's in which he speaks of the commune as God's 
 special agent for bringing society into harmony with nature. It is 
 just the " good despot " of the Physiocrats over again. Or take 
 Fourier's comparison in which he ranks himself with Newton as the 
 discoverer of the law of " attraction of passion," and believes that 
 his " stroke of genius," as Zola calls it, lies in knowing how to utilise 
 the passions which God has given us to the best advantage. 
 
 What is still more interesting is that this newer socialism marks 
 a veritable reaction against the principles of 1789. 1 The Revolu- 
 tionists hated every form of association, and suspected it of being a 
 mere survival of the old regime, & chain to bind the individual. 
 Not only was it omitted from the Declaration of the Rights of Man, 8 
 but it was formally prohibited in every province prohibitions which 
 have been withdrawn only quite recently. It is difficult to imagine a 
 greater contrast to the spirit of the Revolution than the beliefs which 
 inspired Owen, Fourier, and Cabet, the founders of the new order. 
 
 But the men of 1789 were not so far wrong, nor were they deceived 
 by their recollections of corporations and guilds, when they expressed 
 the belief that any form of association was really a menace to liberty. 
 There is an old Italian proverb which states that every man who 
 has an associate has also a master. The Liberal school has to a 
 certain extent always shared these apprehensions, and ample justifi- 
 cation might be found for them in the many despotic acts of 
 associates, whether capitalists or workmen. 
 
 But the " associative " socialists of the early part of the last 
 century were impressed, even more than Sismondi and Saint-Simon 
 were, by the new phenomenon of competition. The mortal struggle 
 for profit among producers and the keen competition for wages 
 among working men which immediately ensued upon the disap- 
 pearance of the old framework of society seemed to them to wear 
 all the hideousness of an apocalyptic beast. With wonderful per- 
 spicacity they predicted that such breakneck competition must 
 
 1 On the relations of socialism to the French Revolution see the preceding 
 chapter on Saint -Simon (p. 109, note). 
 
 * The Declaration of the Rights of Man speaks of liberty, property, resistance 
 to oppression, but there is not a word about the right of association. Trade 
 association, one of the oldest and most democratic forms of association, WAS 
 proscribed by the famous decree of Le Chapelier (1791), and severe penalties 
 were imposed upon associations of more than twenty persons by the Penal 
 Code of 1810. These prohibitions were gradually removed in the course of the 
 nineteenth century. Friendly societies were the first to be set free, then followed 
 trade unions, but these laws were not definitely repealed until July 1, 1901,
 
 234 THE ASSOCIATIVE SOCIALISTS 
 
 inevitably result in combination and monopoly. 1 Voluntary associa- 
 tion of a co-operative character (they paid hardly any attention to 
 the possibilities of corporative association) appeared to supply the 
 only means of suppressing this competition without either endanger- 
 ing liberty or thwarting the legitimate ambitions of producers. And 
 it is not very clear as yet that they were altogether mistaken in their 
 point of view. 
 
 The two best known representatives of this school are Robert 
 Owen and Charles Fourier. Although they were contemporaries 
 the one was born in 1771, the other in 1772 2 it does not appear that 
 they ever became known to one another. Owen never seems to 
 have paid any attention to Fourier's system, and Fourier never refers 
 to " Owen's communistic scheme " without showing some trace of 
 bitterness. Indeed, it is doubtful whether he knew anything at all 
 about it except from hearsay. 3 
 
 Such reciprocal ignorance does little credit to their powers of 
 observation. Still it is easily explained. Despite a certain simi- 
 larity in their plans for social regeneration for example, they both 
 proceed to create small autonomous associations, the microcosms 
 which were to serve as models for the society of the future, or 
 the yeast which was to leaven the lump and notwithstanding 
 that after their deaths they were both hailed as the parents of one 
 common offspring, co-operation, they spent their whole lives in 
 two very different worlds. Without any rhetorical exaggeration and 
 without making any invidious distinctions we may truthfully say 
 that Owen was a rich, successful manufacturer and one of the 
 greatest and most influential men of his day and country, while 
 Fourier was a mere employee in the realm of industry, or a " shop- 
 sergeant," as he liked to call himself. Later on Fourier became the 
 recipient of a small annuity ; but his reputation only spread slowly 
 
 1 " It is obvious that the present regime of free competition which is supposed 
 to be necessary in the interests of our stupid political economy, and which is 
 further intended to keep monopoly in check, must result in the growth of 
 monopoly in almost every branch of industry." (Victor Considerant, Principe* 
 de Socialisme.) 
 
 1 Fourier's first book, Les Quatre Mouvements, was published in 1808, and 
 his last, La Fausse Industrie, in 1836. Owen's earliest work, A New View of 
 Society ; or Essays on the Formation of Human Character, was published in 
 1813, and his last work, The Human Race governed without Punishment, in 
 1858. 
 
 "According to details supplied by journalists, Owen's establishments seem 
 to have at leaat three serious drawbacks which must inevitably destroy the whole 
 enterprise the numbers are excessive, equality is one of hi ideals, and there 
 ia no reference to agriculture," (Unite universette, rol. ii, p. 35 )
 
 ROBERT OWEN 285 
 
 and with much difficulty among a small circle of friends. Contrary 
 to what might have been expected, the millionaire manufacturer was 
 the more ardent socialist of the two. A militant communist and an 
 anti-cleric, he loved polemics, and advanced his views both in the 
 Press and on the platform. His humble rival was just a grown-up 
 boy with the habits of an old woman. He scarcely ever left his 
 house except to listen to a military band ; he wrote sedulously, 
 attempting to turn out the same number of pages each day, and 
 spent most of his life on the look-out for a sleeping partner, who, 
 unfortunately, never turned up. 
 
 Other writers of whom we shall have something to say in connec- 
 tion with this school are Louis Blanc, Leroux, and Cabet. 
 
 I : ROBERT OWEN 
 
 ROBERT OWEN of all socialists has the most strikingly original, not 
 to say unique, personality. One of the greatest captains of industry 
 of his time, where else have we such a commanding figure ? Nor 
 is his socialism simply the philanthropy of the kind-hearted 
 employer. It is true that it is not revolutionary, and that he 
 could not bring himself to support the Chartist movement, which 
 seems harmless enough now. 1 He never suggested expropriation 
 as an ideal for working men, but he exhorted them to create new 
 capital, and it is just here that the co-operative programme differs 
 from the collectivist even to this day. But for all practical purposes 
 Owen was a socialist, even a communist. Indeed, he was probably 
 the first to inscribe the word " socialism " on his banner. 2 
 
 1 Despite the fact that Chartism was essentially a working-class movement, 
 controlled by the Working Men's Association, its demands were exclusively 
 political, the chief of them being universal suffrage. 
 
 2 It is quite possible that Owen regarded the term as his own invention, but 
 we now know that it had been previously employed by Pierre Leroux, the French 
 socialist. The publication of Owen's What is Socialism f in 1841, however, ia 
 the earliest instance of the term being employed as the title of a book. 
 
 Owen lived an extremely active life, and died in 1857 at the advanced age 
 of eighty-seven. Of Welsh artisan descent, he began life as an apprentice in a 
 cotton factory, setting up as a master spinner on his own account with a capital 
 of 100, which he had borrowed from his father. His rise was very rapid, and at 
 the age of thirty he found himself co-proprietor and director of the New Lanark 
 Mills. It was then that he first made a name for himself by his technical im- 
 provements and his model dwellings for his workmen. It was at this period 
 that his ideas on education also took shape. By and by it became the fashion 
 to make a pilgrimage to view the factory at New Lanark, and among the visitor* 
 were several very distinguished people. His correspondents also included more
 
 236 THE ASSOCIATIVE SOCIALISTS 
 
 His passion for Utopias did not prevent him initiating a number 
 of reforms and establishing several institutions of a thoroughly 
 practical character. Special mention ought to be made of his 
 interest in the welfare of his workers, an inspiration that has been 
 caught by several manufacturers since. 
 
 Nor must we imagine, simply because we have placed him along 
 with the Associative socialists, that association was the only solution 
 that met with his approval. As a matter of fact there is scarcely 
 a solution of any description which was not to some extent tried 
 by him. 
 
 Beginning with the establishment of model workshops in his 
 factory at New Lanark, there is hardly a suggestion incorporated 
 in his exposition of socialism which was not attempted and even 
 successfully applied in the course of his experiments there. Among 
 them are included such important developments as workmen's 
 dwellings, refectories, the appointment of officials to look after the 
 social and moral welfare of the workers, etc. 
 
 These experiments had the further distinction of serving as a 
 
 than one royal personage. Among these we may specially mention the King 
 of Prussia, who sought his advice on the question of education, and the King of 
 Holland, who consulted him on the question of charity. 
 
 The crisis of 1815 revealed to Owen the serious defects in the economic order, 
 and this marks the beginning of the second period of his life, when he dabbled 
 in communal experiments. In 1825 he founded the colony of New Harmony 
 in Indiana, and the same year witnessed the establishment of another colony 
 at Orbiston, in Scotland. But these lasted only for a few years. In 1832 we 
 have the National Equitable Labour Exchange, which was not much more 
 successful. 
 
 Owen, sixty -three years of age, and thoroughly disappointed with his experi- 
 ments, but as convinced as ever of the truth of his doctrines, entered now upon 
 the third period of his life, which, as it happened, was to be a fairly long one. 
 This period was to be devoted wholly to propagating the gospel of the New 
 Moral World The New Moral World being the title of his chief work and of 
 the newspaper which he first published towards the end of 1834. He took an 
 active part in the Trade Union movement, but does not seem to have been 
 much interested in the co-operative experiments which were started by the 
 Rochdale Pioneers in 1844, although curiously enough this is his chief claim 
 to fame. 
 
 Owen was in no sense a litterateur, being essentially a man of affairs, and we 
 are not surprised to find that the number of books which he has left behind him 
 is email. But he was an indefatigable lecturer, and wrote a good deal for the 
 press. We must confess, however, that it is not easy, as we read his addresses 
 and articles to-day, to account for the wonderful contemporary success which 
 they had. 
 
 There is an excellent French work by Dolleans dealing with his life and 
 doctrines (1907). The best English life, that of Podmore, is unfortunately out 
 of print.
 
 ROBERT OWEN 237 
 
 model for the factory legislation of the next fifty years. We have 
 only to glance at the following programme of reforms effected by 
 him to realise this : 
 
 1. He reduced the hours of labour from seventeen to ten per diem. 
 
 2. No children under ten years of age were employed, but free 
 education was supplied them in schools built for the purpose. 
 
 3. All fines then a common feature of all workshops were 
 abolished. 1 
 
 Seeing that neither his experiments nor his prestige as an employer 
 was sufficient to influence his fellow employers, he now tried to gain 
 the sympathetic attention of the legislature. He turned first of all 
 to the British Government, and then to that of other countries, 
 looking to legislation to provide what he believed should have been 
 supplied by the goodwill of the ruling classes themselves. 
 
 Even before the days of Lord Shaftesbury he had inaugurated a 
 campaign in favour of limiting the hours of children working in 
 factories. In 1819 the first Factory Act was passed, fixing the 
 minimum age at which children might be employed at nine years, 
 although Owen himself would have put it at ten. 
 
 Discouraged by the little support which he obtained for his 
 projects, and having satisfied himself as to the impotence both of 
 patronage and legislation as forces of social progress, he turned his 
 attention to a third possibility, namely, association. Association, 
 he imagined, would create that new environment without which 
 no solution of the social question was ever possible. 
 
 1. THE CREATION OF THE MILIEU 
 
 The creation of a social milieu was the one impelling force that 
 inspired all Owen's various experiments. This was his one desire, 
 
 1 To his fellow-employers who complained of his almost revolutionary 
 proposals Owen made reply as follows and his words are quite as true now as 
 they were then : " Experience must have taught you the difference between an 
 efficiently equipped factory with its machinery always clean and in good working 
 order and one in which the machinery is filthy and out of repair and working 
 only with the greatest amount of friction. Now if the care which you bestow 
 upon machinery can give you such excellent results, may you not expect equally 
 good results from care spent upon human beings, with their infinitely superior 
 structure ? Is it not quite natural to conclude that these infinitely more delicate 
 and complex mechanisms will also increase in force and efficiency and will be 
 really much more economical if they are kept in good working condition and 
 treated with a certain measure of kindness ? Such kindness would do much to 
 remove the mental friction and irritation which always results whenever the 
 nourishment is insufficient to keep the body in full productive efficiency, as well 
 as to arrest deterioration and to prevent premature death."
 
 238 THE ASSOCIATIVE SOCIALISTS 
 
 whether he asked it of the masters, the State, or of the workers 
 themselves. 
 
 He has thus some claim to be regarded as the father of etiology 
 etiology being the title given by sociologists to that part of their 
 subject which treats of the subordination and adaptation of man to 
 his environment. His theory concerning the possibility of trans- 
 forming the organism by influencing its surroundings occupies the 
 same position in economics as Lamarck's theory does in biology. By 
 nature man is neither good nor bad. He is just what his environ- 
 ment has made him, and if at the present moment he is on the whole 
 rather bad, it is simply because his environment is so detestable. 
 Scarcely any stress is laid upon the natural environment which 
 seemed of such supreme importance to writers like Le Play. Owen's 
 interest was in the social environment, the product of education and 
 legislation or of deliberate individual action. 1 Change the environ- 
 ment and the individual would be changed. He failed to see that 
 this meant begging the whole question. If man is simply the 
 product of his environment, how can he possibly change that environ- 
 ment ? It is like asking a man to raise himself by the hair of his 
 head. But the futility of such criticism will be readily appreciated 
 if we remind ourselves that it is to such insignificant beginnings 
 as these that we owe the conception of the garden city. It was 
 Owen's concern for the worker and his great desire to provide 
 him with a home where some degree of comfort and some measure 
 of beauty might be obtainable that gave the earliest impetus to 
 that movement. 
 
 From a moral point of view this deterministic conception 
 resulted in the absolute denial of all individual responsibility. 2 
 Every noble or ignoble deed, every act, whether deserving of praise 
 or blame, of reward or punishment, reflects neither credit nor dis- 
 credit upon its author, for the individual can never be other than he 
 actually is. 
 
 There was all the more reason, then, why all religious influences, 
 especially that of Christianity, should be excluded. This contempt 
 for religion explains why Owen found so little support in English 
 
 1 Education is given a very prominent place in Owen's system, and once 
 we accept his philosophy we realise what an important place it was really 
 bound to have. Education was to make men, just as boots and caps are 
 made. Were it not altogether foreign to our purpose it would be interesting 
 to compare his educational ideals with those of Rousseau as outlined in 
 Smile. 
 
 * " The idea of responsibility is one of the absurdest, and has done a great 
 deal of harm." (Catechism of the New Moral World, 1838.)
 
 ROBERT OWEN 239 
 
 society, which revolted against what appeared like cynical atheism, 
 although Owen himself was really a deist. 1 
 
 Economically, the doctrine of payment according to work rather 
 than capacity was to result in absolute equality. For why should 
 higher intelligence, greater vigour or capacity for taking pains 
 entitle a man to a greater reward if it is all a question of environment ? 
 Hence Owen's associations were to be communal. 
 
 We need not here detail the history of his experiments in colonisa- 
 tion. It is the usual story of failure and disappointed hopes. At 
 last Owen himself was driven to the conclusion that his attempt 
 to mould the environment which was to re-create society had proved 
 unsuccessful. He renounced all his ambitions for building up a new 
 social order, and contented himself with an attempt to rid society as 
 at present constituted of some of the more potent evils that were 
 sapping its strength. And this brings us to his second essential idea, 
 the abolition of profit. 
 
 2. THE ABOLITION OF PROFIT 
 
 The first necessity, if the environment was ever to be changed, 
 was to get rid of profit. There was the essential evil, the original sin. 
 Profit was the forbidden fruit which had compassed the downfall of 
 man and caused his expulsion from the Garden of Eden. Its very 
 definition conveyed an implication of injustice, for it was always 
 defined as whatever was over and above cost of production. Products 
 ought to be sold for what they cost ; the net price is the only just 
 price. But profit is not merely an injustice, it is a perpetual menace. 
 Economic crises resulting from over-production, or rather from under- 
 consumption, 2 may always be traced back to an unhealthy desire 
 for profit. The existence of profit makes it impossible for the worker 
 to repurchase the product of his toil, and consequently to consume 
 the equivalent of what he produced. Immediately it is completed 
 the product is snatched up by a superior body which makes it 
 inaccessible either to the maker or to the men who could furnish an 
 equivalent amount of labour or who could offer as the price of 
 acquiring it a value equal to that labour. 
 
 The problem is to abolish this parasitism, and the first question 
 
 1 On the other hand, Owen had great influence with the working classes, and 
 this he attributed to the fact that, " freed from all religious prejudice, he was 
 able to look upon men and human nature in general with infinite charity, and 
 in that light men no longer seemed responsible for their actions." (Quoted by 
 Dolleans.) 
 
 1 Like most of the economists and socialists of that time, Owen was very 
 much impressed with the crisis of 1815.
 
 240 THE ASSOCIATIVE SOCIALISTS 
 
 that suggests itself is whether the ordinary operation of competition, 
 assuming it were altogether free and perfect, would be sufficient to 
 get rid of it. The economists declare that it would, and the 
 Hedonistic school makes bold to affirm that under a regime of perfect 
 competition the rate of profit would fall to zero. But Owen believed 
 nothing of the kind. 1 He regarded competition and profit as in- 
 separable, and if one was war the other was simply the spoils of 
 conflict. 
 
 Accordingly some form of combination must be devised which 
 will suppress profit, together with "all that gives rise to that in- 
 ordinate desire for buying in the cheapest market and selling in the 
 dearest." But the instrument of profit is gold or money. Profits 
 are always realised in the form of money. 8 Gold is an intermediary 
 in every act of exchange, and its intervention goes a long way 
 towards explaining the anomaly of selling a commodity for more 
 than cost price. The objective, then, must be money, and it must be 
 replaced by labour notes, which will supply us with a measure of 
 value altogether superior to money. Seeing that labour is the cause 
 and substance of value, it is only natural that it should afford us the 
 best means of measuring value. It is quite obvious that ample 
 homage is paid to the Ricardian theory of value, but conclusions 
 both novel and unproved are drawn from it. 
 
 The producer who wishes to dispose of his produce will be given 
 
 1 On the other hand, there is this objection : 
 
 Whenever profit forms a part of cost of production it is impossible to dis- 
 tinguish it from interest. In that case it is true that even perfect competition 
 would not do away with profit, since it will only reduce the price to the level of 
 cost of production. In that case profit cannot be said to be either unjust or 
 parasitic, for the product is sold exactly for what it cost. 
 
 When profit does not enter into cost of production there is no possibility of 
 confusing it with interest. It is simply the difference between the sale price 
 and the cost of replacing the article. In this it is certainly parasitic, and would 
 disappear under a r&jime of perfect competition, which must to some extent 
 destroy the monopoly upon which such profit rests. 
 
 But the distinction between profit and interest was not known in Owen's 
 time, and Owen would have said that they are both one, and that if profit 
 occasionally claims a share in the cost of production with a view to defying 
 competition it has no right to any such refuge, for cost of production should 
 consist of nothing but the value of labour and the wear and tear of capital. 
 Accordingly it ought to be got rid of altogether. 
 
 2 " Metallic money is the cause of a great deal of crime, injustice, and want, 
 and it is one of the contributory causes which tend to destroy character and to 
 make life into a pandemonium. 
 
 " The secret of profit is to buy cheap and to sell dear in the name of an 
 artificial conception of wealth which neither expands as wealth grows nor 
 contracts as it diminishes."
 
 ROBERT OWEN 241 
 
 labour notes in proportion to the number of hours which he has 
 worked. In the same way the consumer who wishes to buy that 
 product will be called upon to pay an equivalent number of labour 
 notes, and so profit will be eliminated. 
 
 The condemnation of money was not new, but what was original 
 was the discovery that labour notes could supply the place of money, 
 a discovery which Owen considered " more valuable than all the 
 mines of Mexico and Peru." It has truly been a wonderful mine, 
 and has been freely exploited by almost every socialist. But it 
 hardly squares with Owen's communistic ideal, which aimed at 
 giving to each according to his needs. The labour notes evidently 
 imply payment according to the capacity of each. Besides, what is 
 the use of any system of exchange that is not to be employed for 
 purposes of distribution ? 1 
 
 It remained to be seen whether this elimination of money could 
 actually be realised in practice. An experiment to that effect was 
 tried in London with the establishment of the National Equitable 
 Labour Exchange. This was the most interesting experiment in 
 the whole movement, although Owen himself was not very proud of 
 his connection with it. It took the form of a co-operative society 
 with a central depot where each member of the society could deposit 
 the product of his labour and draw the price of it in labour notes, 
 the price depending upon the number of hours of work the product 
 had cost, which the member himself was allowed to state. These 
 products, or goods as they were now called, marked with a figure 
 which indicated the number of hours they had taken to produce, 
 were at the disposal of any member of the Exchange who wished to 
 buy them. All that a member had to do was to pay the ticketed 
 price in labour notes. And so every worker who had taken, say, 
 ten hours to make a pair of stockings was certain of being able to 
 buy any other article which had also cost ten hours' labour. In this 
 fashion everyone got whatever his product had cost him, and every 
 trace of profit automatically disappeared. The profit-maker, whether 
 industrial or commercial or merely an intermediary, was effectively 
 removed, because producers and consumers were brought into direct 
 
 1 This contradiction did not escape Owen. But we must not forget that 
 he regarded this merely as a compromise, and that he looked forward to a 
 time when the establishment of a communistic association with a new environ- 
 ment would lead to a complete solution of the problem. He began in the New 
 Harmony colony by making pro rota payment for the work done, but the object 
 was to arrive gradually at a state of complete equality where no distinction 
 was to be made between the service rendered or the labour given with the 
 result that the colony was extinct in six months.
 
 242 THE ASSOCIATIVE SOCIALISTS 
 
 contact with one another, and so the problem was apparently 
 solved. 1 
 
 The experiment, which had about the same measure of success 
 as the attempts to establish a communal colony in America, did not 
 last very long. The slightest acquaintance with the laws of value 
 would have convinced the reformer of the futility of his attempt. 
 But it marks an important departure in the history of economic 
 doctrines as being the first of a long line of experiments designed to 
 solve the same problem, but with very different methods. It is the same 
 idea that inspires Proudhon's Bank and Solvay's Comptabilisme social. 
 
 The particular mechanism wherewith the elimination of profit 
 was essayed is really of quite secondary importance. But the 
 essential idea which lay behind the whole attempt namely, the 
 abolition of profit is at least partly realised in that solid and useful 
 institution which is now found all over the world, and which was 
 
 1 The Labour Exchange, which was opened in September 1832, at first enjoyed 
 a slight measure of success. There were 840 members, and they even went the 
 length of establishing a few branches. Among the chief causes of the failure of 
 the scheme the following may be enumerated : 
 
 (a) The associates, being themselves allowed to state the value of their 
 products, naturally exaggerated, and it became necessary to relieve them of a 
 task which depended entirely upon their honour, and to place the valuation in 
 the hands of experts. But these experts, who were not at all versed in Owen's 
 philosophy, valued the goods in money in the ordinary way, and then expressed 
 those values in labour notes at the rate of 6d. for every hour's work. It could 
 hardly have been done on any other plan. But it was none the less true that 
 Owen's system was in this way inverted, for instead of the labour standard 
 determining the selling value of the product, the money value of the product 
 determined the value of the labour. 
 
 (6) As soon as the society began to attract members who were not quite as 
 conscientious as those who first joined it, the Exchange was flooded with goods 
 that were really unsaleable. But for the notes received in exchange for these 
 the authorities would be forced to give goods which possessed a real value, 
 that is, goods which had been honestly marked, and which commanded a good 
 price, with the result that in the long run there would be nothing left in the 
 depot except worthless products. In short, the Exchange would be reduced to 
 buying goods which cost more than they were worth, and selling goods that 
 really cost less than they were worth. 
 
 Since the notes were not in any way registered, any one, whether a member 
 of the society or not, could buy and sell them in the ordinary way and make a 
 handsome profit out of the transaction. Three hundred London tradesmen 
 did this by offering to take labour notes in payment for merchandise. They 
 soon emptied the Exchange, and when they saw that nothing valuable was left 
 they stopped taking the notes, and the trick was done. 
 
 M. Denis very aptly points out that the Exchange was really of not much 
 use to the wage-earner, who was not even allowed to own what he had produced. 
 There is some doubt after all as to whether the system would prove quite 
 successful in abolishing the wage -earners.
 
 ROBERT OWEN 248 
 
 bequeathed to us by this experiment of Owen's the co-operative 
 stores. Their first appearance dates from 1832, the year of the 
 Bank of Exchange experiment, but it was not until ten years later 
 that they assumed their present form as the outcome of the efforts 
 of the Rochdale Pioneers. 
 
 The co-operative retail societies have as their rule either to 
 make no profits or to restore any profit that may accrue to their 
 members in proportion to the amount of their purchases at the 
 stores. In reality there is no profit, but simply a cancelling of 
 insurance against risks which has been shared in by all the members. 
 The process of elimination is strictly in accordance with Owen's 
 method of putting producer and consumer in direct contact with 
 one another with a view to getting rid of the middleman. But the 
 elimination of profit is accomplished without eliminating money. 1 
 That close relation which Owen and a number of other socialists 
 believed to exist between money and profit is purely imaginary. We 
 know as a matter of fact that the highest profits are to be got under 
 the truck system, in the African equatorial trade, for example, 
 where guns are exchanged at five times their value for caoutchouc 
 reckoned at a third of its value, representing a profit of 1500 per 
 cent. The employment of money has brought such definiteness into 
 the method of valuation that the rate of profit per unit on a yard 
 of cloth, say, has become almost infinitesimal. Such exactness of 
 calculation would have been impossible under either the truck or 
 the labour note system. 
 
 The co-operative association, with its system of no profits, will 
 for ever remain as Owen's most remarkable work, and his fame will 
 for ever be linked with the growth of that mo.vement. But he was 
 hardly conscious of the important part which he was playing in the 
 inauguration of the new movement. It is seldom that we meet 
 with the word " co-operation " in his writings, although that is not 
 a matter of any great consequence, because the term at that time 
 had not the significance which it has to-day, being then simply 
 synonymous with communism. Not only was Owen unwilling to 
 assume any parental responsibility for the co-operative society, his 
 latest offspring, but he expressly refused to consider it as at all 
 representative of his system. Shops of that description seemed to 
 him little better than philanthropic institutions, quite unworthy of 
 
 1 This does not imply that consumers' associations, when they are better 
 organised and federated, with large central depots at their command, will not 
 take up this project once again that is, will not try to dispense with money in 
 their commercial transactions. They will certainly keep an eye on that problem.
 
 244 THE ASSOCIATIVE SOCIALISTS 
 
 his great ideal. 1 Before passing judgment upon him it is only fair 
 to remember that since those early days the character of the co- 
 operative stores has been completely changed. He lived to see the 
 establishment of the Rochdale society, with its twenty-eight pioneers, 
 six of whom were ardent disciples of Owen himself, and two of 
 these, Charles Howarth and William Cooper, were the very soul of 
 that immortal association. But Owen was by this time seventy- 
 three years of age, and he scarcely realised that a child had been 
 born to him. This somewhat late arrival was to perpetuate his 
 name, and more than any of his other schemes was to save it from 
 oblivion. 
 
 Owen had founded no school, unless of course we consider that 
 the co-operators are deserving of the title. There were, however, a 
 few disciples who attempted to apply his theories. One of these was 
 William Thompson, whose writings, forgotten for many years, have 
 recently come in for a good deal of extravagant praise. His principal 
 work, An Inquiry into the Principles of the Distribution of Wealth, was 
 published in 1824. As compared with Owen he reveals a greater 
 depth of thought and shows a more thorough acquaintance with 
 economic science, and he ought perhaps to be given premier place as 
 the founder of socialism. But, as we have pointed out in the 
 Preface, we cannot readjust the judgment of history, and we are 
 bound to accept the names which tradition has made sacred. And 
 if a person's rank in history is to be measured by his influence rafher 
 than his talent, then Thompson's influence was nil, for at the time 
 his work seems to have passed almost unnoticed. 
 
 We will only remark that Thompson's grasp of the idea that 
 labour does not enjoy all it produces is much firmer than Owen's. 
 This meant opening the way for a discussion of surplus value and 
 unproductive labour, of which more anon. He agrees with Owen in 
 thinking that expropriation would not remedy the evil, and he also 
 would rather build up a new form of enterprise in which the worker 
 would be able to retain for himself all the produce of his labour. 
 This was precisely the co-operative ideal. 8 
 
 1 That was Holyoake's view (History of Co-operation, vol. i, p. 215). But, 
 according to a passage quoted by Dolleans, Owen contemplated making an 
 appeal to the co-operative societies to come to the rescue of his National Labour 
 Exchange. 
 
 1 To the workers he wrote : " Would you like to enjoy youraslves the 
 whole products of your labour ? Ycu have nothing more to do than simply to 
 alter the direction of your labour. Instead of working for you know not whom, 
 work for each other." (Quoted by Foxwell in his introduction to Anton Menger'a 
 The Right to the Whole Produce of Labour.)
 
 CHARLES FOURIER 245 
 
 II : CHARLES FOURIER 
 
 OWEN'S practical influence has been much greater than Fourier's, for 
 most of the important socialistic movements of the last century can 
 easily be traced back to Owen. But Fourier's intellectual work, 
 when taken as a whole, though more Utopian and less restrained 
 in character than Owen's, has a considerably wider outlook, and 
 combines the keenest appreciation of the evils of civilisation with 
 an almost uncanny power of divining the future. 1 
 
 To some writers Fourier is simply a madman, and it is difficult 
 not to acquiesce in the description when we recall the many extrava- 
 gances that disfigure his work, which even his most faithful disciples 
 can only explain by giving them some symbolic meaning of which 
 we may be certain Fourier would never have thought. 2 The term 
 " bourgeois socialist " seems to us to describe him fairly accurately, 
 but its employment lays us open to the charge of using a term that 
 he himself would never have recognised. But what are we to make 
 of one who speaks of Owen's communistic scheme as being so pitiable 
 as to be hardly worth refuting ; who " shudders to think of the 
 Saint-Simonians and of all their monstrosities, especially their 
 declamations against property and hereditary rights 3 and all this 
 in the nineteenth century " ; who in his scheme of distribution 
 scarcely drew any distinction between labour, capital, and business 
 ability, five-twelfths of the product being given to labour, four- 
 twelfths to capital (which is probably more than it gets to-day), and 
 three-twelfths to management ; who outbid the most brazen-faced 
 company promoter by offering a dividend of 30 to 36 per cent., or for 
 those who preferred it a fixed interest of 8 per, cent. ; 4 who held up 
 
 1 See the lecture on Lea Propheties de Fourier in Gide's Co-operation. 
 
 1 It is hardly necessary, however, to credit him with a greater amount of 
 aocentricity than he actually possessed, and I seize this opportunity of refuting 
 once more a story told by more than one eminent economist, attributing to him 
 the statement that the members of the Phalanstere would all be endowed with a 
 tail with an eye at the end of it. The caricaturists of the period " Cham," for 
 example represent them in that fashion. The legend doubtless grew out of the 
 following passage from his works, which is fantastic enough, as everybody will 
 admit. After pointing out that the inhabitants of other planete have several 
 limbs which we do not possess, he proceeds : " There is one limb especially which 
 we have not, and which possesses the following very useful characteristics. It 
 acts as a support against falling, it is a powerful means of defence, a superb 
 ornament of gigantic force and wonderful dexterity, and gives a finish as well 
 as lending support to every bodily movement." (Fausse Industrie, vol. ii, p. 5.) 
 
 1 Nouveau Monde industriel, p. 473. 
 
 1 Letter dated January 23, 1831, quoted by Pellarin, Vie de Fourier 
 (Paris, 1850).
 
 246 THE ASSOCIATIVE SOCIALISTS 
 
 the right of inheritance as one of the chief attractions that would be 
 secured by the Phalanstere ; and who finally declared that inequality 
 of wealth and " even poverty are of divine ordination, and conse- 
 quently must for ever remain, since everything that God has ordained 
 is just as it ought to be " ? 1 
 
 To the men of his time, and to every one who has not read him, 
 which means practically everybody, Fourier appears as an ultra- 
 socialist or communist. That opinion is founded not so much 
 upon the extravagance of his view or the hyperbolical character of 
 his writing as upon the popular conception of the Phalanst^re, which 
 was the name bestowed upon the new association he was going to 
 create. Visions of a strange, bewildering city where the honour of 
 women as well as the ownership of goods would be held as common 
 property are conjured up at the mention of that word. Our 
 exposition of his system must obviously begin with an examination 
 of the Phalanst^re, upon the understanding of which everything 
 turns. 
 
 1. THE PHALANSTERE 
 
 As a matter of fact nothing could be more peaceful than the 
 prospect which the Phalanstere presents to our view. Anything 
 more closely resembling Owen's New Harmony or Cabet's Icaria or 
 Campanella's Civitas Solis or More's Utopia would be difficult to 
 imagine. Externally it looks for all the world like a grand hotel a 
 Palace Hotel on a gigantic scale with 1500 persons en pension. One 
 is instinctively reminded of those familiar structures which have 
 lately become such a feature of all summer and winter resorts, con- 
 taining all manner of rooms and apartments, concert halls and 
 lecture rooms, etc. All of this is described by Fourier with the 
 minutest detail. No restrictions would be placed upon individual 
 liberty. Anyone so choosing could have a suite of rooms for himself, 
 and enjoy his meals in the privacy of his own room that is, if he 
 preferred it to the table d'hote. Hotel life is generally open only 
 to the few. The Phalanstere would have rooms and tables at 
 all prices to suit all five classes of society, with a free table in 
 addition. 
 
 A number of people living under the same roof and eating at the 
 same table, and adopting this as their normal everyday method of 
 living, sums up the element of communism which the scheme con- 
 
 1 Nouveau Monde indtistriel, p. 26. For further details see (Euvres choisie* 
 de Fourier, with introduction by Charles Gide, and Hubert Bourgin'e big volume 
 on Fourier.
 
 CHARLES FOURIER 247 
 
 tained. And the question is naturally asked, Why should Fourier 
 attach such supreme importance to this mode of existence as to make 
 it the sine qua non of his whole system and the key to any solution 
 of the problem ? The answer lies in the conviction, which he fully 
 shared with Owen, that no solution is possible until the environment 
 is changed, and so changed that an entirely new type of man will 
 result from it. 
 
 Economically, of course, life under the same roof can offer to the 
 consumer the maximum of comfort at a minimum of cost. Cooking, 
 heating, lighting, etc., would under such conditions be cheaper and 
 more efficient, and all the worries and anxieties of individual house- 
 keeping would be swept aside. 
 
 Socially a common life of this kind would gradually teach different 
 persons to appreciate one another. Sympathy would take the place 
 of mutual antipathy, which under the present regime, as Fourier 
 eloquently remarks, shows an " ascending scale of hatred and a 
 descending scale of contempt." Besides, the multiph'city of relations 
 and interests, and even of intrigues, which would occasionally 
 enliven this little world would at any rate make life more in- 
 teresting. 
 
 On this double series of advantages Fourier is quite inexhaustible. 
 He reckons up the economies with the painstaking care of an old 
 clerk, and boasts the superiority of the table (Thdte over the family 
 meal with the enthusiasm of an old bachelor. The social and moral 
 advantages seem somewhat more doubtful. It is not very obvious 
 that contact with the rich would make the poor more polished or 
 amicable, nor is it very clear that either would be much happier for 
 it. Fourier's Utopia is already in operation in the United States, 
 where, owing to the increase in the cost of living, the economic 
 advantages of a communal life are more fully taken advantage of. 
 Not only are there a great number of bachelors living at the clubs, 
 but young couples have recently made a practice of taking up 
 their abode at the hotels. They are already on the way to the 
 Phalanstre. 
 
 This shows that Fourier was considerably in advance of his time, 
 and those who hold that doctrines, after all, are always suggested 
 by facts would find it difficult to discover anything pointing towards 
 such communal experiments in the earlier part of the nineteenth 
 century. 
 
 His solution of the servant problem, which is becoming more 
 difficult every day, is one that is likely to be adopted in the 
 near future. His suggestion was the substitution of collective for
 
 248 THE ASSOCIATIVE SOCIALISTS 
 
 individual services as being more compatible with human dignity 
 and independence, and the development of industrial rather than 
 domestic production. This has already taken place in the case of 
 bread-making and laundry work, and there are signs of its extension 
 to house-sweeping (by means of the vacuum cleaner), carpet- 
 cleaning, etc. A further extension to the art of cooking may also be 
 expected. 1 
 
 2. INTEGRAL CO-OPERATION 
 
 Careful scrutiny of the internal arrangements of the PhalanstSre 
 shows it to be something other than an ordinary hotel after all. It 
 may perhaps be regarded as a kind of co-operative hotel, belonging 
 to an association and accommodating members of that association 
 only. It is much more thoroughgoing than the ordinary co-opera- 
 tive society, which is just content to buy commodities as an associa- 
 tion without making any real attempt to practise communism, 
 except in those rare cases where a co-operative restaurant is set up 
 alongside of a co-operative warehouse. 
 
 The " Phalange," not content to remain a mere consumers' 
 association, was to attempt production as well. Around the hotel 
 was to be an area of 400 acres, with farm buildings and industrial 
 establishments that were to supply the needs of the inmates. The 
 Phalange was to be a small self-sufficing world, a microcosm 
 producing everything it consumed, and consuming as far as it 
 could all it produced. Occasionally, no doubt, there would be 
 occasional surpluses or some needs would remain unsatisfied, and 
 then recourse would be had to exchange with other Phalanges. 
 Every Phalange was to be established as a kind of joint-stock com- 
 pany. Private property was not to be extinguished altogether, but 
 to be transformed into the holding of stock a transformation of a 
 capitalistic rather than of a socialistic nature. M. de Molinari states 
 that the future will witness the almost universal application of the 
 joint-stock principle, and he for one would welcome its extension. 
 Fourier has forestalled his prophecy by three-quarters of a century, 
 with an insight that is truly remarkable for the time in which he 
 wrote, for joint-stock undertakings were then exceedingly rare. He 
 enumerates the many advantages which would result from such a 
 
 1 It is necessary to point out that Fourier's suggestions for a solution of the 
 domestic servant problem are really not quite so definite as we have given the 
 reader to understand in the text. They are mixed up with a number of other 
 ideas of a more or less fantastic description,' but very suggestive never- 
 theless. This is especially true of the suggestion to transform domestic servic* 
 bj making it mutually gratuitous an idea that is worth thinking about.
 
 CHARLES FOURIER 249 
 
 transformation in the nature of property, and he roundly declares 
 that " a share in such concerns is really more valuable than any 
 amount of land or money." 
 
 How were the extravagant dividends which he promised when 
 propounding his scheme to be paid out ? The usual method in 
 financial and commercial transactions is to distribute them according 
 to the holding of each individual. But such was not to be his plan. 
 Capital was to have a third of the profits, labour five-twelfths, and 
 ability three- twelfths. ** Ability," which signifies the work of 
 management, was to devolve upon those individuals who were chosen 
 by the society and were considered best fitted for the work. Fourier 
 never realised that there was a possibility of the wrong man being 
 chosen. He had no experience of universal suffrage, and he believed 
 that within such a tiny group the election would be perfectly bona- 
 fide. 
 
 Associations known as Phalanges have actually been established 
 in Paris, and to some extent at any rate they have realised the ideal 
 as outlined by Fourier. The profits are divided in almost strict 
 accordance with Fourier's formula, 1 and in order to emphasise their 
 descent from him the members have caused a statue to be raised to 
 his memory in their quarter of the town the Boulevard de Clichy. 
 
 Not content with giving us an outline of a co-operative produc- 
 tive society, Fourier has also left us an admirably concise statement 
 of the problem that faces modern society. " The first problem for 
 the economist to solve," says he, " is to discover some way of trans- 
 forming the wage-earner into a co-operative owner." 8 
 
 The necessity for such transformation consists in the fact that 
 this is the only way of making labour at once attractive and pro- 
 ductive, for " the sense of property is still the strongest lever in 
 civilised society." 8 " The poor individual in Harmony who only 
 possesses a portion of a share, say a twentieth, is a part proprietor 
 of the whole concern. He can speak of our land, our palaces and 
 castles, our forests and factories, for all of them belong partly to 
 him." * " Hence the role of capitalist and proprietor are synony- 
 mous in Harmony." 6 
 
 1 We were thinking especially of associations like that of the painters under the 
 leadership of M. Buisson, where distribution is as follows : labour, 50 per cent., 
 capital 27 per cent., administration 12 per cent. 
 
 1 Association domestique, vol. i, p. 466. 
 
 1 Ibid., p. 466. Note that Fourier says that this only applies to civilised 
 societies. For those who live in the future Harmony city there will be othfr 
 and more powerful motives. 
 
 4 Unitt univertelk, vol. iii, p. 517. Ibid., p. 467. 
 
 K.U. X
 
 250 THE ASSOCIATIVE SOCIALISTS 
 
 The worker will draw his share of the profits not merely as a 
 worker, but also as a capitalist who is a shareholder in the concern, 
 and as a member of the directorate, in which every shareholder has 
 a voice. The administration of the business will form a part of his 
 responsibilities. It is just what we are accustomed to call co- 
 partnership. He will, moreover, participate in the privileges and 
 management of the Phalange as a member of a consumers' association. 
 
 All this seems very complicated, but it was a part of Fourier's 
 policy to transmute the divergent interests of capitalists, workers, 
 and consumers by giving to each individual a share in these con- 
 flicting interests. 1 Under existing conditions they are in conflict 
 with one another simply because they are focused in different 
 individuals. Were they to be united in the same person the conflict 
 would cease, or at any rate the battleground would be shifted to the 
 conscience of each individual, where reconciliation would not be 
 quite such a difficult matter. 
 
 A programme which aims, not at the abolition of property, but 
 at the extinction of the wage- earner by giving him the right of 
 holding property on the joint-stock principle, which looks to succeed, 
 not by advocating class war, but by fostering co-operation of capital 
 with labour and managing ability, and attempts to reconcile the 
 conflicting interests of capitalist and worker, of producer and 
 consumer, debtor and creditor, by welding those interests together 
 in one and the same person, is by no means commonplace. Such 
 was the ideal of the French working classes until Marxian collectivism 
 
 1 The system of integral association proposed by Fourier, including both 
 co-operative production and co-operative distribution, will be better understood 
 if we look at the facts of the present situation. 
 
 On the one hand we have co-operative associations of producers who are not 
 particularly anxious that the<r products should be distributed among themselves ; 
 they simply produce the goods with a view to selling them and making a profit 
 out of the transaction. On the other hand, the distributing societies simply aim 
 at giving their members certain advantages, such as cheaper goods, but they 
 make no attempt to produce the goods which they need. 
 
 In countries where co-operative societies are properly organised, as they 
 are in England, for example, many of these societies have undertaken to produce 
 at least a part of what they consume, and some of them have even acquired 
 small estates for the purpose ; but only a small proportion of the employees are 
 members of the societies, with the result that their position is not very different 
 from that of other working men. One understands the difficulty of grouping 
 people in this way. But if the associations are to live it is absolutely necessary 
 that they should produce what they require under conditions that are more 
 favourable than those of ordinary producers ; in a word, that they should be 
 able to create a kind of new economic environment. 
 
 Even in the colonies one does not find many instances of vigorous associations 
 of this kind.
 
 CHARLES FOURIER 251 
 
 took its place, and it is quite possible that its deposition may be 
 only temporary after all. The programme which the Radical 
 Socialists swear allegiance to, and which they set against the purely 
 socialistic programme, is the maintenance and extension of private 
 property and the abolition of the wage- earner. By taking this 
 attitude they are unconsciously following in the wake of Fourier. 1 
 
 8. BACK TO THE LAND 
 
 The title at the head of this section is to-day adopted as a motto 
 by several social schools. It also figured in Fourier's programme 
 long ago. Fourier, however, employed the phrase in a double sense. 
 
 In the first place, he thought that there must be a dispersion of 
 the big cities and a spreading out of their inhabitants in Phalansteres, 
 which would simply mean moderate-sized villages with a popula- 
 tion of 1600 people, or 400 families. Great care was to be exercised 
 in choosing a suitable site. Wherever possible the village was to 
 be placed on the bank of a beautiful river, with hills surrounding 
 it, the slopes of which would yield to cultivation, the whole area 
 being flanked by a deep forest. It was not, as some one has remarked, 
 intended as an Arcadia for better-class clerks. 2 It was simply an 
 anticipation of the garden cities which disciples of Ruskin and Morris 
 are building all over England. These are designed, as we know, not 
 merely with a view to promoting health and an appreciation of beauty, 
 but also to encouraging the amenities of life and to solving the 
 question of housing by counteracting the high rental of urban land. 
 
 In the second place, industrial work of every description, factory 
 and machine production of every kind, were to be reduced to the 
 indispensable minimum a condition that was absolutely necessary 
 if the first reform was ever to become practicable. Contrary to 
 what might have been expected, Fourier felt no antipathy towards 
 capitalism, but entertained the greatest contempt for industrialism, 
 which is hardly the same thing. 8 A return to the land, if it was to 
 mean anything at all, was to mean more agriculture. But care 
 must be taken not to interpret it in the old sense of tillage or the 
 cultivation of cereals. It was in no- measured terms that he spoke 
 
 1 Co-partnership as outlined by M. Briand is to-day an item in the programme 
 of the Radical Democratic party. See Lea Actions du Travail, by M. Antonelli. 
 
 * M. Faguet, Revue dee Deux Mondes, August 1, 1896. 
 
 * " Industrialism is the latest scientific illusion." (Quatrc Mouvementt, p. 28.) 
 We must also draw attention to his suggestion for co-operative banks, where 
 agriculturists could bring their harvest and obtain money in exchange for it a 
 rough model of the agricultural credit banks. But he only regarded this OB a 
 step towards the Phalanstere
 
 252 THE ASSOCIATIVE SOCIALISTS 
 
 of the cultivation of corn and the production of bread, which has 
 caused mankind to bend under the cruellest yoke and for the coarsest 
 nourishment that history knows. The only attractive forms of 
 cultivation, in his opinion, were horticulture and arboriculture, apple- 
 growing, etc., joined, perhaps, with poultry-keeping and such occupa- 
 tions as generally fall to the lot of the small-holder. 1 The inhabitant 
 of the Phalanstere would be employed almost exclusively in looking 
 after his garden, just as Adam was before the Fall and Candide 
 after his misfortunes. 
 
 4. ATTRACTIVE LABOUE 
 
 The attractiveness of labour was made the pivot of Fourier's 
 system. Wherever we like to look, whether in the direction of 
 so-called civilised societies or towards barbarian or servile com- 
 munities, labour is everywhere regarded as a curse. There is no 
 reason why it should be, and in the society of the future it certainly 
 will not be, for men will then labour not because they are constrained 
 to either by force or by the pressure of need or the allurement of 
 self-interest. Fourier's ideal was a social State in which men would 
 no longer be forced to work, whether from the necessity of earning 
 their daily bread or from a desire for gain or from a sense of social 
 or religious duty. His ambition was to see men work for the mere 
 Idve of work, hastening to their task as they do to a gala. Why 
 should not labour become play, and why should not the same degree 
 of enthusiasm be shown for work as is shown by youth in the 
 pursuit of sport ? 2 
 
 Fourier thinks this would be possible if everyone were certain 
 that he would get a minimum of subsistence by his work. Labour 
 would lose all its coercive features, and would be regarded simply 
 as an opportunity for exercising certain faculties, provided sufficient 
 
 1 The kinds of labour which Fourier selects as examples are always connected 
 with fruit-growing cherry orchards, pear orchards, etc. Fruit and flowers 
 have a very important place in his writings. He seems to have anticipated the 
 fruit-growing rancher of California. 
 
 Without stopping to examine some of the more solid reasons which unfor- 
 tunately are buried beneath a great deal of rubbish why fruit-growing should 
 take the place of agriculture, we must just recall the curious fact that he was 
 always emphasising the superiority of sugar and preserves over bread, and 
 pointed to the " divine instinct " by which children are enabled to discover 
 this. The suggestion was ridiculed at the time, but is to-day confirmed by 
 some of the most eminent doctors and teachers of hygiene. 
 
 1 It is interesting to contrast this view with Bucher's, who thinks that the 
 evolution of industry simply increases its irksomeness. A conception of regres- 
 sive or spiral evolution might reconcile the two views.
 
 CHARLES FOURIER 253 
 
 liberty were given everyone to choose that kind of work which 
 suited him best, and provided also the labour were sufficiently 
 diversified in character to stimulate imagination and were carried 
 on in an atmosphere of joy and beauty. The sole object of the 
 Phalanstere, as we have already seen, was to make labour more 
 attractive by creating a new kind of social life in which production 
 as well as distribution would be on a co-operative basis and horti- 
 culture would take the place of agriculture. But Fourier was not 
 content to stop at that, and he proceeds to show the importance of 
 combining different kinds of employment. Some of his suggestions 
 are very ingenious ; others, on the other hand, are equally puerile. 
 The most notable of these is his proposal to bring individuals together 
 into what he calls groups and series. A person would be allowed to 
 join these groups according to his own individual preferences, and 
 as it would not involve his spending his whole life in any one of them, 
 he would be free to ** flit " from one to the other. 
 
 But it is about time we took leave of our guide. We cannot 
 pretend to follow the twists and turns of his labyrinthine psychology, 
 with its dozen passions, of which the three fundamental ones are 
 the desire for change, for order, and for secrecy ; nor can we bring 
 ourselves to accept his theodicy, nor his views on climatic and cosmo- 
 genic evolution, which was some day to result in sweetening the waters 
 of the ocean, in melting the polar glaciers, in giving birth to new 
 animals, and in putting us in communication with other planets. 
 Yet even this muddy torrent is not without some grain of gold in it. 
 
 Take the question of education, for example, which holds a very 
 prominent place in his writings. Old bachelor that he was, he never 
 cared very much for children, but he nevertheless foreshadowed the de- 
 velopment of modern education on several important points. Froebel, 
 who conceived the idea of the kindergarten (1837), was among his 
 disciples. 1 
 
 His teaching on the sex question bears all the marks of lax 
 morality, and indicates the fallacy of thinking that untrained 
 passions and instincts can be morally justified. 2 His extreme views 
 
 1 Let us not forget his Petitea Hordes, which consisted of groups of boys who 
 undertook the sweeping of public paths, the surveillance of public gardens, and 
 the protection of animals. The idea was very much ridiculed at the time, but 
 a number of similar organisations, each with its badge and banner, were recently 
 instituted by Colonel Waring in the city of New York 
 
 1 " My theory is that every passion given by nature should be allowed the 
 fullest scope. That is the key to my whole system. Society requires the full 
 exercise of all the faculties given us by God."
 
 254 THE ASSOCIATIVE SOCIALISTS 
 
 on this question, which even go beyond the advocacy of free union, 
 have contributed a great deal to the downfall of Fourierism. Paul 
 Janet remarks somewhere that the socialists have not been very 
 happy in their treatment of the woman question, and we have already 
 shown how this weakness led to the downfall of Saint-Simonism. 
 But even on this subject Fourier has penned a few pithy sentences. 
 " As a general rule," he says, " it may be said that true social 
 progress is always accompanied by the fuller emancipation of 
 woman, and there is no more certain evidence of decadence than the 
 gradual servility of women. Other events undoubtedly influence 
 political movements, but there is no other cause that begets social 
 progress or social decline with the same rapidity as a change in the 
 status of women." 1 Unfortunately his feminism was not so much 
 inspired by respect for the dignity of woman as by his hatred of 
 family life, and the liberty which he thought to be the true test of 
 progress was generally nothing better than free love. 
 
 The anti-militarists have good claim to regard him as a fore- 
 runner. Speaking of present-day society, he said that " it consists 
 of a minority of armed slaves who hold dominion over a majority 
 of disarmed." 
 
 It was not Fourier's intention to introduce men into the world 
 of Harmony at one stroke. He thought that as an indispensable 
 preliminary they should go through a stage of transition which he 
 calls Garantisme, where each one would be given a minimum of 
 subsistence, security, and comfort in short, everything that is 
 considered necessary by the advocates of working-class reform. 
 
 Fourierism never enjoyed the prestige and never exercised the 
 influence which Saint-Simonism did, but its action, though less 
 startling, and confined as it was to a narrower sphere, has not been 
 less durable. Nothing has been heard of Saint-Simonism these last 
 fifty years, but there is still a Phalanst^re school. It is not very 
 numerous, perhaps, if we are only to reckon those who formally 
 adhere to the doctrine, but if we take into consideration the co- 
 operative movement, as we ought at least to some extent, it is seen 
 to be very powerful still. For a long time Fourier's ideas were 
 scouted by everybody, but during the last fifteen years much more 
 sympathetic attention has been given them. 2 
 
 Among his disciples there are at any rate two who deserve 
 
 1 Quatre Mouvemente, p. 194. 
 
 * See, for example, such works as Zola's Travail, and Barre's L'Ennemi dea 
 Lois ; and as an example of the general change in the tone of the economists ws 
 may refer to Paul Leroy-Beaulieu's latest writings, in which he speaks of Fourier 
 as a " genial thinker/ 1
 
 Louis BLANC 255 
 
 special mention. Victor Considerant, one of the strongest advo- 
 cates of Fourierism, has left us the best exposition of the 
 doctrine that we have, in his book Doctrine saddle (18344-4). Like 
 Owen, he experimented in American colonisation, 1 and gained a 
 measure of notoriety in the Revolution of 1848 by insisting upon 
 the right to work as a necessary compensation for the loss of 
 property. 
 
 Andre Godin left a monument more permanent than books, in 
 the famous Familistere which was founded by him. It consists of 
 an establishment for the manufacture of heating apparatus at 
 Guise, run entirely on co-partnership lines, the profits being dis- 
 tributed in accordance with the rules of the master.* It is not a 
 new co-operative society of the humdrum kind, however. Close to 
 the works, right in the middle of a beautiful park, are one or two 
 huge blocks which contain the " flats " where the co-partners live, 
 as well as schools, creches, a theatre, and a co-operative stores. But 
 despite its fame, and notwithstanding the fact that it has become a 
 kind of rendezvous for co-operators all the world over, there is 
 nothing very attractive about it, and if one wants to get a good idea 
 of what a real Phalanstere is like it is better to visit either Bournville 
 or Port Sunlight, or Agneta Park in Holland. 
 
 Ill : LOUIS BLANC 
 
 IT is not the most original work that always attracts most attention. 
 Stuart Mill, writing of Saint-Simonism and Fourierism, claims that 
 " they may justly be counted among the most remarkable produc- 
 tions of the past and present age." To apply such terms to the 
 writings of Louis Blanc would be entirely out of place. His pre- 
 decessors' works, despite a certain mediocrity, are redeemed by 
 occasional remarks of great penetratidn ; but there is none of that 
 in Louis Blanc's. Moreover, his treatment is very slight, the whole 
 exposition occupying about as much space as an ordinary review 
 
 1 It is no part of our task to relate the story of the several colonies founded 
 either by disciples of Fourier or of Owen, Experiments of this kind were fairly 
 general in the United States between 1841 and 1844, when no less than forty 
 colonies were founded. Brook Farm, which is the best known of these, included 
 among its members some of the most eminent Americans Charming and Haw- 
 thorne, for example but none of the settlements lasted very long. 
 
 Similar attempts have been made in France at a still more recent period. The 
 one at Cond6-8ur-Vesgres, near Rambouillet, where a few faithful disciples of 
 Fourier have come together, is still flourishing. 
 
 1 Founded in 1859, it only became a co-partnership in 1888, the year of 
 Godin's death.
 
 256 THE ASSOCIATIVE SOCIALISTS 
 
 article. 1 And there is no evidence of exceptional originality, for the 
 sources of its inspiration must be sought elsewhere in the writings 
 of Saint-Simon, of Fourier, of Sismondi, and of Buonarotti, one of 
 the survivors of the Babeuf conspiracy, 8 and in the democratic 
 doctrines of 1793. In short, Blanc was content to give a convenient 
 exposition of such socialistic ideas as the public had become 
 accustomed to since the Restoration. 
 
 Nevertheless, no sooner was the Organisation du Travail published 
 in 1841 than it was read and discussed by almost everybody. Several 
 editions followed one another in rapid succession. The title, which 
 is borrowed from the Saint-Simonians, supplied one of those popular 
 formulae which conveniently summed up the grievances of the 
 working classes in 1848, and during the February Revolution Louis 
 Blanc came to be regarded as the best qualified exponent of the 
 views of the proletariat. Even for a long time after 1848 the work 
 was considered to be the most characteristic specimen of French 
 socialistic writing. 
 
 Its success was in a measure due to the circumstances of the 
 period. The brevity of the book and the directness of the exposition 
 made the discussion of the theme a comparatively easy matter. 
 The personal notoriety of the author also had a great deal to do with 
 the interest which his work aroused. During the short career of the 
 July monarchy, Blanc, both in the press and on the platform, had 
 found himself one of the most valiant supporters of the advanced 
 democratic wing. His Histoire de Dix Ans gave him some standing 
 as a historian. Later on the role which he played as a member of 
 the Provisional Government of 1848, and afterwards at the inaugura- 
 tion of the Third Republic, contributed to his fame as a public man. 
 And, last of all, his unfortunate experience in connection with the 
 failure of the national workshops, for which he was unjustly blamed, 
 added to the interest which the public took in him. 
 
 All this, however, would not justify his inclusion in our history 
 were it not for other reasons which give to the Organisation du 
 Travail something more than a mere passing interest. 
 
 In no other work is the opposition between competition and 
 association so trenchantly stated. Every economic evil, if we are 
 to believe Blanc, is the outcome of competition. Competition affords 
 an explanation of poverty and of moral degradation, of the growth of 
 
 1 As a matter of fact it first appeared as an article in the Revue duProgree in 1 839. 
 
 1 Buonarotti was the author of La Conspiration pour VEgaliti, dite de Babeuf, 
 published in 1828. Little notice was taken of the volume by the public, but it 
 was much discussed in democratic circles.
 
 Louis BLANC 257 
 
 crime and the prevalence of prostitution, of industrial crises and 
 international feuds. " In the first place," writes Blanc, " we shall 
 show how competition means extermination for the proletariat, and 
 in the second place how it spells poverty and ruin for the bourgeoisie." 1 
 The proof spreads itself out over the whole work, and is based upon 
 varied examples gleaned from newspapers and official inquiries, 
 from economic treatises and Government statistics, as well as from 
 personal observations carried on by Blanc himself. No effort is 
 spared to make the most disagreeable facts contribute of their 
 testimony. Everything is arranged with a view to one aim the 
 condemnation of competition. Only one conclusion seems possible : 
 " If you want to get rid of the terrible effects of competition you 
 must remove it root and branch and begin to build anew, with 
 association as the foundation of your social life." 
 
 Louis Blanc thus belonged to that group of socialists who thought 
 that voluntary associations would satisfy all the needs of society. 
 But he thinks of association in a somewhat different fashion from 
 his predecessors. He dreams neither of New Harmony nor of a 
 Phalanstere. Neither does he conceive of the economic world of the 
 future as a series of groups, each of which forms a complete society 
 in itself. Fourier's integral co-operation, where the Phalanstere was 
 to supply all the needs of its members, is ignored altogether. His 
 proposal is a social workshop, which simply means a co-operative 
 producers' society. The social workshop was intended simply to 
 combine members of the same trade, and is distinguished from the 
 ordinary workshop by being more democratic and equalitarian. 
 Unlike Fourierism, it does not contain within itself all aspects of 
 economic life. By no means self-contained, it merely undertakes 
 the production of some economic good, which other folk are expected 
 to buy in the ordinary way. Louis Blanc's is simply the commonest 
 type of co-operative society. 2 The schemes of both Owen and 
 Fourier were much more ambitious, and attempted to apply the 
 principle of co-operation to consumption as well as to production. 
 
 Nor was the idea altogether a new one. A Saint-Simonian of the 
 
 1 Organisation du Travail, 5th ed. (1848). p. 77. 
 
 1 We refer to it as the commonest type because in the previous section 
 we have shown that other co-operative societies exist, such as Le Travail, for 
 example, which claims to be modelled upon Fourier's scheme, especially in the 
 matter of borrowed capital. But the usual type is affiliated to the Chambre 
 consultative des Associations de Production. Article II of its regulations 
 reads as follows : " No one will be allowed to become a subscriber who is not a 
 worker in some branch of production or other." See the volume published by 
 the Office du Travail in 1898, Lei Aeaociations Ouvrieret de Production. 
 B.D. r*
 
 258 THE ASSOCIATIVE SOCIALISTS 
 
 name of Buchez had already in 1831 l made a similar proposal, but 
 it met with little success. Workers in the same trade carpenters, 
 masons, shoemakers, or what not were advised to combine together, 
 to throw their tools into the common lot, and to distribute among 
 themselves the profits which had hitherto gone to the entrepreneur. 
 A fifth of the annual profits was to be laid aside to build up a 
 " perpetual inalienable reserve," which would thus grow regularly 
 every year. " Without some such fund," says Buchez, with 
 an unerring instinct for the future, " association will become 
 little better than other commercial undertakings. It will prove 
 beneficial to the founders only, and will ban everyone who is not 
 an original shareholder, for those who had a share in the concern 
 at the beginning will employ their privileges in exploiting others." * 
 Such is the destiny that awaits more than one co-operative society, 
 where the founders become mere shareholders and employ others 
 who are simply hirelings to do the work for them. 
 
 Whereas Buchez was greatly interested in petite industry, * Blanc 
 was in favour of the great industry, and that seems to be the only 
 difference between bis social workshop and an ordinary co-operative 
 society. But in Blanc's opinion the social workshop was just a 
 cell out of which a complete collectivistic society would some day 
 issue forth. Its ultimate destiny did not really interest him very 
 much. The ideal was much too vague and too distant to be profit- 
 ably discussed. The important thing was to make a beginning 
 and to prepare for the future in a thoroughly practical fashion, but 
 " without breaking altogether with the past." That seemed clearly 
 to be the line of procedure. To give an outline of what that future 
 would be like seemed a vain desire, and would simply mean out- 
 lining another Utopia. 
 
 It is just because his plan was precise and simple that Louis 
 Blanc succeeded in claiming attention where so many beautiful but 
 quite impossible dreams had failed. Here at last was a project 
 which everyone could understand, and which, further, would not be 
 very difficult to adopt. This passion for the concrete rather than 
 the ideal, for some practical formula that might possibly point the 
 way out of the morass of laissez-faire, may be discovered in more 
 than one of his contemporaries. It is very pronounced in Vidal's 
 
 1 In the Journal des Sciences morales et politiques, December 17, 1831. Only 
 me association the goldsmiths', in 1834 wasfounded as the resu'tof this article. 
 
 1 Quoted by Festy, Le Mouvement ouvrier au Debut de la Monarchie de 
 Juillet, p. 88 (Paris, 1908). 
 
 * Buchez's proposals for the reform of the "grat industry" were of an 
 entirely different character.
 
 Louis BLANC 259 
 
 work, for example. Vidal was the author of an interesting book on 
 distribution which unfortunately seems to be now quite forgotten. 1 
 Much of the success of the project, like that of the State Socialism 
 of a later period, was undoubtedly due to this feeling. 
 
 The projected reform seemed exceptionally simple. A national 
 workshop was to be set up forthwith in which all branches of pro- 
 duction would be represented. The necessary capital was to be 
 obtained from the Government, which was expected to borrow it. 
 Every worker who could give the necessary moral guarantee was 
 allowed to compete for this capital. Wages would be equal for 
 everybody, a thing which is quite impossible under present conditions, 
 largely because of the false an ti -social character of a good deal of 
 our education. In the future, when a new system of education 
 will have improved morality and begotten new ideas, the proposal 
 will seem a perfectly natural one. Here we come across a suggestion 
 that seems common to all the associationists, namely, the idea of a 
 new environment effecting a revolution in the ordinary motives of 
 mankind. As to the hierarchy of the workshop, that will be estab- 
 lished by election, except during the first year, when the Govern- 
 ment will undertake to conduct the organisation, because as yet the 
 members will hardly be sufficiently trained to choose the best repre- 
 sentatives. The net revenue will be divided into three portions, of 
 which the first will be distributed between the various members of 
 the association, thus contributing to a rise in their wages ; the second 
 portion will go towards the upkeep of the old, the sick, and the infirm, 
 and towards easing the burdens of some other industries ; while the 
 third portion will be spent in supplying tools to those who wish to 
 join the the association, which will gradually extend its sway over the 
 whole of society. The last suggestion inevitably reminds us of 
 Buchez's " inalienable and perpetual capital. " 
 
 Interest will be paid on the capital employed in founding the 
 industry, such interest being guaranteed against taxation. But we 
 must not conclude that Blanc favoured this condition because he 
 believed in the legitimacy of interest, as Fourier did. He was too 
 pronounced a disciple of the Saint-Simonians ever to admit that 
 it was legitimate. The time will come, he thinks, when it will no 
 longer be necessary, but he gives no hint as to how to get rid of it. 
 For the present at any rate it must be paid, were it only to enable 
 the transition to be made. " We need not with savage impatience 
 destroy everything that has been founded upon the abuses which 
 as a whole we are so anxious to remove. " The interest paid, along 
 1 Francois Vidal, Do la Repartition des Richesses (1846).
 
 260 THE ASSOCIATIVE SOCIALISTS 
 
 with the wages, will form a part of the cost of production. The 
 capitalists, however, will have no share in the net profit unless they 
 have directly contributed to it. 
 
 It seems that the only difference between the social workshop 
 and the present factory is its somewhat more democratic organisa- 
 tion, and the fact that the workers themselves seize all the profit 
 (i.e. over and above net interest), instead of leaving it, as was hitherto 
 the case, to the entrepreneur. 
 
 But this social workshop, as we have said, is a mere cell out of 
 which a new society is expected to form. The amusing feature is 
 this, that the new society can only come into being through the 
 activity of competition competition purged of all its more abomin- 
 able features, that is to say. " The arm of competition must be 
 strengthened in order to get rid of competition." That ought not 
 to be a very difficult task, for the " social workshop as compared 
 with the ordinary private factory will effect greater economies and 
 have a better system of organisation, for every worker without 
 exception will be interested in honestly performing his duty as 
 quickly as possible.' 1 On every side will private enterprise find 
 itself threatened by the new system. Capital and workers will 
 gravitate towards the social workshop with its greater advantages. 
 Nor will the movement cease until one vast association has been 
 formed representing all the social shops in the same industry. Every 
 important industry will be grouped round some central factory, and 
 " the different shops will be of the nature of supplementary establish- 
 ments." To crown the edifice, the different industries will be grouped 
 together, and, instead of competing with one another, will materially 
 help and support each other, especially during a time of crisis, so 
 that the understanding existing between them will achieve a still 
 more remarkable success in preventing crises altogether. 
 
 Thus by merely giving it greater freedom the competitive regime 
 will gradually disappear, to make way for the associative regime, 
 and as the social workshops realise these wonderful ideals the evils 
 of competition will disappear, and moral and social life will be 
 cleansed of its present evils. 
 
 The remarkable feature of the whole scheme is that hardly 
 anything new is needed to effect this vast change. Just a little 
 additional pressure on the part of Government, some capital to 
 set up the workshops, and a few additional regulations to guide 
 it in its operations, that is all. 
 
 This is really a very important point in Louis Blanc's doctrine, 
 which clearly differentiates it both from Owen's and Fourier's.
 
 Louis BLANC 261 
 
 They appeared to think that the State was not necessary at all : 
 private initiative seemed quite sufficient. It was hoped that society 
 would renew itself spontaneously without any extraneous aid, and 
 this is still the working creed of the co-operative movement. 
 Wherever the co-operative movement has flourished the result has 
 been entirely due to the efforts of its members. But Louis Blanc's 
 attention was centred on the highly trained artisan, and the problem 
 was to find capital to employ him. Were they to rely upon their 
 own savings, they would never make a beginning. 1 Moreover, some- 
 body must start the thing, and power is wanted for this. That power 
 will be organised force, which will be employed, however, not so 
 much as an ally, but rather as a " starter." Intervention will neces- 
 sarily be only temporary. Once the scheme is started its own 
 momentum will keep it going. The State, so to speak, " will just 
 give it a push : gravity and the laws of mechanics will suffice for 
 the rest." That is just where the ingenuity of the whole system 
 comes in, and as a matter of fact the majority of the producing co- 
 operative societies now at work owe their existence to the financial 
 aid and administrative ability of public bodies, without which they 
 could hardly keep going. 
 
 Louis Blanc, accordingly, is one of the first socialists to take 
 care to place the burden of reform upon the shoulders of the State. 
 Rodbertus and Lassalle make an exactly analogous appeal to the 
 State, and for this reason the French writer deserves a place among 
 the pioneers of State Socialism. 
 
 This appeal of the socialists is beautifully naive. On the one 
 hand they invite the adherence of Government to a proposal that is 
 frankly revolutionary, in which case it is asked to compass its own 
 destruction naturally not a very attractive prospect. On the 
 other hand the project seems harmless enough, and the support 
 which the Government is asked to extend further emphasises the 
 modest nature of the undertaking. State socialism cannot escape 
 the horns of this dilemma by proclaiming itself frankly conservative, 
 as it has done in Germany. 
 
 1 " Tha emancipation of the working classes is a very complicated business, 
 It is bound up with so many other questions and involves such profound changes 
 of habit. So numerous are the various interests upon which an apparent though 
 perhaps not a real attack is contemplated, that it would be sheer folly to imagine 
 that it could ever be accomplished by a series of efforts tentatively undertaken 
 and partially isolated. The whole power of the State will be required if it is 
 to succeed. What the proletarian lacks is capital, and the duty of the State 
 is to see that he gets it. Were I to define the State I should prefer to think of 
 it as the poor man's bank." (Organiiation du Travail, p. 14.)
 
 262 THE ASSOCIATIVE SOCIALISTS 
 
 Louis Blanc, like Lassalle after him, was much concerned with 
 immediate results, and he failed to notice this objection. He paid 
 considerable attention to another line of criticism, however, and 
 one that he considered much more dangerous. He sought a way 
 of escape by using an argument which was afterwards frequently 
 employed by the State Socialists, as we shall see by and by. 
 
 The question was whether State intervention is contrary to 
 liberty or not. " It clearly is," says Louis Blanc, " if you conceive 
 of liberty as an abstract right which is conferred upon man by the 
 terms of some constitution or other. But that is no real liberty at 
 all. Full liberty consists of the power which man has of developing 
 and exercising his faculties with the sanction of justice, and the 
 approval of law." 1 The right to liberty without the opportunity 
 of exercising it is simply oppression, and wherever man is ignorant 
 or without tools he inevitably has to submit to those who are either 
 richer or better taught than himself, and his liberty is gone. In 
 such cases State intervention is really necessary, just as it is in the 
 case of inferior classes or minors. Lacordaire's saying is more pithy 
 still : " As between the weak and the strong, liberty oppresses and 
 law sets free." Sismondi had already employed this argument, and 
 much capital has been made of it by every opponent of laissez-faire? 
 
 In the writings of Louis Blanc may be found the earliest faint 
 outline of a movement that had assumed considerable proportions 
 before the end of the century. State socialism, which was as yet a 
 temporary expedient, by and by becomes an important economic 
 doctrine with numerous practical applications. 
 
 The events of 1848 gave Louis Blanc an opportunity of partly 
 realising his ideas. We shall speak of these experiments when we 
 come to discuss the misdirected efforts of the 1848 socialists. But 
 the ideas outlined in the Organisation du Travail were destined to a 
 more permanent success in the numerous co-operative productive 
 
 1 " The illusive conception of an abstract right has had a great hold upon 
 the public ever since 1789. But it is nothing better than a metaphysical abstrac- 
 tion, which can afford but little consolation to a people who have been robbed 
 of a definite security that was really theirs. The ' rights of man,' proclaimed 
 with pomp and defined with minuteness in many a charter, has simply served as 
 a cloak to hide the injustice of individualism and the barbarous treatment meted 
 out to the poor under its aegis. Because of this practice of defining liberty as a 
 right, men have got into the habit of calling people free even though they are 
 the slaves of hunger and of ignorance and the sport of every chance. Let us 
 say once for all that liberty consists, not in the abstract right given to a man, 
 but in the power given him to exercise and develop his faculties." (Organisation 
 du Travail, p. 19.) 
 
 2 Cf. pp. 186 et teq.
 
 Louis BLANC 263 
 
 societies which were founded as a result of its teaching. They are 
 still quite popular with a certain class of French working men. 
 
 Though inferior to both Fourier and Owen, Blanc gave consider- 
 able impetus to the Associative movement, and quite deserves his 
 place among the Associative socialists. 
 
 Beside Louis Blanc it may be convenient to refer to two other 
 writers, Leroux and Cabet, who took part in the same movement 
 right up to the Revolution of 1848. 
 
 Pierre Leroux exercised considerable influence over his contem- 
 poraries. George Sand's works are full of social dissertations, and 
 she herself declares that most of these she owed to Leroux. How- 
 ever, one can hardly get anything of the nature of a definite contri- 
 bution to the science from his own writings, which are vaguely 
 humanitarian in character. We must make an exception, perhaps, 
 of his advocacy of association, 1 and especially of the idea of solidarity, 
 a word that has been exceedingly fortunate in its career. Indeed, 
 it seems that he was the first to employ this famous term in the 
 sense in which it is used to-day as a substitute for charity.* 
 
 Apparently, also, he was the first to contrast the word " socialism " 
 with its antithesis " individualism." 3 The invention of these two 
 terms is enough to save his name from oblivion in the opinion of 
 every true sociologist. 
 
 Cabet had one experience which is rare for a socialist : he had 
 filled the office of Attorney- General, though only for a short time 
 it is true. Far greater celebrity came to him from the publication 
 of his novel, Le Voyage en Icarie. There is nothing very original in 
 the system outlined there. He gives the usual easy retort to those 
 who question him concerning the fate of idlers in Icaria : " Of idlers 
 in Icaria there will be none." In his enthusiasm for his ideal he 
 
 1 " Your want of faith in association," he wrote to the National Assembly 
 of 1848, " will force you to expose civilisation to a terribly agonising death." 
 
 1 L 'Humanity (1840). It would be wrong to conclude, however, that this 
 desire for secularising charity meant that Leroux was anti-religious. On the 
 contrary, he admits his indebtedness for the conception of solidarity to the 
 dictum of St. Paul, " We are all members of one body." 
 
 " I was the first to employ the term ' socialism.' It was a neologism then, 
 but a very necessary term. I invented the word as an antithesis to 'indivi- 
 dualism.' " (Qrtvede Samarez, p. 288.) As a matter of fact, as far back as 1834 
 he had contributed an article entitled De Vlndividiialisme et du Socialisms to the 
 Revue encyclopidique. The same word occurs in the same review in an article 
 entitled Discoura sur la Situation actuette de VEsprit humain, written two years 
 before. See his complete works, vol. i, pp. 121, 161, 378. For a further account 
 of Leroux see M. F. Thomas's Pierre Ltroux (1906), a somewhat dull but 
 highly imaginative production.
 
 264 FRIEDRICH LIST 
 
 went farther than either Owen or Considerant by personally super- 
 intending the founding of a colony in the United States (1848). 
 Despite many a grievous trial the settlement managed to exist for 
 fifty years, finally coming to grief in 1898. 1 
 
 Cabet is frankly communistic, and in that respect resembles 
 Owen rather than Fourier, although he always considered himself a 
 disciple of the latter. But this was perhaps due to his admiration 
 for Fourier, with whom he was personally very well acquainted. 
 Although he was a communist he was no revolutionist. He was a 
 good-natured fellow who believed in making his appeal to the 
 altruistic feelings of men, and was sufficiently optimistic to believe 
 that moral conversion was not a difficult process. 8 
 
 CHAPTER IV : FRIEDRICH LIST AND THE 
 NATIONAL SYSTEM OF POLITICAL ECONOMY 
 
 BY the middle of the nineteenth century the doctrine of Adam 
 Smith had conquered the whole of Europe. Former theories were 
 forgotten and no rival had appeared to challenge its supremacy. But 
 during the course of its triumphant march it had undergone many 
 changes and had been subjected to much criticism. Even disciples 
 like Say and Malthus, and Ricardo especially, had contributed many 
 important additions and effected much improvement. Through the 
 influence of Sismondi and the socialists new points of view had been 
 gained, involving a departure from the narrow outlook of the master 
 in the direction of newer and broader horizons. 
 
 Of the principles of the Classical school the Free Trade theory 
 was the only one which still remained intact. This, however, 
 was the most important of all. Here the triumph had been com- 
 plete. Freedom of international trade was accepted as a sacred 
 doctrine by the economists of every country. In Germany as in 
 England, hi France as in Russia, there was complete unanimity among 
 scientific authorities. The socialists at first neglected this topic, and 
 when they did mention it it was to express their complete approval 
 of the orthodox view. 3 A few isolated authors might have hinted at 
 
 1 For Cabet's life and the story of Icaria see Prudhommeaux's two volumes, 
 fitienne Cabet and Histoire de la Communauti icarienne. 
 
 1 " The communista will never gain much success until they have learned 
 to reform themselves. Let them preach by example and by the exercise of 
 social virtues, and they will soon convert their adversaries." 
 
 Protection was attacked by Sismondi in Nouv. Princ., Book IV, chap. 11. 
 He considered it a fruitful source of over-production, and uttered his condem-
 
 FRIEDRICH LIST 265 
 
 reservations or objections, but they never caught the public ear. 1 
 It is true that Parliaments and Governments in many countries 
 hesitated to put these new ideas into practice. But even here, 
 despite the strength of the opposing forces, one can see the growing 
 influence of Smith's doctrine. The liberal tariff of Prussia in 181 8 r 
 the reforms of Huskisson in England (1824-27), were expressly 
 conceived by their authors as partial applications of those principles. 
 However, there arose in Germany a new doctrine for which the 
 peculiar economic and political conditions of that country at the 
 beginning of the nineteenth century afforded a favourable environ- 
 ment. Although the development was slow it was none the less 
 startling. Friedrich List, in his work entitled Das Nationals System 
 der Politischen Oekonomie, promulgated the theory of the new Protec- 
 tion. " The history of my book," he remarks in his preface, ** is 
 the history of half my life." He might have added that it was also 
 the history of Germany from 1800 to 1840. It was no mere co- 
 incidence that led to the creation of an economic system based 
 exclusively upon the conception of nationality in that country, 
 where the dominant political note throughout the nineteenth century 
 was the realisation of national unity. List's work was a product 
 of circumstances, and these circumstances we must understand if 
 we are to judge of the author and his work. 
 
 nation of the absurd desire of nations for self-sufficiency. Saint-Simon con* 
 sidered Protection to be the outcome of international hatred (CEuvrea, vol. iii, 
 p. 36), and commended the economists who had shown that " mankind had but 
 one aim and that its interests were common, and consequently that each individual 
 in his social connection must be viewed as one of a company of workers " (Lettre* 
 a un Americaine, (Euvres, voL ii, pp. 186-187). The Saint-Simonians never 
 touched upon the question directly, but it is quite clear that Protective rights 
 were to have no place in the universal association of which they dreamt. Accord- 
 ing to Fourier, there was to be the completest liberty in the circulation of goods 
 among the Phalansteres all the world over. (Cf. Bourgin, Fourier, pp. 326-329 ; 
 Paris, 1905.) 
 
 1 We refer to two of them only : Augustin Cournot and Louis Say of Nantes. 
 The former, in his Becherches sur lea Principea moth'matiquea de la Theorie dea 
 Richess&s (1838), a work that is celebrated to-day but which passed unnoticed 
 at the time of its publication, has criticised the theory of Free Trade. But the 
 reputation which he subsequently achieved was not based upon this part of the 
 book. Louis Say (1774-1840) was a brother of J. B. Say. He published a 
 number of works, now quite forgotten, in which he criticised several doctrines 
 upheld by his brother, whose displeasure he thus incurred. We refer to his last 
 work, Etudes sur la Richesse des Nations et Refutation des principals Erreura en 
 JSconomie politique (1836), for this is the work to which List alludes. It is 
 probable that Louis Say's name would have remained in oblivion but for 
 List. Richelot, in his translation of List (second edition, p. 477), quotes some of 
 the more important passages of Say's book.
 
 266 FRIEDRICH LIST 
 
 I : LIST'S IDEAS IN RELATION TO THE ECONOMIC 
 CONDITIONS IN GERMANY 
 
 THE Germany of the nineteenth century presents a unique spec- 
 tacle. Her population was at first essentially agricultural, and the 
 various states politically and economically isolated. Her industry 
 was fettered by the corporative regime, and her agriculture was still 
 in feudal thraldom. Freed from these encumbrances, and having 
 established first her economic and then her political unity, she took 
 her place during the last three decades of the century among the 
 foremost of industrial Powers. 
 
 The Act of Union of 1800 had ensured the economic unity of the 
 British Isles. The union of England and Scotland was already a 
 century old, and Smith regarded it as " one of the chief causes of the 
 prosperity of Great Britain." 1 France had accomplished the same 
 end by the suppression of domestic tariffs in 1791. But Germany 
 even in 1815 was still a congeries of provinces, varying in im- 
 portance and separated from one another by tariff walls. List, in 
 the petition which he addressed in 1819 to the Federal Assembly in 
 the name of the General Federation of German Trade and Com- 
 merce, could reckon no less than thirty- eight kinds of tariffs within 
 the German Confederacy, without mentioning other barriers to 
 commerce. In Prussia alone there were no fewer than sixty-seven 
 different tariffs. 8 "In short," says List in another petition, "while 
 other nations cultivate the sciences and the arts whereby commerce 
 and industry are extended, German merchants and manufacturers 
 must devote a great part of their time to the study of domestic 
 tariffs and taxes." * 
 
 These inconveniences were still further aggravated by the com- 
 plete absence of import duties. The German states were closed to 
 one another, but, owing to the absence of effective central control, were 
 open to other nations a peculiarly galling situation on the morrow 
 of the Continental Blockade. The peace treaty was scarcely signed 
 
 1 The union of England and Scotland dates from 1707. Compare the pas- 
 sage in Adam Smith, Book V, chap. 2, part ii, art. 4 ; Carman's edition, voL ii, 
 p. 384. 
 
 2 List, Werktj ed. Hausser, vol. ii, p. 17. The seventh edition of the National 
 System, which was published hi 1883 by M. Eheberg, contains an excellent 
 historical and critical introduction. Our quotations are from the English 
 translation by Lloyd, published in 1885, republished, with introduction by 
 Professor Shield Nicholson, in 1909. 
 
 * Petition presented to a meeting of the German princes at Vienna in 1820 
 (IFerie,YoLii,p.27).
 
 LIST AND ECONOMIC CONDITIONS IN GERMANY 267 
 
 when England so long cut off from her markets and forced to over- 
 stock her warehouses with her manufactured goods began to flood 
 the Continent with her products. Driven from France by the pro- 
 tective tariff established by the Restoration Government, these goods, 
 offered at ridiculously low prices, found a ready market in Germany. 
 
 The German merchants and manufacturers became thoroughly 
 alarmed, and there arose a general demand for economic unity and a 
 uniform tariff. Public opinion urged a reform which appeared to 
 be the first step in the movement towards national unity. In 1818 
 Prussia secured her own commercial unity by abolishing all internal 
 taxation, retaining only those duties which were levied at the 
 frontier. Her new tariff of 10 per cent, on manufactured goods, 
 with free entrance for raw material, was not regarded as prohibitive, 
 and was actually approved of by Huskisson as a model which the 
 British Parliament might well imitate. But this reform, confined as 
 it was to Prussia alone, did nothing to improve the lot of the German 
 merchants elsewhere, for the Prussian tariff applied just as much to 
 them as to foreigners. 
 
 This particular reform, far from staying the movement towards 
 uniform import duties, only accelerated it. A General Association 
 of German Manufacturers and Merchants was founded at Frankfort 
 in 1819 to urge confederation upon the Government. The agita- 
 tion was inspired by Friedrich List. He had been for a short time pro- 
 fessor at Tubingen and was already well known as a journalist. He 
 was nominated general secretary of the association, and became the 
 soul of the movement. He wrote endless petitions and articles, and 
 made personal application to the various Governments at Munich, 
 Stuttgart, Berlin, and Vienna. He was anxious that Austria should 
 take the lead. But all in vain. The Federal Assembly, hostile as 
 it was to every manifestation of public opinion, refused to reply to 
 the petition of the merchants and manufacturers. List himself was 
 soon taken up with other interests. He was named as the deputy 
 for Reutlingen, his native town, in the state of Wiirtemberg, in 1820, 
 bnt was banished from the Assembly and condemned to ten months' 
 imprisonment for criticising the bureaucracy of his own country. 
 After seeking refuge in France he spent a few years travelling in 
 England and Switzerland, and then returned to Wlirtemberg, where 
 he again suffered imprisonment. Upon his release from prison he 
 resolved to emigrate to America, where Lafayette, whom he had 
 met in Paris, promised him a warm welcome. 
 
 Returning to Germany in 1832, after having made numerous 
 friends and accumulated a fortune, he found the tariff movement for
 
 268 FRIEDRICH LIST 
 
 which he had struggled thirteen years before just coming to a head. 
 It was to be established, however, in a fashion quite different from 
 what he had expected. It was not to be a general reform, and 
 Austria was not to be leader. Prussia was to be the pivot of the 
 movement, which was to be accomplished by means of a series of 
 general agreements. In 1828 there were formed almost simultaneously 
 two Tariff Unions, the one between Bavaria and Wurtemberg, the 
 other between Prussia and Hesse-Darmstadt. Within the areas of 
 both of these unions goods were to circulate freely, and a common 
 rate of duty was to be established at the frontiers. From the very 
 first there was a rapprochement between the unions, but a definite 
 fusion in one Zollverem was only decided upon on March 22, 1833. 
 The new regime actually came into being on January 1, 1834. 
 Even before that date Saxony and some of the other states had 
 already joined the new union. 
 
 Thus by 1834 the commercial union of modern Germany was 
 virtually accomplished. The Zollverein united the principal German 
 states, 1 Austria excepted, and under this regime industry, assured 
 of a large domestic market, increased by leaps and bounds. But a 
 new problem presented itself, namely, what system of taxation was 
 to be adopted by the union as a whole. In 1834 the liberal Prussian 
 tariff of 1818 was adopted without much opposition, but nothing 
 more was attempted just then. Many of the manufacturers, how- 
 ever, especially the iron-smelters and the cotton and flax spinners, 
 demanded a more substantial means of protection against foreign 
 competition. This clamour became more intense as the need for 
 iron and manufactured goods increased the demand for raw material. 
 Hence from 1841 the date of the completed Zollverein a new 
 discussion arose between the partisans of the status quo, inclining 
 towards free exchange, and the advocates of a more vigorous 
 protection. 
 
 List's National System, advocating Protection, appeared at the 
 psychological moment. This delightfully eloquent work is full of 
 examples borrowed from history and experience. The peculiar 
 condition of contemporary Germany was the one source of List's 
 inspiration, and since the work was written for the public at large 
 it is remarkably free from all traces of the " schools." Germany's 
 industry, the sole hope of her future greatness, had found scope for 
 development only during the peace which followed 1815. It was still 
 
 1 Baden, Nassau, and Frankfort joined in 1835 and 1836. But there still 
 remained outside Mecklenburg and the Free Towns of the Hanse, Hanover, 
 Brunswick, and Oldenburg.
 
 LIST AND ECONOMIC CONDITIONS IN GERMANY 269 
 
 in its infancy, and found itself hard hit by the competition of 
 England, with her long experience, her perfected machinery, and 
 her gigantic output. This was the all-important fact for List. 
 England, whose rivalry appeared so dangerous, had closed her 
 markets to German agriculturists by her Corn Laws, while industrial 
 competition was out of the question. Two other nations, France 
 and the United States, destined, like Germany, to become great in- 
 dustrial Powers, indicated the path of emancipation. France, 
 warned by the results of the Treaty of Eden (1786) as to the evils 
 of English competition, hastened to defend her fortunes by means of 
 prohibitive tariffs. Still more significant was the example of the 
 United States, whose situation was in all respects comparable with 
 that of Germany. In both cases economic independence was hardly 
 yet fully established, the natural resources were abundant, the 
 territory was vast, the population intelligent and industrious, with 
 the hope of a great political future. Though scarcely free as yet, the 
 Americans made the establishment of industry and the shutting out 
 of English goods by means of protective tariffs their first care. Thus 
 there was everywhere the same danger, the tyrannical supremacy 
 of England, and the same method of defence, Protection. Would 
 Germany alone stand aloof from adopting similar measures ? 
 
 That is the essential point of List's thesis. But these very prac- 
 tical views tended to damage the well-known arguments of those 
 economists whom List refers to collectively as " the school." The 
 " school " maintained that nations as well as individuals should buy 
 in the cheapest markets and devote all their energies to producing 
 just those commodities which yield them the greatest gain. Industry 
 can only grow in proportion to the amount of capital saved, but a 
 protective regime hinders accumulation and so defeats its own end. 
 To overcome these objections it is not necessary to combat them 
 one by one, for the discussion may be carried to an entirely different 
 field. The " school " adopts a certain ideal of commercial policy 
 as the basis of its thesis, namely, the increase of consumable wealth, 
 or, as List puts it, in an awkward enough fashion, " the increase of 
 its exchangeable values." * This fundamental point of view must 
 
 1 List's expression " exchangeable value " merely signifies the mass of present 
 advantages the material profit existing at the moment. It is not a very happy 
 phrase, and it would be a great mistake to take it literally or to attach great 
 importance to it. In his Letters to Ingersoll, p. 186, he gives expression to the 
 same idea by saying that Smith's school had in view " the exchange of one 
 material good for another," and that its concern was chiefly with " such exchanged 
 goods rather than with productive forces." We note that List never speaks of 
 Ricardo, but only of Smith and Say, whose works alone he seems to have read.
 
 270 FREEDRICH LIST 
 
 be changed if we would avoid the consequences which naturally 
 follow from it. List realised this, and in his attempt to accomplish 
 the task he gave expression to new truths which make his book 
 one of lasting theoretical value and ensure for it an important place 
 hi the history of economic doctrines. 
 
 In fact, he introduces two ideas that were new to current theory, 
 namely, the idea of nationality as contrasted with that of cosmopoli- 
 tanism, and the idea of productive power as contrasted with that of 
 exchange values. List's whole system rests upon these two ideas. 
 
 (a) List accuses Adam Smith and his school of cosmopolitanism. 
 Their hypothesis rested on the belief that men were henceforth to 
 be united in one great community from which war would be banished. 
 On such a hypothesis humanity was merely the sum of its individuals. 
 Individual interests alone counted, and any interference with econo- 
 mic liberty could never be justified. But between man and humanity 
 must be interpolated the history of nations, and the " school " had 
 forgotten this. Every man forms part of some nation, and his 
 prosperity to a large extent depends upon the political power of that 
 nation. 1 
 
 Universal entente is doubtless a noble end to pursue, and we 
 ought to hasten its accomplishment. But nations to-day are of 
 unequal strength and have different interests, so that a definite union 
 could only benefit them if they met on a footing of equality. The 
 union might even only benefit one of them while the others became 
 dependent. Viewed hi this new light, political economy becomes 
 the science which, by taking account of the actual interests and of 
 the particular condition of each nation, shows along what path each 
 may rise to that degree of economic culture at which union with 
 other civilised nations, accompanied by free exchange, might be both 
 possible and usefuL 2 
 
 List distinguishes several " degrees of culture," or what we would 
 to-day call " economic stages," and he even claims actual historical 
 sequence for his classification into the savage, the pastoral, the 
 
 1 " In the TfaJian and the Hanseatio cities, in Holland and England, in France 
 and America, we find the powers of production and consequently the wealth of 
 individuals growing in proportion to the liberties enjoyed, to the degree of 
 perfection of political and social institutions, while these, on the other hand, derive 
 material and stimulus for their further improvement from the increase of the 
 material wealth and the productive power of individuals." (National System, 
 p. 87.) 
 
 8 He defines " political or national economy " aa " that which, emanating 
 from the idea and nature of the nation, teaches how a given nation, in the present 
 state of the world and its own special national relations, can maintain and 
 improve its economical condition ." (Ibid., p. 99.)
 
 LIST AND ECONOMIC CONDITIONS IN GERMANY 271 
 
 agricultural, the agricultural-manufacturing, and the agricultural- 
 manufacturing-commercial stage. 1 A nation becomes " normal " 8 
 only when it has attained the last stage. List understands by this 
 that such is the ideal that a nation ought to follow. As a matter of 
 fact he would allow it to possess a navy and to found colonies only 
 on condition that it kept up its foreign trade and extended its sphere 
 of influence. It is only at this stage that a nation can nourish a vast 
 population, ensure a complete development of the arts and sciences, 
 and retain its independence and power. The last two ideas con- 
 stitute the sine qua non of nationality. 3 Not all nations, it is true, 
 can pretend to this complete development. It requires a vast 
 territory, with abundant natural resources, and a temperate climate, 
 vehich itself aids the development of manufactures. 4 But where 
 
 1 It was the example of England that gave List the idea, but the whole con- 
 ception ia based upon a historical error. England possessed a navy, had founded 
 colonies and developed her international trade long before she became a manu- 
 facturing nation. Since the time of List various categories of national develop- 
 ment have been proposed. Hildebrand speaks of periods of natural economy, 
 of money economy, and of credit economy (Jahrbiicker fur National Oeleonomie, 
 vol. ii, pp. 1-24). Bticher proposed the periods of domestic economy, of 
 town economy, and of national economy as a substitute (Die Entxtchung der 
 Volkswirtschaft, 3rd ed., p. 108). Sombart, in his turn, has very justly 
 criticised this classification in his book Dm modems Kapitalismus (vol. i, p. 51; 
 Leipzig, 1902). But would that which he proposes himself be much better ? 
 
 No one, we believe, has as yet remarked that List borrowed this enumeration 
 of the different economic states, almost word for word, from Adam Smith. 
 In chap. 5 of Book II, speaking of the various employments of capital, Smith 
 clearly distinguished between three stages of evolution the agricultural state, 
 the agricultural-manufacturing, and the agricultural- manufacturing-commercial. 
 Smith considered that this last stage was the most desirable, but in his opinion its 
 realisation must depend upon the natural course of things. 
 
 a The term " normal " is one of the vaguest and most equivocal we have in 
 political economy. It would be well if we were rid of it altogether. What 
 controversies have not raged around the ideas of a normal wage or a normal 
 price 1 One of the chief merits of the Mathematical school lies in the success 
 with which it has effected the substitution of the idea of an equilibrium price. 
 The idea of a normal nation is about as vague as that of a normal wage, and 
 it is curious that our author describes as normal a whole collection of charac- 
 teristics which, according to his own account, were at the moment when he 
 wrote only realised by one nation, namely, England. 
 
 8 P. 292. The idea of national power is, moreover, not completely lost sight 
 of by Smith, as is proved by the following passages : " The riches and, so far as 
 power depends upon riches, the power of every country must always be in pro- 
 portion to the value of its annual produce. . . . But the great object of the 
 political economy of every country is to increase the riches and power of that 
 country." (Wealth of Nations, Book II, chap. 5 ; Carman's edition, vol. i, p. 851.) 
 
 * On the question of the industrial vocation of the temperate zone and the 
 agricultural vocation of the torrid compare National System, Book II, chap. 4.
 
 272 FRIEDRICH LIST 
 
 these conditions are given then it becomes a nation's first duty to 
 exert all its forces in order to attain this stage. Germany possessed 
 these desiderata to a remarkable degree. All that was needed was 
 an extension of territory, and List lays claim to Holland and Denmark 
 as a portion of Germany, declaring that their incorporation would 
 be regarded even by themselves as being both desirable and necessary. 
 Accordingly, he wished them to enter the Confederacy of their own 
 free will. 1 
 
 Hence the aim of a commercial policy is no longer what it was for 
 Smith, viz. the enriching of a nation. It is a much more complex 
 ideal that List proposes, both historically and politically, but an ideal 
 which implies as a primary necessity the establishment of manu- 
 factures. 
 
 (b) This necessity becomes apparent from still another point of 
 view. The estimate of a nation's wealth should not be confined to one 
 particular moment. It is not enough that the labour and economy 
 of its citizens should at the present moment assure for it a great mass 
 of exchange values. It is also necessary that these resources of labour 
 and of economy should be safeguarded and that their future develop- 
 ment should be assured, for " the power of creating wealth is in- 
 finitely more important than the wealth itself." A nation should 
 concern itself with the growth of what List in a vague fashion calls 
 its productive forces even more than with the exchange values 
 which depend upon them.* Even a temporary sacrifice of the 
 second may be demanded for the sake of the first. In these expres- 
 sions List merely wishes to emphasise the distinction between a 
 policy which takes account of a nation's future as compared with 
 one which takes account only of the present. " A nation must 
 sacrifice and give up a measure of material property in order 
 
 1 " The German nation will at once obtain what it is now in need of, namely, 
 fisheries and naval power, maritime commerce and colonies." (National System, 
 p. 143.) List has no difficulty in allying his patriotic idealism with the practical 
 side of his nature. 
 
 1 List deliberately distinguishes between exchange values and productive 
 forces ; but the distinction is by no means a happy one. For a policy which 
 aims at encouraging productive forces has no other way of demonstrating its 
 superiority than by showing an increase of exchange value. The two notions 
 are not opposed to one another, and in reckoning a nation's wealth we must 
 take some account of its present state as well as of its future resources. In his 
 Letters to Ingersott (cf. Letter IV, referred to above) he distinguishes between 
 " natural and intellectual capital " on the one hand and " material productive 
 capital " on the other (Adam Smith's idea of capital). " The productive powers 
 of the nation depend not only upon the latter, but also and chiefly upon the 
 former."
 
 LIST AND ECONOMIC CONDITIONS IN GERMANY 273 
 
 to gain culture, skill, and powers of united production ; it must 
 sacrifice some present advantages in order to ensure to itself future 
 ones." * 
 
 But what are these productive forces which constitute the per- 
 manent source of a nation's prosperity and the condition of its 
 progress ? 
 
 With particular insistence List first of all mentions the moral 
 and political institutions, freedom of thought, freedom of conscience, 
 liberty of the press, trial by jury, publicity of justice, control of 
 administration, and parliamentary government. All these have a 
 stimulating and salutary effect upon labour. He is never weary of 
 recalling to mind the loss of wealth caused by the Revocation of the 
 Edict of Nantes, or by the Spanish Inquisition, which, says he, '* had 
 passed sentence of death upon the Spanish navy long ere the English 
 and the Dutch fleets had executed the decree " (p. 88). He unjustly * 
 accuses Smith and his school of materialism, and condemns them 
 for neglecting to reckon those infinitely powerful but perhaps less 
 calculable forces. 
 
 But of all the productive forces of a nation none, according to 
 List, can equal manufactures, for manufactures develop the moral 
 forces of a nation to a superlative degree. ** The spirit of striving 
 
 1 National System, p. 117. 
 
 1 Unjustly as we think, for on more than one occasion Smith did take 
 account of moral forces. He dated the prosperity of English agriculture from 
 the time when farmers were freed from their long servitude and became hence- 
 forth independent of the proprietors. He remarks that towns attain prosperity 
 quicker than the country, because a regular government is earlier established there. 
 " The best effect which commerce and manufactures have is the gradual intro- 
 duction and establishment of order and good government, and with them the 
 liberty and security of individuals among the inhabitants of the country. This, 
 though it has been the least observed, is by far the most important of their effect*. 
 Mr. Hume is the only writer who so far as I know has hitherto taken notice of it." 
 (Book III, ohap. 4 ; Cannan, voL i, p. 383.) Speaking of the American colonies, 
 Smith (Cannan, vol. ii, p. 73) makes the remark that although their fertility is 
 inferior to the Spanish, Portuguese, and the French colonies, " the political 
 institutions of the English colonies have been more favourable to the improve- 
 ment and cultivation of this land than those of any of the other three nations." 
 How could Lost have forgotten the celebrated passage in which Smith attributes 
 the prosperity of Great Britain largely to its legal system, which guarantees to 
 each individual the fruits of his toil and which must be reckoned among the defini- 
 tive achievements of the Revolution of 1688 ? " That security which the laws in 
 Great Britain give to every man that he shall enjoy the fruits of his own labour is 
 alone sufficient to make any country flourish, notwithstanding these and twenty 
 other absurd regulations of commerce ; and this security was perfected much 
 about the same time that the bounty was established." (Book IV, chap. 5; 
 Cannan, vol. ii, pp. 42-43.)
 
 274 FRIEDRICH LIST 
 
 for a steady increase in mental and bodily acquirements, of emulation 
 and of liberty, characterise a State devoted to manufactures and 
 commerce. ... In a country devoted to mere raw agriculture, dull- 
 ness of mind, awkwardness of body, obstinate adherence to old 
 notions, customs, methods, and processes, want of culture, of 
 prosperity, and of liberty prevail." l Manufactures permit of a 
 better utilisation of a country's products than is the case even with 
 agriculture. Its water-power, its winds, its minerals, and its fuel 
 supplies are better husbanded. The presence of manufactures gives 
 a powerful impetus to agriculture, for the agriculturist profits even 
 more than the manufacturer, owing to the high rent, increased 
 profits, and better wages that follow upon an increased demand for 
 agricultural products. The very proximity of manufactures consti- 
 tutes a kind of permanent market for those agricultural products, 
 a market which neither war nor hostile tariffs can ever affect. It 
 gives rise to varied demands and allows of a variation of cultivation, 
 which results in a regional division of labour. This enables each 
 district to develop along the most advantageous line, whereas in 
 a purely agricultural country each one has to produce for his personal 
 consumption, which means the absence of division of labour and a 
 consequent limitation of production. 2 
 
 Industry for List is not what it was for Smith. For him it is 
 a social force, the creator of capital and of labour, and not the 
 natural result of labour and saving. It deserves introduction even 
 at the expense of a temporary loss, and its justification is that of 
 all liberal institutions, namely, the impetus given to future produc- 
 tion. In a beautiful comparison which would deserve a niche in a 
 book of classical economic quotations he writes as follows : " It is 
 true that experience teaches that the wind bears the seed from one 
 region to another, and that thus waste moorlands have been trans- 
 formed into dense forests ; but would it on that account be wise 
 policy for the forester to wait until the wind in the course of ages 
 effects this transformation ? " 3 The tariff, apparently, is the only 
 method of raising the wind. 
 
 By placing himself at this point of view List is able to defeat 
 the most powerful arguments used by his opponents. All we 
 can say in reply is that manufactures will not produce these effects 
 if they have not already a raison d'etre in the natural evolution 
 
 1 National System, chap. 17, beginning. 
 
 1 Compare chapters 7 and 15, where he treats of the manufacturing industry 
 in ite relation to each of the great economic forces of the country. 
 Ibid., p. 87.
 
 LIST AND ECONOMIC CONDITIONS IN GERMANY 275 
 
 of a nation that is, if they do not demand too costly a sacrifice. 
 The land on which the settler sows his corn can scarcely be re- 
 garded as ready to receive it if it lacks the power to make it 
 grow. 
 
 List's Protectionism, as we may guess from what precedes, 
 possesses original features. It is not a universal remedy which may 
 be indifferently applied to every country at any period or to all its 
 products. It is a particular process which can only be used in certain 
 cases and under certain conditions. Subjoined are some of the cha- 
 racteristic traits of this Protectionism which List himself has neatly 
 described. 
 
 (1) The Protectionist system can only be justified when it aims 
 at the industrial education of a nation. 1 It is thus inapplicable to a 
 nation like the English, whose industrial education is already com- 
 plete. Nor should it be attempted by countries that have neither 
 the aptitude nor the resources necessary for an industrial career. 
 The nations of the tropical zone seem destined to the pursuit of 
 agriculture, while those of the temperate zone are accustomed to 
 engage in many and varied forms of production. 1 
 
 (2) But a further justification is also necessary. It must be 
 shown that the nation's progress is retarded by the competition of a 
 powerful manufacturing rival which has already advanced farther 
 on the industrial path. 8 " The reason for this is the same as that 
 why a child or a boy in wrestling with a strong man can scarcely 
 be victorious or even offer steady resistance." 4 This was precisely 
 the case with Germany in her struggle with England. (It is interest- 
 ing to come across a full account of the process of " dumping " in 
 List's letters to Ingersoll. " Dumping," which has received much 
 attention lately in connection with the trust movement, consists in 
 
 1 National System, p. 150. 
 
 * " It may in general be assumed that where any technical industry cannot 
 be established by means of an original protection of 40 to 60 per cent., and 
 cannot continue to maintain itself under a continued protection of 20 to 30 
 per cent., the fundamental conditions of manufacturing power are lacking." 
 (Ibid., p. 251.) 
 
 ' " Solely in nations of the latter kind, namely, those which possess all the 
 necessary mental and material conditions and means for establishing a manu- 
 facturing power of their own and of thereby attaining the highest degree of 
 civilisation and development of material prosperity and political power, but which 
 are retarded in their progress by the competition of a foreign manufacturing Power 
 which is already farther advanced than their own only in such nations are 
 commercial restrictions justified for the purpose of establishing and protecting 
 their own manufacturing power." (Ibid., p. 144.) 
 
 4 Md., p. 240.
 
 276 FRIEDBTCH LIST 
 
 selling at a low price in foreign markets in order to keep up prices 
 in the home market. 1 ) 
 
 (8) Even in that case Protection can be justified " only until that 
 manufacturing Power is strong enough no longer to have any reason to 
 fear foreign competition, and thenceforth only so far as may be neces- 
 sary for protecting the inland manufacturing power in its very roots." ' 
 
 (4) Lastly, Protection ought never to be extended to agriculture. 
 The reasons for this exception are that on the one hand agricultural 
 prosperity depends to a great extent upon the progress of manu- 
 factures the protection of the latter indirectly benefits the former 
 and on the other hand an increase in the price of raw materials 
 or of food would injure industry. Moreover, there exists a natural 
 division which is particularly advantageous to the system of cultiva- 
 tion pursued by each country, a division dependent upon the natural 
 qualities of their soils, which Protection would tend to destroy. This 
 territorial division does not exist for manufactures, " for the pursuit 
 of which every nation in the temperate zone seems to have an equal 
 vocation." 8 
 
 One might experience some difficulty in understanding the sudden 
 
 1 "Everyone knows," says he (quoted by Hirst, pp. 231 et seq.), "that the 
 cost of production of a manufactured good depends very largely upon the 
 quantity produced that is, upon the operation of the law of increasing returns. 
 This law exercises considerable influence upon the rise and fall of manufacturing 
 power. . . . An English manufacturer producing for the home market has a 
 regular sale of 10,000 yards at 6 dollars a yard. . . . His expenses being thus 
 guaranteed by his sales in the home market, the cost of producing a further 
 quantity of 10,000 yards for the foreign market will be considerably reduced 
 and would yield him a profit even were he to sell for 3 or 4 dollars a yard. And 
 even though he should not be making any profit just then, he can feel pretty 
 confident about the future when he has ruined the foreign producer and driven 
 him out of the field altogether." List thinks that this shows how impossible it 
 is for manufacturers in a new country without any measure of protection to 
 compete with other countries whose industry is better established. But this is 
 one of the arguments that has been most frequently used by British manu- 
 facturers in recent years in demanding protection against American competition. 
 We would like to know what List would have thought of this. 
 
 1 National System, p. 144, and the whole of chap. 16 of Book II. He con- 
 sidered that " it would be a further error if France, after her manufacturing 
 power has become sufficiently strong and established, were not willing to revert 
 gradually to a more moderate system of Protection and by permitting a limited 
 amount of competition incite her manufacturers to emulation." (Ibid., p. 249.) 
 
 fbid., p. 253, and especially p. 162, etc., where with a sudden change of front 
 he declares himself in favour of Free Trade in agriculture, and employs the 
 arguments which Free Traders had applied to all products. Compare again p. 230, 
 where he declares that agriculture " by the very nature of things is sufficiently 
 well protected against foreign competition."
 
 SOURCES OF LIST'S INSPIRATION 277 
 
 volte- face of List in favour of free exchange in agriculture did we 
 forget the particular situation in Germany, to which his thoughts 
 always returned. This is equally true of many other points in his 
 system. Germany was an exporter of corn and suffered from the 
 operation of the English Corn Laws. German agriculture needed 
 no protection, but suffered from want of markets, and List would 
 have been very happy to persuade England to abandon her Corn 
 Laws. Agricultural protection was only revived in Germany 
 towards the end of 1879, when the agriculturists thought they were 
 being threatened by foreign competition. 
 
 II : SOURCES OF LIST'S INSPIRATION. HIS INFLUENCE 
 UPON SUBSEQUENT PROTECTIONIST DOCTRINES. 
 THE question of the origin of List's Protectionist ideas has fre- 
 quently been raised. The works of the Frenchmen Dupin and 
 Chaptal undoubtedly gave him some material for reflection, but he 
 was really confirmed in his opposition to laissez-faire by the men 
 whom he met in America. While there he came into intimate contact 
 with the members of a society which had been founded at Philadelphia 
 for the encouragement of national industry. The founder of this 
 society was an American statesman named Hamilton, the author 
 of a celebrated report upon manufactures, who as far back as 1791 
 had advocated the establishment of Protection for the encouragement 
 of struggling American industries. 1 Hamilton's argument, as List 
 fully recognised, bears a striking similarity to the thesis of the 
 National System. 2 The Philadelphian society, which was then pre- 
 
 1 The authors were unable to find a copy of Hamilton's works in France, but 
 according to Bastable (Commerce of Nations, 6th edL, London, 1912, pp. 120, 
 121) the principal arguments deduced by the report to prove the advantages of 
 industry are that it permits of greater division of labour, prevents unemploy- 
 ment, supplies a more regular market than the foreign, and encourages 
 immigration. 
 
 1 It is very probable that Lost had read the work of another American Pro- 
 tectionist, Daniel Raymond, whose Thought* on Political Economy appeared in 
 1820 and ran into four editions (cf. Daniel Raymond, by Charles Patrick Neill, 
 Baltimore, 1897). This seems to be the opinion of the majority of writers who 
 during the last few years have especially concerned themselves with the study 
 of List's opinions (Miss Hirst, in her Life of Friedrich List, and M. Curt Kohler 
 in his book Problematisches zu Friedrich List, Leipzig, 1909). But to regard 
 Raymond as his only inspirer, as is done by Rambaud in his Histoire des Doctrines, 
 seems to us mere exaggeration. Apart from the facts that Raymond's ideas 
 are not particularly original and that List had lived some years in America 
 in a Protectionist environment, List never quotes him at all. On the other
 
 278 FRIEDRICH LIST 
 
 sided over by Matthew Carey (the father of the economist of whom 
 we shall have to speak by and by), immediately after List's arrival 
 in America inaugurated an active campaign on behalf of a revision 
 of the tariffs. Ingersoll, the vice-president, persuaded List to join 
 in the campaign, which he did by publishing in 1827 a number of 
 letters which caused quite a sensation. 1 They are really just a 
 rSsumS of the National System. The policy which in the course of 
 a few years he was to advocate in Germany he now recommended 
 to the consideration of the Americans. 
 
 But facts were even more eloquent than books, and what chiefly 
 struck the practical mind and the observant eye of List was the 
 
 hand, he frequently and enthusiastically refers to both Dupin and Chaptal 
 in his Letters to IngersoU,. The expression " productive forces " was probably 
 borrowed from Baron Dupin's Situation progressive dei Force* de la France 
 (Paris, 1827), which opens with the following words : " This forms an intro- 
 duction to a work entitled The Productive and Commercial Forces of France. 
 By productive forces I mean the combined forces of men, animals, and nature 
 applied to the work of agriculture, of industry, or of commerce." Again, the 
 idea of protecting infant industries is very neatly put by Chaptal. On p. xlvi 
 of the introduction to his De V Industrie franyais (published in 1819) we meet with 
 * the following words : " It does not require much reflection to be convinced of the 
 fact that something more than mere desire is needed to overcome the natural 
 obstacles in the way of the development of industry. Everywhere we feel that 
 ' infant industries ' cannot struggle against older establishments cemented by 
 time, supported by much capital, freed from worry and carried on by a number of 
 trained, skilled workmen, without having recourse to prohibition in order to over- 
 come the competition of foreign industries." 
 
 It is certain that List, during his first stay in France, had read these two 
 authors, and had there found a confirmation of his own Protectionist ideas. It 
 is not less certain, from a letter written by him in April 1825 (quoted by Miss Hirst, 
 p. 33), that he was converted before going to America, but that he expected to find 
 some new arguments there which would strengthen him in his opposition to 
 Smith. Marx's assertion made in his Theorien uber den Mehrwerth, vol. i, p. 339 
 (published by Kautsky, Stuttgart, 1905), that List's principal source of inspiration 
 was Ferrier (Du Gouvernement considere dans tea Rapports avec le Commerce, Paris, 
 1805) has not the slightest foundation. Neither has the attempt to credit Adam 
 Miiller with being the real author of the conception of a national system of poli- 
 tical economy. List, we know, was acquainted with Miiller, a Catholic writer 
 who wished for the restoration of the feudal system. But to be a German 
 writer in the Germany of the nineteenth century was quite enough to imbue 
 one with the idea of nationality. Moreover, Protectionists' arguments are 
 extremely limited in number, so that they do not differ very much from one 
 epoch to another, and it is a comparatively easy task to find some precursors 
 of Friedrich List. 
 
 1 Published in a volume entitled Outlines of a New System of Political Economy, 
 in a Series of Letters addressed by F. List to Charles IngersoU (Philadelphia, 1827). 
 This publication did not find a place in the collected edition published by Hausser, 
 but the whole of it has been incorporated in the interesting Life of Friedrich List 
 by Margaret E. Hirst (London, 1909).
 
 SOURCES OF LIST'S INSPIRATION 279 
 
 material success of American Protection, just as in Germany he 
 had been impressed by the beneficial effects which temporary Pro- 
 tection enforced by the Continental Blockade had produced there. 1 
 
 Far from being injurious to the economic development of the 
 United States, it seemed as if Protection had really helped it. What 
 it actually did was to quicken by the space of a few years an evolu- 
 tion which nature herself was one day bound to accomplish. So 
 vast was the territory, so abundant the natural resources, and so 
 advantageously were they placed for the application of human 
 energy that no system, however defective, could long have delayed 
 the accumulation of wealth. The similar condition of Germany 
 lent colour to the belief that the same experiment carried on under 
 similar circumstances would also succeed there. 
 
 Accordingly, List's work, though not directly connected with 
 any known American system, is the first treatise which gives a clear 
 indication of the influence upon European thought of the economic 
 experiences of the New World. 
 
 In a beautiful paragraph in the National System List has himself 
 confessed to this. " When afterwards I visited the United States, 
 I cast all books aside they would only have tended to mislead me. 
 The best work on political economy which one can read in that 
 modern land is actual life. There one may see wildernesses grow 
 into rich and mighty states ; and progress which requires centuries 
 in Europe goes on there before one's eyes, viz. that from the condition 
 of the mere hunter to the rearing of cattle, from that to agriculture, 
 and from the latter to manufactures and commerce. There one may 
 see how rents increase by degrees from nothing to important revenues. 
 There the simple peasant knows practically far better than the most 
 acute savants of the Old World how agriculture and rents can be 
 improved ; he endeavours to attract manufacturers and artificers 
 to his vicinity. Nowhere so well as there can one learn the importance 
 of means of transport, and their effect on the mental and material 
 life of the people. That book of actual life I have earnestly and 
 diligently studied, and compared with the results of my previous 
 studies, experience, and reflections." 2 
 
 Though from this point of view List's Protectionism seems 
 closely connected with the most modern of economic units, a still 
 closer tie links him to the Mercantilism of old. Nor did he ever 
 
 1 This was the consideration that influenced him in adopting a Protectionist 
 atttiude, although hitherto he had regarded himself ap a disciple of Smith and 
 Say. (Letters to IngersoU, p. 173.) 
 
 1 National System, preface, p. 54.
 
 280 FRIEDRICH LIST 
 
 dissemble his love for the Mercantilists, especially for Colbert. 
 He accused Smith and Say of having misunderstood them, and he 
 declared that they themselves more justly deserved the title of 
 Mercantilists because of their attempt to apply to whole nations a 
 very simple conception which they had merely copied from a mer- 
 chant's note-book, namely, the advice to buy in the cheapest and 
 sell in the dearest market. He distinguishes between two classes of 
 Mercantilists according as they are influenced by one or other of 
 two dominating ideas. On the one hand we have those who 
 emphasise the importance of industrial education, which is the 
 dominant note in List's philosophy. This idea has quite taken 
 the place of the older idea of a favourable balance of trade, and 
 has been adopted by such a Liberal thinker as John Stuart Mill, 
 whereas the other has been definitely rejected by the science. 
 Furthermore, the Mercantilism of the seventeenth century was 
 a special instrument employed in the interests of a permanent 
 policy, which was exclusively national ; while List's Protection, 
 according to his own opinion, was merely a means of leading nations 
 towards the possibility of union on a footing of equality. It was a 
 mere transitory system, a policy dictated by circumstances. 
 
 List's system cannot be regarded as the inspirer of modern Pro- 
 tection, any more than he himself can be regarded as a direct descen- 
 dant of the old Mercantilists. Even in Germany, despite the great 
 literary success of his work, its influence was practically nil, unless 
 we credit it with the slight increase of taxation upon which the 
 Zollverein decided in 1844, and couple with it the Protectionist 
 campaign afterwards carried on by List in the columns of his news- 
 paper. 1 But the Liberal reforms carried out by the English Parlia- 
 ment under the Premiership of Peel were during that very same 
 year crowned by the abolition of the Corn Laws. This measure 
 caused much consternation throughout Europe, and the confirma- 
 tion which Cobden's ideas thus received influenced public opinion 
 a good deal and gave a Liberal trend to the commercial policy of 
 Europe during the next few years. The rSgime of commercial treaties 
 inaugurated by Napoleon III was an outcome of this change of 
 feeling. 
 
 Towards the end of 1879 a vague kind of Protectionism made its 
 appearance in Europe. Tariff walls were raised, but they never 
 seemed to be high enough. One would like to know whether these 
 new tariffs, established successfully by Germany and France, were 
 in any way inspired by List's ideas. 
 
 1 The Zollvereinsblatt, which was published by him towards the end of 1843.
 
 SOURCES OF LIST'S INSPIRATION 281 
 
 It does not seem that they were. Neither of the two countries 
 which have remained faithful to a thoroughgoing Protection any 
 longer,, needs industrial education. Both of them have long since 
 arrived at that complex state which, according to List, is necessary 
 for the full development of their civilisation and the expansion 
 of their power. Germany and the United States have no longer 
 any cause to fear England. Their commercial fleets are numerous, 
 their warships powerful, and their empires are every day expanding. 
 Were he to return to this world to-day, List, who so energetically 
 emphasised the relative value of the various commercial systems, and 
 the necessity of adapting one's method to the changing conditions of 
 the times and the character of the nation, but always laid such 
 stress upon the essentially temporary character of the tariffs raised, 
 would perhaps find himself ranged on the side of those who demand a 
 lowering of those barriers in the interest of a more liberal expansion 
 of productive forces. Has he himself not declared that " in a few 
 years the civilised nations of the world, through the perfection of 
 the means of transport, through the influence of material and in- 
 tellectual ties, will be as united, nay, even more closely knit together, 
 than were the counties of England a hundred years ago " ? x Even 
 the profound changes in the international economic situation during 
 the last sixty years fail to supply a serious justification for the Pro- 
 tectionist policy of the great commercial nations, and the essential 
 traits of this new regime differ toto ccelo from the outlines supplied 
 by List. Far from allowing agriculture to develop naturally, there 
 has arisen the cry for some protection for the farmer, which has 
 served as a pretext for a general reinforcement of tariffs in a great 
 number of cases, notably in France and Germany. The competition 
 of American corn has hindered European agriculture from benefiting 
 by the advancement of industry as List had predicted. Modern 
 tariffs, involving as they do the taxation of both agricultural and 
 industrial products, imply a conception of Protection entirely different 
 from List's. He would have confined Protection to the most im- 
 portant branches of national production to those industries from 
 which the other and secondary branches receive their supplies. Only 
 
 1 National System, p. 230. We do not by any means imply that the Germany ol 
 List's day was in greater need of Protection than the Germany of to-day. Indeed, 
 if WR accept Chaptal's view, we may well deny this, for, writing in 1819, he said 
 that Saxony occupied a place in the front rank of European nations in the matter 
 of industry. Speaking of Prussia, he declared that the industry of Aix-la-Chapelle 
 alone was enough to establish the fame of any nation (De V Industrie fran^aite, 
 vol. i, p. 75). We must also recall the fact that the basis of the present prosperity 
 of Germany was laid under a regime of much greater freedom. 
 
 H.D. X
 
 282 FRIEDRICH LIST 
 
 on this ground would he have justified exceptional treatment. 1 It is 
 an essentially vigorous conception, and what he sought of Protection 
 was an energetic stimulant and an agent of progress. But a tariff 
 which indifferently protects every enterprise, which no longer dis- 
 tinguishes between the fertilising and the fertilised industries, and 
 increases all prices at the same time, can have only one effect a loss 
 for one producer and a gain for another. Their relative positions 
 remain intact. It is no longer a means of stimulating productive 
 energy ; it is merely a general instrument of defence against foreign 
 competition, and is essentially conservative and timorous. 
 
 To speak the truth, tariff duties are never of the nature of an 
 application of economic doctrines. They are the results of a com- 
 promise between powerful interests which often enough have nothing 
 in common with the general interest, but are determined by purely 
 political, financial, or electoral considerations. Hence it is futile to 
 hope for a trace of List's doctrines in the Protective tariffs actually 
 in operation. His influence, if indeed it is perceptible anywhere, 
 must be sought amid the subsidiary doctrines which uphold them. 
 
 The only complete exposition of Protectionism that has been 
 given us since List's is that of Carey, 2 the American economist. 
 Carey was at first a Free Trader, but in 1858 became a Protectionist, 
 and his ideas, which were expounded in his great work The Principles 
 of Social Science, published in 1858-59, bear a striking resemblance 
 to those of his German predecessor. 
 
 Carey, like List, directs his attack against the industrial pre- 
 eminence of England, and substitutes for the ideal of international 
 division of labour the ideal of independent nationality, each nation 
 devoting itself to all branches of economic activity, and thus evolv- 
 ing its own individuality. According to him, Free Trade tends to 
 " establish one single factory for the whole world, whither all the 
 raw produce has to be sent whatever be the cost of transport." 3 
 
 1 " Neither is it at all necessary that all branches of industry should be 
 protected in the same degree. Only the most important branches require special 
 protection, for the working of which much outlay of capital in building and 
 management, much machinery and therefore much technical knowledge, skill, and 
 experience, and many workmen are required, and whose products belong to the 
 category of the first necessaries of life and consequently axe of the greatest im- 
 portance as regards their total value as well as regards national independence 
 (as, for example, cotton, woollen, and linen manufactures, etc.). If these main 
 branches are suitably protected and developed, all other less important branches 
 of manufacture will rise up around them under a less degree of j.roteotion." 
 (National System, p. 145.) 
 
 a On Carey see infra. Book HI. 
 
 3 Carey, Principles of Social Science,
 
 SOURCES OF LIST'S INSPIRATION 283 
 
 The effect of this system is to hinder or retard the progress of all 
 nations for the sake of this one. But a society waxes wealthy and 
 strong only in proportion as it helps in the development of a number 
 of productive associations wherein various -kinds of employments 
 are being pursued, which increase the demand for mutual services 
 and aid one another by their very proximity. Such associations 
 alone are capable of developing the latent faculties of man x and of 
 increasing his hold upon nature. These two traits help to define 
 economic progress. Under a slightly different form we have a 
 picture of the normal nation or the complex State so dear to the 
 heart of Friedrich List an ideal of continuous progress as the 
 object of commercial policy being substituted for one of immediate 
 enrichment. 
 
 Following List, but in a still more detailed fashion, Carey sought 
 to show the beneficial effects that the proximity of protected in- 
 dustry would have upon agriculture. But unfortunately there are 
 other arguments upon which Carey lays equal stress that are really 
 of a much more debatable character. 
 
 Protection, according to Carey, by furnishing a ready market for 
 agricultural products, would free agriculture from the burden of an 
 exorbitant cost of carriage to a distant place. This argument, which 
 List 2 merely threw out as a passing suggestion, continually recurs 
 with the American author. But, as Stuart Mill justly remarked,* 
 if America consents to such expenditure it affords a proof that she 
 procures by means of international exchange more manufactured 
 goods than if she manufactured them herself. 
 
 Another no less debatable point : The exportation of agricultural 
 products, says Carey, exhausts the soil, for the products being con- 
 sumed away from the spot where they are grown, the fertilizing 
 agents which they contain are not restored to the earth ; a manu- 
 facturing population in the immmediate neighbourhood * would 
 remedy this. But, as John Stuart Mill again remarks, 5 and justly 
 
 1 Carey, Principles of Social Science. 
 
 1 National System, Book II, ohap. 3. 
 
 * Principles of Political Economy, Book V, chap. 10, 1. 
 
 1 " Of all the things required for the purposes of man, the one that least bears 
 transportation, and is, yet, of all the most important, is manure. The soil can 
 continue to produce on the condition, only, of restoring to it the elements of 
 which its crop had been composed. That being complied with, the supply of 
 food increases, and men are enabled to come nearer together and combine their 
 efforts developing their individual faculties, and thus increasing their wealth ; 
 and yet this condition of improvement, essential as it is, has been overlooked 
 by all economists." (Principles of Social Science, vol. i, pp. 273-274.) 
 
 1 Principles of Political Economy, Book V, chap. 10, 1.
 
 284 FRIEDRICH LIST 
 
 enough, it is not Free Trade that forces America to export cereals. 
 If she does so, it is because exhaustion of soil appears to her an 
 insignificant inconvenience compared with the advantage gained by 
 exportation. 
 
 Carey, finally, was one of the first to discover in Protection a 
 means of increasing wages. Once the complex economic State is 
 established there arises a keen competition between the entrepreneurs 
 who require the service of labour a competition which naturally 
 benefits the workman. But this advantage, granting that it does 
 exist, is more than counterbalanced by the increased price of 
 goods. 
 
 We see that Carey, although sharing the fundamental concep- 
 tions of List, employs arguments that are much less valid. Both in 
 power of exposition and in the scientific value of his work, the German 
 author shows himself vastly superior to his American successor. 
 He is also much more moderate. Carey is not content with industrial 
 Protection ; he demands agricultural Protection as well, and the 
 duties, though a little higher than those proposed by List, seem 
 hardly sufficient for him. 
 
 Despite all this similarity of views, Carey does not owe his 
 inspiration to List. He was acquainted with the National System 
 and he quoted it. But American economic literature had already 
 supplied him with analogous suggestions. Even more than books, 
 the economic life of America itself as it evolved before his very 
 eyes had contributed to the formation of his ideas. It was the 
 progress of America under a Protective regime, it was the spectacle 
 of a country as yet entirely new and sparsely populated, increasing 
 the produce of her soil as colonisation extended, and multiplying her 
 wealth as population became more dense, that inspired him with the 
 idea of a policy of isolation with a view to hastening the utilisation 
 of those enormous resources. More fortunate than List, he saw his 
 ideas accepted, if not by the scientific experts of his country (who 
 on the whole remained aloof), at least by the American politician, 
 who has applied his principles rather freely. 1 
 
 Carey's doctrine, accordingly, cannot be attributed directly to 
 the influence of List. It remains to be seen whether List had any 
 influence upon European doctrines. 
 
 He undoubtedly succeeded in forcing the acceptance of the idea 
 of a temporary Protection for infant industries even upon Free 
 Traders. The most notable convert to this view was John Stuart 
 
 1 On this point see Jenks, Henry G. Carey als Nationalokonom, chap. 1 
 Jena, 1S85);
 
 SOURCES OF LIST'S INSPIRATION 285 
 
 Mill. 1 But it was a somewhat Platonic concession that he made. He 
 thought it inapplicable to old countries, for their education was no 
 longer incomplete, and at best useful only for new countries. 
 
 Can modern Protectionists claim descent from List ? In the 
 absence of any systematic treatise dealing with their ideas, it is not 
 always easy to glean the significance of their doctrines from the 
 various articles, discourses, and brochures amid which they are 
 scattered. 2 Neglecting those writers who are merely content to 
 reproduce the old fallacies of the Mercantile arguments concerning 
 the balance of trade, 3 the majority of them appear to base their case 
 more or less explicitly upon two principal arguments: (1) the 
 necessity for economic autonomy ; (2) the patriotic necessity of 
 securing a national market for national products. 4 These two 
 
 1 Compare the long passage in the Principles, Book V, chap. 10, 1, which 
 begins : " The only case in which on mere principles of political economy protect- 
 ing duties can be defensible is when they are imposed temporarily (especially in 
 a young and rising nation) in hopes of naturalising a foreign industry, in itself 
 perfectly suitable to the circumstances of the country. The superiority of one 
 country over another in a branch of production often varies only from having 
 begun it sooner." Stuart Mill, however, does not refer to Last, and one 
 wonders whether the paragraph owes anything to his influence. 
 
 1 We must make an exception of M. Cauwes, whose Protectionism, on the 
 contrary, is a quite logical adaptation of List's idea, viz. the superiority of 
 nations possessing a complex economy. This is the only scientific system of 
 Protection that we are to-day acquainted with. But it must be confessed that 
 the majority of writers are very far removed from Cauwes' point of view. 
 Compare his Coure d' Economic politique, 3rd ed., vol. iii. 
 
 * Such, e.g., are the economists who are always speaking of a " commercial 
 deficit," i.e. of an unfavourable balance of commerce. Despite the frequent 
 refutations which have been given of it, it is still frequently quoted as an axiomatic 
 truth. List criticised the school for ite complete indifference to the balance of 
 imports and exports. But he did not favour the Mercantilist theory of the 
 balance of trade ; on the contrary, he regarded that as definitely condemned 
 (p. 21 8). He regarded the question from a special point of view, that of monetary 
 equilibrium. When a nation, says he, imports much, but does not export a corre- 
 sponding amount of goods, it may be forced to furnish payment in gold, and a 
 drainage of gold might give rise to a financial crisis. The indifference of the school 
 with regard to this question of the quantity of money is very much exaggerated 
 (Book II, chap. 13). The policy of the great central banks of to-day aims at 
 easing those tensions in the money market which appear as the result of over- 
 importation, and in this matter they have proved themselves much superior to 
 any system of Protection. 
 
 * Some writers go even farther. Patten (Economic Foundation* of Pro- 
 tection longs to see a national type established peculiar to each country, as the 
 result of forcing the inhabitants to be nourished and clothed according to the 
 natural resources of the country in which they live. We should, as a consequence 
 of this, have an American type quite superior to any European type. "Then," 
 ays he, " we should be able to exercise a preponderant influence upon the fate of
 
 286 FRIEDRICH LIST 
 
 points of view, which are more or less clearly avowed and accepted 
 as political maxims, would, if applied with logical strictness, 
 result in making all external commerce useless. Each nation would 
 thus be reduced to using just those resources with which Nature 
 had happened to endow it, but it could get little if any of the goods 
 produced by the rest of mankind. These two ideas were not 
 absolutely foreign to List's thought, although they never assumed 
 anything more than a secondary or subordinate character. He never 
 considered them as the permanent supports of a commercial policy. 
 List frequently spoke of making a nation independent of foreign 
 markets by means of industry. He considered that nation highest 
 which " has cultivated manufacturing industry in all its branches 
 within its territory to the highest perfection, and whose territory 
 and agricultural production is large enough to supply its manu- 
 facturing population with the largest part of the necessaries of life 
 and raw materials which they require." But he also recognised that 
 such advantages were exceptional, and that it would be folly for a 
 nation to attempt to supply itself by means of national division 
 of labour that is, by home production with articles for the pro- 
 duction of which it is not favoured by nature, and which it can 
 procure better and cheaper by means of international division of 
 labour, or, in other words, through foreign commerce. Complete 
 autonomy is accordingly an illusion. But we cannot deny that 
 some of his expressions seem to give credit to the false idea that a 
 country which obtains a considerable portion of its consumption 
 goods from foreigners must be dependent upon those foreigners. 1 
 In fact, it is no more dependent upon the foreigner than the foreigner 
 is upon it. In the case of a buyer and seller who is the dependent 
 person ? There is but one instance in which the expression is justified, 
 and that is when a foreign country has become the only source of 
 supply for certain commodities. Then the buyer does become 
 dependent, and List rightly enough had in view the manufacturing 
 monopoly enjoyed by England a monopoly that no longer exists. 
 
 other nations and could force them to renounce their present economic methods 
 and adopt a more highly developed social State." Until then no foreign goods 
 are to enter the country. Here, as is very frequently the case, Protectionism ia 
 confounded with nationalism or imperialism. 
 
 1 " A merely agricultural State is an infinitely less perfect institution than an 
 agricultural-manufacturing State. The former is always more or less economically 
 and politically dependent on those foreign nations which take from it agricultural 
 products in exchange for manufactured goods. It cannot determine for itself 
 how much it will produce : it must wait and see how much others will buy from 
 It." (National System, p. 146.)
 
 LIST'S REAL ORIGINALITY 287 
 
 He also spoke of retaining the home market for home-made 
 goods ; but he thought that this guarantee would of necessity have 
 to be limited to the period when a nation is seeking to create an 
 industry for itself : at a later period foreign competition becomes 
 desirable in order to keep manufacturers and workmen from in- 
 dolence and indifference. 1 
 
 At no period was List anxious to make economic autonomy or 
 the preservation of the home market the pivot of his commercial 
 policy. The creation of native industry is the only justification of 
 protective rights, but this is the one point which modern Protec- 
 tionists cannot insist upon without anachronism. 
 
 List left no marked traces of his influence either upon practical 
 politics or upon Protectionist doctrines. It is in his general views 
 that we must seek the source of his influence and the reason for the 
 position which he holds in the history of economic doctrines. 
 
 Ill : LIST'S REAL ORIGINALITY 
 
 LIST'S method is essentially that of the pioneer. He was the first 
 to make systematic use of historical comparison as a means of 
 demonstration in political economy. Although he can lay no claim 
 to be the founder of the method, still the brilliant use which he 
 made of it justifies us in classifying him as the equal, if not the 
 superior, of those who at the same moment were attempting the 
 creation of the Historical school and the transformation of history 
 into the essential organon of economic research. 
 
 List also introduced new and useful points of view into economics. 
 The principle of free exchange as formulated by Smith, and especially 
 by Ricardo and Say, was evidently too absolute and rested upon a 
 demonstration that was too abstract for the ordinary politician. If, 
 as List justly remarks, the practice of commercial nations has so 
 long remained contrary to a doctrine that all economists regard as 
 admirable, it is not without some just cause. As a matter of fact, can 
 the statesman ever place himself outside of the point of view of 
 national interest of which he is the custodian ? It is not enough for 
 him to know that the interchange of products will in some degree 
 
 1 " A nation which has already attained manufacturing supremacy can only 
 protect its own manufactures and merchants against retrogression and indol- 
 ence by the free importation of means of subsistence and raw materials, and 
 by the competition of foreign manufactured goods." (National System, p. 153.) 
 Hence the appeal to England in the name of this theory to abolish her tariffs, 
 but to gracefully allow France, Germany, and the United States to continue 
 theirs.
 
 increase wealth. 1 He must be certain that this increased wealth 
 will benefit his own nation. He must be equally well assured that 
 Free Trade will not result in too sudden a displacement of population 
 or industry, the social and political results of which might be very 
 harmful. In other words, political economy must be subordinated 
 to politics in general, and to-day there is no single economist who 
 does not recognise the impossibility of separating them in practice. 2 
 There is none that does not perceive the influence of political power 
 on economic prosperity,and that consequently does not recognise the 
 necessity for the different complexion which the peculiar circum- 
 stances of each country imposes upon the practical application of 
 the principle of commercial liberty. 
 
 This is not all. List by abandoning the favourite habit of 
 eighteenth-century writers who contrasted man and society, and by 
 giving us a picture of man as he really is, as a member of a nation, 
 has introduced a fruitful conception into economics of which we 
 have not yet seen the full results. He rightly treats of nations not 
 merely as moral and political associations created by history, but 
 also as economic associations. Just as a nation is politically 
 strengthened by the moral cohesion of its citizens, so its economic 
 cohesion increases the productive energy of each individual and 
 enhances the prosperity of the whole nation. 
 
 And Governments, while charged with maintaining the political 
 unity of a country, ought also to retain its economic unity by sub- 
 ordinating all local interests to the general interest, by preserving 
 intact the liberty of internal trade, by organising railways and canals 
 on a national basis, by keeping watch over the central bank, and by 
 aiming at a uniform code of commercial legislation. This was the 
 programme outlined by List in his paper the Zollvereinsblatt. 
 
 This belief in the power which a unified economic organisation 
 can bring to a nation is by no means too common among individual- 
 ists, who at bottom are often parti cularists. But List possessed it in 
 the highest degree. He devoted many years of his life to advocating 
 
 1 See M. Pareto's Economia Politica (Milan, 1906) for a demonstration that 
 international exchange is not necessarily advantageous for both parties (chap. 9, 
 45). 
 
 1 But the line is sometimes difficult to follow. Latterly statesmen have been 
 concerned not so much with the exportation of goods as with the migration 
 of capital. Ought the Minister for Foreign Affairs to veto the raising of a loan 
 in the home market on behalf of a foreign Power or an alien company ? To what 
 extent ought bankers and capitalists to accept his advice ? Such are some of the 
 questions that for some years past have been repeatedly asked in France, England, 
 and Germany. And it seems in almost every case that political economy has 
 had to bow before political necessity, and not vice versa.
 
 LIST'S REAL ORIGINALITY 289 
 
 the establishment of a German railway system, and it was he who 
 traced the principal highways which have since been established 
 in Germany. Protection, in his opinion, was one means of increasing 
 the economic cohesion of Germany, because of the solidarity of 
 interests which would result from the presence of a powerful industry. 
 
 With similar enthusiasm he devoted himself to two apparently 
 contradictory tasks the suppression of inter-State duties and the 
 establishment of protective rights. To him there was no element 
 of contradiction in this, any more than there would be for us in a 
 national system of political economy with no protective rights. 1 
 
 He also extended the political horizon of the Classical school and 
 substituted a dynamic for their purely static conception of national 
 development. His thorough examination of the conditions of 
 economic progress is a contribution to the study of international 
 trade exactly analogous to the contribution made by Sismondi to 
 the study of national welfare. But, unlike Sismondi, who wished to 
 retard this progress, he is anxious to stimulate it, and so he charges 
 the State with the duty of safeguarding the future prosperity of the 
 country and with furthering its production. The actual procedure, 
 involving as it did the establishment of protective rights, may 
 appear to us to be unfortunate. 2 But the idea which inspires it the 
 recognition that in the interests of the future national power has a 
 definitely economic role is essentially sound. To-day it is a mere 
 commonplace, but when List enunciated it it was quite a novel 
 idea. 
 
 In attempting to define List's real significance one feels that 
 
 1 It is very remarkable that List's greatest admirer, Diihring, in his Kritische 
 Oeachichte der Nationalokonomie und de Sozialismus (2nd ed., p. 362), insists on 
 the fact that Protection is not an essential element, but a mere temporary form 
 of the principle of national economic solidarity, which is List's fundamental con- 
 ception, and which must survive all forma of Protection. Diihring is the only 
 real successor of List and Carey. He has developed their ideas with a great 
 deal of ability and has shown himself a really scientific thinker. But what 
 he chiefly admires in both writers is not their Protection, but their effort to lay 
 hold of the material and moral forces which lie below the mere fact of exchange, 
 and upon which a nation's prosperity really depends. His Kursus der National- 
 und Sozial-oekonomic (Berlin, 1873) is very interesting reading. 
 
 * Except the Saint-Si monians nobody seems to have conceived of the State's 
 responsibility for a nation's productive forces. List refers to them sympathetic 
 ally, especially to those who, like Michel Chevalier, " sought to discover the con- 
 nection of these doctrines with those of the premier schools, and to make their 
 ideas compatible with existing circumstances " (National System, p. 287). But 
 List differs from them in his love of individual liberty and in the importance 
 which he attaches to moral, political, and intellectual liberty as elements of 
 productive efficiency.
 
 290 PROUDHON AND THE SOCIALISM OF 1848 
 
 he failed in the achievement of his chief aim. He has not succeeded 
 in breaking down the abstract theory of international trade. On 
 the other hand, he did make a real contribution to economic science, 
 a contribution which the whole of the nineteenth century seemed 
 bent upon emphasising, namely, that the Classical writers had been 
 too ready to draw universal conclusions from their doctrines, forget- 
 ting that in economics it is never safe to pass from pure theory to 
 practical applications without taking account of the intermediate 
 links and making allowance for change of time arid place considera- 
 tions which abstract theory rightly avoids. List's merit lies in his 
 having emphasised this truth, especially in the region of international 
 trade, and in his doing it just at that particular moment. 
 
 CHAPTER V: PROUDHON AND THE 
 SOCIALISM OF 1848 
 
 PROUDHON comes next, though his place in the history of economic 
 doctrines is not easily defined. Like all socialists he begins with a 
 criticism of the rights of property. The economists had carefully 
 avoided discussing them, and political economy had become a mere 
 resumt of the results of private property. Proudhon regarded these 
 rights as the very basis of the present social system and the real 
 cause of every injustice. Accordingly he starts with a criticism of 
 property in opposition to the economists who defended it. 
 
 But how can we reform the present system or replace it by a 
 better ? Herein lies the difficulty. Born twenty years earlier, 
 Proudhon, like many others, would perhaps have invented a Utopia. 
 But what was possible in 1820 was no longer so twenty years later. 
 Public opinion was already satiated with schemes of reform. Owen, 
 Saint-Simon, Fourier, Cabet, and Louis Blanc had each in his turn 
 proposed a remedy. The fancy of reformers had roamed at will 
 over the whole wide expanse of possible reforms. Proudhon was 
 well acquainted with all these efforts, and had come to the conclusion 
 that they were all equally useless. Hence he turns out to be a critic 
 of the socialists as well as of the economists. 
 
 Proudhon attempts the correction of the vices of private property 
 without becoming a party to what he calls the " crass stupidity of 
 socialism." Every Utopian scheme is instinctively rejected. He 
 cares nothing for those who view society as they do machinery and 
 think that an ingenious trick is all that is needed to correct all
 
 PRIVATE PROPERTY AND SOCIALISM 291 
 
 anomalies and to reset the machine in motion. To him social life 
 means perpetual progress. 1 He knows that time is required for the 
 conciliation of those social forces that are warring against one another. 
 He was engrossed with his attempt to find a solution for this difficult 
 problem when the Revolution of 1848 broke out, and Proudhon, 
 suddenly thrown into action, finds himself forced to express his 
 ideas in a concrete form, such that all could understand. The critic 
 has to try his hand at construction, and almost despite himself he 
 outlines another Utopia in his Exchange Bank. 
 
 Other writers had sought a solution in the complete overthrow of 
 the present methods of production and distribution. But Proudhon 
 thought it lay in improved circulation. It was an ingenious idea, and 
 it deserves mention in a history of economic doctrines because of 
 the truth, mingled with error, which it contains, and because it 
 has become the type of a series of similar projects. It is upon this 
 conception that we wish to dilate here. Leaving aside his other 
 ideas, which are no whit less interesting, we shall treat of Proudhon 
 the philosopher, moralist, and political theorist only in so far as these 
 have influenced Proudhon the economist.* 
 
 I : CRITICISM OF PRIVATE PROPERTY AND SOCIALISM 
 
 THE work that first brought Proudhon to the notice of the public 
 was a book published in 1840 entitled Qu'est-ce que la Proprittt f 
 Proudhon was then thirty-one years of age. 3 Born at Besancon, he 
 
 1 Philosophic du Progris, (Euvres, vol. xx, p. 19 : " Growth is essential to 
 thought, and truth or reality whether in nature or in human affairs is essentially 
 historical, at one time advancing, at another receding, evolving slowly, but always 
 undergoing some change." In his Contradictions economiques he defines social 
 science as " the systems tised study of society, not merely as it was in the past 
 or will be in the future, but as it Is in the present in all its manifold appearances, 
 for only by looking at the whole of its activities can we hope to discover intelli- 
 gence and order." (Vol. i, p. 43.) " If we apply this conception to the organisa- 
 tion of labour we cannot agree with the economists when they say that it is 
 already completely organised, or with the socialists when they declare that it 
 must be organised, but simply that it is gradually organising itself ; that is, that 
 the process of organisation has gone on since time immemorial and is still going 
 on, and that it will continue to go on. Science should always be on the look-out 
 for the results that have already been achieved or are on the point of realisation." 
 (Vol. i, p. 45.) 
 
 * A vigorous exposition of his other ideas is given in Bougie's La Sociologie 
 df Proudhon (Paris, 1911). 
 
 1 The following are Proudhon's principal works: 1840, Qu'at-ce que la 
 Propriett ? (studies in ethics and politics) ; 1846, Systlmt dea Contradictions 
 iconomiquu (the " philosophy of destitution ") ; 1848, Organisation du Cridit et 
 d la Circulation et Solution du Probteme tocial ; 1848, Rkuml de la Question
 
 292 PROUDHON AND THE SOCIALISM OF 1848 
 
 was the son of a brewer, 1 and was forced to earn his living at an early 
 age. He first became a proof-corrector, and then set up as a printer 
 on his own account. Despite hard work he became a diligent reader, 
 his only guide being his insatiable thirst for knowledge. The sight 
 of social injustice had sent the iron into his soul. Economic questions 
 were faced with all the ardour of youth, with all the enthusiasm of 
 a man of the people speaking on bshalf of his brothers, and with all 
 the confidence of one who believes in the convincing force of logic 
 and common sense. All this is very evident in his brilliantly imagina- 
 tive work. Mingled with it is a good deal of that provoking swagger 
 which was noted by Sainte-Beuve as one of his characteristics, and 
 which appears in all his writings. 
 
 Throughout this treatise from first page to last there periodically 
 flashes one telling phrase which sums up bis whole argument, 
 " Property is theft." 
 
 gociale, Banque d 1 fichange ; 1849, Lea Confessions d'un Revolutionnaire ', 1850, 
 Interet et Principal (a discussion between M. Bastiat and M. Proudhon) ; 1858, 
 De la Justice dans la Revolution et dans VEglise (three volumes) ; 1861, La Qutrrt 
 et la Paix ; 1865, De la C apatite politique des Classes ouvrieres. Our quotations 
 are taken from the (Euvres completes, published in twenty -six volumes by Lacroix 
 (1867-70). 
 
 1 " Do you happen to know, madam, what my father was ? Well, he was just 
 an honest brewer whom you could never persuade to make money by selling 
 above cost price. Such gains, he thought, were immoral. ' My beer,' he would 
 always remark, 'costs me so much, including my salary. I cannot sell it for more.' 
 What was the result ? My dear father always lived in poverty and died a poor 
 man, leaving poor children behind him." (Letter to Madame d'Agoult, Corre- 
 tpondance, vol. ii, p. 239.) 
 
 1 It has been said that Proudhon borrowed this formula from Brissot de 
 Warville, the author of a work entitled Recherches philosophiques sur le Droit 
 de Propriety et sur le Vol, consider is dans la Nature et dans la Societe. It was 
 first published in 1780, and reappeared with some modifications in vol. vi, 
 pp. 261 et seq., of his Bibliotheque philosophique du Legislateur (1782). But 
 this is a mistake. Proudhon declares that the work was unknown to him (Justice, 
 vol. i, p. 301) ; and, moreover, the formula is not there at all. Brissot's point of 
 view ia entirely different from Proudhon's. The former believes that in a state 
 of nature the right of property is simply the outcome of want, and disappears 
 when that want is satisfied ; that man, and even animals and plants, has a 
 right to everything that can satisfy his wants, but that the right disappears 
 with the satisfaction of the want. Consequently theft perpetrated under the 
 pressure of want simply means a return to nature. The rich are really the 
 thieves, because they refuse to the culprit the lawful satisfaction of his needs. 
 The result is a plea for a more lenient treatment of thieves. But Brissot is very 
 careful not to attack civil property, which is indispensable for the growth of 
 wealth and the expansion of commerce, although it has no foundation in a 
 natural right (p. 333). There is no mention of unearned income. Proudhon, on the 
 other hand, never even discusses the question as to whether property is based 
 upon want or not. He would certainly have referred to this if he had read Brissot.
 
 PRIVATE PROPERTY AND SOCIALISM 293 
 
 The question then arises as to whether Proudhon regards all 
 property as theft. Does he condemn appropriation, or is it the mere 
 fact of possession that he is inveighing against ? This is how the 
 public at large have viewed it, and it would be useless to deny that 
 Proudhon owes a great deal to this interpretation, and the consequent 
 consternation of the bourgeoisie. But his meaning is quite different. 
 Private property in the sense of the free disposal of the fruits of 
 labour and saving is in his opinion of the very essence of liberty. At 
 bottom this is nothing more than man's control over himself. 1 But 
 why attack property, then ? Property is attacked because it gives 
 to the proprietor a right to an income for which he has not worked. 
 It is not property as such, but the right of escheat, that forms the 
 butt of Proudhon's attack ; and following the lead of Owen and other 
 English socialists, as well as the Saint-Simonians, he directs his charges 
 against that right of escheat which, according to circumstances and 
 the character of the revenue, is variously known as rent, discount, 
 money interest, agricultural privilege, sinecure, etc. 2 
 
 Like every socialist, Proudhon considered that labour alone was 
 productive. 8 Land and capital without labour were useless. Hence 
 the demand of the proprietor for a share of the produce as a return 
 for the service which his capital has yielded is radically false. It 
 is based upon the supposition that capital by itself is productive, 
 whereas the capitalist in taking payment for it literally receives 
 something for nothing. 4 
 
 1 Contradictions, vol. i, pp. 219, 221. 
 
 1 Resume de la Question sociale, p. 29. We meet with the same idea in other 
 passages. " Property under the influence of division of labour has become a mere 
 link in the chain of circulation, and the proprietor himself a kind of toll-gatherer 
 who demands a toll from every commodity that passes his way. Property is the 
 real thief." (Banque d'Schange, p. 166.) We must also remember that Proudhon 
 did not consider that taking interest was always illegal. In the controversy 
 with Bastiat he admits that it was necessary in the past, but that he has found 
 a way of getting rid of it altogether. 
 
 1 We must distinguish between this and Marx's doctrine. Marx believed that 
 all value is the product of labour. Proudhon refuses to admit this. He thinks 
 that value should in some way correspond to the quantity of labour, but that 
 this is not the case in present-day society. Marx wag quite aware of the fact that 
 Proudhon did not share his views (see Misere de la Philosophic). Proudhon 
 follows Rodbertus, who taught that the products only and not their values are 
 provided by labour. 
 
 Propriete, ler Memoire, pp. 131-132. It is true that Proudhon adds that 
 without land and capital labour would be unproductive. But he soon forgets 
 his qualifications when he proceeds to draw conclusions, especially when he 
 comes to give an exposition of the Exchange Bank, where we meet with the 
 following sentence : " Society is built up as follows : All the raw material required 
 is gratuitously supplied by nature, so that in the economic world every product
 
 294 PROUDHON AND THE SOCIALISM OF 1848 
 
 All this is simply theft. His own definition of property is, " The 
 right to enjoy the fruits of industry, or of the labour of others, or to 
 dispose of those fruits to others by will." 1 
 
 The theme is not new, and the line of thought will be re- 
 sumed by Rodbertus among others. The originality of the work 
 consists not so much in the idea as in the brilliance of the exposition, 
 the vehemence of the style, and the verve of the polemics hurled 
 against the old arguments which based property upon labour, upon 
 natural right, or upon occupation.' A German writer a has said that, 
 published in Germany or in England, the book would have passed 
 unnoticed, because in both those countries the defence of property 
 had been much more scientific than in France. 3 
 
 The whole force of the work lies, not in itself, but in the weakness 
 of the opposing arguments, and this fact is quite sufficient to give it 
 a certain permanent value. The treatise sent an echo through the 
 whole world, and its author may be said to have done for French 
 socialism what Lassalle did for German. The ideas set forth are not 
 new, but they are expressed in phrases of wonderful penetration. 
 
 There is also a wealth of ingenious remarks, which, if not, 
 perhaps, true, deserve retention because of their originality. How 
 such spoliation on the part of capitalists and proprietors can continue 
 without a revolt of the working men is a question which has been 
 asked by every writer on theoretical socialism, without its full import 
 ever being realised. Is there not something very improbable in this ? 
 The problem is a curious one, indeed, and requires much ingenuity 
 for its solution. Marx disposed of it by his theory of surplus value. 
 Rodbertus in a simpler fashion showed the opposition between 
 economic distribution as realised in exchange and the social distribu- 
 
 ifl really begot of labour, and capital must be considered unproductive." Else- 
 where he writes j " To work is not necessarily to produce anything." (Solution 
 du Problime. social, CEuvres, vol. vi, pp. 361 et seq., and p. 187.) 
 
 1 Propri&i, ler Mkmoire, p. 133. 
 
 1 L. von Stein, Oeschichte der sozialen Bewtgung in Frankreich, vol. iii, p. 362 
 (Leipzig, 1850). A remarkable piece of work altogether. 
 
 It is true that Proudhon's attack is entirely directed against the ethics of 
 private property. He shows how every justification that is usually offered, such 
 as right of occupation, natural right, or labour, cannot justify the institution as 
 it is to-day. Private property as we know it is confined to the few, whereas 
 on these principles it ought to be widely diffused. Criticism of this kind is not 
 very difficult, perhaps, but it does nothing to weaken the arguments of those 
 who would justify property on the grounds of social utility. The criticism of the 
 Saint-Simonians, who approach it from the point of view of utility and productive- 
 ness rather than from the ethical standpoint, seems to be much more profound. 
 This is why we have regarded them as the critics of private property.
 
 PRIVATE PROPERTY AND SOCIALISM 295 
 
 tion which lurks behind it. Proudhon has his own solution. There 
 is, says he, between master and men continual miscalculation. 1 
 The master pays each workman in proportion to the value of his 
 own individual labour, but reserves for himself the product which 
 results from the collective force of all a product which is altogether 
 superior to that yielded by the sum of their individual efforts. This 
 excessive product represents profits. " It is said that the capitalist 
 pays his workmen by the day. But to be more exact we ought to 
 say that he pays a per diem wage multiplied by the number of 
 workmen employed each day which is not the same thing. For 
 that immense force which results from union and from the harmonious 
 combination of simultaneous efforts he has paid nothing. Two 
 hundred grenadiers can deck the base of the Louqsor statue in a few 
 hours, a task which would be quite impossible for one man though 
 he worked two hundred days. According to the capitalist reckoning 
 the wages paid in both cases would be the same." 2 " And so the 
 worker is led to believe that he is paid for his work, whereas in 
 reality he is only partly paid for it. Even after receiving his wage 
 he still retains a right of property in the things which he has pro- 
 duced." 8 His explanation, though very subtle, is none the less 
 erroneous. 
 
 The appearance of the pamphlet made Proudhon famous, not 
 merely in the eyes of the public, who knew little of him beyond his 
 famous formula, but also in the opinion of the economists. Blanqui 
 and Gamier, among others, interested themselves in his work. ** It 
 is impossible to have a higher opinion of anyone than I have of 
 you," writes the former. 4 Blanqui by his favourable report to the 
 Academy of Moral Sciences was instrumental in thwarting the 
 legal proceedings which the Minister of the Interior was anxious 
 to take against Proudhon. And it was upon Garnier's advice that 
 the publisher Guillaumin, although a strong adherent of orthodox 
 economics, consented to issue a new work by Proudhon in 1846. 
 The book was entitled Les Contradictions 6conomiques, and Guillaumin 
 was not a little startled by it. 6 
 
 1 "This is the fundamental idea of my first Mbnoire." (Quoted by Sainte- 
 Beuve, P. J. Proudhon, p. 90.) Later on he complains that the suggestion was 
 never even discussed. 
 
 1 Propri&e, ler M&moire, p. 94. 
 
 1 Ibid., p. 91. 
 
 Blanqui's letter dated May 1, 1841, in reply to a communication from 
 I'roudhon concerning the second Mimoire on property. 
 
 1 Cf. Sainte-Beuve, P. J. Proudhon, pp. 202, 203 ; and see on this point 
 Proudhon's amusing letters to Guillaumin (Correspondance, vol. ii).
 
 296 PROUDHON AND THE SOCIALISM OF 1848 
 
 The sympathy of the economists is easily explained. They 
 realised from the first that Proudhon was a vigorous opponent of 
 their views, but it was not long before they discovered that he 
 was an equally resolute critic of socialism. Let us briefly examine 
 his attitude with regard to the latter. 
 
 No one has ever referred to socialists in harsher terms. " The 
 Saint-Simonians have vanished like a masquerade." 1 " Fourier's 
 system is the greatest mystification of our time." 8 To the com- 
 munists he writes as follows : " Hence, communists ! Your presence 
 is a stench in my nostrils and the sight of you disgusts me." Else- 
 where he says : " Socialism is a mere nothing. It never has been 
 and never will be anything.'' * The violence of his attitude towards 
 his predecessors springs from a fear of being confused with them. 
 The procedure is intended to put the reader on his guard against 
 all equivocation, and to afford him valuable preparation for appreciat- 
 ing Proudhon's solutions by showing how utterly impossible the 
 other solutions are. 
 
 His attack upon the socialists roughly amounts to a charge of 
 failure to realise that the destruction of the present regime would 
 involve taking a course in the opposite direction. The difficult 
 problem which he set out to solve was not merely the suppression of 
 existing economic forces, but also their equilibration. 4 He never 
 contemplated " the extinction of such economic forces as division 
 of labour, collective effort, competition, credit, property, or even 
 
 1 Propriety ler Memoir e, p. 203. 
 
 a An article in Le Peuple, in 1848. Proudhon's attacks are more especially 
 directed against Fourier. Fourier's was at this time the only socialist school 
 that had any influence, and this was largely due to the active propaganda of 
 Victor Considerant. See Contradictions, vol. ii, p. 297, and Propriete, ler Memoire, 
 pp. 153 et seq. 
 
 1 Contradictions, vol. ii, p. 285. For the attack on Cabet, Louis Blanc, and 
 the communists see the whole of chap. 12 of the Contradictions. Louis Blanc 
 " has poisoned the working classes with his ridiculous formulae " (Idee generate 
 de la Revolution, p. 108). Louis Blanc himself is summed up as follows : " He 
 seriously thought that he was the bee of the Revolution, but he turned out 
 to be only a grasshopper." (Ibid.) 
 
 4 " I believe that I am the first person possessed of a full knowledge of the 
 phenomena in question who has dared to uphold the doctrine that instead of 
 restraining economic forces whose strength has been so much exaggerated we 
 ought to try to balance them against one another in accordance with the little 
 known and less perfectly understood principle that contraries, far from being 
 mutually destructive, support one another just because of their contrary nature." 
 (Justice, vol. i, pp. 265-266. ) The same idea also finds expression on pp. 302-303. 
 Elsewhere he remarks that what society is in search of is a way of balancing the 
 natural forces that are contained within itself (Revolution demontrie par It Coup 
 d'Etat, p. 4.1).
 
 PRIVATE PROPERTY AND SOCIALISM 297 
 
 economic liberty." l His chief concern was to preserve them, but 
 at the same time to suppress the conflict that exists between 
 them. The socialists aim merely at destruction. For com- 
 petition they would substitute an associative organisation of 
 labour; instead of private property they would set up community 
 of goods * or collectivism ; instead of the free play of personal 
 interest they would, according to Fourier, substitute love, or love 
 and devotion, as the Saint-Simonians put it, or the fraternity of 
 Cabet. But none of these satisfies Proudhon. 
 
 He dismisses association and organisation as being detrimental 
 to the liberty of the worker. 8 Labour's power is just the result of 
 " collective force and division of labour." Liberty is the economic 
 force par excellence. " Economic perfection lies in the absolute 
 independence of the workers, just as political perfection consists in 
 the absolute independence of the citizens." * " Liberty," he remarks 
 in an address delivered to the electors of the department of the Seine 
 in 1848, " is the sum total of my system liberty of conscience, 
 freedom of the press, freedom of labour, of commerce, and of teaching, 
 the free disposal of the products of labour and industry liberty, 
 
 1 " Division of labour, collective force, competition, exchange, credit, property, 
 and even liberty these are the true economic forces, the raw materials of all 
 wealth, which, without actually making men the slaves of one another, give entire 
 freedom to the producer, ease his toil, arouse his enthusiasm, and double his 
 produce by creating a real solidarity which is not based upon personal considera- 
 tions, but which binds men together with ties stronger than any which sympa- 
 thetic combination or voluntary contract can supply." (Idee gknk.ra.le. de la 
 Rivolution au XIX' Siicle, p. 95.) The economic forces are somewhat differently 
 enumerated in chap. 13 of La Capar.ite da Classes ouvrieres. Association and 
 mutuality are mentioned ; but while recognising the prestige of the word " asso- 
 ciation," especially among working men, Proudhon concludes that the only real 
 association is mutuality not in the sense of a mutual aid society, which he 
 thinks is altogether too narrow. 
 
 1 It is true that Fourier was not a communist. Proudhon shows that on the 
 one hand his Phalanstere would abolish interest, while it would give a special 
 remuneration to talent on the other, simply because " talent is a product of society 
 rather than a gift of nature." (Proprieti, ler Mbnoire, p. 156.) 
 
 * Proudhon's opposition to the principle of association is very remarkable. 
 He refers to it more than once, but especially in the Idee generate de la Revolu- 
 tion. " Can association be regarded as an economic force ? For my own part I 
 distinctly say, No. By itself it is sterile, even if it does not check production, 
 because of the limits it puts upon the liberty of the worker." (P. 89.) " Associa- 
 tion means that everyone is responsible for someone else, and the least counts as 
 much as the greatest, the youngest as the oldest. It gets rid of inequality, 
 with the result that there is general awkwardness and incapacity." (Ibid.) 
 
 ' La Revolution demontree par It Coup d'Etat, pp. 53, 54. Elsewhere: "When 
 you speak of organising labour it seems as if you would put out the eyes of 
 liberty." (Organisation du Credit el de I'fichange, (Xuvrts, vol. vi, p. 01.)
 
 298 PROUDHON AND THE SOCIALISM OF 1848 
 
 infinite, absolute, everywhere and for ever." He adds that his is 
 ** the system of '89," and that he is preaching the doctrines of 
 Quesnay, of Turgot, and of Say. Indeed, it would not be difficult 
 to imagine ourselves reading the Classical rhapsodies concerning the 
 advantages of Free Trade over again. 1 
 
 Communism as a juridical system is rejected no less ener- 
 getically. There is no suggestion of suppressing private property, 
 which is the necessary stimulant of labour, the basis of family 
 life, and indispensable to all true progress. His chief concern 
 is to make it harmless and toplace it at the disposal of everyone. 2 
 " Communism is merely an inverted form of private property. 
 Communism gives rise to inequalities, but of a different character 
 from those of property. Property is the exploitation of the weak by 
 the strong, communism of the strong by the weak." 3 It is still 
 robbery. ** Communism," he exclaims, " is the religion of misery." * 
 " Between the institution of private property and communism there 
 is a world of difference." * 
 
 Racial devotion or fraternity as possible motives for action are 
 not recognised. They imply the sacrifice and the subordination of 
 one man to another. All men have equal rights, and the freer 
 exercise of those rights is a matter of justice, not of fraternity. 
 Proudhon thinks the axiom so very evident that he takes no trouble 
 to explain it, but merely gives us a definition of justice. In his first 
 MSmoire it is defined as " a kind of respect spontaneously felt and 
 reciprocally guaranteed to human dignity in any person and under 
 
 1 Programme rivolutionnaire. To the electors of the Seine, in the Repre- 
 sentant du Peuple. ((Euvres, vol. xvii, pp. 45, 46.) 
 
 1 " I should like everybody to have some property. We are anxious that the^ 
 should have property in order to avoid paying interest, because exorbitant 
 interest is the one obstacle to the universal use of property." (Le Peuple, 
 September 2, 1849.) 
 
 8 ProprUU, ler Memoir e, p. 204. 
 
 4 Contradictions, vol. ii, p. 203. 
 
 Organisation du Credit et de la Circulation, p. 131. Elsewhere s " To adopt 
 Hegelian phraseology, the community is the first term in social development 
 the thesis ; property the contradictory term the antithesis. The third term 
 the synthesis must be found before the solution can be considered complete." 
 (Propriete, ler Mbmoire, p. 202.) That term will be possession pure and simple 
 the right of property with no claim to unearned income. " Get rid of property, 
 but retain the right of possession, and this very simple change of principle will 
 result in an alteration of the laws, the method of government, and the character 
 of a nation's economic institutions. Evil of every kind will be entirely swept 
 away." Proudhon employed Hegelian terminology as early as 1840, four 
 years before Karl Griin's visit to Paris. For Proudhon's relation to Griin sea 
 Sainte-Beuve's P. J. Proudhon.
 
 PRIVATE PROPERTY AND SOCIALISM 299 
 
 all circumstances, even though the discharge of that feeling exposes 
 us to some risk." 1 
 
 His juscice is tantamount to equality. If we apply the definition 
 to the economic links which bind men together, we find that the 
 principle of mutual respect is transformed into the principle of 
 reciprocal service.* Men must be made to realise this need for recip- 
 rocal service. It is the only way in which equality can be respected. 
 " Do unto others as you would that others do unto you " this 
 principle of justice is the ethical counterpart of the economic 
 precept of mutual service. 8 Reciprocal service must be the new 
 principle which must guide us in rearranging the economic links of 
 society. 
 
 And so a criticism of socialism helps Proudhon to define the 
 positive basis of his own system. The terms of the social problem 
 as it presents itself to him can now be clearly followed. On the one 
 hand there is the suppression of the unearned income derived from 
 property a revenue which is in direct opposition to the principle 
 of reciprocal service. On the other hand, property itself must be 
 preserved, liberty of work and right of exchange must be secured. 
 In other words, the fundamental attribute of property must be 
 removed without damaging the institution of property itself or 
 endangering the principle of liberty.* 
 
 It is the old problem of how to square the circle. The extinction 
 of unearned incomes must involve the communal ownership of the 
 instruments of production, although Proudhon did not seem to think 
 so. Hitherto the reform of property had been attempted by attack- 
 ing the production and distribution of wealth. No attention was 
 ever paid to exchange. But Proudhon thought that in the act of 
 exchange inequality creeps in and a new method of exchange is 
 needed. Towards the end of the Contradictions iconomiques 
 he gives us an obscure hint of the kind of reform to be aimed at. 
 After declaring that nothing now remains to be done except " to 
 sum up all contradictions in one general equation," he proceeds to 
 ask what particular form that equation is to take. We have already, 
 
 1 Justice dans la Rivolviion, vol. i, pp. 182-183. 
 
 1 Ibid., p. 269. " It is easy to show how the principle of mutual respect is 
 logically convertible with the principle of reciprocal service. If men are equal 
 in the eyes of justice they must also have a common necessity, and whoever 
 would place his brothers in a position of inferiority, against which it is the chief 
 duty of society to fight, is not acting justly." 
 
 * This idea of mutual service is further developed, especially in Organisation 
 du Credit etdela Circulation (CEuvres, vol. vi, pp. 92-93), and in Idle gtncrale, p. 97. 
 
 That is how the problem is put in the preface to the first Mbnoire.
 
 300 PROUDHON AND THE SOCIALISM OF 1848 
 
 he remarks, been permitted a glimpse of it. " It must be a law 
 of exchange based upon a theory of mutual help. This theory of 
 mutualism that is, of natural exchange is from the collective 
 point of view a synthesis of two ideas that of property and that of 
 communism." x No further definition is attempted. In a letter 
 written after the publication of the Contradictions he still refers to 
 himself as a simple seeker, and states that he has a new book in 
 preparation, in which these propositions are to be further developed. 
 
 About the same time he had laid out his plans for active propa- 
 ganda in the press. But the Revolution of 1848 threw him into the 
 miUe of party politics and hastened the publication of his theories. 
 
 In order to give a better idea of the place occupied by Proudhon's 
 ideas, and to show how they were connected with the socialist 
 experiments of the time, we must say a few words about the Revolu- 
 tion itself. 
 
 II : THE REVOLUTION OF 1848 AND THE DISCREDIT 
 OF SOCIALISM 
 
 SOCIALISTS of all shades of opinion, who from 1830 to 1840 had been 
 advocating radical reforms, were given a unique opportunity of 
 putting their theories to the test during the Revolution of 1848. 
 During the four months (February to June) which preceded the 
 terrible ruin of the socialist Republic by the bourgeoisie projects of 
 all kinds which for many years had been discussed in books and 
 newspapers appeared to be on the point of bearing fruit. For a 
 number of weeks nothing seemed impossible. " The right to work," 
 "organisation of labour," and "association," instead of being so 
 many formulas, were by a mere stroke of the magic wand to be 
 translated into realities. 
 
 Enthusiasts were not wanting to attempt this task of trans- 
 formation, but, alas ! only to find every scheme tumble into ruins. 
 Every formula, when put to the test, was found to be void. The 
 malevolence of some people, the impatience of others, the awkward- 
 ness and haste of the promoters even, made the experiments odious 
 and ridiculous. Public opinion was at last thoroughly wearied and 
 all the reformers were indiscriminately condemned. 
 
 The year 1848 is accordingly a memorable one in the history of 
 
 social ideas. The idealistic socialism of Louis Blanc, of Fourier, and 
 
 of Saint-Simon was definitely discredited. Bourgeois writers thought 
 
 that it was utterly destroyed. Reybaud, who contributed the 
 
 1 Contradiction*, vol. ii, p. 414.
 
 THE REVOLUTION OF 1848 801 
 
 article on Socialism to the Dictionnaire cTEconomie politique (edited 
 by Coquelin and Guillaumin) in 1852, writes as follows : " To speak 
 of socialism nowadays is to deliver a funeral oration. It has 
 exhausted itself. The vein is worked out. Should the human 
 mind in its vertigo ever take it up again it will be in a different form 
 and under the influence of other illusions." 
 
 It fared scarcely better at the hands of subsequent socialists. Marx 
 referred to all his predecessors under the rather misleading title of 
 Utopians, and against their fantastic dreams he set up the " scientific 
 socialism " of Das Kapital. Between the two epochs lies a distinct 
 cleavage, marked by the Revolution of 1848. We must briefly see 
 how this was brought about, and rapidly review the more important 
 experiments that were made. 
 
 First of all there is "the right to work." Fourier's formula, 
 which was developed by Considerant and adopted by Louis Blanc 
 and other democrats, became extremely popular during the reign 
 of Louis Phillipe. Proudhon speaks of it as the only true formula 
 of the February Revolution. ** Give me the right to work," he 
 declares, " and I will give you the right of property." * 
 
 Workmen thought that the first duty of the Provisional Govern- 
 ment was to give effect to this formula. On February 25 a 
 small group of Parisian workmen came to the Hotel de Ville to 
 urge their claims, and the Government hastened to recognise them. 
 The decree drawn up by Louis Blanc was as follows : " The Pro- 
 visional Government of the French Republic undertakes to guarantee 
 the existence of every worker by means of his labour. It further 
 undertakes to give work to all its citizens." The following day 
 another decree announced the immediate establishment of national 
 workshops with a view to putting the new principle into practice. 
 All that was necessary to gain admission was to have one's name 
 inscribed in one of the Parisian municipal offices. 
 
 Louis Blanc in his book of 1841 had demanded the establishment 
 of " social " workshops. Public opinion, misled by the similarity of 
 names, and encouraged to persist in its error by the enemies of 
 socialism, thought that the national workshops were the creation 
 of Louis Blanc. Nothing could be more incorrect. The " social " 
 workshops, as we know, were to engage in co-operative production, 
 whereas the national workshops were to provide employment for 
 idlers. Similar institutions had been established during every crisis 
 bet ween 1790 and 1830, generally under the name of " charity works." 
 Moreover, it was Marie, the Minister of Public Works, and not 
 Le Droit au Travail et It Droit de Proprittt, pp. 4, 5, 58 (1848).
 
 302 PROUDHON AND THE SOCIALISM OF 1848 
 
 Louis Blanc, who organised them. Far from providing work as the 
 socialists had hoped, the Government soon realised that the work- 
 shops afforded an admirable opportunity for binding the workmen 
 together into brigades which might act as a check upon the socialistic 
 tendencies of the Luxembourg Commission, then presided over by 
 Louis Blanc. The workshops were placed under the management 
 of fimile Thomas, the engineer, who was an avowed opponent of 
 the scheme. In his Histoire des Ateliers nationaux, written in 1849, 
 he tells us how they were controlled by him in accordance with the 
 wishes of the anti-socialist majority of the Provisional Govern- 
 ment. 1 
 
 But they were mistaken in their calculations. Those who 
 thought that the national workshops could be used for their own 
 political ends were soon undeceived. The Revolution greatly increased 
 the number of idlers, already fairly considerable as the result of the 
 economic crisis of 1847. Moreover, the opening of the workshops 
 brought the workmen from the provinces into Paris. Instead of the 
 estimated 10,000, 21,000 had been enrolled by the end of March, 
 and by the end of April there were 99,400. They were paid two 
 francs a day while at work, and a franc when there was no work 
 for them. In a very short time it became impossible to find employ- 
 ment for so many. The majority of them, whatever their trade, 
 were employed upon useless earthworks, and even these soon proved 
 inadequate. Discontent soon became rife among this army of un- 
 fortunate workers, humiliated by the nature of the ridiculous labour 
 upon which they were employed, and scarcely satisfied with the 
 moderate salary which they received. The wages paid, however, were 
 
 1 Every historian is agreed on this point, which Louis Blanc has dealt with 
 at great length in his Histoire de la Revolution de 1848 (chap. 11). The testi- 
 mony of contemporaries, especially Lamartine in his Histoire de la Revolution 
 de 1848 (vol. ii, p. 120), is also very significant. " These national workshops were 
 placed under the direction of men who belonged to the anti-socialist party, whose 
 one aim was to spoil the experiment, but who managed to keep the sectaries of 
 the Luxembourg and the rebels of the clubs apart until the meeting of the 
 National Assembly. Paris was disgusted with the quantity and the character 
 of the work accomplished, but it little thought that these men had on more 
 than one occasion defended and protected the city. Far from being in the pay 
 of Louis Blanc, as some people seem to think, they were entirely at the beck and 
 call of bis opponents." E. Thomas in his Histoire des Ateliers nationaux (pp. 146- 
 147) relates how Marie sent for him on May 23 and secretly asked him whether 
 the men in the workshops could be relied upon. " Try to get them strongly 
 attached to you. Spare no expense. If there is any need we shall give you plenty 
 of money." Upon Thomas asking what was the purpose of all this, Marie replied : 
 "It is all in the interest of public safety. Make sure of the men. The day is 
 not far distant when we shall need them in the streets,"
 
 THE REVOLUTION OF 1848 803 
 
 more than enough for the kind of work that was being done. The 
 workshops became centres of political agitation, and the Government, 
 thoroughly alarmed, and acting under pressure from the National 
 Assembly, was constrained to abandon them. 
 
 Suddenly, on June 21, a summons was executed upon all men 
 between seventeen and twenty-five enrolled in the shops, ordering 
 them to join the army or to leave for the country, where more digging 
 awaited them. The exasperated workmen rose in revolt. Rioting 
 broke out on June 23, but it was crushed in three days. Hundreds 
 of the workers died in the struggle, and the country was terrorised 
 into reaction. 
 
 That simple logic which is always so characteristic of political 
 parties held the principle of " the right to work " responsible for this 
 disastrous experience, and it was definitely condemned. This is 
 quite clear from the constitutional debates in the National Assembly. 
 The constitutional plan laid down by Armand Marrast on June 19, 
 a few days before the riots, recognised " the right to work." " The 
 Constitution," says Article 2, " guarantees to every citizen liberty, 
 equality, security, instruction, work, property, and public assist- 
 ance." But in the new plan of August 29 after the experience of 
 June the article disappeared. The right to relief only was recog- 
 nised. In the discussion on the article an amendment re-establishing 
 " the right to work " was proposed by Mathieu de la Drdme. A 
 memorable debate followed, in which Thiers, Lamartine, and Tocque- 
 ville opposed the amendment, while the Radical Republicans Ledru- 
 Rollin, Cremieux, and Mathieu de la Drome defended it. 1 The 
 socialists had become extinct. Louis Blanc was in exile, Consideiant 
 ill, while Proudhon was afraid of startling his opponents and of 
 compromising his friends. Besides, the Assembly had already made 
 up its mind. The amendment was defeated, and Article 8 of the 
 preamble to the Constitution of 1848 runs as follows : ** The 
 Republic by means of friendly assistance should provide for its 
 necessitous citizens, either by giving them work as far as it can, 
 or by directly assisting those who are unable to work and have no 
 one to help them." 
 
 During the reign of the July Monarchy " the organisation of 
 labour " was another phrase which divided the honours with " the 
 right to work." With the spread of the Revolution came a similar 
 menacing demand for its realisation. By a strange coincidence the 
 author of this formula was also a member of the Provisional Govern- 
 
 1 These addresses were afterwards published in a volume entitled Le Droit 
 au Travail.
 
 304 PROUDHON AND THE SOCIALISM OF 1848 
 
 ment. And so when on February 28, three days after the recognition 
 of " the right to work," the workers came in a body and claimed the 
 creation of a Minister of Progress, the organisation of labour, and 
 the abolition of all exploitation, Louis Blanc immediately seized the 
 opportunity to urge his unwilling colleagues to accede to their 
 demands. He himself had pressed the Government to take the 
 initiative in social reform, and now that the Revolution had made 
 him a member of the Government how could he escape his responsi- 
 bility ? After some difficulty his colleagues succeeded in persuadind 
 him to accept the alternative of a Government commission on labour, 
 of which he was to be president. The commission was entrusted 
 with the task of drawing up the proposed reforms, which were after- 
 wards to be submitted to the National Assembly. To mark the 
 contrast between the old and the new regime the commission carried 
 on its deliberations in the Palais du Luxembourg, where the Chambre 
 des Pairs formerly sat. 
 
 The Luxembourg commission was composed of representatives 
 elected by workmen and masters, three for each industry. The 
 representatives met in a general assembly to discuss the reports 
 prepared by a permanent committee of ten workers and an equal 
 number of masters, to which Louis Blanc had added a few Liberal 
 economists and socialists, such as Le Play, Dupont- White, Wolowski, 
 Considdrant, Pecqueur, and Vidal. Proudhon was also invited, but 
 refused to join. As a matter of fact, only the workers took part in 
 the sittings. 
 
 The commission, although it possessed no executive power, 
 might have been of some service. But Louis Blanc, as he himself 
 confessed, regarded it as " a golden opportunity where socialism had 
 at its disposal a tribunal from which it could address the whole of 
 Europe." 1 He still kept up his role of orator and writer, and 
 devoted most of the sittings to an eloquent appeal for the theories 
 already outlined in his Organisation of Labour.* Vidal and Pecqueur 
 undertook the task of elaborating the more definite proposals. In a 
 lengthy report which appeared in the Moniteur 8 they outlined a 
 plan of State Socialism, with workshops and agricultural colonies, 
 
 1 Louis Blanc, Histoire de la Revolution de 1848, vol. ii, p. 135. 
 
 1 See the addresses in his La Revolution de Fevrier au Luxembourg (Paris, 
 1849). 
 
 * Moniteur, April 27, May 2, 3, and 6, 1848. The dismissal of the commission 
 meant an interruption of the Exposi general, but Vidal in his work Vivre en travail- 
 lant I Projets, Voires, et Moyens de Reformer aociales (1848) continued the exposi 
 tion. It contains a plan for agricultural credit, a State land purchase scheme in 
 Order to get rid of rent, a proposal for buying up railways and mines and for
 
 THE REVOLUTION OF 1848 805 
 
 with State depots and bazaars as places of sale. Money in the form 
 of warrants was to be borrowed on the security of goods, and a 
 State system of insurance excepting life policies was to be 
 established. Finally, the Bank of France was to be transformed 
 into a State bank. This was to extend the operation of credit, 
 and to reduce the rate of discount simply to insurance against 
 risk. Vidal and not Pecqueur is obviously the author of the report, 
 for it contains some of the projects that had already appeared in 
 his book De la Repartition des Richesses, 
 
 None of the projects was even discussed by the National 
 Assembly. The only positive piece of work accomplished by Louis 
 Blanc's commission was done under pressure from the workmen. 
 This was the famous decree of March 2, abolishing piece-work 
 and reducing the working day to ten hours in Paris and eleven hours 
 in the provinces. This decree, though it was never put into 
 operation, marks the first rudiments of French labour legislation. 
 Louis Blanc was forced to grant it because the working-class element 
 on the commission refused to take part in its proceedings until they 
 were satisfied on this point. The commission must also be credited 
 with several successful attempts at conciliation. 
 
 Not only did the commission fail to do anything permanent, 
 but its degeneracy into a mere political club thoroughly alarmed 
 the public. It became involved in elections, and even intervened 
 in street riots. It finally took a part in the demonstration of 
 May 15, which, under pretext of demanding intervention in 
 favour of Poland, resulted in an invasion of the National Assembly 
 by the mob. Louis Blanc had already retired. Since the reunion 
 of the National Assembly the Government had been replaced by an 
 executive commission, and Blanc, no longer a supporter of the 
 Government, sent in his resignation on May 13. After that the 
 commission was at an end, and, like the national workshops, 
 it all resulted in nothing save a general discredit of socialist 
 opinion. 
 
 There still remained the " working men's associations." Every 
 socialist writer of the early nineteenth century was agreed on this 
 principle of association. Every reformer, with the exception of 
 Proudhon, 1 who always pursued a path of his own, regarded it as 
 the one method of emancipation. It was quite natural that it should 
 be put to the test. 
 
 erecting cheap dwellings. It affords an interesting example of State Socialism 
 in 1848 which seems to have struck many people then as being very amusing. 
 1 Cf. tupra, p. 297, note 3.
 
 306 PROUDHON AND THE SOCIALISM OF 1848 
 
 In its declaration of February 26 the Provisional Government 
 stated that besides securing the right to work, the workers 
 must combine together before they could secure the full benefit 
 of their labour. The moment Louis Blanc attained to power he 
 sought to guide the energies of the commission in this direction. 
 The " Association " was to be of the nature of a co-operative produc- 
 tive society, supported by the State. Under the influence of Buchez, 
 an old Saint- Simonian, a Republican Catholic and the founder of 
 the newspaper called IS Atelier, there had been formed in 1834 an 
 association of jewellers and goldsmiths. 1 But it was a solitary 
 exception. 
 
 Louis Blanc was more fortunate. He successively founded 
 associations of tailors, of saddlers, of spinners and lace-makers, and 
 he secured Government orders for tunics, saddles, and epaulettes 
 for them. Other associations followed, and by July 5 the 
 National Assembly was sufficiently interested in these experiments 
 to vote the sum of three millions to their credit. A good portion of 
 this sum passed into the hands of mixed associations of masters and 
 men formed with the sole purpose of benefiting by the Government's 
 liberality. The workmen's associations pure and simple, however, 
 received more than a million, and there was not a sou of it left by 
 1849. 
 
 The first co-operative movement inspired by the ideas of 
 Louis Blanc was of short duration. The National Assembly took 
 good care to place the new societies under Ministerial control by 
 appointing a Conseil 6? Encouragement, nominated by the Ministry to 
 fix the conditions under which loans should be granted. The 
 Conseil hastened to publish model regulations which left the associa- 
 tions little scope for internal organisation. So stringent were the 
 rules that several of them were immediately jeopardised, and every 
 society which failed to conform to one of the three models outlined 
 in Article 19 of the Commercial Code was obliged to dissolve. This 
 meant every society which was not nominally a collective society, 
 a joint stock or a limited liability company. By 1855, according 
 to the testimony of Reybaud, there remained only nine out of those 
 subsidised in 1848. Consumers' co-operative societies, that is, the 
 societies which aimed at securing cheap commodities, established 
 at Paris, Lille, Nantes, and Grenoble, were also dissolved. 
 
 And so all these experiments the only ones that had not already 
 brought reformers into discredit were destined to fail in their turn. 
 Their extinction was partly due to political causes, partly to their 
 1 Of. tupra, " Tk? Associative Socialist*."
 
 THE EXCHANGE BANK THEORY 307 
 
 founders, who had not yet been trained in the difficult task of 
 building up such associations. 
 
 The social experiments of 1848 one after another foundered, 
 bringing a distrust of theories in their train. There still remained 
 one other experiment connected with Proudhon's name that of 
 free credit. But it also was destined to fail like the rest. 
 
 Ill : THE EXCHANGE BANK THEORY 
 
 THE Revolution of 1848 did not take Proudhon quite unawares, 
 although he considered the outbreak was rather sudden. He was 
 soon convinced that the real problem to be determined was eco- 
 nomic rather than political, but he also realised that the education 
 of the masses was too backward to permit of a peaceful solution. 
 Proudhon, in this matter at one with his French confreres, had 
 hoped for such a solution. 1 He thought the February Revolution 
 was a child prematurely born. 1 In a striking article in the columns 
 of Le Peuple he gave wistful expression to his fears as he foresaw 
 the Revolution impending. Its solution had been delivered to none 
 and its interpretation baffled the ingenuity of all. 
 
 "I have wept over the poor workman, whose daily bread is already 
 sufficiently uncertain and who has now suffered misery for many 
 years. I have undertaken his defence, but I find that I am powerless 
 to succour him. I have mourned over the bourgeois, whose ruin I 
 have witnessed and who has been driven to bankruptcy and goaded 
 to opposition of the proletariat. My personal inclination is to 
 sympathise with the bourgeois, but a natural antagonism to his 
 ideas and the play of circumstance have made me his opponent. 
 I have gone in mourning and paid penance for the spirit of the 
 old Republic long before there were any signs of its offspring. 
 This Revolution which was to restore the public order merely marks 
 the beginning of a new departure in social revolution which no one 
 understands." s 
 
 But the Revolution having once begun, Proudhon did not feel 
 
 1 " I need hardly say that this measure of fiscal reform [namely, the abolition 
 of private property] must be carried out without any violence or robbery. There 
 must be no spoliation, but ample compensation must bo given." (Reaumi de la 
 Question sociale, p. 27.) 
 
 * Solution du Prdbl&me. social (CEuvrea, vol. vi, p. 32). 
 
 8 CEuvres, vol. xviii, pp. 6-7. See also the letter dated February 26, 1848 
 (Corrupondance, vol. ii, p. 280) : " France will certainly accomplish it, whether 
 it remains a republic or not. It might even be carried out by the present deca- 
 dent Government, at a trifling coat." This thought did not prevent his taking 
 a hand in the Revolution.
 
 308 PROUDHON AND THE SOCIALISM OF 1848 
 
 himself justified in being behindhand. He had been a most severe 
 critic of the existing regime, and he felt that he was bound to 
 attempt a solution of the practical problems which suddenly came 
 to the front. He became a journalist and threw himself whole- 
 heartedly into the struggle. Hitherto he had been content with 
 vague suggestions as to where the evil lay. But now he was anxious 
 to make reform practicable and to fill in the details of the scheme ; 
 and so he invented the Exchange Bank. 
 
 Proudhon's exposition of the scheme is contained in a number 
 of pamphlets, in newspapers, and in his books. 1 The explanations 
 do not always tally, and he is not always happy in stating exactly 
 what he thinks. This explains why he has been so often misunder- 
 stood. We shall try to give a risutni of his ideas before proceeding 
 to criticise them and to compare them with analogous projects 
 formulated both before and after his time. This will help us to 
 understand where the originality of the scheme lay. 
 
 The fundamental principle on which the whole scheme rests is 
 somewhat as follows : Of all the forms of capital which allow of 
 a right of escheat to the product of the worker, whether in the form 
 of rent, of interest, or of discount, the most important is money, 
 for it is only in the form of money that these dues are actually 
 paid. 8 If we could suppress the right of escheat in the case of this 
 universal form of capital in other words, if interest were abolished 
 the right of escheat in every other case would soon disappear. 
 
 Let us suppose that by means of some organisation or other 
 money required for the purchase of land, machinery, and buildings 
 for industrial purposes could be procured without interest. Were 
 this the case the required capital would then be obtained in that 
 way instead of by payment of interest or rent as is the case to-day. 
 
 1 In a pamphlet entitled Organisation du Credit et dela Circulation, and dated 
 March 31, 1848, he expounds the principle of the scheme and indicates some of 
 its general features. The scheme is dealt with in a number of articles contributed 
 to Le Reprisentant du Peuple for April, afterwards published in book form 
 by Darimon, under the title of Resumt de la Question sociale. The plan differs 
 slightly from the statute* of the People's Bank as they appear in vol. vi of the 
 CEuvrcs, but the guiding principle is much the same. A further exposition was 
 given in Le Peuple in February and March 1849, just when the Bank was being 
 founded. There is still another account contained in the volume entitled Interet 
 et Principal : Discussion entre M. Proudhon and M. Bastiat sur V Interet du 
 Capitaux (Paris, 1880). This controversy was carried on in the columns of La 
 Voix du Peuple from October 1849 to October 1850. Proudhon frequently refers 
 to the same idea in his other works, notably in Justice dans la Revolution, rol. i, 
 pp. 289 et seq., and in Idee ginerale, pp. 197 et seq. 
 
 1 See Solution du Probleme tocial, pp. 178, 179.
 
 THE EXCHANGE BANK THEORY 809 
 
 The suppression of money interest would enable the worker to 
 borrow capital gratuitously, and would give him immediate control 
 over all useful capital instead of renting it. All attempts to hold 
 up capital for the sake of receiving interest without labour would 
 thus be frustrated. The right of property would be reduced to 
 mere possession. Exchange would be reciprocal, and the worker 
 would secure all the produce of his labour without having to share 
 it with others. In short, economic justice would be secured. 
 
 This is all very well, but how can the necessary money be 
 obtained without paying interest ? Everything depends upon that. 
 
 Proudhon invites us to consider what money really is. It is a 
 mere medium of exchange which is designed to facilitate the circula- 
 tion of goods. Proudhon, who had hitherto regarded money a 
 capital par excellence, now treats it as a mere instrument of exchange. 
 " Money by itself is of no use to me. I merely take it in order to part 
 with it. I can neither consume it nor cultivate it." x It is a mere 
 medium of exchange, and the interest paid merely covers this cost 
 of circulation. 2 But paper money will fulfil this function quite as 
 well and much more cheaply. Banks advance money in exchange 
 for commodities or supply bills which are immediately transferable 
 into cash. In exchange for this service the banker receives a 
 discount which goes to remunerate the shareholders who have 
 supplied the capital. Why not establish a bank without any capital 
 which, like the Bank of France, will discount goods with bills either 
 circulation or exchange notes? The bills would be inconvertible, 
 and consequently would cost scarcely anything, and there would be 
 no capital to remunerate. 
 
 The service given would be equal to that given by the banks, but 
 would cost a great deal less. All that would be required to ensure 
 the circulation of the bills would be an understanding on the part 
 of the clientele of the new bank that they would accept them as 
 payment for goods. The bearer would thus be certain that they 
 were always immediately exchangeable, just as if they were cash. 
 The clients would lose nothing by accepting them, for the statutes 
 would decree that the bank should never trade in anything except 
 goods actually delivered or under promise of delivery. The notes in 
 circulation would never exceed the demands of commerce. They 
 would always represent goods already produced and actually sold, 
 
 1 Inttrct et Principal, p. 112. 
 
 1 " Money is simply a supplementary kind of capital, a medium of exchange 
 or a credit instrument. If this is the case what claim has it to payment ? To 
 think of remunerating money for the servic* which it gives 1 " (Jbuhp. 113.)
 
 310 PROUDHON AND THE SOCIALISM OF 1S48 
 
 but not yet paid for. 1 Following the example of other banks, the 
 bank would advance to the seller of the goods a sum of money which 
 it would subsequently recover from the buyer. The merchants 
 and manufacturers would obtain not only their circulating capital 
 without payment of interest, but also the fixed capital necessary for 
 the founding of new industries. These advances obtained without 
 interest would enable them to buy and not merely to rent the 
 instruments of production which they needed. 2 
 
 The consequences of a reform of this kind cannot be easily 
 enumerated. Not only would capital be freely placed at the disposal 
 of everyone, but every class distinction would disappear 3 as soon 
 as the worker ceased selling his products at cost price * and govern- 
 ment itself would become useless. The aim of all government is to 
 check the oppression of the weak by the strong. 5 But the moment 
 fair exchange becomes possible, free contract is sufficient to secure 
 this ; there is no longer anyone who is oppressed. All are equally 
 favoured, for the cause of contention has been removed. " Once 
 capital and labour are identified, society will subsist of its own 
 accord, and there will no longer be any need for government." 
 
 1 Cf . Resume de la Question sociale, p. 39. 
 
 1 Moreover, the advances will take the form of discount. The entrepreneur 
 who has some scheme which he wishes to carry out " will in the first place collect 
 orders, and on the strength of those orders get hold of some producer or dealer 
 who has such raw material or services at his disposal. Having obtained the goods, 
 he pays for them by means of promissory notes, which the bank, after taking due 
 precaution, will convert into circulation notes." The consumer is really a sleeping 
 partner in the business, and between him and the entrepreneur there is no need 
 for the intervention of money at all. (Organisation du Credit, (Euvres, vol. vi, 
 p. 123.) Discount was the fundamental characteristic of the bank, and no 
 criticism is directed against this feature of its operations. 
 
 " How to resolve the bourgeoisie and the proletariat into the middle class, the 
 class which lives upon its income and that which draws a salary into a class which 
 has neither revenue nor wages, but lives by inventing and producing valuable 
 commodities to exchange them for others. The middle class is the most active 
 class in society, and is truly representative of a country's activity. This was 
 the problem in February 18.48." (Revolution demontrie par le Coup d'Stat, p. 135.) 
 
 * " Reciprocity means a guarantee on the part of those who exchange com- 
 modities to sell at cost price." (Idee generate de la Revolution, pp. 97-98.) 
 
 " The very existence of the State implies antagonism or war as the essential 
 or inevitable condition of humanity, a condition that calls for the intervention of 
 a coercive force which shall put an end to the struggle continually waging between 
 the weak and the strong." ( Voix du Peuple, December 3, 1849 ; (Euvres, vol. xix, 
 p. 23.) " When economic development has resulted in the transformation of society 
 even despite itself, then the weak and the strong will alike disappear. There will 
 only be workers ; and industrial solidarity, and a guarantee that their products will 
 be told., will tend to make them equal both in capacity and wealth." (Ibid., p. 18.)
 
 THE EXCHANGE BANK THEORY 811 
 
 Government has " its origin and its whole being immersed in the 
 economic system." Proudhon's system means anarchy the absence 
 of government. 1 
 
 Such is Proudhon's plan, and such its consequences. To under- 
 stand its full significance we must inquire whether (1) the substitu- 
 tion of exchange notes for bank-notes payable at sight is practicable, 
 and, (2) supposing it to be practicable, if it is likely to have the effects 
 anticipated by its author. 
 
 Proudhon states that his system merely involves the universal 
 adoption of exchange notes. 2 The Exchange Bank would merely 
 append the manager's signature against the particular commodity 
 discounted. But the issue of bank-notes at the present time involves 
 nothing more than this. Instead of the bill of exchange which it now 
 buys, and which enjoys only a limited circulation because the signa- 
 tories have only a very limited credit, it is proposed that the Bank 
 of France should substitute a note bearing its own signature, which 
 is universally known and testifies to an illimitable amount of credit. 
 In what respects, then, does Proudhon's circulating medium differ 
 from a bank-note ? It differs simply in the fact that the signature of 
 the Bank of France involves a promise of reimbursement in metallic 
 money, a commodity universally accepted and demanded, while 
 Proudhon's Exchange Bank enters into no such definite agreement, 
 but merely undertakes to accept it in lieu of payment. 
 
 Theoretically, perhaps, the difference may appear insignificant, 
 
 1 " Consequently we consider ourselves anarchists and we have proclaimed 
 the fact more than once. Anarchy is suitable for an adult society just as hierachy 
 is for a primitive one. Human society has progressed gradually from hierarchy 
 to anarchy." (CEuvres, vol. xix, p. 9.) A little later, in Idee gknkralt de la 
 Revolution, he states that the aim of the Revolution was " to build up a property 
 constitution and to dissolve or otherwise cause the disappearance of the political 
 or government system by reducing or simplifying, by decentralising and suppress- 
 ing the whole machinery of the State." This idea was borrowed from Saint- 
 Simon, and Proudhon has acknowledged the debt in his Idie gkntrale.. This 
 conception of industrial society rendering government useless or reducing it to 
 harmless proportions is a development, though perhaps somewhat extravagant, 
 of the economic Liberalism of J. B. Say. The first edition of the M emoire tur 
 la Proprieti contains an admission of anarchical tendencies. " What are you, 
 then ? I am an anarchist. I understand your doubts on this question. You 
 think that I am against the Government. That is not so. You asked for my 
 confession of faith. Having duly pondered over it, and although a lover of order, 
 I have come to the conclusion that I am in the fullest sense of the word an 
 anarchist." 
 
 2 " The whole problem of circulation is how to make the exchange note uni- 
 versally acceptable, how to secure that it shall always be exchangeable for goods 
 and services and convertible at sight." (Organisation du Credit, (Euvres, vol. ri, 
 pp. 113, 114.)
 
 812 PROUDHON AND THE SOCIALISM OF 1848 
 
 since the signatures are the only guarantee of the solvency of the 
 notes of the Bank of France and the Exchange Bank alike. 
 But in practice it is enormous. The certainty that the note can 
 be exchanged for money gives it a wide currency and makes it 
 acceptable to many people who rely implicitly upon their confidence 
 in the bank. They need give no thought to the question of its 
 solvency. A mere circulating medium, on the other hand, in addition 
 to transferring a claim to certain goods belonging to clients of the 
 bank, involves a certain amount of confidence in the solvency of 
 those clients a confidence not always easily justified. A note of 
 this kind will only circulate among the bank's clientele. It will 
 never reach the general public as the bank-note actually does. The 
 clients themselves will keep their engagements just so long as the 
 bank continues to discount goods that have actually been delivered 
 and never refuses payment when it falls due. Failing this, the 
 exchange notes, instead of regularly returning to the bank, will 
 remain in circulation. A alight crisis or a little tension, and many 
 of the clients will become insolvent. The total nominal value of 
 the exchange notes will quickly surpass the actual value of the goods 
 which they represent. There will be a rapid depreciation, and clients 
 even will refuse to take them. 
 
 It is just possible to conceive of the circulation of such exchange 
 notes, but the area of circulation will be a very limited one, and it 
 will be utterly impossible if all the clients are not perfectly solvent. 
 
 Let us, however, suppose that the practical difficulties have 
 been overcome, and that the exchange notes are already in circulation. 
 Interest will not disappear even then, and herein lies the essential 
 weakness of the system. 
 
 Why does the Bank of France charge a discount ? Is it, as 
 Proudhon suggests, because it supplies cash in return for a bill of 
 exchange, so that "the seigneurial right of discount" * would dis- 
 appear with the adoption of a non-metallic currency ? The bank 
 charges discount simply because it gives a certain quantity of 
 merchandise immediately exchangeable in return for a bill of 
 exchange falling due some months hence. It gives a tangible 
 commodity in exchange for a promise a present good for a future. 
 What the bank takes is the difference between the present value ol 
 the bill of exchange and its value when it falls due. It is not the 
 mere whim of the banker or the employment of a particular kind of 
 money that gives rise to discount. It belongs to the very nature 
 of things. Proudhon notwithstanding, a sale for cash and a sale 
 1 Organisation du Credit.
 
 THE EXCHANGE BANK THEORY 313 
 
 with future payment must remain two different operations, 1 at least 
 as long as the actual possession of a good is judged to be more 
 advantageous than its future possession. 
 
 This difference, even in the case of the Exchange Bank, would 
 very soon reappear. The exchange notes would represent goods 
 which were to be sold at a certain date. Although the Bank may 
 refuse to discount, this will not lessen the advantage enjoyed by 
 those merchants who are paid in cash. In order to secure this 
 advantage they will enter into agreement with those buyers who pay 
 cash either in the form of goods or of precious metals (which are, 
 after all, commodities), granting a slight rebate on the paper price. 
 There would thus be two sets of prices, the paper prices of goods 
 sold for future payment and the money price of goods sold for cash. 
 The first would be higher than the second, and the difference 
 refused by the banks would be pocketed by the sellers. Money 
 interest would then reappear under a new form. 
 
 To this Proudhon would reply that the clients of the bank, under 
 the terms of their agreement, are debarred from taking any such 
 premiums. Of course, if they remained faithful to their promises 
 interest or discount would be suppressed ; but this would result, not 
 from the organisation of the Exchange Bank, but because of mutual 
 agreement. This would be a purely moral reform requiring no 
 banking contrivance to aid it, but one in which progress must 
 inevitably be very slow. 
 
 The Bank of Exchange failing to suppress discount, or to check 
 the right of escheat in general, Proudhon's other conclusions fall to 
 the ground. 
 
 His theoretical error consists in his treating money at one 
 moment as capital par excellence, at another as a mere medium of 
 exchange having no value. He forgets that money is desired not 
 merely for purposes of exchange, but also as a store of value, as the 
 proper instrument for hoarding and saving ; and although the 
 exchange notes may replace it in one respect, they fail in another. 
 We may increase the circulating media at pleasure, but we cannot 
 multiply our capital. Money may be replaced by goods, but this will 
 not add a single franc to the capital which already exists in society, 
 of which money itself is a part. Nor will it lessen the superior value 
 
 1 Proudhon always maintained that his reform merely consisted in transform- 
 ing a credit sale into a cash one. But he might as well have said that black was 
 white. Far from giving mutual benefit, the borrower will be the one who will gain 
 most advantage. Elsewhere he says that to give credit is merely to exchange. 
 This is true enough, but discount is employed just to equalise different credit 
 transactions. 
 
 E.D. L
 
 314 PROUDHON AND THE SOCIALISM OF 1848 
 
 of present as compared with future goods a superiority which 
 gives rise to the phenomenon of interest. The only result of multi- 
 plying the exchange notes without increasing the amount of social 
 capital would be to raise prices as a whole, the price of land, houses, 
 and machinery as well as the price of consumption goods. Capital 
 would be lent as before, and being less plentiful the high rate of 
 interest or rent would tend to maintain the high level of prices, and 
 these would in turn be still further increased a strange outcome of 
 a reform intended to lower them ! Proudhon, having exaggerated 
 the evil effects of gold, now accepts Say's formula too literally. 
 J. B. Say allowed himself to be led into error by his own formula 
 that " Goods exchange for goods," and it is interesting to note that 
 the Exchange Bank is the logical, though somewhat paradoxical, 
 outcome of the reaction against the Mercantilist ideas concerning 
 money which can be traced to Adam Smith and the Physiocrats. 
 
 This does not imply that Proudhon's idea is devoid of truth. 
 The false ideal of free credit contains the germ of a true ideal, namely, 
 mutual credit. The Bank of France is a society of capitalists whose 
 credit is established by the public who accept their notes. They 
 really deal in public credit. Proudhon saw clearly enough that 
 their notes are ultimately guaranteed by the public. The public are 
 the true signatories of these commercial goods. Were the public 
 insolvent the bank would never recover its advances, which really 
 constitute the security for the bills. The shareholders' capital is 
 only a supplementary guarantee. The Comte Mollien, the Financial 
 Minister of Napoleon I, declared that in theory a bank of issue 
 should be able to operate without any capital. The public lends 
 money to itself through the intermediary, the bank. Why not 
 operate without the intermediary ? Why not eliminate the entre- 
 preneur of credit just as the industrial or commercial entrepreneur 
 is eliminated in the case of the co-operative society ? Discount 
 would not disappear altogether, perhaps, but the rate of discount 
 for borrowers would be diminished in proportion to the extent 
 to which they stood to gain as lenders. This is the principle of 
 the mutual credit society, where the initial capital is almost 
 entirely superseded, its place being taken by the joint liability 
 of the co-operators. Proudhon's initial conception seems to be 
 reducible to this very simple idea. 1 
 
 1 In the Idle genkrale, de la Revolution au XI X e Siedc, p. 198 : " The citizens 
 of France have a right to demand and if need be to join together for the establish- 
 ment of bakehouses, butchers' shops, etc., which will sell them bread and meat 
 and other articles of consumption of good quality at a reasonable price, taking
 
 THE EXCHANGE BANK THEORY 315 
 
 It seems that Proudhon was merely following the idea of a 
 co-operative credit bank, just as in other parts of the work he copies 
 other forms of co-operation without ever showing much sympathy 
 for the principle itself. 1 
 
 In addition to a correct conception of the value of mutual credit, 
 there runs throughout his whole system a more fundamental idea 
 which helps to distinguish it from other forms of official socialism 
 which arose either before or after his time. This is his profound 
 belief in individual liberty as the indispensable motive of economic 
 activity in industrial societies. He realised better than any of his 
 predecessors that economic liberty is a definite acquisition of 
 modern societies, and that every true reform must be based on 
 liberty. He has estimated the strength of spontaneous economic 
 forces more clearly than anyone else. He has demonstrated 
 their pernicious effects, but at the same time he has recognised, 
 as Adam Smith had done, that this was the most powerful lever of 
 progress. His passionate love of justice explains his hatred of 
 private property, and his jealous belief in liberty aroused his hostility 
 to socialism. Despite his famous formula, Destruam et cedificabo, 
 he destroyed more than he built. His liberalism rested on his 
 profound hold of economic realities, and the social problem of to-day, 
 as Proudhon clearly saw, is how to combine justice with liberty. 
 
 Proudhon's project for an Exchange Bank must not be confused 
 with analogous schemes that have appeared either before or after his 
 day. All these schemes have a common basis in a reform of exchange 
 as a remedy for social inequalities. Apart from this one idea the 
 resemblance is frequently superficial, and the economic bases differ 
 considerably. 
 
 (1) Proudhon's idea has often been contrasted with Robert Owen's 
 labour notes, and with the scheme prepared by Mr. Bray in 1839, 
 in a work entitled Labour's Wrongs and Labour's Remedy, 2 as well as 
 
 the place of the present chaotic method, where short weight, poor quality, and 
 an exorbitant price seem to be the order. For a similar reason they have the 
 right to establish a bank, with the amount of capital which they think fit, in 
 order to get the cash which they need for tteir transactions as cheaply aa 
 possible." 
 
 1 " Association avoids the waste of the retail system. M. Rossi recommends it 
 to those small householders who cannot afford to buy wholesale. But this kind 
 of association is wrong in principle. Give the producer, by helping him to 
 exchange bis products, an opportunity of supplying them with provisions at 
 wholesale prices, or, what comes to the same thing, organise the retail trade so as 
 to leave only just the same advantage as in the case of the wholesale transaction, 
 and ' association ' will be unnecessary." (Idie gknkrale, de la Revolution, p. 92.) 
 
 1 This system was criticised by Marx in his Mistre de la Philosophic, published
 
 316 PROUDHON AND THE SOCIALISM OF 1848 
 
 with the later system outlined by Rodbertus. Proudhon's circulating 
 notes have nothing in common with the labour notes described by 
 these writers. The circulating notes represent commercial goods 
 produced for the purpose of private ^exchange. Prices are freely 
 fixed by buyer and seller, and they bear no relation to the labour 
 time, as is the case with the labour notes. The final result, doubt- 
 less, was expected to be the same. Proudhon hoped that in this 
 way the price of goods, now that it was no longer burdened with 
 interest on capital, would equal cost of production. This result 
 was to be obtained indirectly. The economic errors in the two 
 cases are also different. Proudhon's error lay in his failure to realise 
 that metallic money is a merchandise as well as an instrument of 
 circulation. The error of Owen, of Bray, and of Rodbertus con- 
 sisted of a failure to see that the price of goods includes some- 
 thing more than the mere amount of labour which they have 
 cost to produce an error which Proudhon at any rate did not 
 commit. 
 
 (2) Proudhon's bank has also been confused with other banks of 
 exchange which are really quite different. The ideas underlying 
 such schemes had become prominent before Proudhon's days, and 
 "numerous practical experiments had been attempted along the lines 
 indicated. These banks aimed, not at the suppression of interest, 
 but at a gradual rapprochement between producer and consumer, 
 the goods offered for sale being bought by the bank, and paid for in 
 exchange notes upon an agreed basis of calculation. Buyers in 
 their turn would come to the bank to obtain the necessaries of life, 
 paying for them in exchange notes. An experiment of this kind 
 was made by a certain Fulcrand Mazel in 1829. 1 In this case the 
 
 in 1847 (Giard and Briere's edition, 1896, pp. 92 et seq.). A more recent and 
 more complete exposition is given in Foxwell's introduction to Anton Monger's 
 The Eight to the Whole Produce of Labour, pp. Ixv, etc. 
 
 1 Mazel gave an exposition of his scheme in a series of pamphlets written in 
 very bombastic language, but only of very slight interest to the economist. 
 Another bank known as Bonnard's Bank was established at Marseilles in 1838, 
 and afterwards at Paris. The ideas are somewhat similar, but much more 
 practical. Both branches are still in active operation. Proudhon refers to this 
 bank in his Capacite politique des Classes ouvrieres. Courcelle-Seneuil gives a 
 very eulogistic account of it in his Traite des Eanques, and in an article in the 
 Journal des Sconomistes for April 1853. The modus operandi is explained in 
 three brochures, which may be seen in the Bibliotheque Kationale. One of these 
 is entitled Listedes A rlicles disponibles a la JBanque; the other two describe the 
 mechanism of the bank. Darimon, one of Proudhon's disciples, in his work De la 
 Eeforme des Banques (Paris, Guillaumin, 1856), gives an account of a large number 
 of similar institutions which were founded during this period. Several systems 
 of the kind have also been discussed by M. Aucuy in his Systemes socialistes
 
 THE EXCHANGE BANK THEORY 817 
 
 bank was merely an entrepot which facilitated the marketing of the 
 goods produced. Such a system is open to the objection that the 
 value of the notes issued in payment for goods would necessarily 
 vary with the fluctuations in the value of these goods during the 
 interval which would elapse between the time they are taken in by 
 the bank and their eventual purchase by consumers. Proudhon's 
 plan was to discount the goods already bought or actually delivered. 
 The bank would only advance what was actually promised, but 
 would make no charge for accommodation. Depreciation could 
 only arise if the buyer were insolvent. It could never result from 
 a fall in price as a result of a diminished demand for the product. 
 Proudhon renounced all dealings with solidarity when he dismissed 
 MazePs project. 1 
 
 d? E change (Paris, 1907). But we cannot accept his interpretation of various 
 points. 
 
 Bonnard's Bank differs from the others in this way. The client of the hank, 
 instead of bringing it some commodity or other which may or may not be sold 
 by the bank, gets from the bank some commodity which he himself requires, 
 promising to supply the, bank with a commodity of his own production when- 
 ever the bank requires it. The bank charges a commission on every transaction. 
 Its one aim is to bring buyer and seller together, and the notes are simply bills, 
 payable according to the conditions written on them. But they cannot be 
 regarded as substitutes for bank bills. Cf. Banque d'Bchange de Marseille, G. 
 Bonnard et Cie.,fondie par Acte du 10 Janvier, 1849 (Marseilles, 1849). 
 
 1 " I repudiate Hazel's system root and branch," he declares in an article con- 
 tributed to Le Peuple of December 1848 (QSuvres, voL xvii, p. 221). He also 
 adds that when he wrote first he had no acquaintance of any kind with Mauel. 
 " It was M. Maze! who on his own initiative revealed his scheme to me and gave 
 me the idea." In one of his projects, published on May 10, 1848, Proudhon seems 
 inclined to adopt this idea, just for a moment at any rate. Article 17 seems to 
 hint at this. " The notes will always be exchangeable at the bank and at the 
 offices of members, but only against goods and services, and in the same way 
 commodities and services can always be exchanged for notes." (Resume de la 
 Question sociale, p. 41.) This article justifies the interpretation which Courcelle- 
 Seneuil puts on it, in his Traite dee Operations de Banque (9th ed., 1899, p. 470), 
 and which Ott accepts in his Traite d'lSconomie sociale (1851), which, moreover, 
 contains a profound analysis and some subtle criticism of Proudhon's idea. But we 
 think that this article was simply an oversight on Proudhon's part ; for beyond 
 a formal refutation of Mazel's ida there is no reference to it in any of his other 
 works, not even in the scheme of the People's Bank. Moreover, it seems to 
 contradict the statement that the notes would be issued against commodities 
 which had been actually sold and delivered, as well as other articles of the scheme 
 e.g. Article 30, dealing with buying and selling. It also conflicts with the idea 
 that the discounting of goods is the prime and essential operation of the bank. 
 In our opinion, Diehl in his book on Proudhon (P. J. Proudhon, Seine Lehre 
 u. seine Leben, vol. ii, p. 183) is wrong in thinking that the Exchange Bank would 
 issue notes against all kinds of goods without taking the trouble to discover 
 whether they had been sold or not.
 
 318 PROUDHON AND THE SOCIALISM OF 1848 
 
 (3) M. Solvay, a Belgian entrepreneur, has recently elaborated a 
 scheme of " social accounting." He also proposes the suppression 
 of metallic money and the introduction of a perfect system of 
 payment. Here, however, the analogy ends. 
 
 What Solvay proposed was the replacement of metallic money, 
 not by bank-notes, but by a system of cheques and clearing-houses. 
 His plan owes its inspiration to the modern development of the 
 clearing-house system. Solvay thought that the system might be 
 so extended as to make the employment of money entirely 
 unnecessary. To every such clearing-house the State would hand 
 over a cheque-book, covering a sum varying with the amount of 
 real or personal property which the house possessed. This cheque- 
 book was to have two columns, one for receipts, the other for expen- 
 diture. Whenever any commodity was sold, the liquidation of debt 
 would be effected by the buyer's stamping the book on the receipt 
 side and the seller's stamping it on the expenditure side. As soon 
 as the total value of these transactions equalled the initial sum 
 which the cheque-book was supposed to represent the book would 
 be returned to the State bureau, where each individual account 
 would be made up. " In this way everybody's receipts and 
 expenditure will always be known with absolute clearness." * 
 
 The advantage of such a system would in the first place consist 
 in the economy of metallic money. In the second place it would 
 furnish the State with information as to the extent of everybody's 
 fortune. The State would then be in possession of the information 
 necessary for setting up an equable scheme of succession duties which 
 would gradually suppress the hereditary transmission of acquired 
 fortune. Such gradual suppression would result in the total extinc- 
 tion of the fundamental injustice of modern society, namely, the 
 inequality of opportunity. 2 It would also help the application of that 
 other principle of distributive justice, namely, " to each according 
 as he produces." The idea is Saint-Simon's rather than Proudhon's. 
 
 The scope of the proposed reform is quite clear. Social account- 
 ing, according to Solvay, is a mere element in a more general 
 conception, that of " productivism," which in various ways is to 
 result in increasing productivity to its maximum. 3 
 
 In all this it is impossible to see anything of Proudhon's ideas. 
 With the exception of the suggestion of suppressing metallic money 
 
 1 Annales de VInstitut Solvay, vdL i, p. 19. 
 Ibid., p. 25. 
 
 1 Ct Principe* d'Orientation sociale, a risumi of Solvay's studies in pro 
 ductivism and accounting {Brussels, 1904).
 
 THE EXCHANGE BANK THEORY 319 
 
 the fundamental conceptions are utterly different. M. Solvay 
 makes no pretence to ability to suppress interest, and he never 
 imagines that money is the cause of interest. The cheque and 
 clearing system is a mere device for facilitating cash payment. It 
 has nothing in common with the Proudhonian system, whereby 
 circulating notes are supposed to place credit sales and cash payments 
 on an equal footing. 1 
 
 The most serious objection to Solvay's system lies in the fact 
 that the suppression of money as a circulating medium must also 
 involve its suppression as a measure of value. It seems difficult to 
 imagine that the universal cheque bank with no monetary support 
 would not result in a rapid inflation of prices because of the super- 
 abundance of paper. But although the particular process advocated 
 by Solvay is open to criticism there can be no objection to his desire 
 to diminish the quantity of metallic money or to further the ideal of 
 equal opportunity for all. 
 
 The project was never successfully put into practice. Like the 
 cognate ideas of " the right to work," " the organisation of labour," 
 and " working men's associations," the idea of " free credit " has 
 left behind it a mere memory of a sudden check. 
 
 On January 31, 1849, Proudhon, in the presence of a notary, 
 set up a society known as the People's Bank, with a view to 
 showing the practicability of free credit. The actual organisation 
 differs considerably from the theoretical outline of the Exchange 
 Bank. The Exchange Bank was to have no capital : the People's 
 Bank had a capital of 5,000,000 francs, divided into shares of the 
 value of 5 francs each. The Exchange Bank was to suppress 
 metallic money : the People's Bank had to be content with issuing 
 notes against certain kinds of commercial goods only. The Exchange 
 Bank was to suppress interest : the People's Bank fixed it at 2 per 
 cent., expecting that it could be reduced to a minimum of i per cent. 
 
 Despite these important changes the bank would not work. At 
 the end of three months the subscribed capital was only 18,000 francs, 
 although the number of subscribers was almost 12,000. Just at 
 
 1 Although Solvay's scheme seems very different from Proudhon's, it possesses 
 features that received the highest commendation from the Luxembourg Commis- 
 sion. In L'Expost giniral de la Commission de Gouvernement pour lea Travailleurs, 
 which appeared in Le Moniteurot May 6, 1848, we read: "When in the future 
 association has become complete, there will be no need for notes even. Every 
 transaction will be carried on by balancing the accounts. Book-keepers will take 
 the place of collecting clerks. Money, both paper and metallic, is largely super- 
 fluous even in present-day society." The author then proceeds to outline a 
 scheme of clearing-houses.
 
 320 PROUDHON AND THE SOCIALISM OF 1848 
 
 that moment March 25, 1849 Proudhon was brought before the 
 Seine Assize Court to answer for two articles published on January 16 
 and 27, 1849, containing an attack on Louis Bonaparte. He was 
 sentenced to three years' imprisonment and fined 3000 francs. On 
 April 11 he announced that the experiment would be discontinued, 
 and that " events had already proved too strong for it," which 
 seemed to suggest that he had lost faith in the scheme. 
 
 From that moment free credit falls into the background, and 
 political and social considerations obtain first place in his later works. 
 
 IV : PROUDHON'S INFLUENCE AFTER 1848 
 
 IT is extremely difficult to follow the influence of Proudhon's thought 
 
 after 1848. 
 
 Karl Marx, who was almost unknown in 1848, became by the 
 publication of his Kapital in 1867 practically the sole representative 
 of theoretical socialism. Marx's Miser e de la Philosophic, 1 published 
 in 1847, is a bitter criticism of the Contradictions tconomiques, and 
 shows how violently he was opposed to Proudhon's ideas. To the 
 champion of collectivism the advocate of peasant proprietorship is 
 scarcely comprehensible ; the theorist of class war can hardly be 
 expected to sympathise with the advocate of class fusion, the revolu- 
 tionary with the pacificist. 2 The success of Marx's ideas after 1867 
 
 1 A hit at Proudhon's Philosophic de la Misere, which was the sub-title of his 
 Contradictions iconomique.8. 
 
 1 In a letter written to Karl Marx on May 17, 1846 (Correspondance, vol. ii, 
 p. 199), d propos the expression " at the moment of striking," which Marx had 
 employed, Proudhon takes the opportunity of declaring that he is opposed to 
 all kinds of revolution. " You are perhaps still of opinion that no reform 
 is possible without some kind of struggle or revolution, as it used to be called, 
 but which is nothing more or less than a shock to society. That opinion I shared 
 for a long time. I was always willing to discuss it, to explain it, and to defend it. 
 But in my later studies I have completely changed my opinion. I think that 
 it is not in the least necessary, and that consequently we ought not to consider 
 revolution as a means of social reform. Revolution means an appeal to force, 
 which is clearly in contradiction to every project of reform. I prefer to put the 
 question in a different fashion, namely, How can we arrange the economic 
 activities of society in sueh a fashion that the wealth which is at present lost to 
 society may be retained for its use ? " And in the Confessions d'un Revolution- 
 naire, p. 61 : "A revolution is an explosion of organic forces, an evolution 
 spreading from the heart of society through all its members. It can only 
 be justified if it be spontaneous, peaceful, and gradual. It would be as 
 tyrannous to try to suppress it as to bring it about through violence." See 
 M. Bourguin's article on Proudhon and Karl Marx in the Revue d'ficonomie 
 politique, 1893.
 
 PROUDHON'S INFLUENCE AFTER 1848 321 
 
 cast all previous social systems into the shade. Proudhon, he 
 thought, was a mere petit bourgeois. When the celebrated Inter- 
 national Working Men's Association was being founded in London in 
 1864 the Parisian workmen who took part in it seemed to be entirely 
 under the influence of Proudhon. At the first International Congress, 
 held at Geneva in 1866, a memorial was presented which bore clear 
 indications of Proudhon's influence, and its recommendations were 
 adopted. At the following Congress, in 1867, Proudhon's ideas met 
 with a more determined resistance, and by the time of the Congress 
 of Brussels (1868), and that of Basle (1869), Marx's influence had 
 become predominant. 
 
 One might even doubt whether the Proudhonian ideas defended 
 by the Parisian workmen in 1866 were really those of the Proudhon 
 of 1848. They seemed much more akin to the thesis of his last 
 work, La Capacity politique des Classes ouvrieres, published in 1865. 
 This book was itself written under the inspiration of a working men's 
 movement which had arisen in Paris after 1862 as the result of a 
 manifesto signed by sixty Parisian workmen. This manifesto had 
 been submitted to Proudhon as the best known representative of 
 French socialism. The attitude of the French workmen at the 
 opening of the " International," then, was the effect of a revival of 
 Proudhonism as the outcome of the publication of this new volume 
 rather than a persistence of the ideas of 1848. 1 
 
 The revival was of short duration. Since then, however, the 
 Marxian ideas have been submitted to very thorough criticism, and 
 certain recent writers have displayed an entirely new interest in 
 Proudhon's ideas. These writers, chief among whom is M. Georges 
 Sorel, combine a great admiration for Marx with a no less real 
 respect for Proudhon. But even in this case it is difficult to speak 
 of the movement as a revival of Proudhon's ideas. It is rather a 
 new current which owes its inspiration to syndicalism and combines 
 French anarchy and German collectivism. In any case, it is so 
 recent that we cannot yet determine its full import. 
 
 1 On this point see Puech, Proudhon et V Internationale (Paris, 1907); preface 
 by M. Andler. 
 
 E.D.
 
 BOOK III: LIBERALISM 
 
 IT is time we returned to the Classical writers. Now that the 
 combat had grown fierce among its critics, we are anxious to know 
 what the Classical school itself was doing to repel the onslaughts of 
 the enemy. Its apparent quiescence must not mislead us into the 
 belief that it was already extinct. Although the great works of 
 Ricardo, Malthus, and Say were produced early in the century, 
 it cannot be said that economic literature even after that period, 
 especially in England, had remained at a standstill. But no work 
 worthy of comparison with the writings of the first masters or their 
 eloquent critics had as yet appeared. Now, however, the science 
 was to captivate the public ear a second time, and for a short period 
 at least to unite its many votaries. 
 
 But the union was no true one. The Classical school itself was 
 about to break up into two camps, the English and the French. In 
 no sense can they be regarded as rivals, for they are defenders of the 
 same cause. They are both champions of the twin principles of 
 Liberalism and Individualism. But while the first, with John 
 Stuart Mill as its leader, lent a sympathetic ear to the vigorous 
 criticism now rampant everywhere, which claimed that the older 
 theories ought to yield place to the new, the French school, on the 
 other hand, with Bastiat as its chief, struggled against all innovation, 
 and reaffirmed its faith in the " natural order " and laissez-faire. 
 
 This divergence really belongs to the origin of the science. Traces 
 of it may be discovered if we compare the Physiocrats with Adam 
 Smith, or J. B. Say with Ricardo ; but it was now accentuated, for 
 reasons that we shall presently indicate. 
 
 Our third Book naturally divides itself into two parts, the one 
 devoted to the French Liberal school, the other to the English. 
 
 CHAPTER I: THE OPTIMISTS 
 
 THE previous Book has shown us the unsettled state of economic 
 science. It has also indicated how the science was turned from its 
 original course by reverses suffered at the hands of criticism, socialism, 
 and mt erven tionism, which were now vigorous everywhere. The 
 
 322
 
 THE OPTIMISTS 823 
 
 time had come for an attempt to bring economic science back into 
 its true path and to its old allegiance to the " natural order," a 
 position which it had renounced since the days of the Physiocrats 
 and Adam Smith. This was the task more especially undertaken 
 by the French economists. 
 
 The attitude of the French school is not difficult to explain, for 
 the French economists found themselves faced by both socialism 
 and Protection. We must never forget that France is the classic 
 land of socialism. 1 The influence exercised in England by Owen 
 and in Germany by Weitling or Schuster is unworthy of comparison 
 with the exalted role played by Saint-Simon, Fourier, or Proudhon in 
 France. The latter writers wielded a veritable charm, not merely 
 over working men, but also over the intellectuals, and on that 
 account were all the more dangerous, in the opinion of economists. 
 
 French Protection was never represented by such a prominent 
 champion as Germany had in List, but it was none the less active. 
 Protection in England succumbed after a feeble resistance to the 
 repeal movement led by Cobden, but in France it was powerful 
 enough to resist the campaign inaugurated by Bastiat. It is true 
 that Napoleon III suppressed it, but it soon reappeared, as vigorous 
 as ever. 
 
 The French school had thus to meet two adversaries, disguised 
 as one ; for Protection was but a counterfeit of socialism, and all 
 the more hateful because it claimed to increase the happiness of 
 proprietors and manufacturers of the wealthy ; while socialists did 
 at least aim at increasing the happiness of the workers of the poor. 
 Protection was also more injurious, for being in operation its 
 ravages were already felt, whereas the other, happily, was still at 
 the Utopian stage. But in hitting at both adversaries at once the 
 French school discovered that it possessed this advantage : it was 
 free from the reproach that it was serving the interests of a particular 
 class, and could confidently reply that it was fighting for the common 
 good. 
 
 A war of a hundred years can scarcely fail to leave a mark 
 upon the nation which bears the brunt of it, and we think that this 
 affords some explanation of the apologetic tendencies and of the 
 normative and finalistic hypotheses for which the French school 
 has so often been reproached. 
 
 1 This fact is recognised even by German socialists themselves. " The 
 people who gave socialism to the world even in its earlier forms have immortalised 
 themselves," says Karl Griin, when speaking of France just about the time 
 that our chapter refers to. (Quoted by Puech, loc. cit., p. 57.)
 
 824 THE OPTIMISTS 
 
 It is necessary that we should try to understand the line of 
 argument adopted by the French writers in defending the 
 optimistic doctrines which they so easily mistook for the science 
 itself. They argued somewhat as follows : 
 
 " Pessimism is the great source of evil. The sombre prophecies 
 of the pessimists have destroyed all belief in ' natural ' laws and in 
 the spontaneous organisation of society, and men have been driven 
 to seek for better fortune in artificial organisation. What is especially 
 needed to refute the attacks of the critics, both socialists and 
 Protectionists, is to free the science from the compromising attitude 
 adopted by Malthus and Ricardo, and to show that their so-called 
 ' laws ' have no real foundation. We must strive to show that 
 natural laws lead, not to evil, but to good, although the path 
 thither be sometimes by way of evil ; that individual interests are 
 at bottom one, and only superficially antagonistic ; that, as Bastiat 
 put it, if everyone would only follow his own interest he would 
 unwittingly find that he was advancing the interests of all." In a 
 word, if pessimism is to be refuted it can only be by the establishment 
 of optimism. 
 
 It is true that the French school protests against the adjective 
 " optimistic," and refuses to be called "orthodox." Its protests would 
 be justified if optimism implied quietism that selfish contentment 
 of the well-to-do bourgeois who feels that everything is for the best 
 in this best of all worlds or the attenuated humanitarianism of 
 those who think that they can allay suffering by kind words or good 
 deeds. It is nothing of the kind. We have already protested 
 against interpreting laissez-faire as a mere negation of all activity. 
 It ought to be accepted in the English sense of fair play and of 
 keeping a clear field for the combatants. The economists both of 
 the past and of the present have always been indefatigable wranglers 
 and controversialists of the first order, and they have never hesitated 
 to denounce abuses. But their optimism is based upon the belief 
 that the prevalence of evil in the economic structure is due to the 
 imperfect realisation of liberty. The best remedy for these defects 
 is greater and more perfect liberty ; x hence the title " Liberal," 
 to which the school lays claim. The liberty of the worker is the 
 best guarantee against the exploitation of his labour and the 
 reduction of wages. M. Emile Ollivier, the author of the law which 
 suppressed combination fines, declared that freedom of combination 
 would put an end to strikes. Free loans would cause the disappear- 
 
 1 " So many things have we attempted ! How is it that liberty, the easiest 
 of all, has never been given a trial ? " (Bastiat, Harmonies, chap. 4, p. 125.)
 
 THE OPTIMISTS 325 
 
 ance of usury. Freedom of trade would put an end to the adultera- 
 tion of goods and the reign of trusts. Competition would everywhere 
 secure cheap production and just distribution. 1 
 
 This optimism, strengthened and intensified, deepened their 
 distrust of every kind of social reform undertaken with a view to 
 protecting the weak, whether by the masters themselves or through 
 the intervention of the State. Liberty, so they thought, would 
 finally remedy the evils which it seemed to create, while State 
 intervention merely aggravated the evils it sought to correct.* 
 
 What seems still more singular is their scant respect for " associa- 
 tionism " as outlined in our previous chapter. It found just as 
 little favour as State control. They did not display quite the 
 same contempt for it as was shown by the Revolutionists. It was 
 no longer actually condemned, and they put forward a formal plea 
 for the right of combination, in politics, in religion, industry, 
 commerce, and labour. But they always interpreted it as a mere 
 right of coalition or association with a view to protecting or 
 strengthening individual activity. Association as an instrument 
 of social transformation that would set up co-operation in place of 
 competition, and which in the name of solidarity demanded certain 
 sacrifices from the individual for the sake of the community, was not 
 to the liking of the Liberal Individualist school. Even the less 
 ambitious and less complete forms, such as the co-operative and 
 the mutual aid society, seemed to them to be full of illusions and 
 deceptions, if not actually vicious. 3 
 
 The most striking characteristic of the French school is its 
 unbounded faith in individual liberty. This distinctive trait has 
 never been lacking throughout the century and a half that separates 
 
 1 One of the sections of Dunoyer' s La Libert^ du Travail is entitled : " Of the 
 True Means of remedying the Evils from which the Workers Buffer, by extending 
 the Sphere of Competition." (Book IV, chap. 10, 18.) 
 
 " As a matter of fact," says Dunoyer elsewhere, " this competition which 
 seems such an element of discord is really the one solid bond which links 
 together all the various sections of the social body." 
 
 ' " Whenever the State undertakes to supply the wants of the individual, 
 the individual himself loses his right of free choice and becomes less progressive 
 and less human ; and by and by all his fellow citizens are infected with a similar 
 moral indifference." (Bastiat, Harmonies, chap. 17, p. 545.) 
 
 * Dunoyer says : " You may search the literature of association as much 
 as you like, but you will never come across a single intelligent discussion of an 
 equitable means of distribution." (Libertedu Travail, vol. ii, p. 397.) Further, 
 he asserts that association has damaged social even more than individual 
 morality, because nothing will be considered lawful unless done by society as 
 a whole. It is true that in this case he was speaking chiefly of corporativs 
 association, but the condemnation has a wider import.
 
 826 THE OPTIMISTS 
 
 us from the time of the Physiocrats. Its most eminent representa- 
 tives, while spurning the title Orthodox or Classical, have repeatedly 
 declared that they wish for no other name than Liberal. 1 
 
 It is also marked by a certain want of sympathy with the masses 
 in their sufferings. Science, doubtless, does not make for sympathy. 
 But what we merely wish to note is the presence of a certain tendency 
 already very pronounced in Malthus to believe that people's 
 misfortunes result from their vices or their improvident habits. 2 
 The Liberal school was quite prepared to extend an enthusiastic 
 welcome to the teaching of Darwin. He pointed out that a necessary 
 condition of progress was the natural selection of the best by the 
 elimination of the incapable, and that the price paid is not a bit too 
 high. Belief in the virtue of competition led to the glorification of 
 the struggle for life. 
 
 But the Liberal school failed to demonstrate the goodness of all 
 natural laws ; neither did it succeed in arresting the progress of either 
 socialism or Protection. The end of the nineteenth century found 
 it submerged beneath the waters of both currents. Yet it never 
 once lost confidence. Its fidelity to principle, its continuity of 
 doctrine, its resolute, noble disdain of unpopularity, have won for it 
 a unique position ; and it deserves better than the summary judgment 
 of foreign economists, who describe it as devoid of all originality, 
 or at best as only a pale reflection of the doctrine of Adam Smith. 
 
 In this chapter we are to study the period when Liberalism and 
 Optimism were at the height of their fame. It runs from 1830 to 1850. 
 It was during this epoch that the union of political and economic 
 liberty took place. Henceforth they are combined in a single cult 
 known as Liberalism. Economic liberty that is, the free choice of 
 vocation and the free exchange of the fruits of one's toil no longer 
 figured in the category of necessary liberties, alongside of liberty of 
 conscience or freedom of the press. Like the others it was one of 
 
 1 On the occasion of the international gathering of economists at the Paris 
 Exposition in July 1900, Levasseur, one of the most moderate members of the 
 Liberal school, said : " There is no need to draw any distinction between us. 
 Liberal economists ought not to be divided in this way. There may be different 
 opinions on the question of applying our principles, but we are all united on 
 this question of liberty. A man becomes wealthy, successful, or powerful all 
 the sooner if he is free. The more liberty we have, the greater the stimulus to 
 labour and thought and to the production of wealth." (Journal des Economistes, 
 August 15, 1900.) 
 
 * " It is a good thing to have a number of inferior places in society to which 
 families that conduct themselves badly are liable to fall, and from which they 
 can rise only by dint of good behaviour. Want is just such a helL" (Dunoyer, 
 La Libert* du Travail p. 409.)
 
 THE OPTIMISTS 827 
 
 the successes already achieved by democracy or civilisation, and to 
 attempt to suppress it was as vain as to try to make a river flow 
 backward. It was just a part of the wider movement towards 
 freedom from all servitude. 
 
 The appearance of political economy at the time when the old 
 regime was showing signs of disintegration is not without significance. 
 The Physiocrats, who were the first Liberal Optimists, were unjustly 
 ignored and neglected by their own descendants, not because of their 
 economic errors so much as because of their political doctrines, 
 especially their acceptance of legal despotism, which seemed to the 
 Liberals of 1830, if not an actual monstrosity, at least a sufficiently 
 typical survival of the old regime to discredit the whole Physio- 
 cratic system. 1 
 
 Charles Dunoyer's book, which appeared in 1845, 2 and which 
 bears the significant title of De la Liberte du Travail, ou simple Expos6 
 des Conditions dans lesquelles les Forces humaines s'exercent avec le plus 
 de Puissance, exactly marks this era of politico-economic Liberalism. 
 But although Dunoyer's book is a eulogy of liberty in all its forms, 
 especially its competitive aspects, the optimistic note is not so 
 marked as it is in another much more celebrated work which 
 appeared about the same date Les Harmonies economiques of 
 Bastiat (1850). The Harmonies and the other works of Bastiat 
 contain all the essential traits of the Liberal doctrine. His extreme 
 optimism and his belief in final causes have been disavowed by a 
 great many of the Liberal economists, but he remains the best 
 known figure of the Optimistic Liberal group, and possibly of the 
 whole French school. 
 
 Another economist whose name is inseparably linked with the 
 Optimistic doctrine, and of whom we have already made some 
 mention, is the American Carey. 3 In many respects Carey ought to 
 be given first place, were it only because of his priority as a writer, 
 and especially, perhaps, since he accuses Bastiat of plagiarism. In 
 his treatment of certain aspects of the subject, such as the question 
 of method, in the logical consistency of his argument, and in the scope 
 of his discussion of such a problem as that of rent, he displays a 
 marked superiority. In our exposition of Bastiat's doctrine we shall 
 
 1 See the discussion of the political doctrine of the Physiocrats, pp. 33 et eeq. 
 
 1 Editions of the same work appeared between 1825 and 1830; but the 
 volume was much smaller and had a different title. Dunoyer will again engage 
 our attention towards the end of this chapter. Of. Villey, L'CEuvre iconomique 
 de Dunoyer (Paris, 1899). 
 
 1 Henry Charles Carey was born at Philadelphia in 1793, and died in 1879. 
 Up to the age of forty-two he followed the profession of a publisher, retiring in
 
 828 THE OPTIMISTS 
 
 give to Carey's the attention which it deserves. OUT decision to give 
 Bastiat and not Carey the central position in this chapter is due in 
 the first place to the consideration that we are writing primarily 
 for French students, who will be more frequently called upon to read 
 Bastiat than Carey ; and in the second place to the fact that the 
 works of the American economist appeared at a time when economic 
 instruction scarcely existed in the United States, and consequently 
 his writings never exercised the same influence as those of the 
 French economist, which appeared just when the war of ideas was 
 at its fiercest. Finally, Carey's doctrine is lacking in the beautiful 
 unity of conception of the Harmonies, so that alongside of the 
 advocacy of free competition among individuals is presented an 
 outline of national Protection. Thus we have been forced to 
 divide our treatment of Carey into two sections. The heterogeneous, 
 not to say contradictory, character of his doctrines accounts for his 
 appearing in two different chapters. 
 
 Bastiat, 1 both at home and abroad, has always been regarded as 
 
 1335 to devote himself to economic studies. The three volumes of his Principles 
 yf Political Economy were issued in 1837, 1838, and 1840 respectively. In 1848 
 appeared The Past, the Present, and the Future, which contains his theory of 
 rent. In 1850 his Harmony of Interests, Agricultural, Manufacturing, and 
 Commercial, was published, and in 1858-59 his Principles of Social Science. 
 
 These dates possess some importance. At the time of the publication of the 
 Harmonies in 1850 Carey wrote a letter to the Journal des Sconomistes accusing 
 Bastiat of plagiarism. Bastiat, who was already on the point of death, wrote 
 to the same paper to defend himself. He admitted that he had read Carey's 
 first book, and excuses himself for not making any reference to it on the ground 
 that Carey had said so many uncomplimentary things about the French that he 
 hesitated to recommend his work. Several foreign economists have since made 
 the assertion that Bastiat merely copied Carey, but this is a gross exaggeration. 
 Coincidence is a common feature in literary and scientific history. We have 
 quite a recent instance in the simultaneous appearance of the utility theory 
 in England and France. 
 
 1 Frederic Bastiat, born in 1801 near Bayonne, belonged to a family of fairly 
 wealthy merchants, and he himself became in turn a merchant, a farmer in the 
 Landes district, a justice of the peace, a councillor, and finally a deputy in the 
 Constituent Assembly of 1848. He made little impression in the Assembly ; 
 but he scarcely had time to become known there before his health gave way. He 
 died at Rome in 1850, at the age of forty-nine. 
 
 Brief as was Bastiat's life, his literary career was shorter still. It lasted just 
 six years. His first article appeared in the Journal des Economist esin 1844. Hia 
 one book, appropriately called Lea Harmonies iconomiques, written in 1849, 
 remains a fragment. In the meantime he published his Petits Pamphlets and 
 his Sophismes, which were aimed at Protection and socialism. He was very 
 anxious to organise a French Free Trade League on the lines of that which won 
 such triumphs in England under the guidance of Cobden, but he did not succeed. 
 
 His life was that of the publicist rather than the scholar. He was not a 
 bookworm, although he had read Say before he was nineteen, and Franklin's
 
 THE OPTIMISTS 829 
 
 the very incarnation of bourgeois political economy. Proudhon, 
 Lassalle in his famous pamphlet Bastiat Schulze-Dclitesch, Cairnes, 
 Sidgwick, Marshall, and Bohm-Bawerk all think of him as the 
 advocate of the existing order. None of them considers him a 
 scientific writer. They treat his writings as a kind of amplification 
 of Franklin's Poor Richard's Almanac, Avhere apologues take the 
 place of demonstration and a much-vaunted transparency of style 
 is simply due to absence of thought. 
 
 Bastiat deserves a juster estimate. The man who wrote that 
 " if capital merely exists for the advantage of the capitalist I am 
 prepared to become a socialist," or who declared that " one important 
 service that still requires to be done for political economy is to 
 write the history of spoliation," was not a mere well-to-do bourgeois. 
 It is true that he carried the " isms " of the French school to absurd 
 lengths. An unkind fate decreed that his contribution should 
 mark the culminating-point of the doctrine, to be followed by the 
 inevitable reaction. To the force of that reaction he had to bow, 
 and his whole work was demolished. 
 
 Bastiat's arguments against socialism are somewhat antiquated, 
 but so are the peculiar forms of socialist organisation which he had 
 in view when writing. This is not true of the arguments dealing with 
 Protection. These have not been entirely useless. Though they 
 failed to check the policy of Protection, they definitely invalidated 
 some of its arguments. If modern Protectionists no longer speak of 
 the "inundation of a country " or of an "invasion of foreign goods," 
 and if the old and celebrated argument concerning national labour is 
 less frequently invoked as a kind of final appeal, we too often forget 
 that all this is due to the small but admirable pamphlets written by 
 
 Poor Richard's Almanac soon afterwards. He was very enthusiastic about the 
 merits of Franklin's works, and Franklin's influence upon his writings, even upon 
 his personal appearance and behaviour, is very marked. " With his long hair, 
 his small cap, his long frock-coat, and his large umbrella, he seemed for all the 
 world like a rustic on a visit to town." (Molinari in the Journal de& ficonomistes, 
 February 1851.) 
 
 These biographical details should not be lost sight of, especially by those 
 who accuse him of lacking scientific culture and of being more of a journalist 
 than an economist. 
 
 Despite the fact that he has been severely judged by foreign economists, he is 
 still very popular in France. His wit is a little coarse, his irony somewhat blunt, 
 and his discourses are perhaps too superficial, but his moderation, his good 
 sense, and his lucidity leave an indelible impression on the mind. And we 
 are by no means certain that the Harmonies and the Pamphlets are not still the 
 best books that a young student of political economy can possibly read. More- 
 over, we shall find by and by that the purely scientific part of his work is by 
 no means negligible.
 
 330 THE OPTIMISTS 
 
 Bastiat. Such were The Petition of the Candle-makers and The 
 Complaint of the Left Hand against the Right. No one could more 
 scornfully show the laughable inconsistency of tunnelling the 
 mountains which divide countries, with a view to facilitating 
 exchange, while at the same time setting up a customs barrier at 
 each end ; or expose the patent contradiction involved in guarantee- 
 ing a minimum revenue to the landed proprietors and capitalists by 
 the establishment of protective rights, while refusing a minimum 
 wage to the worker. No one has better emphasised the difficulty 
 of justifying an import duty as compared with an ordinary tax, for 
 a tax is levied upon the individual for the benefit of all, while a 
 duty is levied upon all for the benefit of the few. 
 
 He has not been quite so happy in his exposition of individualism. 
 The problem has been over-simplified : individual and international 
 exchange have been treated as if they were on all fours. Analogies, 
 more amusing than solid, are employed to show that the advantages 
 of international trade are greater if a country has an unfavourable 
 balance against it, and that international exchange benefits poor 
 countries most. 1 
 
 The thesis of the constructive portion of his work is as follows : 
 " The general laws of the social world are in harmony with one 
 another, and in every way tend to the perfection of humanity." 
 A priori, however, are we not confronted with rank disorder every- 
 where ? To that he replies in his well-known apologue, " Things 
 are not what they seem," pointing out that we cannot always 
 trust what we see, and that what is not seen is very often true. 
 Apparent antagonisms on closer view often reveal harmonious 
 elements. But man's freedom sometimes breaks the harmony and 
 destroys the liberty of others. Especially is this the case with 
 spoliation, which Bastiat never attempts to justify, but denounces 
 whenever he has the chance. But around man and within him are 
 diverse forces which must lead him the way of the good, deviate he 
 never so often, and which will finally and automatically re-establish 
 the harmony. ** My belief is that evil, far from being antagonistic 
 to the good, in some mysterious way promotes it, while the good 
 can never end in evil. In the final reckoning the good must surely 
 triumph." 2 
 
 It is quite evident that this doctrine goes far beyond the con- 
 
 1 On this question of who benefits by international trade see our discussion 
 of Mill's treatment of the problem (pp. 364-365). 
 
 2 Harmonies, p. 21. Our quotations are taken from the tenth edition of the 
 (Euvres completes.
 
 THE OPTIMISTS 331 
 
 ception of " natural laws," and implies a belief in a Providential 
 order. Bastiat never shrinks from this position. He never misses 
 an opportunity of declaring his faith in language much clearer than 
 that of the Physiocrats. " God," he writes, " has placed within each 
 individual an irresistible impulse towards the good, and a never- 
 failing light which enables him to discern it." * 
 
 Auguste Comte has delivered an eloquent protest against the vain 
 and irrational disposition to think that only the spontaneous can 
 be regarded as conforming to the " order " of nature. Were this 
 the case any practical difficulty " that presented itself in the course 
 of industrial development could only be met with a kind of solemn 
 resignation under the express sanction of political economy." 2 
 
 Even as an exposition of the Providential order Bastiat's faith 
 is not easy to justify. It by no means agrees with the Christian 
 teaching on the point. For we cannot forget that although Scripture 
 teaches us that both man and nature were declared good when first 
 created by God, it also teaches that both have been entirely perverted 
 by man's iniquity, and that never will they become good of their 
 own accord, since there is no natural means of salvation. 8 Christian 
 people are exhorted to kill the natural man within them and to 
 foster the growth of the new man. Christianity promises a new 
 heaven and a new earth an infinitely more revolutionary doctrine 
 than that of the economic Optimists. Bastiat's God is, after all, just 
 " Le Dieu des bonnes gens " whose praises are sung by Beranger. 
 
 What are the facts of this pre-established harmony ? What are 
 its laws, and where are they operative ? They are in evidence 
 everywhere, Bastiat thinks in value and exchange, in the insti- 
 tution of private property, in competition, production and con- 
 sumption, etc. We shall content ourselves with a consideration 
 of the circumstances under which Bastiat thought it was most clearly 
 seen. 
 
 1 " Economic phenomena are not without their efficient cause and their 
 Providential aim." (Harmonies, last page.) 
 
 " Looking at this harmony, the economist can join with the astronomer and 
 the physiologist and say : Digitus Dei est hie." (Ibid., chap. 10, p. 39.) 
 
 " If everyone would only look after his own affairs, God would look after 
 everybody's." (Hid., chap. 8, p. 290.) 
 
 1 Auguste Comte, Cours de Philosophie positive, vol. iv, p. 202. 
 
 1 The liturgy of the Reformed Church reads as follows : " We acknowledge 
 and confess our manifold sins." See our chapter on Doctrines that owe their 
 Inspiration to Christianity.
 
 332 THE OPTIMISTS 
 
 I : THE THEORY OF SERVICE-VALUE 
 
 FIRST of all we have the law of value, " which is to political economy 
 what numbers are to arithmetic." * 
 
 Ricardo taught that value was determined by the quantity of 
 labour necessary for production. This theory is entirely at one 
 with Bastiat's, and he would have felt no compunction about 
 inserting it in the Harmonies, for a theory of value which showed 
 that every form of property is really based upon labour seemed to 
 accord with the requirements of justice. But although Bastiat's 
 method was almost exclusively deductive, and as little realistic as 
 possible, he could never content himself with an explanation whicfe 
 was all too clearly in conflict with the facts. Such a theory could 
 never explain why the value of a pearl accidentally discovered 
 should equal the value of another laboriously brought from the 
 depths of the sea. Accordingly he sought another explanation, 
 juster, and more in accordance with facts, than Ricardo's. 
 
 Carey effected just the needed correction of the Ricardian theory,' 
 by propounding another ingenious explanation, namely, that value 
 is determined, not by the quantity of labour actually employed in 
 production, but by the quantity of labour saved. This would 
 account for those facts that refused to fit in with the Ricardian 
 theory, and the chance pearl was no longer a stumbling-block. 
 Bastiat was evidently attracted by this theory. 2 But his satisfaction 
 was by no means complete, for it is not quite clear how a value 
 which is proportional to the amount of labour saved that is, to 
 labour which never has been and never will be undertaken can be 
 considered as an economic harmony. But a ray of light illumines 
 the darkness. The labour saved is a kind of service rendered to the 
 person who acquires the commodity. The long-sought explanation 
 is found at last ! " Value is the ratio between two exchanged 
 services." 8 And, seeing that individual property and private for- 
 tunes represent sums of values, we might say that a person's property 
 is merely the sum of the services rendered by him. Herein lies the 
 harmony. Nothing better could be wished for, and Bastiat exults 
 in his discovery. Everything becomes quite clear, every contradic- 
 
 1 Harmonies, chap. 5, p. 140. 
 
 1 "I have attempted to show that value is based not so much upon the 
 amount of labour which a thing has cost the person who made it, as upon the 
 amount of labour it saves the persons who obtain it. [He ought to have acknow- 
 ledged his indebtedness to Carey in this matter.] Hence I have adopted the 
 term ' service,' which implies both ideas." (Ibid., chap. 9, p. 341.) 
 
 Ibid., chap. 5, p. 145.
 
 THE THEORY OF SERVICE- VALUE 833 
 
 tion is removed, every difficulty solved, if we take for our starting- 
 point the crux of economic theory namely, why diamonds are con- 
 sidered more valuable than water. The diamond is more valuable 
 simply because the person who gives it to me is rendering me a 
 greater service than he who merely gives me a glass of water. This 
 was not the case on the Medusan raft, but even in that instance, 
 seeing that the service rendered was incalculable, the value must 
 have been immense. 
 
 Every solution propounded by economists utility, scarcity, 
 difficulty of acquisition, cost of production, labour is included 
 within this conception of service, and " economists of all shades of 
 opinion ought to feel satisfied." " My decision is favourable to 
 every one of them, for they have all seen some aspect of the truth ; 
 error being on the other side of the shield." 1 Moreover, the word 
 " service " has the advantage of including, besides value properly 
 so called (that is, the price of goods), the price of all productive 
 services such as appear under the heads of loans, rent, discount, and 
 interest in short, " everything that can be said to render a service." * 
 
 1 Harmonies, chap. 5, p. 193. 
 
 " Socialists and economists, champions of equality and fraternity, I challenge 
 you, however numerous you may be, to raise even a shadow of objection to the 
 legitimacy of mutual service voluntarily rendered, and consequently against 
 the institution of private property as I have defined it. With regard to both 
 these considerations, men can only possess values, and values merely represent 
 equal services freely secured and freely given." (Ibid., chap. 8, pp. 265, 268.) 
 
 Had the limits of this work permitted us to speak of the Italian economists 
 we should have had to refer to Ferrara, professor at Turin from 1849 to 1858, 
 whose theory of value and economic harmony link him to his contemporaries 
 Carey and Bastiat. The whole economic edifice, according to Ferrara, was 
 built upon cost of production. The value of a commodity is not measured 
 by the amount of labour which it really has cost to produce, but by the amount 
 of labour that would be required to produce another similar commodity, or, 
 if the commodity in question be absolutely limited in quantity, such as is the 
 case with an old work of art, by the labour necessary to produce a new one 
 that would satisfy the same need equally well an application of the principle 
 of substitution which had not been formulated when Ferrara wrote. The 
 progress of industry gradually reduces the cost of labour and dispenses with 
 human effort ; hence harmony. 
 
 Everything, including the earth and its products, even capital, are subject 
 to this same law, and a gradual diminution of rent and a lowering of the rate 
 of interest are thus assured. 
 
 Ferrara 's principal writings consist of prefaces to Italian translations of the 
 works of the chief economists. They were published in a collection known as 
 Biblioleca ddV Economista (Turin, 1850-70, 26 vols.). 
 
 1 Harmonies, chap. 7, p. 236. The controversy between Bastiat and Proudhon 
 in 1849 concerning the legitimacy of interest was published under the title of 
 Oratuiti du Crtdii, but the argument is scarcely worth examining here. Bastiat's
 
 334 THE OPTIMISTS 
 
 One cannot help smiling at Bastiat's naive exultation, for he 
 never realises that his formula is so comprehensive and includes 
 everything within itself simply because it is an empty form a mere 
 passe-partout. It really amounts to saying that value depends upon 
 desirability, and we are not so much farther on after all. 1 On 
 closer view, it even lacks that apologetic tone which evidently 
 attracted Bastiat to it. It legitimises neither value nor property, 
 and even if it did it would simply be by the help of a hypocritical 
 formula, for the word " service " gives rise to the belief that all value 
 implies a benefit for those who receive it and a virtue in those who 
 give it. But very frequently it is nothing of the kind. The owner 
 of a house or of a piece of land in the city of London which is let 
 or sold at a fabulous price, the capitalist who lends money to a 
 needy borrower at a usurious rate, or the politician even who in 
 return for an enormous bribe secures some financial concession, 
 cannot be said to be rendering any real service, for all these have 
 either been solicited or demanded, or perhaps even extorted under 
 pressure. Such abnormal rates of discount, interest, or rent can 
 find no place in Bastiat's formula. From a moral and ethical point 
 of view it is equally futile. It is a mere mask which affords protection 
 as well to the worst exploiter as to the honest tradesman : all are 
 thrown promiscuously into the " universal harmony." * 
 
 argument is based upon the supposition that the person who lends money 
 performs some service or other, and that the service, whenever given, should be 
 paid for ; in other words, he maintains that capital is productive. A plane 
 means more planks produced, and it is only just that the owner of the plane 
 should get some of them. Proudhon replies that he does not deny the legitimacy 
 of interest under present conditions, but that interest itself is just a historical 
 category to use a phrase that only became current after Proudhon's time and 
 that it will be quite unnecessary under the new regime. The Exchange Bank was 
 to be the parent of the new order. The two combatants never really come to 
 blows. They keep on arguing about nothing. The result is that this discussion 
 is very trying and brings little honour to either. 
 
 1 " The relative importance of any service must vary with the circumstances. 
 This will depend upon its utility, and the number of people who are willing to 
 give the amount of labour, of ability or training necessary to produce it, as 
 well as the amount of labour which it will save us. " (Harmonies, chap. 6, p. 146. ) 
 
 1 Bastiat himself was obliged to recognise this. " I have not taken the 
 trouble to ask whether all these services are real and proper or whether men are 
 not sometimes paid for services which they never give. The world is full of 
 such injustices." (Ibid., chap. 6, p. 167.) 
 
 But if the world is full of people who are paid for services which they have 
 never given or for merely imaginary and improper work, what is the use of 
 speaking of value and property as if they were founded upon service rendered ? 
 
 See Gide's article on La Notion de la Valeur dans Bastiat, in the Revue 
 d' Economic politique, 1887.
 
 THE LAW OF FREE UTILITY AND RENT 335 
 
 Despite the justness of these criticisms, and although Bastiat's 
 attempt to explain value by employing the term " service " must 
 be regarded as futile, the word has not remained a mere ingenious 
 epithet. On the contrary, it has won for itself a permanent place 
 in economic terminology. We shall again meet with it in the 
 vocabulary of that school which prides itself upon the exactness of 
 its method, namely, the Hedonistic and Mathematical school. These 
 later writers constantly make use of the term " productive services," 
 and would find it hard to discover another word having a suffi- 
 ciently wide connotation. 1 It is true that the word " service " with 
 all the noble associations of unselfish interest and professional honour 
 which cling to it (compare the phrase " his Majesty's service "), may 
 lead us astray as to the economic arrangements of society, and that 
 a recollection of the less distinguished uses of the term may cause 
 us to doubt the wisdom of Bastiat's choice. Still, it is the best that 
 we can imagine when speaking of the society of the future. It is 
 employed in the same sense as Auguste Comte used the term " social 
 function," or as the equivalent of Marshall's " economic chivalry." ' 
 In attempting to present to ourselves the society of the future, or at 
 least the society of our dreams, we must hope that the present 
 incentive to economic activity, which is merely the desire for profit, 
 will gradually give place to the idea of social service. When that 
 day dawns a statue ought to be erected to the memory of Bastiat. 
 
 II : THE LAW OF FREE UTILITY AND RENT 
 
 RICARDO'S law of rent was the optimist's nightmare. Should it by 
 any chance prove true, then the institution of property must be 
 abandoned altogether, and victory must lie with the socialists, 
 whom the economists regarded as somewhat of a social nuisance. 
 It was necessary, then, at all costs, to show that this law had in 
 reality no foundation, and with this end in view Bastiat attempts 
 to defend the paradox that nature or land gratuitously gives its 
 products to all men. But must we really say that corn and coal, 
 the products of soil and mine, literally do not pay for the trouble of 
 getting them ? In other words, have they no value ? Bastiat 
 replies that they doubtless possess some value, but that the price 
 paid for them does not cover the natural utility of those products. 
 
 1 J. B. Say had already employed the term " service " without giving it any 
 normative significance, simply using it to distinguish between wealth which 
 consists of acts and wealth which consists of material products. 
 
 4 Social Possibilities of Economic Chivalry, in Economic Journal, March 1907,
 
 336 THE OPTIMISTS 
 
 It merely covers cost of production, and is only just sufficient to 
 reimburse the proprietor for the expense incurred. 
 
 Every product contains two layers of superimposed utilities. 
 The one is begot of onerous toil and must be paid for. It constitutes 
 what we call value. The other, which is thrown into the bargain, 
 is a gift of nature, and as such is never paid for. This lower stratum, 
 though it is of considerable importance, is ignored simply because it 
 is not revealed in price. It is invisible because it is free. 
 
 But whenever a commodity is free, like air, light, or running 
 water, it is the common possession of everybody. The same idea 
 may be expressed by saying that below the apparent layer of value 
 which constitutes individual property there lies an invisible layer 
 of common property which benefits everybody alike. " What 
 Providence decreed should be common has remained so throughout 
 the whole history of human transactions." 
 
 " This," says Bastiat, " is the essential law of social harmony." 
 The proprietor, who in the Ricardian theory figures as a kind of 
 dragon, jealously guarding the treasures of national wealth, which 
 can only be enjoyed on payment of a fine, or who in Proudhon's 
 passionate invectives is denounced as an interceptor of the gifts of 
 God, appears to Bastiat as a mere intermediary between nature and 
 consumer. He is like a good servant who draws water from a 
 common fount, and receives payment, not for the water drawn, but 
 solely for the trouble of drawing it. 1 
 
 But there is a still greater degree of harmony. Of the two 
 elements the onerous and the gratuitous which enter into the 
 composition of all forms of wealth, the former gradually tends to 
 lose its importance relatively to the latter. It is a general law of 
 industry that as invention progresses the human effort necessary to 
 obtain the same satisfaction diminishes. New labour is almost 
 always more productive than old, and this is true with regard to all 
 
 1 "And I also declare that you have not intercepted any of the gifts of 
 God. It is true that you received them free out of nature's hand. But it is 
 equally true that you have handed them on freely, reserving nothing for yourself. 
 Fear not, but live in peace and freedom from every qualm." (Harmonies, 
 chap. 8, p. 257.) 
 
 " Coal is free for everyone. There is neither paradox nor exaggeration in 
 that. It is as free as the water of the brook, if we only take the trouble to get 
 it, or pay others for getting it for us." (Ibid., chap. 10.) Bastiat would not 
 regard the shareholders' dividends as payments for the trouble which the share- 
 holders have taken in getting the coal. The dividends simply pay for the trouble 
 taken to save the money which made the exploitation possible. 
 
 Say spoke of free natural agents. What he meant to refer to was such 
 natural commodities as air and water, which are at the disposal of everyone.
 
 THE LAW OF FREE UTILITY AND RENT 837 
 
 products, whether corn or coal, steel or cotton. It is true not only of 
 the products of the land, but also of the land itself. The cost of 
 clearing new land is diminishing, just as the expense of making new 
 machinery is decreasing. The natural utility, on the contrary, is 
 never diminished. Corn has to-day exactly the same utility as it 
 had on the morrow of the Deluge. 
 
 Property being nothing more than a sum of values, every 
 diminution of value must be interpreted as a constant restriction of 
 the rights of property. 
 
 Hence this result, " which reveals a most important fact for the 
 science, a fact, if I mistake not, as yet unperceived," x namely, 
 that in every progressive society common or gratuitous utility never 
 stops growing, while the more arduous portion, which is usually 
 appropriated, gradually contracts. Present society is already 
 communistic, and is becoming more so every day. 
 
 The idea is indeed an attractive one. Individual property is like 
 a number of islands surrounded by a vast communal sea which is 
 continually rising, fretting their coasts and reducing their areas. 
 When labour has become all-powerful and when science has dispensed 
 with effort the last islet of property will sink beneath the wave of 
 free utility. And so Bastiat triumphantly exclaims : " You com- 
 munists dream of a future communism. Here you have the actual 
 thing. All utilities are freely given by the present social order 
 provided we facilitate exchange." 2 
 
 Bastiat, usually so logical, seems inclined to be sophistical here. 
 If we seek beneath this brilliant demonstration we shall merely find 
 the statement that rent is non-existent because the value of com- 
 modities including all natural products can never exceed cost of 
 production. This cost of production is being continually lowered, 
 and so the value of goods must be falling. 
 
 But the statement requires proof. There is nothing to show how 
 the price of natural goods under the influence of competition would 
 tend to fall to the level of cost of production still less to the 
 minimum level. There is no refutation either of the differential or 
 monopolistic theory of rent. There is doubtless this much truth in 
 it : nature does not create value, nor does it demand payment for 
 it. No one would to-day say that a single cent of the price of corn 
 or coal was meant as payment for the alimentary properties of the 
 one or the calorific capacity of the other. But although it is true 
 that nature asks nothing in return, it is not correct to say that the 
 landowner demands nothing except payment for trouble and 
 1 Harmonies, chap. 8, p. 256. Ibid., chap. 5, p. 142.
 
 338 THE OPTIMISTS 
 
 expenditure incurred. And this extra gain he never relinquishes 
 unless under pressure of competition. But this very seldom happens, 
 and economic theorists have to be content merely with showing how 
 the sale price usually exceeds the cost of production, and how this 
 excess is variously known as rent, profits, or surplus value. 
 
 Bastiat was fully conscious of the weakness of his argument. 
 He saw quite clearly that possession of a suitable piece of land in 
 the Champs-Elysees would earn something more than mere payment 
 for labour and outgoings. It is then that he takes refuge in his 
 theory of value, and attempts to show that the proprietor will never 
 draw more than the price of the service rendered. This may be 
 true. But the mere fact of possessing a natural source of wealth 
 permits of the raising of the price of these goods a great deal, and 
 then what becomes of community of interests, and of the theory 
 that the goods are handed on by the proprietor free of any charge ? 
 
 How superior is Carey's theory, both in its scientific value and in 
 its social import ! Carey follows Ricardo step by step, whereas it 
 seems that Bastiat had only a very imperfect acquaintance with the 
 Ricardian theory. 1 In reply to the statement that the value of corn 
 rises progressively because the more fertile lands are occupied first, 
 and the less fertile have to be utilised afterwards, Carey points out 
 that, on the contrary, cultivation begins with the poorer land first, 
 and that the richest is the last to be cultivated. The consequence 
 is just the reverse of what Ricardo predicted. As production 
 increases, the price of corn will be lowered. The process of reasoning 
 by which this reversal of the order of cultivation is demonstrated is 
 very interesting. The domestication of land, if the phrase be 
 permissible, like the utilisation of all natural forces, takes place 
 according to the inverted order of their strength. Animals are 
 domesticated before man harnesses wind or water, and water and 
 wind are employed before there is any thought of vapour or electricity. 
 The same is true of land. Fertile land in its natural state is either 
 
 1 Bastiat does not seem to have studied rent. The chapter of the Har- 
 monies on this subject was never completed. Fontenay, one of his disciples, 
 wrote a brilliant book called Du Revenu fancier (1854), which is almost forgotten 
 to-day. He attempted to show : 
 
 (1) That Ricardian or differential rent would not exist were all the land 
 equally fertile and suitably cultivated. 
 
 (2) That it is incorrect to speak of the rent of natural fertility, as Adam Smith 
 and the Physiocrats did, if all utility (and not merely value) is the product of 
 human labour. A fish, a grape, a grain of wheat, a fat ox, all of them have 
 been created by human industry. Nature is for ever incapable of doing this. 
 This is quite true if we say nature alone, but it is equally true of labour taken 
 by itself.
 
 THE LAW OF FREE UTILITY AND RENT 339 
 
 overrun with vegetation, which must be grubbed up, or is covered 
 with water, which must be drained off. " Rich land is the terror of 
 the emigrant." a Its virgin forests must be felled, its wild animals 
 destroyed, its marshes drained, and its pestilential miasmas rendered 
 innocuous if it is not to become a mere graveyard. And not until 
 several generations have given of their toil will it be of much use. 
 Rather than undertake the task the earliest emigrant seeks the lighter 
 soils of the hill-side, which are better adapted to his feeble means, as 
 well as safer and more easily defended. 
 
 That this theory is well founded may be very clearly seen if we 
 watch the progress of cultivation or the colonisation of new lands, 
 or glance at the general history of civilisation. Men group them- 
 selves in villages on the higher levels or build their castles on the 
 slopes of the hills, and only descend slowly and carefully into the 
 lower plains. How many are the localities in France where the new 
 town may be seen overspreading the plain close to the old city 
 which still crests the hill ! The various national gods Hercules, 
 for example, who stifled the hydra of Lerna in his arms and shot the 
 birds of Stymphalus's pool with his arrows are in all probability 
 just the men who first dared break up the alluvial soils. 
 
 This theory, again, is open to the same objection as Ricardo's. 
 It applies to some cases only, and under certain conditions. Ricardo's 
 theory explained the facts relative to England, where population 
 presses heavily upon the limited area of a small island already 
 well occupied. Carey's theory is equally well adapted to an 
 immense continent, with a thinly scattered population, occupying 
 only a few cultivated islets amid the vast ocean of virgin forest 
 and prairie. The two theories are not contradictory. They apply 
 to two different sets of conditions, or to successive phases of economic 
 evolution. And seeing that Ricardo's applies to the more advanced 
 stage of civilisation, it certainly ought to have the last word. If 
 Carey were writing now he would probably express himself somewhat 
 differently, for it is no longer true even of the United States that 
 the more fertile lands are still awaiting cultivation. Only the poorer 
 and the more arid plains remain uncultivated, and here dry farming 
 has to be resorted to. So that even in the " Far West " Ricardo's theory 
 is closer to the facts than Carey's. Rents are rising everywhere, 
 and not a few American millionaires owe their fortunes to this fact. 8 
 
 1 Carey, Principles of Social Science. 
 
 1 Even in Algeria, for example, where Carey's theory was at first true, now 
 that the fertile plain of the Mitidja has been cultivated by two generations of 
 colonists it is certain that there is only second-class land available.
 
 340 THE OPTIMISTS 
 
 It is just possible that Bastiat had some knowledge of Carey's 
 theory, for the theory is outlined in The Past, the Present, and the 
 Future, published by Carey a little before Bastiat's death, as well as 
 in his Social Science, which appeared ten years later. At any rate, 
 let us render thanks to both of them for the suggestive thought that 
 as human power over nature increases, effort, difficulty, and value, 
 which is the outcome of difficulty, will disappear, and that, conse- 
 quently, the sum total of real wealth at the disposal of everyone will 
 increase, but that the poor will be those who will benefit most. 1 
 
 Ill : THE RELATION OF PROFITS TO WAGES 
 
 THE law of rent was not the only discordant note. That other law 
 which stated that profits vary inversely with wages was also 
 dissonant and needed refuting. Bastiat emphasises the contrast 
 between it and his new law of harmony, according to which the 
 interests of capital and labour are one, their respective shares 
 increese together, and the proportion given to labour grows more 
 rapidly even than capital's. 2 
 
 That is the conclusion which Bastiat wishes to illustrate by 
 means of the following table : 
 
 Total Product Capital's Share Labour's Share 
 
 First period . . 1000 500 (50 per cent.) 500 (50 per cent.) 
 
 Second period . . 2000 800 (40 ) 1200 (60 \ 
 
 Third period . . 3000 1050 (35 ) 1950 (65 ) 
 
 Fourth period . . 4000 1200 (30 ) 2800 (70 ) 
 
 This law he speaks of as " the great, admirable, comforting, 
 necessary, and inflexible law of capital." 
 
 The proof is very simple too simple, perhaps. It rests entirely 
 upon the law concerning the lowering of the rate of interest, noted 
 by Turgot and other economists long before Bastiat's time. If 
 capital, instead of asking 5 per cent., only demands 3 per cent., then 
 its share is diminished, and any further diminution of its share 
 must mean an increase of the proportion available for labour. 
 
 1 " Wealth consists of the right to command the services of nature, which are 
 always free." (Carey, Principles of Social Science, vol. i, chap. 13.) 
 
 "As man's power over nature grows, his power over his fellow-men seems to 
 dwindle and equality becomes possible." (Ibid., vol. iii, p. 122.) 
 
 Compare, for example, the relative equality of comfort enjoyed by those 
 who travel by rail irrespective of class distinctions (which are only to be found 
 in some countries) with the former method of travelling by post-chaise. 
 
 1 " Capitalists and workers, don't look at one another with an air of defiance 
 and vengeance." (Harmonies, p. 252.)
 
 THE RELATION OF PROFITS TO WAGES 341 
 
 But a relative diminution of this kind will not prevent capital 
 drawing an absolutely greater share, provided the total produce goes 
 on increasing, as is the case in every progressive community. Its 
 total share, though on the increase, may be decreasing relatively to 
 the share which goes to labour. For example, the total product 
 may be tripled, capital's share having doubled in the meantime, 
 while labour's portion is quadrupled. Unfortunately this is a 
 purely sophistical argument. The figures given in the table are 
 simply invented to meet the needs of the case. Even the universality 
 of the law concerning the lowering of the rate of interest is open to 
 dispute. Economic history seems to point to a series of periodic 
 oscillations of the rate, and quite recently it has risen very con- 
 siderably. 
 
 The so-called " law " becomes more than doubtful if, following 
 Bastiat, we include under the term interest, not merely net interest, 
 but also profits and dividends and all kinds of returns from capital. 
 
 But, even admitting that such a law is thoroughly established, 
 does that prove that capital's share is decreasing ? A lowering of 
 the rate of interest cannot affect the capital already invested in 
 factories, mines, railways, State funds, etc. The latter will not draw 
 a penny less, and a fall in the rate of interest will increase the value 
 of all old capital. Every capitalist knows this and speculates on 
 the chance of its happening. 1 
 
 Only in the case of new capital, then, will a lower rate of interest 
 reduce the capitalist's share. If by any chance this new capital 
 should prove less productive than the old it may then happen that 
 the reduced rate of interest will mean an equal or even a greater 
 rise in the remuneration of labour. This is quite a probable 
 contingency, and the proof advanced by economists who believe in 
 a gradual lowering of the rate of interest is just this very fact that 
 new capital is generally less productive than old. 
 
 In short, the problem presented by the rate of interest, implying 
 as it does a certain connection between the value of the capital and 
 the value of the revenue, is entirely different from the question as to 
 what share of the produce will eventually fall to the lot of the 
 capitalist and what to the workers. 2 
 
 1 A lowering of the rate of interest from 5 to 3 per cent, means that what 
 formerly cost 60 and yielded 3 per cent, will now cost 100. There is no 
 decrease of the revenue and there ia an increase in the capital. It is quite 
 a good bargain. A lowering of the rate of interest will simply reduce the 
 amount of capital in those instances where the borrower can effect a conversion 
 to his own advantage. 
 
 1 This truth is BO obvious that Rodbertus, as we shall see by and by, took
 
 842 THE OPTIMISTS 
 
 Not only is the demonstration which Bastiat thought he had 
 given false, but the thesis itself is very doubtful when tested by the 
 facts. Statistics seem to show quite clearly Bastiat's law notwith- 
 standing, and not depreciating the influence of other powerful 
 factors, such as trade unions, strikes, and State intervention that 
 during the course of the nineteenth century the share of the social 
 revenue which falls to the lot of capital has increased more rapidly 
 than labour's. 1 
 
 IV : THE SUBORDINATION OF PRODUCER 
 TO CONSUMER 
 
 BASTIAT laid considerable stress upon this principle, but it is not 
 easy to realise its harmonic significance. 
 
 The subordination of producer to consumer is nothing less than 
 the subordination of private to general interest. Producers always 
 consult their own interests, and are continually in search of profits. 
 Still, everything invented with a view to increasing profits results in 
 lowering prices, so that the consumer is the person who finally 
 benefits by it. 2 And so economic laws, the law of competition and 
 of value, constrain the producer who really wishes to be selfish to 
 be altruistic, even de)>ite himself. The laws outwit him, but his 
 undoing benefits everyone else. While working for a maximum 
 profit he is really toiling to satisfy the needs of others in the most 
 economical fashion, and therein lies the harmony. 
 
 In all difficult economic problems the criterion should be this : 
 What solution will prove most advantageous to consumers ? Never 
 ought we ask what will be most profitable for producers, although, 
 
 the opposite point of view and attempted to argue on the strength of the " iron 
 law" that capital's share is always increasing, while labour's is decreasing. 
 This thesis seems to have no better foundation than the other. See an article 
 by Riat entitled Deux Sophism&s economiques, in the Revue d'Economie politique 
 for March 1905. 
 
 Bastiat's thesis may also be seen in Carey. The Liberal school has clearly 
 adopted it. See Paul Leroy-Beaulieu's Repartition der Bichesses. 
 
 1 See Gide's Political Economy, p. 599 (English translation), and Colson's 
 Political Economy, vol. iii, p. 366. According to Colson, capital's share has 
 quadrupled since 1820, while labour's has only increased in the proportion of 
 1:3*. 
 
 1 " Just as the earth is the great reservoir of electricity, so the public or the 
 consumer is the one source of any gain or loss which the producer makes or 
 suffers. Everything comes back to the consumer. Consequently every im- 
 portant question must be studied from the consumer's point of view if we 
 want to get hold of its general and permanent results," (Harmonies, chap. 11, 
 p. 414.)
 
 THE SUBORDINATION OF PRODUCER TO CONSUMER 343 
 
 unfortunately, this is the more usual question. In matters of 
 international trade, when the interest of the producer is uppermost, 
 Protection is established. If we only consulted the interest of 
 consumers, Free Trade would become an immediate necessity. Or 
 take the case of public or private expenditure. The producer can 
 bring himself to excuse or even to approve of breaking windows or 
 wasting powder, 1 but the consumer unceremoniously condemns all 
 such destruction of wealth as useless consumption. 
 
 But Bastiat is not content with giving the consumer mere 
 economic pre-eminence. He is equally anxious to demonstrate his 
 moral superiority. " If humanity is to be perfected, it must be by 
 the conversion of consumers, and not by the moralising of pro- 
 ducers," * and so, he holds consumers responsible for the production 
 of unnecessary or worthless commodities, such as alcohol. 8 Bastiat's 
 contribution to this subject is quite first-class, and may possibly be 
 his best claim to a place among the great economists. He was not 
 far wrong when on his deathbed he delivered to his disciples as his 
 last instructions his novissima verba, " Political economy should 
 be studied from the consumer's standpoint." This distinguishes 
 him from his famous antagonist, Proudhon, who always had the 
 producer's interest at heart. 
 
 The only things with which we can reproach Bastiat are a too 
 persistent faith in natural harmonies and a belief in the efficacy of 
 ordinary economic laws to bring about the supremacy of the con- 
 sumer. In fact, the consumer's reign has not yet come, and the 
 economic mechanism is becoming more and more the tool of the 
 profit-maker. The consumer has had to seek in organisation a 
 method of defending his own interests and those of the public, with 
 whose interests his own are often confused. This is why we have 
 institutions like the co-operative society and the consumers' league. 
 His moralisation, moreover, is not entirely his own affair. Before 
 the consumer realises the full measure of his responsibility and the 
 extent of his duties a great deal of work will be necessary on the 
 part of buyers' social leagues, temperance leagues, etc. 
 
 Strangely enough, economists of the Liberal Individualist school 
 view such institutions with a somewhat critical eye. 4 
 
 1 See one of Bastiat's best known pamphlets, La Vitre cassee. 
 
 * Harmonies, chap. 6, p. 419. 
 
 8 Quoted by his friend Pailloltet in his preface to the CEuvres complete*. 
 
 * E.g. Yves Guyot in the Journal des Economistes for 1904 et passim. See 
 p. 326.
 
 344 THE OPTIMISTS 
 
 V : THE LAW OF SOLIDARITY 
 
 WE must not forget, as most writers on the subject seem to have 
 done, that Bastiat was the first to give the law of solidarity so 
 popular in the economics of to-day a position of honour within the 
 science of political economy. 1 One of the unfinished chapters of 
 the Harmonies, entitled ** Solidarity," was meant to expound the 
 thesis that " society is just a collection of solidarities woven 
 together." 2 
 
 The name is deceptive, however, and his conception of solidarity 
 is quite different from the one current to-day, while the conclusions 
 drawn are by no means similar. 
 
 The fundamental doctrine upon which the Solidarists of to-day 
 would base a new morality is briefly this : Every individual owes all 
 the good with which he is endowed, and all the evil with which he 
 is encumbered, to others. So whether he is wealthy or poor, virtuous 
 or vicious, it is his duty to share with those who are worse off, and he 
 has a right to demand a share from those who are better off. Only 
 in this way can we justify legal assistance, insurance, Factory Acts, 
 education, and taxation. The doctrine is a negation, or at the very 
 least a modification, of the strict principle of individual responsibility. 
 
 But Bastiat views it differently. He has no desire to weaken 
 individual responsibility, for responsibility must be the indispensable 
 corrective of liberty. And solidarity, because of the feeling of 
 interdependence to which it gives rise, is so bewildering that Bastiat 
 anxiously asks whether solidarity is actually necessary " in order to 
 hasten or to secure the just retribution of deeds done." A closer 
 survey reconciles him to the prospect, for he sees in it a means of 
 extending and deepening individual responsibility. Seeing that the 
 results of good and bad deeds react upon everyone, everybody must 
 be interested in furthering every good deed and in repressing the bad, 
 especially since every deed reacts upon its author with its original 
 force multiplied a thousand, and perhaps a million times. 3 The 
 
 1 The word is not his invention. That honour is claimed by Pierre Leroux. 
 See p. 235. 
 
 1 Harmonies, chap. 21, p. 624. 
 
 "There is not a man living whose character has not been determined by 
 a thousand factors entirely beyond his control." (Ibid., p. 623.) 
 
 " All profit by the progress of the one, and the one by the progress of the 
 many." (Ibid., chap. 11, p. 411.) 
 
 8 "Solidarity implies a kind of collective responsibility. And so solidarity 
 as well as responsibility is a force that makes for progress. It is a system that 
 is admirably calculated to check evil and to advance the good." (Ibid,, 
 chap. 21, pp. 622-626.)
 
 BASTIAT AND THE LAW OF SOLIDARITY 345 
 
 harmony just consists in that. Bastiat's solidarity aims, not at the 
 development of fraternity, but at the strengthening of justice. It 
 does not urge upon society the duty of permitting no differences 
 among its members, but it does emphasise the importance of handling 
 the scourge or bestowing the palm with greater impartiality. And 
 Bastiat, despite his law of solidarity nay, possibly because of that 
 very law definitely rejects all legal assistance, even in the case of 
 deserted children ! National insurance, old age pensions, profit- 
 sharing, free education, everything that is comprised under the term 
 " social solidarity " is cast aside. 1 
 
 It is a terribly individualistic conception of solidarity. Com- 
 parison with Carey's ideas is again interesting. Carey may seem to 
 ignore it altogether, inasmuch as he never mentions the name. But 
 if the name was unknown to him he gave a good description of the 
 principle itself when he referred to it as " the power of association." 
 And he was also probably the first to put the double character of 
 solidarity, as we know it to-day, in a clear light : 
 
 (1) As the differences among mankind increase in number and 
 intensity the more perfect will solidarity become. 
 
 (2) Individuality, instead of being weakened by it, is strengthened 
 and intensified.* 
 
 Someone may perhaps point out that in our treatment of the 
 Optimists' attack upon the great Classical laws no mention has been 
 made of that terribly discordant theme, Malthus's law of population, 
 which ascribes all vice and misery to the operation of a natural 
 instinct. On this particular point Bastiat's treatment is lacking in 
 both vigour and originality. His reply merely amounts to showing 
 
 1 " Workers must understand that these collective funds [pension funds] 
 must be voluntarily contributed by those who are to have a share in them. 
 It would be quite unjust, as well as anti-social, to raise them by means of taxa- 
 tion that is, by force from the classes who have no share in the benefits." 
 (Harmonies, chap. 14, p. 471.) 
 
 " A peasant marries late in the hope of having a small family, and we force 
 him to rear other people's children. He has to contribute towards the rearing of 
 bastards." (Ibid., chap. 20, pp. 617, 618.) 
 
 Speaking of sharing in the benefits, he remarks : " That is really not worth 
 talking about." (Ibid., chap. 14, p. 457.) 
 
 1 " Organisms in nature have their rank and degree of perfection determined 
 by the number of organs which they possess and the amount of difference which 
 exists between each of them." (Social Science, vol. iii, p. 461.) 
 
 " Life has been defined as an exchange of mutual obligations, but if there 
 were no difference between the various objects how could the exchange take 
 place ?" (Ibid., vol. i, pp. 54-55.) 
 
 " The more perfectly co-ordinated the whole is, the better developed will be 
 each of its parts/' (Ibid., vol. iii, p. 462.) 
 
 K.D. II
 
 346 THE OPTIMISTS 
 
 that the preventive obstacles, such as shame and continence, religious 
 feeling and the desire for equality, all of which limit the number of 
 children, are equally natural, so that nature has placed a remedy 
 alongside of the evil. 
 
 A more solid argument, borrowed from Carey, attempts to show 
 how a growing density of population allows of a growth of production, 
 so that the production of commodities may develop pari passu with 
 the growth of population, or may even exceed it. Carey relied 
 upon his own observations. All over the vast American continent, 
 especially on the immense plains of the Mississippi, he noticed that 
 the few encampments of the poor tribes that dwelt there were being 
 rapidly replaced by large industrial centres. Such an increase of 
 population in immediate contiguity naturally resulted in a great 
 amassing of wealth. 
 
 We have already noted the fact that the growth of wealth in the 
 United States has outstripped the increase in its population. The 
 simultaneous development of Germany, both in numbers and wealth, 
 is still more striking. 
 
 But Carey's population theory is open to the same criticism as 
 was urged against his theory of rent. Up to a certain degree of 
 density it is undoubtedly true, but there is no ground for believing 
 that it holds good beyond this. 
 
 Bastiat's name is frequently linked with Dunoyer's, to whom we 
 have already had occasion to refer. 1 Dunoyer was one of the most 
 militant of the politico-economic Liberals, and fully shared their 
 belief that free competition was a sufficient solution for every social 
 problem. 8 The obvious drawbacks of free competition, he thought, 
 were due to its imperfect character. No one was more opposed to 
 State Socialism and to intervention of every kind. He was opposed 
 to labour legislation, to Protection, to the regulation of the rights 
 of property, and even to the State management of forests. As we 
 have already remarked, he was against every kind of combination, 
 because it stood as an obstacle in the path of free competition. 
 
 Logically enough he was in favour of the free disposal of land, 
 and would not even make any reservations in favour of heirs. He 
 refuses to recognise the right of entail because the exercise of the 
 
 1 Charles Dunoyer was Bastiat's senior. The first edition of De la Liberti 
 dtt Travail, to which we have already referred, dates from 1 825, and the last edition 
 from 1845. He took an active part in opposing the Restoration Government, 
 but he became prefect and subsequently Conseiller d'Etat under Louis Philippe. 
 
 * RIolinari, a modern French economist, holds similar views.
 
 BASTIAT AND THE LAW OF SOLIDARITY 847 
 
 testator's liberty necessarily involves the curtailment of the liberty 
 of his successors. 1 
 
 Some of the arguments which he employs in support of free 
 exchange are quite novel. The following is one of the most interest- 
 ing. Admitting that it is not to the advantage of a poor country 
 to trade with another which is wealthier or industrially superior, the 
 same thing must apply to the poorer districts of a country in their 
 dealings with other provinces that have suddenly become rich, or 
 with rich provinces recently acquired by conquest. But " as soon 
 as they are annexed their superiority presumably disappears." The 
 argument is amusing, but not very solid. It is not impossible that 
 free exchange, even within the bounds of the same country, may have 
 the effect of drawing capital and labour from the poorer districts 
 towards the richer, from Creuse or Corsica to Paris. This is just 
 what does happen. It is not, perhaps, a very serious evil, because 
 what France loses on the one hand she gains on the other ; but if 
 Creuse or Corsica were independent states, anxious to preserve their 
 individuality, we could understand their taking measures to prevent 
 this drainage. It is true that it is not easy to see how protective 
 rights could accomplish this a point which Dunoyer might well have 
 emphasised. 
 
 We cannot speak of Dunoyer without saying a word about his 
 theory of production. Labour with him is everything. Nature and 
 raw material are nothing. He stands at the opposite pole to the 
 Physiocrats, 2 and supplied a handle to those socialists who before 
 Marx's day had thought that laboui was the only source of wealth, 
 and that consequently all wealth should belong to the worker. But 
 he pays no very great attention to this idea. His chief concern is 
 with production, and not with distribution. 
 
 From this view of production he draws several interesting 
 conclusions. 
 
 In the first place, it matters little to him whether labour is applied 
 to material objects or not. That makes no difference, so far as its 
 
 1 If a person died intestate he was in favour of equal division of wealth. 
 The arguments which he employed are very interesting, especially those directed 
 against the upholders of primogeniture. They thought that by depriving the 
 younger sons of their inheritance they became more industrious and thoughtful. 
 Dunoyer replies by asking whether it would not be an advantage to deny the 
 right of succession to the eldest son as well, "for it is obviously unfair that he 
 should be deprived of that kind of training which is so profitable to his younger 
 brothers." Dunoyer forgot that it would have gone iU with hi arguments if the 
 socialists had taken him at his word. 
 
 1 "Labour is the only source of productive power. Capital is a human 
 creation, and land is simply a form of capital." (De la Liberte du Travail, Book VI.)
 
 348 DECLINE OF THE CLASSICAL SCHOOL 
 
 character or productivity is concerned, for in both cases what is 
 produced is an immaterial thing called utility. What the baker 
 produces is not bread, but the wherewithal to satisfy a certain 
 desire. This is exactly what the prima donna produces. The so- 
 called liberal professions are placed in the same category as manual 
 work, and in this respect again Dunoyer takes up a position opposed 
 to that of the Physiocrats. 1 
 
 Contrary to what might have been expected, this large extension 
 of the concept production fails to include commerce. Dunoyer 
 applies the title productive to the singer, but refuses it to the 
 merchant, and by this strange reversal he arrives once again at the 
 Physiocratic position. Exchange is not productive 2 because buying 
 and selling does not involve any work, and where there is no work 
 there is no production. Exchange creates utilities, and it is not 
 easy to understand what more Dunoyer expects from it, seeing he 
 admits that labour can do nothing more. Exchange, he thought, 
 was a purely legal transaction, and he was loath to admit that any 
 act of a '' corporate will " without labour or physical effort could 
 create wealth, just as the Physiocrats found it impossible to think of 
 wealth other than as a product of the soil. 
 
 CHAPTER II : THE APOGEE AND DECLINE OF 
 THE CLASSICAL SCHOOL. JOHN STUART MILL 
 
 WHILE the French economists, alarmed at the consequences 
 involved in the theories of Malthus and Ricardo, strove to transmute 
 the Brazen laws into Golden ones, the English economists pursued 
 their wonted tasks, never once troubled by the thought that they 
 
 1 Say had already recognised the claims of immaterial wealth alongside of 
 material, and he had employed the term " services " in describing them. In 
 this way he considered that the professor, the doctor and the actor had claims to 
 be regarded as producers. Dunoyer, while accepting his conclusion, criticises 
 his way of putting it. He recognises no distinction between material and 
 immaterial wealth. There is nothing but utility. " It is true that taste, educa- 
 tion, etc., are immaterial, but so is everything that man produces." But he is 
 entirely wrong when he says that a good teacher is a producer of enlightened 
 men and a doctor a producer of healthy persons. We are at a loss to explain 
 why at one moment he refuses to recognise the material element in production, 
 while at another he grossly exaggerates the material results of purely intellectual 
 labour. 
 
 * "Labour and exchange belong to two categories of facts which are abso- 
 lutely distinct in their nature. Labour implies production. Commerce and 
 exchange imply nothing of the kind." (De la Liberte du Travail, p. fi99.)
 
 DECLINE OF THE CLASSICAL SCHOOL 849 
 
 were possibly forging a weapon for their own destruction at the 
 hands of socialists. 
 
 The thirty years which separate the publication of Ricardo's 
 Principles of Political Economy {1817) from Mill's book bearing the 
 same title are occupied by economists of the second rank, who 
 apply themselves, not to the discovery of new principles, but to the 
 development and co-ordination of those already formulated. Of 
 course we must not lose sight of the mass of critical work bearing 
 upon certain aspects of current doctrines, which was produced by 
 English economists just about this time. But their ideas attracted 
 as little attention as did Cournot's in France or Gossen's in 
 Germany. 1 
 
 These were the days when Miss Martineau and Mrs. Marcet gave 
 expositions of political economy in the form of tales, or conversa- 
 tions with " young Caroline," 2 when MacWickar, writing his First 
 Lessons in Political Economy for the use of Elementary Schools, 
 expressed the belief that the science was already complete. " The 
 first principles of political economy," he wrote, " are mere truisms 
 which children might well understand, and which they ought to be 
 taught. A hundred years ago only savants could fathom them. 
 To-day they are the commonplaces of the nursery, and the only real 
 difficulty is their too great simplicity." 8 
 
 We cannot attempt the individual study of all the economists of 
 this period. 4 However, one of them, Nassau Senior, 6 certainly 
 deserves more space than we can give him in this history, and is 
 
 1 Seligman in the Economic Journal for 1903, pp. 335-511, devotes two 
 very interesting articles to such writers under the title of Some Neglected 
 British Economists. One is astonished to find how many there are and the 
 originality which they show, and to learn that several of the more important 
 modern theories are simply rediscoveries. 
 
 * Mrs. Marcet's Conversations belong to 1817, Miss Martineau's Illustrations 
 to 1832. The latter had a wonderful vogue. 
 
 1 Quoted by Seager in a lecture on economics at Columbia University in 1 908. 
 
 * We have already referred to McCulloch and James Mill, two of Ricardo's 
 immediate disciples. We must just add the names of Torrens and Gibbon 
 Wakefield. Wakefield was the author of a book which had a great reputation 
 at one time, but which was simply an attempt to apply the Ricardian principles 
 to the practice of colonisation. 
 
 5 Nassau Senior during a part of his life was Professor of Political Economy 
 at Oxford. The Oxford chair, created in 1825, was the first chair of economics 
 to be established in England. His writings, which treat of various subjects, 
 belong to the period 1827-52. The bulk of his doctrine is contained in hia 
 Political Economy, contributed to the Encyclopedia Britannica in 1836 and after- 
 wards published separately. This small volume may be regarded as the earliest 
 manual of political economy.
 
 350 DECLINE OF THE CLASSICAL SCHOOL 
 
 perhaps the best representative of the Classical school, showing its 
 good and bad points better than any other writer. He removed 
 from political economy every trace of system, every suggestion of 
 social reform, every connection with a moral or conscious order, 
 reducing it to a small number of essential, unchangeable prin- 
 ciples. Four propositions seemed sufficient for this new Euclid, 1 
 all necessary corollaries being easily deducible from one or other of 
 these. Senior's ambition was to make an exact science of it, 
 and he deserves to be remembered as one of the founders of pure 
 economics. 
 
 He is responsible for the introduction into political economy of 
 a new and hitherto neglected element, namely, an analysis of 
 abstinence or saving. (The former word, which is Senior's choice, 
 is the more striking and precise term.) It is true enough, as 
 Senior remarks, that abstinence does not create wealth, but it 
 constitutes a title to wealth, because it involves sacrifice and pain 
 just as labour does. Hitherto the income of capital had been the 
 least defensible of all revenues, for Ricardo had only discussed it 
 incidentally, and had represented it as a surplus left over after 
 paying wages. The claim of capital was believed to be as evident 
 as that of land or labour, and there was no need for any further 
 inquiry. But has it any real right to separate remuneration, seeing 
 that, unlike the other two agents, it is itself a product of those two 
 and not an original factor of production ? Here at last is its title, 
 not in labour, but in abstinence. 
 
 But if on the one hand Senior succeeds in establishing the claim 
 of interest, he invalidates the claim of most other capital revenues 
 on the other. Let us follow his argument. Cost of production is 
 made up of t*,vo elements, labour and abstinence, and wherever free 
 competition obtains, the value of the products is reduced to this 
 minimum. Where competition is imperfect, where there is a greater 
 or less degree of monopoly, then between cost of production and 
 value lies a margin which constitutes extra income for those who 
 profit by it. This revenue by definition of labour and abstinence is 
 independent of every sacrifice or personal effort. This revenue 
 Senior calls rent, and his theory is thus a mere extension of the 
 Ricardian. Rent is not the result of appropriating the better 
 situated or the more fertile lands only. It may be due to the appro- 
 priation of some natural agent or to the possession of some personal 
 
 1 The four principles were : (i) the Hedonistic Principle ; (ii) the Principle 
 of Population ; (iii) the Law of Increasing Returns in Industry ; (iv) the Law 
 of Diminishing Returns in Agriculture.
 
 DECLINE OF THE CLASSICAL SCHOOL 851 
 
 quality such as the artiste's voice or the surgeon's skill, 1 or it may 
 simply be the result of social causes or fortuitous circumstances. 
 Senior shows that rent, far from being an exceptional phenomenon, 
 is really quite normal. This kind of revenue which is wanting in 
 title drawn, but not earned is extremely important, and absorbs 
 a great share of the total wealth. Indeed, Senior goes much further, 
 and states that whenever, as in the case of death, capital passes from 
 the hands of those who have earned it into the possession of others, 
 it immediately becomes rent. The inheritor cannot plead abstinence 
 the virtue is not transmissible, and he has no title to his fortune 
 except just good luck. 2 
 
 No revolutionary socialist could ever have invented a better 
 argument for the abolition of the existing order. And how different 
 from the " natural order " 1 But Senior is quite unmoved, and the 
 superb indifference with which economists of the Ricardian school 
 affirm their belief in their doctrines without taking any account of 
 the consequences which might uphold or might destroy those very 
 beliefs has a peculiar scientific fascination for us. 
 
 Also, it was Senior who laid stress upon scarcity as the basis of 
 economic value. But a thing to possess value must be not merely 
 rare, it must also satisfy some want. It must be a rare utility. It 
 is the same term, " scarcity," that was employed by Walras. 
 
 The Classical doctrines were taught during the first half of the 
 
 1 " But a considerable part of the produce of every country is the recompense 
 of no sacrifice whatever ; is received by those who neither labour nor put by, 
 but merely hold out their hands to accept the offerings of the rest of the com- 
 munity." (Political Economy, p. 89.) He takes the income of a successful 
 doctor as an illustration, and divides it up as follows (ibid., p. 189) : 
 
 Wages or payment for labour . . 40 
 Profit or payment for abstinence . . . 960 
 Rent 3000 
 
 See Senior's Theory of Monopoly, by Richard Ely (American Economic 
 Association, 1899). 
 
 1 This confusion between rent and the income of inherited wealth does little 
 honour to Senior, for the two facts belong to entirely different categories. Rent 
 is a purely economic phenomenon, resulting from the necessary conditions of 
 exchange. It owes nothing to social organisation, not even to the institution 
 of private property. Inheritance, on the other hand, is a purely juridical phe- 
 nomenon, the product of civil law. Even if inheritance were abolished it would 
 make no difference to the existence and growth of rent, whether obtained from 
 the soil or from some other source ; whereas under the hypothetical rigime of 
 perfectly free competition, although rent would no longer be known, inheritance, 
 together with all its privileges, might still continue to exist. Senior evidently 
 understands by the term " rent " any kind of income that is not obtained by 
 personal effort. But this is clearly a perversion of the original meaning.
 
 352 DECLINE OF THE CLASSICAL SCHOOL 
 
 nineteenth century, not in England alone, but in every country of 
 the world. In Germany they were expounded by von Thiinen, of 
 whom we have already spoken, and by his contemporary Rau. 1 In 
 France, despite the growing influence of the optimistic politico- 
 liberal creed considered in our last chapter, English Classical 
 economics was still taught by a large number of economists, among 
 whom Rossi deserves special mention. His Cours d'ficonomie 
 politigue, published in 1840, enjoyed a fair success, due, not to any 
 originality in the contribution itself, but to the somewhat oratorical 
 style of the work. 2 
 
 But to proceed to the central figure of this chapter John Stuart 
 Mill. 8 With him Classical economics may be said in some way 
 to have attained its perfection, and with him begins its decay. The 
 middle of the nineteenth century marks the crest of the wave. 
 What makes his personality so attractive is his almost dramatic 
 appearance, and the consciousness that he was placed between two 
 schools, even between two worlds. To the one he was linked by 
 the paternal ties which bound him to the Utilitarian school, wherein 
 he was nurtured ; the other beckoned him towards the new horizons 
 that were already outlined by Saint-Simon and Auguste Comte. 
 During the first half of his life he was a stern individualist ; but the 
 
 1 Rau's treatise on political economy belongs to the years 1826-37, and vqn 
 Thiinen's Der Isolirte Stoat appeared in 1826. 
 
 1 Pellegrino Rossi, who became a naturalised Frenchman in 1833, was an 
 Italian by birth. He succeeded Say as professor at the College de France. He 
 afterwards became Lecturer on Constitutional Law, and his name is commemo- 
 rated in one of the annual prizes. He eventually entered the diplomatic service, 
 and was attached to the Papal See during the pontificate of Pius IX. He waa 
 assassinated at Rome in 1 848. 
 
 ' Johi Stuart Mill, born in 1806, was the son of James Mill the economist of 
 whom we have already spoken. The system of education which his father planned 
 for him can only be described as extraordinary. Practised on anyone else it would 
 have been fatal. At the age of ten he was already well versed in universal history 
 and in the literatures of Greece and Rome. At thirteen he had a fair grasp of 
 science and philosophy, and had written a history of Rome. By the time he was 
 fourteen he knew all the political economy that there was to know then. In 
 1829, then a young man of twenty-three, he published his first essays on political 
 economy. In 1843 appeared his well-known System of Logic, which immediately 
 established his fame. In 1848 he issued the admirable Principles of Political 
 Economy. Mill was in the service of the East India Company up to the time 
 when it lost its charter in 1858. From 1865 to 1868 he was a member of the 
 House of Commons. After the death of his wife, who collaborated with him 
 in the production of several of his works, especially Liberty (1859), being un- 
 willing to quit the spot where she lay buried, he spent the last years of his life, 
 except those taken up by his Parliamentary work, at Avignon. His auto- 
 biography contains a precious account of his life and of his gradual conversion 
 td socialistic views.
 
 DECLINE OF THE CLASSICAL SCHOOL 353 
 
 second found him inclined to socialism, though he still retained his 
 faith in liberty. His writings are full of contradictions ; of sudden, 
 complete changes, such as the well-known volte-face on the wages 
 question. Mill's book exhibits the Classical doctrines in their final 
 crystalline form, but already they were showing signs of dissolving 
 in the new current. 
 
 Like other theorists of the " Pure " school, he declared that there 
 was no room in political economy for the comparative judgment of 
 the moralist, but it was he also who wrote : " If, therefore, the 
 choice were to be made between communism with all its chances 
 and the present state of society with all its sufferings and injustices ; 
 if the institution of private property necessarily carried with it as 
 a consequence that the produce of labour should be apportioned as 
 we now see it, almost in an inverse ratio to the labour the largest 
 portions to those who have never worked at all, the next largest to 
 those whose work is almost nominal, and so in a descending scale, the 
 remuneration dwindling as the work grows harder and more dis- 
 agreeable, until the most fatiguing and exhausting bodily labour 
 cannot count with certainty on being able to earn even the necessaries 
 of life ; if this or communism were the alternative, all the difficulties, 
 great or small, of communism, would be but as dust in the balance." * 
 
 It was Mill the utilitarian philosopher who declared that a 
 person of strong conviction " is a social power equal to ninety-nine 
 who have only interests." It was he also who wrote that " com- 
 petition may not be the best conceivable stimulus, but it is at present 
 a necessary one, and no one can foresee the time when it will not be 
 indispensable to progress." But he also admits that " co-operation is 
 the noblest ideal," and that it " transforms human life from a con- 
 flict of classes struggling for opposite interests to a friendly rivalry 
 in the pursuit of a good common to all.** * 
 
 Mill, it has been said, was simply a gifted popular writer. But 
 this is to under-estimate his ability. It is true that, unlike Ricardo, 
 Malthus, or Say, his name is not associated with any economic law, 
 but he opened up a wider prospect for the science which will 
 secure him a reputation long after the demise of these so-called laws. 
 His fame is doubly assured, for in no other work on political 
 economy, not excepting even the Wealth of Nations, are there so 
 many pages of fine writing, so many unforgettable formulae which 
 will always be repeated by everyone who has to teach the science. 
 It is not for nought that the Principles has served as a text-book for 
 half a century in most of the English universities. 
 
 1 Principles, Book II, chap. 1, 3. > Ibid., Book IV, chap. 7, 7,
 
 354 DECLINE OF THE CLASSICAL SCHOOL 
 
 Before examining the changes in the Classical doctrines which 
 Mill himself effected, we must give a brief outline of those theories as 
 they appeared in all their inflexible majesty towards the middle of 
 the nineteenth century, during the period between the publication 
 of the Principles and the death of John Stuart Mill, between 1848 and 
 1873. This was the period when the Classical Liberal school believed 
 that its two old rivals, Protectionism and socialism, were definitely 
 crushed. Reybaud, in his article on socialism in the Dictionnaire 
 d' Economic politique of 1852, wrote as follows : " To speak of 
 socialism to-day is to deliver a funeral oration." Protection had 
 just been vanquished in the struggle that led to the repeal of the 
 English Corn Laws, and was to suffer a further check, alike in France 
 and in the other countries of Europe, as a result of the treaties of 
 1860. The future lay with the Classics. It was little thought that 
 1867 would witness the publication of Kapital, that in 1872 the 
 Congress of Eisenach would reassemble, when the treaties of 1860 
 would be publicly denounced. 
 
 Let us profit by its hour of glorious existence to give an exposition 
 of the doctrines which it taught. The treatment must necessarily be 
 very summary, seeing that we are not writing a treatise on political 
 economy, and that our attention must be confined to writers who 
 are definitively members of the Liberal school. 
 
 I : THE FUNDAMENTAL LAWS 
 
 A BELIEF in natural laws was always an article of faith with the 
 Classical school. Without some such postulate it seemed to them 
 that no collection of truths, however well attested, could ever lay 
 claim to the title of science. But these natural laws had none of 
 that " providential," " finalistic," and " normative " character so 
 frequently dwelt upon by the Physiocrats 1 and the Optimists. They 
 are simply natural laws like those of the physical order, and are 
 clearly non-moral. They may prove useful or they may be harmful,, 
 and men must adapt themselves to them as best they can. To say 
 that political economy is a " dismal science " because it shows that 
 certain laws may have unfortunate results is as absurd as it would 
 be to call physics a " dismal science " because lightning kills. 
 
 1 Dupont de Nemours, writing very much in the spirit of the Classical school, 
 had already given an excellent definition of natural law. " By natural law 
 we are to understand those essential conditions that regulate all things in accord- 
 ance with the design laid down by the Author of Nature. They are the ' essential 
 conditions ' to which men must submit if they would obtain all the benefits 
 which the natural order offers them." (Introduction to Quesnay's works, p. 21.)
 
 THE FUNDAMENTAL LAWS 355 
 
 Far from being irreconcilable with individual liberty, these laws 
 are among its direct results. They are the spontaneous links which 
 bind together all free men. Freedom is always subject to conditions. 
 Men are not free in the matter of eating or not eating, and if they 
 would eat they must cultivate the soil. Freedom is limited not only 
 by the actions of other human beings, but also by the laws of the 
 physical world which surrounds us. 
 
 These laws are universal and permanent, for the elementary 
 needs of mankind are always and everywhere the same. Economics 
 is in quest of such permanent laws, and has no concern with the 
 merely temporary. It is only by seeking the more general and 
 consequently the more nearly universal laws that economics can 
 apprehend truth or hope to become a science. It must study man, 
 not men the type, not the individual the homo OBconomicus 
 stripped of every attribute except self-interest. It does not deny 
 the existence of other qualities, but merely relegates them to the 
 consideration of other sciences. 
 
 It now remains to see what those natural laws were. 
 
 (1) The Law of Self-interest. This law has since been named the 
 Hedonistic principle a term that was never employed by the 
 Classical school. Every individual desires well-being, and so would 
 be possessed of wealth. Similarly he would, if possible, avoid evil 
 and escape effort. This is a simple psychological law. Could 
 anything be more universal or permanent than this law, which is 
 simply the most natural and the most rational (using the term in its 
 Physiocratic sense) statement of the law of self-preservation ? In 
 virtue of this fundamental principle the Classical school is frequently 
 known as the Individualist school. 
 
 But individualism need imply neither egoism nor egotism. This 
 confusion, which is repeatedly made with a view to discrediting the 
 Classical writers, is simply futile. No one has displayed greater 
 vigour in protesting against this method of treating individualism 
 than Stuart Mill. To say that a person is seeking his own good 
 is not to imply that he desires the failure of others. Individualism 
 does not exclude sympathy, 1 and a normal individual feels it a 
 source of gratification whenever he can give pleasure to others. 
 
 But this did not prevent Ricardo and Malthus showing the 
 numerous instances in which individual interests conflict, where 
 
 1 Adam Smith, let us remember, also wrote a book on the Theory of Moral 
 Stniimenta (see Book I, chap. 2), and Stuart Mill writes as follows : " In the 
 golden rule of Jesus of Nazareth we read the complete spirit of the ethics of 
 utility. To do as you would be done by and to love your neighbour as yourself 
 constitute the ideal perfection of utilitarian morality." ( Utilitarianism, chap. 2. )
 
 356 DECLINE OF THE CLASSICAL SCHOOL 
 
 it is necessary that one interest should be sacrificed to another. 
 And Mill, far from denying the existence of these conflicts, has taken 
 special pains to emphasise them. The Classical writers, together 
 with the Optimists, reply that such contradictions are apparent only, 
 and that beneath these appearances there is harmony ; or they 
 point out that these antinomies are due to the fact that both 
 individualism and liberty are only imperfectly realised, and as yet 
 not even completely understood, but that as soon as they are securely 
 established the evils which they have momentarily created will be 
 finally healed. 1 Liberty is like Achilles' lance, healing the wounds 
 it inflicts. Other individualists, such as Herbert Spencer, declare 
 that the conflict of individual interests is not merely advantageous 
 to the general interests of society, but is the very condition of 
 progress, weeding out the incapable to make room for the fittest. 
 
 (2) The Law of Free Competition. Admitting that each individual 
 is the best judge of his own interests, then it is clearly the wisest 
 plan to let everyone choose his own path. Individualism pre- 
 supposes liberty, and the Individualist school is also known as the 
 Liberal school. This second title is more exact than the first, and 
 is the only one which the French school will accept. It emphatically 
 repudiates every other, whether Individualist, Orthodox, or Classical. 1 
 
 1 This is how Mill views it : " It is only in a very imperfect state of the 
 world's arrangements that anyone can best serve the happiness of others by 
 the absolute sacrifice of his own." (Utilitarianism, chap. 2.) But it is scarcely 
 necessary to add, seeing that the two propositions are necessarily complementary, 
 that one of the best ways of securing happiness is to sacrifice one's self in the 
 cause of others. All that is required is a little patience. " Education and 
 opinion will so use that power as to establish in the mind of every individual 
 an indissoluble association between his happiness and the good of the whole." 
 Interpreted in this way, individualism is closely akin even to the most transcendent 
 form of solidarity. 
 
 * One is sometimes asked to state the differences between the Classical, the 
 Individualist, the Liberal, and the Optimist schools. The question does not 
 seem to us to be a very important one, but we may answer it in this way : 
 
 (a) The Individualist school, according to the worst interpretation put 
 upon it, thinks that egoism is the only possible system of ethics and that 
 each for himself is the sole principle of action. But, naturally enough, everyone 
 is anxious to avoid the taunt of selfishness, and the existence of such economic 
 ties as exchange and division of labour make egoism impossible as an ethical 
 system. According to the broadest interpretation of the term, individualism 
 implies the recognition of individual welfare as the sole aim of every activity, 
 whether individual or social, economic or political. But this does not take us 
 very far, for every socialist and individualist would accept this interpretation. 
 We seldom speak of the welfare of society per se as an entity possessed of conscious 
 feeling. This definition is much too wide. It includes solidarity and association, 
 State intervention and labour legislation, provided the aim be to protect the
 
 THE FUNDAMENTAL LAWS 857 
 
 The English school is equally decisive in its preference for 
 " Liberalism." The terms " Manchesterism " and " Manchester- 
 thum " have also been employed, especially by German critics, in 
 describing this feature of their teaching. 
 
 But the Classical school itself thought of laissez-faire neither as 
 a dogma nor a scientific axiom. It was treated merely as a practical 
 rule which it was wise to follow, not in every case, but wherever a 
 better had not been discovered. Those who act upon it, in Stuart 
 Mill's opinion, are nearer the truth nineteen times out of twenty than 
 those who deny it. 1 This practical Liberalism is intended to apply 
 to every aspect of economic life, and their programme includes 
 liberty to choose one's employment, free competition, free trade 
 beyond as well as within the frontiers of a single country, free banks, 
 and a competitive rate of interest ; and on the negative side it 
 implies resistance to all State intervention wherever the necessity 
 for it cannot be clearly demonstrated, as in the case of protective or 
 parental legislation. 
 
 individual against certain dangers. Self-sacrifice is not excluded, for what can 
 strengthen individualism like self-sacrifice ? This is the interpretation which 
 Schatz puts upon it in his L'Individualisme iconomique et social. But the term 
 " individualist " is too indefinite and we must avoid it whenever we can. 
 
 (b) The so-called Liberal school uses the term in a much more definite fashion. 
 The individual is to be not merely the sole end of economic action, but he is 
 also to be the sole agent of the economic movement, because no one else can 
 understand his true interests or realise them in a better way. Interpreted in 
 this fashion, it means letting the individual alone and removing every external 
 intervention, whether by the State or the master. 
 
 According to the one definition, individualism is a creed which everyone 
 can adopt ; according to the other it is open to very serious objections. Experi- 
 ence shows that the individual, whether as consumer buying injurious, costly, or 
 useless commodities, or as worker working for wages that ruin his health and 
 lower his children's vitality, is a poor judge of his own interest, and is helpless 
 to defend himself, even where science and hygiene are on his side. 
 
 (c) If we push this interpretation a stage farther and admit not only that each 
 individual is best qualified to speak for himself, but also that the social interest 
 is simply the sum of the individual interests, all of which converge in a harmonious 
 whole, then the Liberal school becomes the Optimistic. In France it has the 
 tradition of a generation behind it, and an attempt has been made to revive it in 
 certain recent works ; still it may now be regarded as somewhat antiquated. 
 
 (d) When we speak of the Classical school we mean those who have remained 
 faithful to the principles enunciated by the earlier masters of economic science. 
 An effort has been made to improve, to develop, and even to correct the older 
 theories, but no attempt has been made to change their essential aspects. In- 
 dividualistic and liberal by tradition, this school has never been optimistic. It 
 lays no claim to finality of doctrine or to the universality of its aim, but simply 
 confines itself to pure science. 
 
 1 Auguate Comte and Positivism.
 
 358 DECLINE OF THE CLASSICAL SCHOOL 
 
 In the opinion of Classical writers, free competition was the 
 sovereign natural law. It was sufficient for all things. It secured 
 cheapness for the consumer, and stimulated progress generally because 
 of the rivalry which it aroused among producers. Justice was 
 assured for all, and equality attained, for the constant pursuit of 
 profits merely resulted in reducing them to the level of cost of 
 production. The Dictionnaire d 1 Economic politique of 1852, which 
 may perhaps be considered as the code of Classic political economy, 
 expressed the opinion that competition is to the industrial world 
 what the sun is to the physical. And Stuart Mill himself, the author 
 of Liberty, no longer distinguishing between economic and political 
 liberty, in less poetic but equally conclusive terms states that " every 
 restriction of competition is an evil," but that " every extension of it 
 is always an ultimate good." * On this point he was a stern opponent 
 of socialism, although in other respects it possessed many attractions 
 for him. " I utterly dissent," says he, " from the most conspicuous 
 and vehement part of their teaching, their declamations against 
 competition." 
 
 But the Classical school, despite its glorification of free com- 
 petition, never had any intention of justifying the present regime. 
 The complaints urged against it on this score, like the similar charge 
 of egoism, are based upon a misconception. On the contrary, the 
 Classics, both new and old, complain of the imperfect character of 
 competition. Senior had already pointed out what an enormous 
 place monopoly still holds in the present regime. A regime of 
 absolutely free competition is as much a dream as socialism, and it 
 is as unjust to judge competition by the vices of the existing order 
 as it would be to judge of collectivism by what occurred in the 
 State arsenals. 
 
 (3) The Law of Population also held an honourable place among 
 Classical doctrines, so honourable, indeed, that even the Optimists 
 never dared contradict it. And of all economists Mill seems most 
 obsessed by it. 2 In his dread of its dire consequences he surpasses 
 Malthus himself. And he reveals a far greater regard for moral 
 considerations than was ever shown by the latter. Mill was already 
 a Neo-Malthusian in the respect which he felt for the rights and 
 liberty of women, which are too seldom consulted when maternity 
 
 1 Principles, Book IV, chap. 7, par. 7 (Ashley's ed., p. 793). See the recent 
 work of Molinari, or La Morale de la Concurrence, by Yves Guyot. 
 
 1 " It is in vain to say that all mouths which the increase of mankind calls 
 into existence bring with them hands. The new mouths require as much food 
 as the old ones and the hands do not produce as much." (Principle*, Book I, 
 chap. 11, 2.)
 
 THE FUNDAMENTAL LAWS 859 
 
 is forced upon them. 1 A numerous family appeared to him as 
 vicious and almost as disgusting as drunkenness.* Time and again 
 he declares that the working classes can hope for no amelioration of 
 their lot unless they check the growth of population. One reason 
 for his favourable view of peasant proprietorship is the restraint 
 which it exercises upon the birth-rate. " The rate of increase of the 
 French population is the slowest in Europe," he writes, and this 
 result he thought very encouraging. 
 
 To exorcise this terrible demon he would even sacrifice the 
 principle of liberty which everywhere else he is at so much pains to 
 defend. He was prepared to support a law to prohibit the marriage 
 of indigents, 8 a proposal to which Malthus was absolutely opposed 
 His plea for this measure of restraint is expounded, not in the 
 Principles, but in another of bis works entitled Liberty. It is, of 
 course, possible that Liberty may owe something to the collaboration 
 of Mrs. Stuart Mill. 
 
 (4) The Law of Demand and Supply the law that determines 
 the value of products and of productive services, such as labour, 
 land, and capital is usually stated in the following terms : Price 
 varies directly with demand, inversely with supply. One of the 
 most important contributions which Mill made to the science was to 
 show that this apparently mathematically precise formula was 
 merely a vicious circle. If it be true that demand and supply cause 
 a variation of price, it is equally true that price causes a variation of 
 demand and supply. Mill corrects the dictum by saying that price 
 
 1 " It is seldom by the choice of the wife that families are too numerous ; on 
 her devolves (along with all the physical suffering and at least a full share of the 
 privations) the whole of the intolerable domestic drudgery resulting from the 
 excess." (Principles, Book II, chap. 13, 2.) 
 
 1 " While a man who is intemperate in drink, is discountenanced and despised 
 by all who profess to be moral people, it is one of the chief grounds made use 
 of in appeals to the benevolent that the applicant has a large family and is 
 unable to maintain them." (Ibid., Book II, chap. 13, 1.) "Little improve- 
 ment can be expected in morality, until the producing large families is regarded 
 with the same feelings as drunkenness or any other physical excess. But while 
 the aristocracy and clergy are foremost to set the example of this kind of in- 
 continence what can be expected of the poor ? " (Ibid., Ashley's ed., p. 375, note.) 
 
 He complains that the Christian religion inculcates the belief that God in His 
 wisdom and care blesses a numerous family. 
 
 * " The laws which in many countries on the Continent forbid marriage 
 unless the parties can show that they have the means of supporting a family, 
 do not exceed the legitimate powers of the State. They are not objectionable 
 as violations of liberty." (Liberty, chap. 6.) 
 
 On the other hand he thought that a law which limited the number of public- 
 houses involved a violation of liberty because it meant treating the workers aa 
 children. (Ibid., chap. 5.)
 
 360 DECLINE OF THE CLASSICAL SCHOOL 
 
 is fixed at a margin where the quantity offered is equal to the 
 quantity demanded. All price variations move about this point, 
 just as the beam of a balance oscillates about a point of equilibrium. 1 
 He thus gave to the law of demand and supply a scientific precision 
 which it formerly lacked, and by substituting the conception of 
 equilibrium for the causal relation he introduced a new principle into 
 economics which was destined to lead to some important modifications. 
 
 The law of demand and supply explains the variations of value, 
 but fails to illuminate the conception of value itself. A more 
 fundamental cause must be sought, which can be found in cost of 
 production. Under a regime of free competition the fluctuations in 
 value tend toward this fixed point, just as " the sea tends to a level ; 
 but it never is at one exact level." * 
 
 A temporary, unstable value dependent upon the variations of 
 demand and supply, a permanent, natural, or normal value regulated 
 by cost of production, such was the Classical law of value. Mill was 
 entirely satisfied with it, as will be seen from the following phrase, 
 which seems rather strange, coming from such a cautious philosopher. 
 " Happily," says he, " there is nothing in the laws of value which 
 remains for the present or any future writer to clear up ; the theory 
 of the subject is complete." 8 
 
 The law which regulates the value of goods applies also to the 
 value of money. Money also has a temporary value, determined by 
 the quantity in circulation and the demand for it for exchange 
 purposes the celebrated quantity theory. But it also has a natural 
 value, determined by the cost of production of the precious metals. 
 
 (5) The Law of Wages. A similar law determined wages the 
 price of hand-labour. Here again is a double law. Temporary 
 wages depend upon demand and supply understanding by supply 
 the quantity of capital available for the upkeep of the workers, the 
 wages fund, and by demand the number of workers in search of 
 employment. 4 This law was more familiarly expressed by Cobden 
 
 1 " The rise or the fall continues until the demand and supply are again equal 
 to one another : and the value which a commodity will bring in any market is no 
 other than the value which in that market gives a demand just sufficient to 
 carry off the existing or expected supply." (Principles, Book III, chap. 2, 4.) 
 
 Cournot in his criticisms of the law of demand and supply had anticipated 
 Mill. But it is very probable that Mill was not acquainted with the Recherches. 
 
 * Principles, Book III, chap. 3, 1, 
 
 3 Ibid., Book III, chap. 1, 1. 
 
 4 " Wages depend, then, on the proportion between the number of the 
 labouriag population and the capital or other funds devoted to the purchase 
 of labour, and cannot under the rule of competition be affected by anything else." 
 (Hi 2., Book II, chap. 11, parts 1 and 3.)
 
 THE FUNDAMENTAL LAWS 561 
 
 when he said that wages rose whenever two masters ran after the 
 same man, and fell whenever two men ran after the same master. 
 
 Natural or subsistence wages in the long run are determined by 
 the cost of production of labour by the cost of rearing the worker. 
 The oscillations of temporary wages always tend to a position of 
 equilibrium about this point. 
 
 This "brazen law," as L assail e calls it, well deserves its title. 
 According to it wages depend entirely upon causes extraneous to the 
 worker, and bear no relation either to his need or to the character of 
 his work or his willingness to perform it. He is at the mercy of a 
 fatalistic law, and is as helpless to influence his market as a bale of 
 cotton. And not only is the law independent of him, but no inter- 
 vention, legal or otherwise, no institution, no system, can alter this 
 state of things without influencing one or other of the two terms of 
 the equation, the quantity of capital employed as wages the wage 
 fund or the numbers of the working population in search of work. 
 " Every plan of amelioration which is not founded upon this principle 
 is quite illusory." Only by encouraging the growth of capital by 
 means of saving, or by discouraging the growth of population and 
 restraining the sexual instinct, can the terms of the equation be 
 favourably modified. Upon final analysis there are only two 
 chances of safety for the workers, and of these the first is beyond 
 their power, 1 while the second means the condemnation to celibacy 
 or onanism of all proletarians, as they are ironically called. 
 
 And thus Mill, who formulated the law with greater rigour than 
 any of his predecessors, found himself alarmed at its consequences. 
 He was specially impressed by the courageous but impotent efforts 
 of trade unionism, then at the beginning of its career. Mill and the 
 economists of the Liberal school were as strongly in favour of the 
 removal of the Combination Laws as they were persistent in their 
 demands for the repeal of the Corn Laws ; but of what use was the 
 right of association and combination when a higher law frustrated 
 every attempt to raise wages ? Just at this time Longe, writing in 
 1866, and Thornton, in his volume on Labour, began to question the 
 validity of the wage fund theory. They experienced no difficulty in 
 converting John Stuart Mill, who followed with his famous recanta- 
 tion in the pages of the Fortnightly. His defection caused a remark- 
 able stir, and was thought almost an offence against the sacred 
 
 1 Saving with a view to augmenting the wages fund is only possible for the 
 rich, and Mill is as insistent upon their doing it as he is upon the workers refraining 
 from marriage. He also tries to impress upon the workers the importance of 
 saving, but his way of showing its advantages is often laborious and obscure.
 
 362 DECLINE OF THE CLASSICAL SCHOOL 
 
 traditions of the Classical school. The conversion was not quite 
 complete, however, for the last edition of the Principles still contains 
 the passages we have already quoted, as well as others equally 
 discouraging to the working classes, and equally fatal to the hopes 
 which they had reasonably placed in their own efforts. 1 
 
 The wage fund theory, though badly shaken as a result of Mill's 
 defection, was not abandoned by all the Classical writers, and some 
 recent American publications have attempted a revival of it.* 
 
 (6) The Law of Rent. The law of competition tends to reduce 
 the selling price until it is equal to the cost of production. But 
 suppose, as is often the case, that there are two costs of production, 
 which of the two will determine the price ? The higher will be the 
 determinant, and so there exists a margin for all similar products 
 whose cost of production is less. Ricardo showed that this was the 
 case with agricultural products as well as with certain manufactured 
 goods. 8 Mill included personal ability, and though the conception 
 of rent was thus very considerably extended, it had not the scope 
 which it had with Senior. 
 
 (7) The Law of International Exchange. According to the Liberal 
 
 1 Stuart Mill admitted that trade unions might modify the relations between 
 demand and supply, forgetting for the moment that this meant a contradiction 
 of the Classical theory. 
 
 The unions might limit the number of available men. He feared that this 
 would result in high wages for the small number of organised labourers and in low 
 wages for the others. They might check the birth-rate, their members becoming 
 accustomed to such a degree of comfort and well-being as would raise their 
 standard of life. He was always a strict Maltkusian. 
 
 1 See the quarterlies of Harvard and Columbia. It was an American, how- 
 ever, Francis Walker, in his Wages Question (1876), who did more than anyone 
 to destroy the old wage fund theory. 
 
 " The cost value of a thing means the cost value of the most costly portion 
 of it." (Principles, Book III, chap. 6, 1, prop. 7.) 
 
 " The eztra gains which any producer or dealer obtains through superior 
 talents for business or superior business arrangements are very much of a similar 
 kind. If all his competitors had the same advantages, and used them, the benefit 
 would be transferred to their customers through the diminished value of the 
 article : he only retains it for himself because he is able to bring his commodity to 
 market at a lower cost while its value is determined by a higher." (Ibid., 
 Book in, chap. 5, 4.) 
 
 Senior had already emphasised one important difference between agricultural 
 and industrial production, namely that whilst the law of diminishing returns 
 operates in the former case, the law of increasing returns is operative in the 
 second. In other words, the cost of production diminishes as the quantity 
 produced increases. The result is, as Mill points out elsewhere, that the 
 industrial employer is anxious to reduce the sale price in order to produce 
 more and to recoup himself for a reduction in price by a reduced cost of 
 production.
 
 THE FUNDAMENTAL LAWS 863 
 
 economists Ricardo and Dunoyer (see p. 346), international trade is 
 subject to the laws regulating individual exchange, and the results 
 in the two cases are almost identical, namely, a saving of labour to 
 both parties. One party exchanges a product which has cost fifteen 
 hours' labour for another which, had an attempt been made to 
 produce it directly, would have involved a labour of twenty hours. 
 The gain is credited to the importing side, for exportation is merely 
 the means whereby it is obtained. Its measure is the excess of the 
 imported value over the value exported. 
 
 It is clear that each party gains by the transaction. It is not 
 quite clear, nor is it altogether probable, that the advantages are 
 equally distributed. But it is generally believed that if any inequality 
 does exist the greater gain goes to the poorer country to the one 
 that is less gifted by nature or less fitted for industrial life. The 
 latter country by very definition would experience great difficulty 
 in attempting the direct production of the imported goods, and would 
 even, perhaps, find it quite impossible. On this point the English 
 Classical or the Manchester school is iri complete agreement with 
 the French school. 1 
 
 It might possibly be pointed out that under a regime of free 
 competition all values would be reduced to the level of cost of 
 production, and products would be exchanged in such a fashion 
 that a given quantity of labour embodied in one commodity would 
 always exchange for an equal quantity embodied in any other. But 
 in such a case where would be the advantage of exchanging ? 
 Ricardo had already anticipated this objection, and had shown that 
 if the rule of equal quantity in exchange for equal quantity were 
 true of exchange between individuals, it did not hold of exchange 
 between different countries, for the equalising action of competition 
 no longer operated, because of the difficulty of moving capital and 
 labour from one to the other. A comparison should be made, not 
 
 1 Ricardo, moreover, gives an exposition of the advantages of international 
 trade in terms that Bastiat might have adopted. " Under a system of perfectly 
 free commerce each country naturally devotes its capital and labour to such 
 employments as are most beneficial to each. This pursuit of individual advantage 
 is admirably connected with the universal good of the whole. By stimulating 
 industry, by rewarding ingenuity, and by using most efficaciously the peculiar 
 powers bestowed by nature, it distributes labour most effectively and most 
 economically : while by increasing the general mass of productions it diffuses 
 general benefit and binds together, by one common tie of interest and intercourse, 
 the universal society of nations throughout the civilised world. It is this principle 
 which determines that wine shall be made in France and Portugal, that corn shall 
 be grown in America and Poland, and that hardware and other goods shall be 
 manufactured in England." (Ricardo, Worh, p. 75.)
 
 364 DECLINE OF THE CLASSICAL SCHOOL 
 
 of the respective costs of the same product in the two countries, but 
 of the respective costs of the imported and the exported products in 
 the same country. Another buttress to strengthen the theory 
 which measures the advantages of international commerce by the 
 amount of labour economised 1 1 
 
 But the value of the exchanged product is still undetermined. It 
 lies somewhere between the real cost of production of the goods 
 exported and the virtual cost of production of the goods imported, 
 in such a way that each country gains something. That is all we 
 are able to say. Mill has gone a step farther. He has abandoned 
 the comparison of costs of production, which is purely abstract, and 
 can afford no practical measure of the advantages, preferring 
 to measure the value of the imported product by the value of the 
 product which must be given in exchange for it. 2 We require to 
 find the causes that enable a country like England to obtain a greater 
 or a lesser quantity of wine in exchange for her coal. In other words, 
 the law of international values no longer involves a comparison of 
 costs of production, but is simply the law of demand and supply. 
 The prices of the two goods arrange themselves in such a fashion 
 that the quantities demanded by the respective countries exactly 
 balance. If there is a greater demand for coal in France than there 
 is for wine in England, England will obtain a great quantity of wine 
 in exchange for her coal, and will consequently find herself in a very 
 advantageous position. 
 
 Mill's theory 3 constitutes a real advance as compared with 
 
 1 The following apparent paradox may be deduced from Ricardo's theory. 
 A country is wise in importing not only those commodities which it can only 
 produce at a disadvantage as compared with its rivals, but also those goods in 
 which it has a distinct advantage in the matter of production, though not so 
 great as the advantage enjoyed in some other case. Under those circumstances 
 it is better that it should produce that product in the making of which it has the 
 greater advantage and exchange it for some other product in which it has less. 
 
 " Two men can both make shoes and hats, and one is superior to the other 
 in both employments ; but in making hats, he can only exceed his competitor 
 by one-fifth, or 20 per cent., and in making shoes he can excel him by one-third, 
 or 33 per cent. Will it not be for the interest of both, that the superior man 
 should employ himself exclusively in making shoes, and the inferior man in making 
 hats." (Ricardo, Works, p. 77, note.) 
 
 And so England might find it advantageous to exchange her coal for French 
 cloths, although she may be able to produce those cloths cheaper herself. 
 
 1 " The value of a thing in any place depends on the cost of its acquisition 
 in that place ; which in the case of an imported article means the cost of pro* 
 duction of the thing which is exported to pay for it." (Principles, Book III, 
 chap. 18, 1.) 
 
 1 Mill first treated of the theory in his Unsettled Questions of Political Economy. 
 A more complicated but more precise exposition is given in the Principle*
 
 THE FUNDAMENTAL LAWS 865 
 
 Ricardo's, for it affords a means of gauging the strength of the foreign 
 demand, and of judging of the circumstances favourable to a good 
 bargain. Mill was of the opinion that a poor country stood to benefit 
 most by the transaction thus confirming Bastiat's belief. A rich 
 country will always have to pay more for its goods than a poor one. 1 
 
 Protectionists affect the opposite belief, holding that it is the 
 poor country that is duped. The English trade with Portugal is 
 one of their favourite illustrations. But it is simply an illustration, 
 and it can never take the place of actual proof. 
 
 Notwithstanding these divergent views, Mill is more sympathetic 
 to the Protectionists than any other economist of the Liberal school. 
 His theory provides them with at least one excellent argument. 
 Seeing that the advantages of international commerce depend upon 
 demand and supply, a country may make it operate to its own 
 advantage by merely pursuing a different policy. New industries 
 might be developed whenever there is a considerable demand for 
 new products, and that demand might easily be so considerable that 
 the price would be lowered. 2 Mill recognises the justice of merely 
 temporary protection, set up with a view to naturalising a new 
 industry, and considers it logically deducible from his principles. 8 
 
 Although Mill may in this way have done something to lighten 
 the task of the Protectionists, we must never forget that he himself 
 
 Book III, chap. 18, 7. The whole process of reasoning, based as it is upon 
 the hypothetical conduct of two persons, is purely abstract, and is of very little 
 practical use. What is really important is to know the relation between the 
 advantages gained by either side. It is true that on the whole imports and ex- 
 ports balance one another, thanks to the operation of money, but that is another 
 question. 
 
 1 " It still appears, that the countries which carry on their foreign trade on the 
 most advantageous terms are those whose commodities are most in demand by 
 foreign countries, and which have themselves the least demand for foreign 
 commodities, from which, among other consequences, it follows that the richest 
 countries, ceteris paribus, gain the least by a given amount of foreign commerce, 
 since, having a greater demand for commodities generally they are likely to 
 have a greater demand for foreign commodities and thus modify the terms of 
 interchange to their own disadvantage." (Principles, Book III, chap. 18, 8.) 
 Note the phrase " a given amount of foreign commerce." That is, although the 
 rate of interchange is less advantageous for the rich country than it is for the 
 poor, still, since the former exchanges much more than the latter it gains more 
 on the whole transaction. Mill states this expressly elsewhere. The rich and 
 the poor country are like the wholesale house and the Kttle shop. The former 
 gains very little on each article sold, but gains much on the whole turnover. 
 
 Ibid., Book V, chap. 10, 1. 
 
 1 An even more important concession to the Protectionist view is his ad- 
 mission that the duties are not always borne by the home consumer in the form 
 of higher prices, but that they are sometimes paid by the foreigner.
 
 366 DECLINE OF THE CLASSICAL SCHOOL 
 
 remained an entirely faithful adherent of the Free Trade doctrine 
 and, except in the case of infant industries, vigorously denounced 
 all protective rights. " All is sheer loss. . . . They prevent the 
 economy of labour and capital, thereby annihilating a general gain 
 to the world which would be shared in some proportion between 
 itself and other countries." * 
 
 The Free Trade doctrine has not remained where it was any 
 more than the other special doctrines of the Classical school. It 
 gave birth to one of the most powerful movements in economic 
 history, which led to the famous law of June 25, 1846, abolishing 
 import duty on corn. This law was followed by others, and ended 
 in the complete removal of all tariff barriers. But the eloquence of 
 Cobden, of Bright, and of others was necessary before it was accom- 
 plished. A national Anti-Corn League had to be organised, no less 
 than ten Parliamentary defeats had to be endured, the allegiance 
 of Peel and the approval of the Duke of Wellington had to be secured 
 before they were removed. All this even might have proved futile 
 but for the poor harvest of 1845. This glorious campaign did more 
 for the triumph of the Liberal economic school and for the dissemina- 
 tion of its ideas than all the learned demonstrations of the masters. 
 Fourteen years were still to elapse before Cobden and Michel Chevalier 
 were able to sign the treaty of 1860. Even this was due to a 
 personal act of Napoleon III, and Cobden was not far wrong when 
 he declared that nine-tenths of the French nation was opposed to it. 
 
 II : MILL'S INDIVIDUALIST-SOCIALIST PROGRAMME 
 
 SUCH were the doctrines taught by the Classical school about the 
 middle of the nineteenth century. The writers in question, however, 
 strongly objected to the term " school," believing that they them- 
 selves were the sole guardians of the sacred truth. And we must 
 admit that their doctrines are admirably interwoven, and present an 
 attractive appearance. On the other hand, it must be confessed that 
 the prospects which they hold out for anyone not a member of the 
 landowning class are far from attractive. For the labourer there 
 is promise of daily toil and bare existence, and at best a wage 
 determined by the quantity of capital or the numbers of the 
 population causes which are clearly beyond the workers' influence, 
 and even beyond the assuaging influence of association and combina- 
 tion. And although the latter rights are generously claimed for the 
 
 1 PrincifAes, Book V, chap. 10, 1. The duty would check the demand of the 
 importing country, and according to Mill's own formula it ought to modify the 
 exchange equation in its favour.
 
 MILL'S INDIVIDUALIST-SOCIALIST PROGRAMME 367 
 
 workers, the occasional antagonism between masters and men 
 presages the eternal conflict between profits and wages. The 
 possession of land is a passport to the enjoyment of monopolistic 
 privileges, which the right of free exchange can only modify very 
 slightly. Rent the resultant of all life's favourable chances 
 reserved for those who need it least, monopolises a growing propor- 
 tion of the national revenue. Intervention for the benefit of the 
 worker, whether undertaken by the State or by some other body, is 
 pushed aside as unworthy of the dignity of labour and harmful to 
 its true interests. " Each for himself " is set up as a principle of 
 social action, in the vain hope that it would be spontaneously 
 transformed into the principle of "Each for all." The search for 
 truth was the dominant interest of the school, and these doctrines 
 were preached, not for the pleasure they yielded, but as the dicta of 
 exact science. Little wonder that men were prepared to fight before 
 they would recognise these as demonstrable truths. And just as it 
 was Mill who so powerfully helped to consolidate and complete the 
 science of economics that Cossa refers to his Principles as the best 
 resume, the fullest, most complete and most exact exposition of the 
 doctrines of the Classical school that we have, 1 it was Mill also who, 
 in successive editions of his book, and in his other and later writings, 
 pointed out the new vistas opening before the science, freed the 
 doctrine from many errors to which it was attached and set its feet 
 on the paths of Liberal Socialism. 
 
 We might say without any suggestion of bias that Mill's evolution 
 was largely influenced by French ideas.* A singularly interesting 
 volume might be written in illustration of this statement. Without 
 referring to the influence of Comte, which Mill was never tired of 
 recognising, and confining our attention only to economics, he has 
 himself acknowledged his debt to the Saint-Simonians for the greater 
 part of his doctrines of heredity and unearned increment, to Sismondi 
 for his sympathy with peasant proprietorship, and to the socialists 
 of 1848 for his faith in co-operative association as a substitute for the 
 wage nexus. 
 
 It would hardly be true to say that Mill became a convert to 
 socialism, although he showed himsplf anxious to defend it against 
 every undeserved attack. To those who credit socialism with a 
 desire to destroy personal initiative or to undermine individual 
 
 1 Histoire des Doctrines faonomiques, p. 338. 
 
 * Mill was for many years resident in France, and died at Avignon. An article 
 written by him in defence of the Revolution of 1848 has been translated into 
 French and published in book form by M. Sadi Carnot.
 
 368 DECLINE OF THE CLASSICAL SCHOOL 
 
 liberty he disdainfully points out that " a factory operative has less 
 personal interest in his work than a member of a communist associa- 
 tion, since he is not, like him, working for a partnership of which 
 he is himself a member," and that " the restraints of communism 
 would be freedom in comparison with the present condition of the 
 majority of the human race." x And although he expresses the 
 belief that " communism would even now be practicable among the 
 ilite of mankind, and may become so among the rest," and hopes that 
 one day education, habit, and culture will so alter the character of 
 mankind that digging and weaving for one's country will be considered 
 as patriotic as to fight for it, 1 still he was far from being a socialist. 
 Free competition, he thought, was an absolute necessity, and there 
 could be no interference with the essential rights of the individual. 
 
 The first blow which he dealt at the Classical school was to 
 challenge its belief in the universality and permanence of natural 
 law. He never took up the extreme position of the Marxian and 
 Historical schools, which held that the so-called natural laws were 
 merely attempts at describing the social relations which may exist at 
 certain periods in economic history, but which change their character 
 as time goes on. He draws a distinction between the laws which 
 obtain in the realm of production and those that regulate distribu- 
 tion. Only in the one case can we speak of " natural " laws ; in the 
 other they are artificial created by men and capable of being 
 changed, should men desire it. 3 Contrary to the opinion of the 
 Classical school, he tries to show that wages, profits, and rent are 
 not determined by immutable laws against which the will of man 
 can never prevail. 
 
 The door was thus open for social reform, which was no small 
 triumph. Of course it cannot be said of the Classical school, or 
 even of the Optimists, that they were prepared to deny the possibility 
 or the efficacy of every measure of social reform, but it must be 
 admitted that they were loath to encourage anything beyond 
 private effort, or to advocate the abolition of any but the older 
 laws. Braun, speaking at a conference of Liberal economists at 
 Mayence in 1869, expressed the opinion that " that conference had 
 given rise to much opposition because it upheld the principle that 
 
 1 Principles, p. 210. ' Representative Government, chap. 3. 
 
 * "The laws and conditions of the production of wealth partake of the 
 character of physical truths. There is nothing optional or arbitrary in them. . . . 
 It is not so with the distribution of wealth. This is a matter of human institution 
 solely. The things once there, mankind, individually or collectively, can do with 
 them as they like." (Principles, Book n, chap. 1, Ij) Karl Marx, a little 
 later than this, claimed that distribution is wholly determined by production.
 
 MILL'S INDIVIDUALIST-SOCIALIST PROGRAMME 369 
 
 human legislation can never change the eternal laws of nature, 
 which alone regulate every economic action." Similar declarations 
 abound in the French works of the period. But, thanks to the 
 distinction drawn by Mill, all this was changed. Though the legislator 
 be helpless to modify the laws of production, he is all-powerful in the 
 realm of distribution, which is the real battle-ground of economics. 
 
 But, as a matter of fact, Mill's distinction is open to criticism, 
 especially his method of stating it ; and we feel that he is unjust to 
 himself when he regards this as his most important and most 
 original contribution to economic science. Production and dis- 
 tribution cannot be treated as two separate spheres, for the one 
 invariably involves the other. And Mill himself is forced to abandon 
 his own thesis when he advocates the establishment of co-operative 
 associations or peasant proprietorship, for each of these belongs as 
 much to the domain of production as to that of distribution. 
 Rodbertus, at almost the same period, gave a much truer expression 
 to Mill's thought by emphasising the distinction which exists between 
 economic and legal ties. 1 Even these may mutually involve one 
 another; still we know that the economic laws which regulate 
 exchange value or determine the magnitude of industrial enterprise 
 are not of the same kind as the rules of law which regulate the transfer 
 of property or lay down the lines of procedure for persons bound by 
 agreement concerning wages, interest, or rent. The first may well 
 be designated natural laws, but the latter are the work of a legislative 
 authority. 
 
 Stuart Mill, not content with merely opening the door to reform, 
 deliberately enters in, and, in striking contrast to the economists of 
 the older school, outlines a comprehensive programme of social 
 policy, which he formulates thus : 2 " How to unite the greatest 
 individual liberty of action, with a common ownership in the raw 
 material of the globe, and an equal participation of all in the 
 benefits of combined labour." 
 
 We may summarise his proposals as follows : 
 
 (1) Abolition of the wage system and the substitution of a 
 co-operative association of producers. 
 
 (2) The socialisation of rent by means of a tax on land. 
 
 (3) Lessening 'of the inequalities of wealth by restrictions on the 
 rights of inheritance. 
 
 This threefold measure of reform possesses all the desiderata laid 
 down by Mill. Moreover, it does not conflict with the individualistic 
 
 1 See Chatelain'e introd action to RodbertaB'e KapUaL 
 Seo Autobiography, P- 133 ("Popular " edition).
 
 370 DECLINE OF THE CLASSICAL SCHOOL 
 
 principle, but would somewhat strengthen it. It involves no personal 
 constraint, but tends to extend the bounds of individual freedom. 
 Let us briefly review these projects seriatim. 
 
 (1) Mill thought that the wages regime was detrimental to 
 individuality because it deprived man of all interest in the product 
 of his labour, with the result that a vast majority of mankind is living 
 under conditions which socialism could not possibly make much worse. 
 
 It is necessary to replace this condition of things by " a form of 
 association which, if mankind continue to improve, must be expected 
 in the end to predominate, and is not that which can exist between a 
 capitalist as chief and workpeople without a voice in the manage- 
 ment, but the association of the labourers themselves on terms of 
 equality, collectively owning the capital with which they carry on 
 their operations, and working under managers elected and removable 
 by themselves." x This noble ideal of a co-operative community 
 was borrowed, not from Owen, but from the French socialists. 
 Mill had already eulogised the French movement, even before its 
 brilliant but ephemeral triumph in 1848. He was not the only one to 
 be attracted by the idea of a co-operative community, for the English 
 Christian Socialists drew their inspiration from the same source. 
 
 Mill lived long enough to witness the decline of co-operative 
 production in England, and of the Co-operative Consumers' Union 
 in France, but neither failure seems to have had any influence upon 
 his projects. 2 Whatever the method might be, the object in his 
 ideal was always the same, the self-emancipation of the workers. 
 
 (2) The rent of land, which Ricardo and his disciples accepted as 
 a natural if not as a necessary phenomenon, appeared to Mill as an 
 
 1 " If the improvement which even triumphant military despotism has only 
 retarded, not stopped, shall continue its course there can be little doubt that the 
 status of hired labourers will gradually tend to confine itself to the description 
 of workpeople whose low moral qualities render them unfit for anything more 
 independent, and that the relation of masters and workpeople will be gradually 
 superseded by partnership in one of two forms : in some cases, association of the 
 labourers with the capitalist ; in others, and perhaps finally in all, association of 
 labourers among themselves." (Principles, Book IV, chap. 7, 4.) 
 
 " In this or some such mode, the existing accumulations of capital might 
 Honestly and by a kind of spontaneous process become in the end the joint 
 property of all who participate in their productive employment a transformation 
 which, thus effected, would be the nearest approach to social justice and the 
 most beneficial ordering of industrial affairs for the universal good which it is 
 possible at present to foresee." (Ibid., Book IV, chap. 7, 6.) 
 
 1 The co-operative movement probably suggested this idea to him. He 
 several times times expresses the opinion that middlemen's profits exceed those 
 of the capitalists, and that the working class would gain more by the removal of 
 the former than they would by the extinction of the latter.
 
 MILL'S INDIVIDUALIST-SOCIALIST PROGRAMME 371 
 
 abnormal fact which was as detrimental to individuality as the 
 wage system itself. Its peculiar danger was, of course, not quite 
 the same. What rent did was to secure to certain individuals 
 something which was not the result of their own efforts, whereas 
 individualism always aimed at securing for everyone the fruits of his 
 own labour suum cuigue. On the principle of giving to each what 
 each produced, everything not directly produced by man himself 
 was to be restored to the community. It is immaterial whether 
 this extra product is due to the collaboration of nature, as Smith 
 and the Physiocrats believed, or whether it is the result of the 
 pressure of population, as Ricardo and Malthus thought, or the 
 mere result of chance and favourable circumstance, as Senior put it. 
 Nothing could be easier than to levy a land tax which would gradually 
 absorb rent, and which could be periodically increased as rents 
 advanced. The idea was a brilliant one, and Mill had learned it 
 from his father. It soon became the rallying-cry of a new school of 
 economists closely akin to the socialists. 
 
 The movement begot of this idea of confiscation deserves the 
 fuller treatment which will be found in another chapter of this work. 
 
 Meanwhile, and until the larger and more revolutionary reform 
 becomes practical, Mill would welcome a modest instalment of 
 emancipation in the shape of peasant proprietorship. Like the 
 co-operative ideal, this also was of French extraction. Admiration 
 of the French peasant had been a fashionable cult in England ever 
 since the days of Arthur Young. 1 Mill thought that among the 
 
 1 But Young remained a champion of grande culture, while Mill was a com- 
 plete convert to peasant proprietorship. But peasant proprietorship is proposed 
 simply as a step towards association. 
 
 " The opinion expressed in a former part of this treatise respecting small 
 lauded properties and peasant proprietors may have made the reader anticipate 
 that a wide diffusion of property in land is the resource on which I rely 
 for exempting at least the agricultural labourers from exclusive dependence on 
 labour for hire. Such, however, is not my opinion. I indeed deem that form 
 of agricultural economy to be most groundlessly cried down, and to be greatly 
 preferable in its aggregate effects on human happiness to hired labour in any form 
 in which it exists at present. But the aim of improvement should be not solely 
 to place human beings in a condition in which they will be able to do without 
 one another, but to enable them to work with or for one another in relations 
 not involving dependence." (Principles, Book IV, chap. 7, 4.) 
 
 Mill was not the only one who looked to peasant proprietorship partly to solve 
 the social problem. Not to mention Sismondi, who was very much taken up 
 with the idea, we have Thornton in England in his Plea for Peasant Proprietor* 
 (1848) and Hippolyte Passy in France in his excellent little volume Des Systimea 
 de Culture (1852) strongly advocating it. The Classical economists for the 
 most part took the opposite point of view, especially Lavergne in his Essai ur 
 rurale de VAngleterre.
 
 372 DECLINE OF THE CLASSICAL SCHOOL 
 
 principal advantages of peasant proprietorship would be a lessening 
 of the injustice of rent, because its benefits would be more widely 
 distributed. The feeling of independence would check the deteriora- 
 tion of the wage-earner, individual initiative would be encouraged, 
 the intelligence of the cultivator developed, and the growth of popu- 
 lation checked. 
 
 Mill inspired a regard for the frugal French peasantry in the 
 English Radical party. To his influence are due the various Small 
 Holdings Acts which have resulted in the establishment of small islets 
 of peasant tillers amid the vast territories of the English aristocracy. 
 
 (3) Mill was equally shocked at our antiquated inheritance law, 
 which permits people to possess wealth which they have never helped 
 to produce. To Senior inheritance ranked with the inequality of 
 rent, and he placed both in the same category. To Mill it appeared 
 to be not merely antagonistic to individual liberty, but a source of 
 danger to free competition, because it placed competitors in positions 
 of unequal advantage. In this matter Mill was under the influence 
 of the Saint-Simonians, and he made no attempt to hide his contempt 
 for the " accident of birth." 
 
 This right of bequest, he felt, was a very difficult problem, for 
 the right of free disposal of one's property even after death con- 
 stituted one of the most glorious attributes of individuality. It 
 implied a kind of survival or persistence of the human will. Mill 
 showed considerable ingenuity in extricating himself from this 
 difficult position. He would respect the right of the proprietor to 
 dispose of his goods, but would limit the right of inheritance by 
 making it illegal to inherit more than a certain sum. The testator 
 would still enjoy the right of bequeathing his property as he wished, 
 but no one who already possessed a certain amount of wealth could 
 inherit it. Of all the solutions of this problem that have been 
 proposed, Mill's is the most socialistic. He puts it forward, however, 
 not as a definite project, but as a mere suggestion. 1 
 
 1 " Were I framing a code of laws according to what seems to me best in itself, 
 without regard to existing opinions and sentiments, I should prefer to restrict, 
 not what anyone might bequeath, but what anyone should be permitted to 
 acquire by bequest or inheritance. Each person should have power to dispose 
 by will of his or her whole property ; but not to lavish it in enriching some one 
 individual beyond a certain maximum." (Principles, Book II, chap. 2, 4.) 
 
 It is hardly necessary to say that this limitation of the right of inheritance 
 is a purely personal opinion of Mill, and that it is rejected along with his other 
 solutions by most individualists. It is not quite correct to say then, as Schatz 
 has said in his Individualism, that Stuart Mill is " the very incarnation of the 
 individualistic spirit." He was really a somewhat sceptical disciple of the school, 
 and his frequent change of opinion was very embarrassing !
 
 MILL'S INDIVIDUALIST-SOCIALIST PROGRAMME 373 
 
 Mill might well have been given a place among the Pessimists, 
 especially as he inherits their tendency to see the darker side of 
 things. Not only did the law of population fill him with terror, but 
 the law of diminishing returns seemed to him the most important 
 proposition in the whole of economic science ; and all his works 
 abound with melancholy reflections upon the futility of progress. 
 There is, for instance, the frequently quoted "It is questionable if 
 all the mechanical inventions yet made have lightened the day's 
 toil of any human being." l In his vision of the future of society 
 he prophesies that the river of human life will eventually be lost in 
 the sea of stagnation. 
 
 It is worth while dwelling for a moment on this idea of a 
 stationary state. Though the conception is an old one, it is very 
 characteristic of Mill's work, and he feels himself forced to the 
 belief that only by reverting to the stationary state can we hope for 
 a solution of the social question. 
 
 Economists, especially Ricardo, had insisted upon the tendency 
 of profits to a minimum as a correlative of the law of diminishing 
 returns. This tendency, it was believed, would continue until 
 profits had wholly disappeared and the formation of new capital 
 was arrested. 2 Mill took up the theory where Ricardo had left it, and 
 arrived at the conclusion that industry would thus be brought to a 
 standstill, seeing that the magnitude of industry is dependent upon 
 
 1 Principles, Book II, chap. 6, 2. 
 
 1 " There is at every time and place some particular rate of profit, which is 
 the lowest that will induce the people of that country and time to accumulate 
 savings. . . . But though the minimum rate of profit is thus liable to vary, and 
 though to specify exactly what it is would at any given time be impossible, such 
 a minimum always exists ; and whether it be high or low, when once it is reached 
 no further increase of capital can for the present take place. The country has 
 then attained what is known to political economists under the name cf the 
 Stationary State." (Ibid., Book IV, chap. 4, 3.) 
 
 Mill indicates the causes that contribute to a fall in the rate of profits as 
 well as the causes that arrest that fall, such as the progress of production and 
 the destruction of wealth by wars and crises. 
 
 It may be worth while pointing out that the word profit as employed by the 
 English economists, and especially by Mill, has not the same meaning as it has 
 with the French writers. French economists since the time of Say have employed 
 the term profit to denote the earnings of the entrepreneur, the capitalist's income 
 being designated interest. The English economists do not distinguish between 
 the work of the entrepreneur and that of the capitalist, and the term profit covers 
 them both. The result is that the French Hedonistic economists can say that 
 under a regime of absolutely free competition profit would fall to zero, while the 
 English economists cannot accept their thesis because profits include interest, 
 which will always remain as the reward of waiting. 
 
 The French point of view ifl more generally adopted to-day.
 
 374 DECLINE OF THE CLASSICAL SCHOOL 
 
 the amount of available capital. Population must then become 
 stationary, and all economic movement must cease. Though 
 alarmed at the economic significance of this prospect, Mill acquiesced 
 in its ethical import. On the whole he thinks that such a state 
 would be a very considerable improvement on our present condition. 
 With economic activity brought to a standstill the current of human 
 life would simply change its course and turn to other fields. 1 The 
 decay of Mammon-worship and the thirst for wealth would simply 
 mean an opportunity for pursuing worthier objects. He hoped that 
 the arrest of economic progress would result in a real moral advance, 
 and in the appeasement of human desires he looked for a solution 
 and for the final disappearance of the social problem. And as far 
 as we can see the reformers of to-day have nothing better to offer us. 
 
 Ill : MILL'S SUCCESSORS 
 
 MILL'S influence was universal, though, properly speaking, he had no 
 disciples. This was, no doubt, partly because writers like Toynbee, 
 who would naturally have become disciples, were already enrolled 
 in the service of the Historical school. 
 
 The Classical school failed to follow his socialistic lead. It still 
 preached the old doctrines, but with waning authority, and no new 
 work was produced which is at all comparable with the works which 
 we have already studied. We will mention a few of the later writings, 
 however, for, though belonging to the second class, they are in some 
 respects excellent. 
 
 In the first place we have several books written by Cairnes,' 
 notably Some Leading Principles of Political Economy (1874). Cairnes 
 is generally regarded as a disciple of Mill, though as a matter of fact 
 he was nothing of the kind. Cairnes was purely Classic, and shared 
 the Classical preference for the deductive method, which he thought 
 the only method for political economy. His preference for that 
 method sometimes resulted in his abusing it, and he was curiously 
 indifferent to all social iniquities. He accepted laissez-faire, not as 
 the basis of a scientific doctrine, but simply as a safe and practical 
 rule of conduct. 8 The old wage fund theory has in him a champion 
 who attempted to defend it against Stuart Mill. It cannot be said 
 
 1 In a letter to Gustave d'Eichthal, recently published, speaking of August 
 Comte, he writes as follows : " How ridiculous to think that this law of civilisation 
 requires as its correlative constant progress ! Why not admit that as humanity 
 advances in certain respects it degenerates in others ? " 
 
 1 On the question of co-operation as a method of social reform, Cairnes, who 
 eiinply refers to it as a possible alternative, may have owed something to Mill. 
 
 * Essay*, p. 281.
 
 MILL'S SUCCESSORS 375 
 
 that he made any new contribution to the science, unless we except 
 his teaching concerning competition. He pointed out that competi- 
 tion has not the general scope that is usually attributed to it. It 
 only obtains between individuals placed in exactly similar circum- 
 stances. In other words, it operates within small areas, and is 
 inoperative as between one area and another. This theory of non- 
 competing groups helps to throw some light upon the persistent 
 inequality shown by wages and profits. 
 
 In France the most prominent representative of political 
 economy during the Second Empire was Michel Chevalier, a disciple 
 of Saint-Simon. He nevertheless remained faithful to the Classical 
 tradition of Say and Rossi, 1 his predecessors at the College de France. 
 He waged battle with the socialists of 1848, made war upon Protec- 
 tion, and had the good fortune to be victorious in both cases, sharing 
 with Cobden the honour of being a signatory to the famous com- 
 mercial treaty of 1860. He realised the important place that rail- 
 ways would some day occupy in national economy, and the great 
 possibilities of an engineering feat like the Suez Canal. He was also 
 alive to the importance of credit institutions, which were only at the 
 commencement of their useful career just then. 2 Although con- 
 nected with the Liberal school, he was not indifferent to the teaching 
 of the Saint-Simonians on the importance of the authority and 
 functions of the State, and he impressed upon the Government the 
 necessity of paying attention to labour questions a matter to which 
 Napoleon III was naturally somewhat averse. Every subject which 
 he handles is given scholarly and eloquent treatment. 
 
 About the same time Courcelle-Seneuil published a treatise on 
 political economy which was for a long time regarded as a standard 
 work. Seneuil was a champion of pure science or " plutology," 
 as he called it, in order to distinguish it from applied science, to 
 which he gave the name " ergonomy." For a long time he was 
 regarded as a kind of pontiff, and the pages of the Journal des ficono- 
 mistes bear evidence of the chastisement which he bestowed upon 
 any of the younger writers who tried to shake off his authority. 
 This was the time when Maurice Block was meting out the same 
 treatment to the new German school in those bitterly critical articles 
 which appeared in the same journal. 
 
 1 Since 1830 there have only been four professors. J. B. Say, Rossi, Michel 
 Chevalier, and Chevalier's son-in-law, M. Paul Leroy-Beaulieu. The history of the 
 chair is a fair summary of the history of French economics. 
 
 3 His most curious book, perhaps, was De la Baisse probable de VOr, a title 
 that caused a good deal of amusement during the latter half of the nineteenth 
 century, but which proved somewhat of a prophecy after all.
 
 376 DECLINE OF THE CLASSICAL SCHOOL 
 
 It is to be regretted that we cannot credit France with the Precis 
 de la Science economique et de ses Principales Applications, which 
 appeared in 1862. Cherbuliez, the author, was a Swiss, and was 
 professor first at Geneva and then at Zurich. Cossa, in his Histoire, 
 speaks of it as " undoubtedly the best treatise on the subject published 
 in France," and as being " possibly superior even to Stuart Mill's." 
 Cherbuliez belonged to the Classical school. He was opposed to 
 socialism, and wrote pamphlets a la Bastiat in support of Liberal 
 doctrines and the deductive method. But, like the Mills before him, 
 and Walras, Spencer, Laveleye, Henry George, and many others 
 who came after, he found it hard to reconcile private property with 
 the individualistic doctrine, " To each the product of his labour." 
 He reconciles himself to this position merely because he thinks that 
 it is possibly a lesser evil than collective property. 
 
 The Liberal school had still a few adherents in Germany, although 
 a serious rival was soon to make its appearance. Prince Smith (of 
 English extraction) undertook the defence of Free Trade, pointing out 
 " the absurdity of regarding it as a social question," and " how much 
 more absurd it is to think that it can ever be solved other than by 
 the logic of facts." Less a doctrinaire than a reformer, Schulze- 
 Delitzsch, about 1850, inaugurated that movement which, notwith- 
 standing the gibes of Lassalle, has made magnificent progress, and 
 to-day includes thousands of credit societies ; though up to the 
 present it has not benefited anyone beyond the lower middle classes 
 the small shopkeeper, the well-to-do artisan, and the peasant 
 proprietor.
 
 BOOK IY: THE DISSENTERS 
 
 WITH Bastiat economic Liberalism, threatened by socialism, sought 
 precarious refuge in Optimism. With Mill the older doctrines found 
 new expression in language scientific in its precision and classical 
 in its beauty. 
 
 It really seemed as if political economy had reached its final 
 stage and that there could be no further excuse for prolonging our 
 survey. 
 
 But just when Liberalism seemed most triumphant and the 
 principles of the science appeared definitely settled there sprang up 
 a feeling of general dissatisfaction. Criticism, which had suffered 
 a temporary check after 1848, now reasserted its claims, and with a 
 determination not to tolerate any further interruption of its task. 
 
 The reaction showed itself most prominently in Germany, where 
 the new Historical school refused to recognise the boundaries of the 
 science as laid down by the English and French economists. The 
 atmosphere of abstractions and generalisations to which they had 
 confined it was altogether too stifling. It demanded new contact 
 with life with the life of the past no less than that of the present. 
 It was weary of the empty framework of general terms. It was 
 athirst for facts and the exercise of the powers of observation. With 
 all the ardour of youth it was prepared to challenge all the tradi- 
 tional conclusions and to reformulate the science from its very base. 
 
 So much for the doctrine. But there was one thing which was 
 thought more objectionable than even the Classical doctrine itself, 
 and that was the Liberal policy with which the science had foolishly 
 become implicated, and which must certainly be removed. 
 
 In addition to such critics as the above there are also the writers 
 who drew their inspiration from Christianity, and in the name of 
 charity, of morality, or of religion itself, uttered their protest against 
 optimism and laissez-faire. Intervention again, so tentatively pro- 
 posed by Sismondi, makes a bold demand for wider scope in view 
 of the pressure of social problems, and under the name of State 
 Socialism becomes a definitely formulated doctrine. 
 
 Socialism, which Reybaud believed dead after 1848, revived in 
 
 its turn. Marx's Kapital, published in 1867, is the completest and 
 
 most powerful exposition of socialism that we have. It is no 
 
 longer a pious aspiration, but a new and a scientific doctrine ready 
 
 .D. 377 M
 
 378 THE DISSENTERS 
 
 to do battle with the champions of the Classical school, and to con- 
 fute them out of their own mouths. 
 
 None of these currents is entirely new. Book II has shown us 
 where they originated, and their beginnings can be traced to the 
 earlier critical writers. 
 
 But we must not forget the striking difference between the ill-fated 
 doctrines of the pre-1848 period and the striking success achieved 
 by the present school. Despite the sympathy shown for the earlier 
 critics, they remained on the whole somewhat isolated figures. Their 
 protests were always individualistic Sismondi's no less than Saint- 
 Simon's, Fourier's no less than Owen's. Proudhon and List never 
 seriously shook the public confidence in Liberalism. Now, on the con- 
 trary, Liberalism finds itself deserted, and sees the attention of public 
 opinion turning more and more in the direction of the new school. 
 
 The triumph, of course, was not immediate. Many of the doc- 
 trines were formulated between 1850 and 1875, but victory was de- 
 ferred until the last quarter of the century. But when it did come it 
 was decisive. In Germany history monopolised the functions of eco- 
 nomics, at least for a time. Intervention has only become universal 
 since 1880. Since then, also, collectivism has won over the majority 
 of the workers in all industrial countries, and has exercised very 
 considerable influence upon politics, while Christian Socialism has 
 discovered a way of combining all its most fervent adherents, of 
 whatever persuasion, in one common faith. 
 
 The advance of this new school meant the decline of the Classical 
 doctrine and the waning of Liberalism. Public interest gravitated 
 away from the teaching of the founders. But in the absence of a new 
 and a definite creed, what we find is a kind of general dispersion of 
 economic thought, accompanied by a feeling of doubt as to the 
 validity of theory in general and of theoretical political economy in 
 particular. The old feeling of security gave place to uncertainty. 
 Instead of the comparative unanimity of the early days we have a 
 complete diversity of opinions, amid which the science sets out on a 
 new career. 
 
 In the last Book we shall find that certain eminent writers have 
 succeeded in renewing the scientific tradition of the founders. But 
 every connection with practical politics had to be removed and a 
 new body of closely knit doctrines had to be created before social 
 thinkers could have this new point of view from which to co-operate.
 
 THE HISTORICAL SCHOOL 379 
 
 CHAPTER I: THE HISTORICAL SCHOOL AND 
 THE CONFLICT OF METHODS 
 
 THE second half of the nineteenth century is dominated by Historical 
 ideas, though their final triumph was not fully established until 
 the last quarter of the century. The rise of these ideas, however, 
 belongs to a still earlier period, and dates from 1843, when there 
 appeared a small volume by Roscher entitled Grundriss. We shall 
 have to return to that date if we wish to understand the ideas of the 
 school and to appreciate their criticisms. 
 
 The successors of J. B. Say and Ricardo gave a new fillip to the 
 abstract tendency of the science by reducing its tenets to a small 
 number of theoretical propositions. The problems of international 
 exchange, of the rate of profits, wages, and rent, were treated simply 
 as a number of such propositions, expressed with almost mathematical 
 precision. Admitting their exactness, we must also recognise that 
 they are far from being adequate, and could not possibly afford an 
 explanation of the different varieties of economic phenomena or help 
 the solution of the many practical problems which the development 
 of industry presents to the statesman. But McCulloch, Senior, 
 Storch, Rau, Gamier, 1 and Rossi, the immediate successors of 
 Ricardo and Say in England and France, repeated the old formulae 
 without making any important additions to them. The new 
 system of political economy thus consisted of a small number of 
 quite obvious truths, having only the remotest connection with 
 economic life. It is true that Mill is an exception. But the Principles 
 dates from 1848, which is subsequent to the foundation of the 
 Historical school. With this exception we may say, in the words of 
 Schmoller, that after the days of Adam Smith political economy 
 seems to have suffered from an attack of anaemia. 8 
 
 Toynbee gives admirable expression to this belief in his article 
 on Ricardo and the Old Political Economy : 8 " A logical artifice 
 became the accepted picture of the real world. Not that Ricardo 
 himself, a benevolent and kind-hearted man, could have wished 
 
 1 Joseph Gamier, who must not be confused with Germain Garnier, the 
 translator of Smith's works, published the first edition of his Elements d'ficonomie 
 politique in 1845. From 1848 up to his death in 1881 he was chief editor of the 
 Journal des Economistes. 
 
 1 G. Schmoller, Zur Litteraturgeschichte der Stoats- und Sozialioissenschafien 
 (Leipzig, 1888). The expression will be found in his study of Roscher. 
 
 A. Toyubee, The Industrial Revolution.
 
 380 THE HISTORICAL SCHOOL 
 
 or supposed, had he asked himself the question, that the world 
 of his treatise actually was the world he lived in ; but he uncon- 
 sciously fell into the habit of regarding laws which were those 
 only of that society which he had created in his study for pur- 
 poses of analysis as applicable to the complex society really 
 existing around him. And the confusion was aggravated by some 
 of his followers and intensified in ignorant popular versions of 
 his doctrines." In other words, there was a striking divergence 
 between economic theory and concrete economic reality, a diver- 
 gence that was becoming wider every day, as new problems arose 
 and new classes were being formed. But the extent of the gap was 
 best realised when an attempt was made to apply the principles of 
 the science to countries where the economic conditions were entirely 
 different from those existing either in England or in France. 
 
 This divergence between theory and reality might conceivably 
 be narrowed in one of two ways. A more harmonious and a more 
 comprehensive theory might be formulated, a task which Menger, 
 Jevons, and Walras attempted about 1870. A still more radical 
 suggestion was to get rid of all abstract theory altogether and to 
 confine the science to a simple description of economic phenomena. 
 This was the method of procedure that was attempted first, and it is 
 the one followed by the Historical school. 
 
 Long before this time certain writers had pointed out the dangers 
 of a too rigid adherence to abstraction. Sismondi an essentially 
 historical writer treated political economy as a branch of moral 
 science whose separation from the main trunk is only partial, and 
 insisted upon studying economic phenomena in connection with their 
 proper environment. He criticised the general conclusions of 
 Ricardo and pleaded for a closer observation of facts. 1 List showed 
 himself a still more violent critic, and, not content with the con- 
 demnation of Ricardian economics, he ventured to extend his stric- 
 tures even to Smith. Taking nationality for the basis of his system, 
 he applied the comparative method, upon which the Historical 
 school has so often insisted, 2 to the commercial policy of the Classical 
 
 1 It is curious that the Historians never refer to Sismondi as one of the 
 pioneers of historical study. Roscher and Hildebrand never mention him at 
 all, and Knies only thinks of him as a socialist (of. Die Nationaldkonomie vom 
 historischen Standpunkt, 2nd ed., p. 322). 
 
 1 Even List did not escape criticism at their hands. Hildebrand thinks that 
 he was infected with the atomic views of Adam Smith and never showed himself 
 sufficiently conscious of the ethical nature of society. " List seems to think that 
 the entire subordination of private interest to public utility is dictated by custom, 
 and even by private interest when properly understood, but he never regards
 
 ORIGIN AND DEVELOPMENT 381 
 
 school ; but history was still employed merely for the purpose of 
 illustration. Finally, socialists, especially the Saint-Simonians, whose 
 entire system is simply one vast philosophy of history, had shown 
 the impossibility of isolating economic from political and juridical 
 phenomena, with which they are always intermingled. 
 
 But no author as yet had deliberately sought either in history or 
 in the observation of contemporary facts a means of reconstructing 
 the science as a whole. It is just here that the originality of the 
 German school lies. 
 
 Its work is at once critical and constructive. On the critical side 
 we have a profound and suggestive, though not always a just, analysis 
 of the principles and methods of the older economists, while its 
 constructive efforts gave new scope to the science, extended the 
 range of its observations, and added to the complexity of its problems. 
 
 Generally speaking, it is not a difficult task to give an exposition 
 of the critical ideas of the school, as we find them set forth in several 
 books and articles, but it is by no means easy to delineate the con- 
 ceptions underlying the positive work. Though implicit in all their 
 writings, these conceptions are nowhere explicitly stated ; whenever 
 they have tried to define them it has always been, as their disciples 
 willingly admit, in a vague and contradictory fashion. x To add further 
 to the difficulty, each author defines them after his own fashion, but 
 claims that his definition represents the ideas of the whole school. 
 
 In order to avoid useless repetitions and discussions without 
 number we shall begin with a rapid survey of the outward develop- 
 ment of the school, following with a rtsumi of its critical work, 
 attempting, finally, to seize hold of its conception of the nature and 
 object of political economy. From our point of view the last-named 
 object is by far the most interesting. 
 
 I : THE ORIGIN AND DEVELOPMENT 
 OF THE HISTORICAL SCHOOL 
 
 THE honour of founding the school undoubtedly belongs to 
 Wilhelm Roscher, a Gottingen professor, who published a book 
 entitled Grundriss zu Vorlesungen uber die Staatswirtschaft nach 
 geschichllicher Methods in 1843. In the preface to that small volume 
 
 it as a public duty rising out of the very nature of society itself." (Hildebrand, 
 Die Nationalokonomie der Oegenwart und Zukunft, p. 73.) Note the ethical 
 Btandpoint of the school. 
 
 1 See, among others, Max Weber's articles hi Schmoller's Jahrbuch for 1903, 
 p. 1881, and 1905, p. 1323. The methodological errors of Roscher, Knies, and 
 Hildebrand get their due meed of criticism.
 
 382 THE HISTORICAL SCHOOL 
 
 he mentions some of the leading ideas which inspired him to under- 
 take the work, which reached fruition in the celebrated System der 
 VolJcswirtschaft (1st ed., 1854). He makes no pretence to any- 
 thing beyond a study of economic history. " Our aim," says he, 
 " is simply to describe what people have wished for and felt in 
 matters economic, to describe the aims they have followed and the 
 successes they achieved as well as to give the reasons why such 
 aims were chosen and such triumphs won. Such research can only 
 be accomplished if we keep in close touch with the other sciences of 
 national life, with legal and political history, as well as with the 
 history of civilisation." l Almost in the same breath he justifies an 
 attack upon the Ricardian school. He recognises that he is far 
 from thinking that his is the only or even the quickest way of attain- 
 ing the truth, but thinks that it will lead into pleasant and fruitful 
 quests, which once undertaken will never be abandoned. 
 
 What Roscher proposed to do was to try to complete the 
 current theory by adding a study of contemporary facts and opinions, 
 and, as a matter of fact, in the series of volumes which constitute 
 the System, every instalment of which was received with growing 
 appreciation by the German world of letters, Roscher was merely 
 content to punctuate his exposition of the Classical doctrines with 
 many an erudite excursus in the domain of economic facts and ideas.' 
 
 Roscher referred to his experiment as an attempt to apply the 
 historical method which Savigny had been instrumental in intro- 
 ducing with such fruitful results into the study of jurisprudence. 8 
 But, as Karl Menger * has well pointed out, the similarity is only 
 superficial. Savigny employed history in the hope of obtaining 
 some light upon the organic nature and the spontaneous origin of 
 existing institutions. His avowed object was to prove their legiti- 
 macy despite the radical pretensions of the Rationalist reformers of 
 the eighteenth century. Roscher had no such aim in view. He 
 was himself a Liberal, and fully shared in their reforming zeal. 
 History with him served merely to illustrate theory, to supply 
 rules for the guidance of the statesman or to foster the growth of 
 what he called the political sense. 
 
 Schmoller thinks that Roscher's work might justly be regarded 
 
 1 Grundriss, preface. 
 
 " Knies is of the same opinion. He remarks that Roscher's work simply 
 means " a completion of historiography rather than a correction of political 
 economy." (Die Nationalokonomie vom geschichtlichen Standpunkte, p. 35.) 
 
 8 Grundriss, preface, pp. iv-v. 
 
 * Untersuchungcn uber die Methods, der Sozialwissenscliaften und der Politischen 
 Oekonomie insbesondere. (Leipzig, 1883.)
 
 383 
 
 as an attempt to connect the teaching of political economy with 
 the " Cameralist " tradition of seventeenth- and eighteenth-century 
 Germany. 1 These Cameralists were engaged in teaching the principles 
 of administration and finance to students who were to spend their 
 lives in administrative work of one kind or another, and they naturally 
 took good care to keep as near actual facts as possible. Even in 
 England and France political economy soon got involved in certain 
 practical problems concerning taxation and commercial legislation. 
 But in a country like Germany, which was industrially much more 
 backward than either England or France, these problems wore a 
 very different aspect, and some correction of the Classical doctrines 
 was absolutely necessary if they were to bear any relation to the 
 realities of economic life. Roscher's innovation was the outcome 
 of a pedagogic rather than of a purely scientific demand, and he was 
 instrumental in reviving a university tradition rather than in creating 
 a new scientific movement. 
 
 In 1848 another German professor, Bruno Hildebrand, put 
 forward a much more ambitious programme, and his Lie National- 
 okonomie der Gegenwart und ZuJeunft shows a much more fundamental 
 opposition to the Classical school. History, he thought, would not 
 merely vitalise and perfect the science, but might even help to re- 
 create it altogether. Hildebrand points to the success of the method 
 when applied to the science of language. Henceforth economics was 
 to become the science of national development. 2 
 
 In the prospectus of the Jahrbiicher fur Nationalokonomie und 
 Statistik, founded by him in 1863, Hildebrand goes a step farther. 
 He challenges the teaching of the Classical economists, especially on 
 the question of national economic laws, and he even blames Roscher 
 because he had ventured to recognise their existence. 8 He did not 
 seem to realise that a denial of that kind involved the undoing of all 
 
 1 Schmoller, loc. cit. For further information concerning the Cameraliste 
 Bee Geschichte der Nationalokonomie, by M. Oncken. Menger and Schmoller 
 also connect Roscher with Heeren, Gervinus, and the other historians of Gottin- 
 gen who during the first quarter of the nineteenth century tried to found a science 
 of politics upon a general study of history. Roscher had studied history under 
 them, and his aim is in every respect similar to theirs. 
 
 1 In the introduction, p. v, he declares that the object of his work is " to 
 open a way for an essentially historical standpoint in political economy and to 
 transform the science of political economy into a body of doctrines dealing with 
 the economic development of nations." 
 
 8 Even Roscher had ventured to say that they partook of a mathematical 
 nature. This is how he expresses his views as against those of Hildebrand on 
 the real aim of political economy in the Jahrbiicher fur Nationaltikonomie und 
 Statietik, vol. i, p. 145 : " Economic science need not attempt to find the
 
 384 THE HISTORICAL SCHOOL 
 
 economic science and the complete overthrow of those " laws of 
 development " which he believed were henceforth to be the basis of 
 the science. 
 
 But Hildebrand's absolutism had no more influence than 
 Roscher's eclecticism, unless we make an exception of his generalisa- 
 tion concerning the three phases of economic development, which 
 he differentiates as follows : the period of natural economy, that of 
 money economy, and finally that of credit. Beyond that he merely 
 contented himself with publishing a number of fragmentary studies 
 on special questions of statistics or history, without, for the most 
 part, making any attempt to modify the Classical theory of produc- 
 tion and distribution. 
 
 The critical study of 1848 hinted at a sequel which was to embody 
 the principles of the new method. But the sequel never appeared, 
 and the difficult task of carrying the subject farther was entrusted 
 to Karl Knies, another professor, who in 1853 published a bulky 
 treatise bearing the title of Political Economy from the Historical 
 Point of View. 1 But there is as much divergence between his 
 views and those of his predecessors as there is between Roscher's 
 and Hildebrand's. He not only questions the existence of natural 
 laws, but even doubts whether there are any laws of development 
 at all a point Hildebrand never had any doubts about and thinks 
 that all we can say is that there are certain analogies presented by 
 the development of different countries. Knies cannot share in the 
 belief of either Hildebrand or Roscher, nor does he hold with the 
 Classical school. He thinks that political economy is simply a 
 history of ideas concerning the economic development of a nation at 
 different periods of its growth. 
 
 Knies's work passed almost unnoticed, ignored by historians and 
 economists alike, until the younger Historical school called attention 
 to his book, of which a new edition appeared in 1883. Knies makes 
 frequent complaints of Roscher's neglect to consider his ideas. 
 
 Such heroic professions naturally lead us to expect that Knies 
 would spare no effort to show the superiority of the new method. 
 
 unchangeable, identical laws amid the multiplicity of economic phenomena. 
 Its task is to show how humanity has progressed despite all the transformations 
 of economic life, and how this economic life has contributed to the perfection of 
 mankind. Its task is to follow the economic evolution of nations as well as of 
 humanity as a whole, and to discover the bases of the present economic civilisa- 
 tion as well as of the problems that now await solution." 
 
 1 The exact title of the first edition was Die Politische Oekonomie vom Stand- 
 punkte der geschichtlichen Methode. A second edition appeared in 1883 with a 
 slightly different title. Our quotations are taken from the second edition.
 
 ORIGIN AND DEVELOPMENT 385 
 
 But his subsequent works dealing with money and credit, upon which 
 his real reputation rests, bear scarcely a trace of the Historical spirit. 
 
 The three founders of the science devoted a great deal of time 
 to a criticism of the Classical method, but failed to agree as to the 
 aim and scope of the science and left to others the task of applying 
 their principles. 
 
 This task was attempted by the newer Historical school, which 
 sprang up around Schmoller towards the end of 1870. This new 
 school possesses two distinctive characteristics. 
 
 (1) The useless controversy concerning economic laws which 
 Hildebrand and Knies had raised is abandoned. The members of the 
 school are careful not to deny the existence of natural social laws or 
 uniformities, and they considered that the search for these was the 
 chief object of the science. In reality they are economic deter- 
 minists. " We know now," says Schmoller, 1 " that psychical causa- 
 tion is something other than mechanical, but it bears the same 
 stamp of necessity." What they do deny is that these laws are 
 discoverable by Classical methods, and on this point they agree with 
 every criticism made by their predecessors. 
 
 As to the possibility of formulating " the laws of development " 
 upon which Hildebrand laid such stress, they professed themselves 
 very sceptical. " We have no knowledge of the laws of history, 
 although we sometimes speak of economic and statistical laws," * 
 writes Schmoller. " We cannot," he regretfully says later, " even 
 say whether the economic life of humanity possesses any element 
 of unity or shows any traces of uniform development, or whether 
 it is making for progress at all." 8 This very characteristic passage 
 from Schmoller was written in 1904, 4 and forms the conclusion 
 
 1 Schmoller, Grundrisa der Volkswirtachaftslehre, vol. i, p. 107 (1904). 
 
 Ibid., vol. i, p. 108. Ibid., vol. ii, p. 653. 
 
 * All historians, however, are not equally sceptical. Ashley in his preface to 
 English Economic History and Theory writes as follows : " Just as the history of 
 society, in spite of apparent retrogressions, reveals an orderly development, 
 so there has been an orderly development in the history of what men have 
 thought, and therefore in what they have thought concerning the economic 
 side of life." And Ingram, in his History of Political Economy, points out 
 that " As we have more than once indicated, an essential part of the idea of 
 life is that of development in other words, of ordered change. And that 
 such a development takes place in the constitution and working of society in 
 all its elements is a fact which cannot be doubted. . . . That there exist 
 between the several social elements such relations as rcako the change of one 
 element involve or determine the change of another is equally plain ; and why 
 the name of natural laws should be denied to such constant relations of co- 
 existence and succession it is not easy to see. These laws being universal admit 
 of the construction of an abstract theory of economic development." (P. 206.)
 
 386 THE HISTORICAL SCHOOL 
 
 of the great synthetic treatise. All attempts at a philosophy of 
 history are treated with the same disdain. 1 
 
 (2) The newer Historical school, not content merely with advo- 
 cating the use of the 'Historical method, hastened to put theory 
 into practice. Since about 1860 German economists have shown a 
 disposition to turn away from economic theory and to devote their 
 entire energy to practical problems, sociological studies and historical 
 or realistic research. The number of economic monographs has 
 increased enormously. The institutions of the Middle Ages and of 
 antiquity, the economic doctrines of the ancients, statistics, the 
 economic organisation of the present day, these are some of the topics 
 discussed. Political economy is lost in the maze of realistic studies, 
 whether of the present day or of the past. 
 
 Although the Historical school has done an enormous amount of 
 work we must not forget that historical monographs were printed 
 before their time, and that certain socialistic treatises, such as 
 Marx's Kapital, are really attempts at historical synthesis. The 
 special merit of the school consists in the impulse it gave to systematic 
 study of this description. The result has been a renewed interest 
 in history and in the development of economic institutions. We 
 cannot attempt an account of all these works and their varied 
 contents. We must remain satisfied if we can catch the spirit of 
 the movement. The names of Schmoller, Brentano, Held, Biicher, 
 and Sombart are known to every student of economic history. 
 Marshall, the greatest of modern theorists, has on more than one 
 occasion paid them a glowing tribute. 2 
 
 The movement soon left Germany, and it was speedily realised 
 that conditions abroad were equally favourable for its work. 
 
 By the end of 1870 practical Liberalism had spent its force. But 
 new problems were coming to the front, especially the labour ques- 
 tion, which demanded immediate attention. 3 Classical economists 
 
 A Schmoller thinks that the science in the present stage of development, 
 while it cannot be prevented from attempting a philosophy of history, is much 
 better employed in building up simple scientific hypotheses with a view to 
 gauging the future course of development than in getting hold of " absolute 
 truths." 
 
 1 Marshall, Principles, Appendix A. 
 
 3 Its influence has been noted by Toynbee in his article on Ricardo and 
 the Old Political Economy. " It was the labour question, unsolved by that 
 removal of restrictions which was all deductive political economy had to offer, 
 that revived the method of observation. Political economy was transformed 
 by the working classes." Elsewhere he adds : " The Historical method is often 
 deemed conservative, because it traces the gradual and stately growth of our 
 venerable institutions ; but it may exercise a precisely opposite influence by
 
 ORIGIN AND DEVELOPMENT 887 
 
 had no solution to offer, and the new study of economic institutions, 
 of social organisation, and of the life of the masses seemed to be the 
 only hopeful method of gaining light upon the question. Com- 
 parison with the past was expected to lead to a better understanding 
 of the present. The Historical method seemed to social reformers 
 to be the one instrument of progress, and a strong desire for some 
 practical result fostered belief in it. When we remember the 
 prestige which German science has enjoyed since 1871, and the success 
 of the Germans in combining historical research with the advocacy 
 of State Socialism, we can understand the enthusiasm with which 
 the method was greeted abroad. 
 
 Even in England, the stronghold of Bicardian economics, the 
 influence of the school becomes quite plain after 1870. 
 
 Here, as elsewhere, a controversy as to the method employed 
 manifests itself. Cairnes in his work The Character and Logical 
 Method of Political Economy (1875 x ), writing quite in the spirit of the 
 old Classical authors, strongly advocates the employment of the 
 deductive method. In 1879 Cliff e Leslie, in his Essays on Political 
 and Moral Philosophy, enters the lists against Cairnes and makes use 
 of the new weapons to drive home his arguments. The use of 
 induction rather than deduction, the constant necessity for keeping 
 economics in living touch with other social sciences, the relative 
 character of economic laws, and the employment of history as a 
 means of interpreting economic phenomena, are among the argu- 
 ments adopted and developed by Leslie. Toynbee, in his Lectures 
 on the Industrial Revolution, gave utterance to similar views, but 
 showed much greater moderation. While recognising the claims of 
 deduction, he thought that history and observation would give new 
 life and lend a practical interest to economics. The remoteness and 
 unreality of the Ricardian school constituted its greatest weak- 
 ness, and social reform would in his opinion greatly benefit by the 
 introduction of new methods. Toynbee would undoubtedly have 
 exercised tremendous influence ; but his life, full of the brightest 
 hopes, was cut short at thirty. 
 
 The lead had been given ; the study of economic institutions 
 and classes was henceforth to occupy a permanent position in 
 English economic writings, and the remarkable works which have 
 since been published, such as Cunningham's Growth of English 
 Industry and Commerce, Ashley's Economic History, the Webbs' 
 
 showing the gross injustice which was blindly perpetrated during this growth." 
 (Industrial Revolution, p. 58.) 
 
 1 The first edition appeared in 1857.
 
 388 THE HISTORICAL SCHOOL 
 
 Trade Unionism and Industrial Democracy, Booth's Life and Labour 
 of the People, bear witness to the profound influence exerted by the 
 new ideas. 
 
 In France the success of the movement has not been quite so 
 pronounced, although the need for it was as keenly felt there. 
 Although it did not result in the founding of a French school of 
 economic historians, the new current of ideas has influenced French 
 economic thought in a thousand ways. In 1878 political economy 
 became a recognised subject in the various curricula of the Facultes 
 de Droit. The intimate connection between economic study and 
 the study of law has given an entirely new significance to political 
 economy, and the science has been entirely transformed by the 
 infusion of the historical spirit. At the same time professional 
 historians have become more and more interested in problems of 
 economic history, thus bringing a spirit of healthy rivalry into the study 
 of economic institutions. Several Liberal economists also, without 
 breaking with the Classical tradition, have devoted their energies to the 
 close observation of contemporary facts or to historical research. 1 
 
 Finally, we have a new group of workers in the sociologists. 
 Sociology is interested in the origin and growth of social institutions 
 of all kinds and in the influence which they have exerted upon one 
 another. After studying institutions of a religious, legal, political, 
 or social character it is only natural that they should ask that the 
 study of economic institutions should be carried on in the same 
 spirit and with the help of the same method. This object has been 
 enthusiastically pursued for some time. The mechanism and the 
 organisation of the economic system at different periods have been 
 closely examined by the aid of observation and history. Abstraction 
 has been laid aside and a preference shown for minute observation, 
 and for induction rather than deduction. 1 
 
 II : THE CRITICAL IDEAS OF THE HISTORICAL SCHOOL 
 
 AMONG so many writers whose works cover such a long period of 
 time we can hardly expect to find absolute unanimity, and we have 
 
 1 We would specially mention Levasseur's excellent work, Histoire dea 
 Classes ouvrieres en France (first edition, 1867). 
 
 * More especially we must mention the group of workers associated with 
 M. Durkheim and the Anne sociologique. But it would be a great mistake to 
 confuse the two methods, the Historical and the Sociological. See Simiand, 
 Methode historique et Science sociale, in the Revue de Synthese historique, 1903. 
 See also La M&hode positive en Science iconomique (Paris, 1912), which contains a 
 study of the methodological problems presented by political economy.
 
 CRITICAL IDEAS 889 
 
 already had occasion to note some of the more important divergencies 
 between them, especially those separating the newer from the older 
 writers of the Historical school. We cannot here enter into a full 
 discussion of all these various shades of opinion, and we must be 
 content to mention the more important features upon which they 
 are almost entirely at one, noticing some of the principal individual 
 doctrines by the way. 
 
 The German Historical school made its debut with a criticism 
 of Classical economics, and we cannot better begin than with a study 
 of its critical ideas. 1 
 
 Although these ideas had already found expression in the writings 
 of Knies, Hildebrand, and Roscher, there was nothing like the dis- 
 cussion which was provoked by them when the newer Historical 
 school, at a much later period, again brought them to public notice. 
 The publication of Karl Menger's work, Untersuchwngen iiber die 
 Methode der Socialwissenschaften, in 1883 a classic both in style and 
 matter ushered in a new era of active polemics. This remarkable 
 work, in which the author undertakes the defence of pure political 
 economy against the attacks of the German Historical school, 
 was received with some amount of ill-feeling by the members of 
 that school, 2 and it caused a general searching of hearts during the 
 next few years. We must try to bring out the essential elements 
 in the discussion, and contrast the arguments advanced by the 
 Historians with the replies offered by their critics. 
 
 Broadly speaking, three charges are levelled at the Classical 
 writers, (i) It is pointed out that their belief in the universality 
 of their doctrines is not easily justified, (ii) Their psychology is 
 said to be too crude, based as it is simply upon egoism, (iii) Their 
 
 1 There is one aspect of the critical work of the German school' with which 
 we have not dealt in this book namely, the criticism of laissez-faire. Some of 
 the members, e.g. Hildebrand, have insisted on the ethical criterion, but none 
 of them share in the optimism of either Smith or Bastiat. The emphasis laid 
 upon relativity made this quite impossible. But all the more eminent writers 
 have remained faithful to the Liberal teaching of the founders. See Hilde- 
 brand's confession of faith at the beginning of vol. i of the Jdhrbucher fur 
 Nationaldkonornie, 1863, vol. i, p. 3. And although some of them, e.g. Brentano 
 and Schmoller, seem to be connected with the new current of ideas that gave 
 rise to State Socialism, the association was quite accidental. They never con- 
 sidered it an organic part of their teaching, and they made no very original 
 contribution to that part of the study. Their connection with economics must 
 always depend upon the light which they have thrown upon the question of 
 method. 
 
 * Cf. Schmoller 's account of Menger's work published in the Jahrbuch in 1884. 
 The article appears also in the volume entitled Zur Litteraturgeschichte der Stoat*- 
 und Sozialwissenschaften (1888).
 
 390 THE HISTORICAL SCHOOL 
 
 use, or rather abuse, of the deductive method is said to be wholly 
 unjustifiable. We will review these charges seriatim. 
 
 The Historians held that the greatest sin committed by Smith 
 and his followers was the inordinate stress which they laid upon the 
 universality of their doctrines. Hildebrand applies the term " univer- 
 salism " to this feature of their teaching, while Knies refers to it as " ab- 
 solutism " or " perpetualism." The belief of the Anglo-French school, 
 according to their version of it, was that the economic laws which they 
 had formulated were operative everywhere and at all times, and that 
 the system of political economy founded upon them was universal 
 in its application. The Historians, on the other hand, maintained 
 that these laws, so far from being categorically imperative, should be 
 regarded always as being subject to change in both theory and practice. 
 
 First with regard to practice. A uniform code of economic 
 legislation cannot be indifferently applied to all countries at all 
 epochs of their history. An attempt must be made to adapt it to 
 the varied conditions of time and place. The statesman's art 
 consists in adapting principles to meet new demands and in invent- 
 ing solutions for new problems. But, as Menger points out, this 
 obvious principle, which was by no means a new one, would have 
 met with the approval of Smith and Say, and even of Ricardo 
 himself ; x although they occasionally forgot it, perhaps, especially 
 when judging the institutions of the past or when advocating the 
 universal adoption of laissez-faire. 
 
 The second idea, namely, that economic theory and economic 
 laws have only a relative value, is treated with even greater emphasis, 
 and this was another point on which the older economists had gone 
 wrong. Economic laws, unlike the laws of physics and chemistry, 
 with which the Classical writers were never tired of comparing them, 
 have neither the universality nor the inevitability of the latter. Knies 
 has laid special stress on this point. " The conditions of economic 
 life determine the form and character of economic theory. Both 
 the process of argument employed and the results arrived at are 
 products of historical development. The arguments are based 
 upon the facts of concrete economic life and the results bear all the 
 marks of historical solutions. The generalisations of economics 
 are simply historical explanations and progressive manifestations of 
 truth. Each step is a generalisation of the truth as it is known 
 
 1 Cf. Menger, foe. cit., pp. ISQetseq. Marshall's ironical remark is very apposite 
 here : " German economists have done good service by insisting on this class of 
 consideration, but they seem to be mistaken in supposing that it was overlooked 
 by the older English economists." (Principles. Book I, chap. 6, note.)
 
 CRITICAL IDEAS 391 
 
 at that particular stage of development. No single formula and no 
 collection of such formulae can ever claim to be final." l 
 
 This paragraph, though somewhat obscure and diffuse, as is often 
 the case with Knies, expresses a sound idea which other economists 
 have stated somewhat differently, by saying that economic laws 
 are at once provisional and conditional. They are provisional in 
 the sense that the progress of history continually gives rise to new 
 facts of which existing theories do not take sufficient account. 
 Hence the economist finds himself obliged to modify the formulae 
 with which he has hitherto been quite content. They are conditional 
 in the sense that economic laws are only true so long as other 
 circumstances do not hinder their action. The slightest change in 
 the conditions as ordinarily given might cancel the usual result. 
 Those economists who thought of their theory as a kind of final 
 revelation, or considered that their predictions were absolutely 
 certain, needed reminding of this. 
 
 But Knies is hopelessly wrong in thinking that this relativity is 
 enough to separate the laws of economics from the laws of other 
 sciences. Professor Marshall justly remarks that chemical and 
 physical laws likewise undergo transformation whenever new facts 
 render the old formulae inadequate. All these laws are provisional. 
 They are also hypothetical in the sense that they are true only in the 
 absence of any disturbing cause. Scientists no longer consider these 
 laws as inherent in matter. They are the product of man's thought 
 and they advance with the development of his intelligence. 8 They are 
 nothing more or less than formulae which conveniently express the 
 relation of dependence that exists between different phenomena ; 
 and between these various laws as they are framed by the human 
 mind there is no difference except a greater or lesser degree of proof 
 which supports them. 
 
 What gives to the laws of physics or chemistry that larger amount 
 of fixity and that greater degree of certainty which render them 
 altogether superior to economic law as at present formulated is a 
 greater uniformity in the conditions that give rise to them, and the 
 
 1 Knies, loc. cit., pp. 24-25. Ashley gives an unmistakable expression to 
 the same opinion in his History. " Political economy is not a body of absolutely 
 true doctrines, revealed to the world at the end of the last and the beginning of 
 the present century, but a number of more or less valuable theories and generalisa- 
 tions. . . . Modern economic theories, therefore, are not universally true ; they 
 are true neither for the past, when the conditions they postulate did not exist, 
 nor for the future, when, unless society becomes stationary, the conditions will 
 have changed." (Preface.) 
 
 1 See Karl Pearson, The Grammar of Science,
 
 392 TEE HISTORICAL SCHOOL 
 
 fact that their action is often measurable in accordance with 
 mathematical principles. 1 
 
 Not only has Knies exaggerated the importance of his doctrine 
 of relativity, 2 but the imputation that his predecessors had failed 
 to realise the need for it was hardly deserved. We shall have to 
 refer to this matter again. Mill's Principles was already published, 
 and even in the Logic, which appeared for the first time in 1843, and 
 several editions of which had been issued before 1853, the year when 
 Knies writes, we meet with the following sentence : * " The motive 
 that suggests the separation of this portion of the social phenomenon 
 from the rest ... is that they do mainly depend at least in the first 
 resort on one class of circumstances only ; and that even when other 
 circumstances interfere, the ascertainment of the effect due to the 
 one class of circumstances alone is a sufficiently intricate and 
 difficult business to make it expedient to perform it once for all 
 and then allow for the effect of the modifying circumstances." 
 Consequently sociology, of which political economy is simply a 
 branch, is a science of tendencies and not of positive conclusions. 
 No better expression of the principle of relativity could ever be given. 
 
 Notwithstanding all this, modern economists have come to the 
 conclusion that the criticisms of the Historical school are sufficiently 
 well founded to justify them in demanding greater precision so as 
 to avoid those mistakes in the future. Dr. Marshall, for one, adopts 
 Mill's expression, and defines an economic law as "a statement of 
 economic tendencies. *' 4 
 
 Even the founders of pure political economy, although their 
 method is obviously very different from that of the Historians, have 
 taken similar precautions. They expressly declare that the con- 
 clusions of the science are based upon a certain number of preliminary 
 hypotheses deliberately chosen, and that the said conclusions are 
 only provisionally true. "Pure economics," says Walras, "has to 
 borrow its notion of exchange, of demand and supply, of capital 
 and revenue, from actual life, and out of those conceptions it has to 
 
 1 Marshall, Principles, 4th ed., Book I, chap. 6, 6. 
 
 What we say about the mathematical method does not imply any criticism 
 of the Mathematical method in political economy. To establish mathematical 
 relations between economic phenomena, as Walras and his school did, and to 
 deduce economic conclusions from general mathematical theories are two 
 different things. 
 
 ' Knies employs the differences there set up in order to deny that economic 
 laws have even the character of national laws. The new Historical school does 
 not go quite go far, as we shall see presently. 
 
 Chap. 4, " Of the Logic of the Moral Sciences." 
 
 Principles, Book I, chap. 6, 6.
 
 CRITICAL IDEAS 393 
 
 build the ideal or abstract type upon which the economist exercises 
 his reasoning powers." l Pure economics studies the effects of com- 
 petition, not under the imperfect conditions of an actual market, 
 but as it would operate in a hypothetical market where each 
 individual, knowing his own interests, would be able to pursue them 
 quite freely, and in full publicity. The conception of a limited 
 area within which competition is fully operative enables us to study 
 as through a magnifying-glass the results of a hypothesis that really 
 very seldom operates in the economic life of to-day. 
 
 We may dispute the advantages of such a method, but we cannot 
 say that the economists ever wished to deny the relativity of a 
 conclusion arrived at in this fashion. 
 
 While willing to admit that the Historians have managed to 
 put this characteristic in a clear light just when some economists 
 were in danger of forgetting it, and that it is a universally accepted 
 doctrine to-day, we cannot accept Knies's contention that it affords 
 a sufficient basis for the distinction between natural and economic 
 laws. And such is the opinion of a large number, if not of the 
 majority, of economists. 8 
 
 The second charge is levelled against the narrowness and 
 insufficiency of the psychology. Adam Smith treated man as a 
 being solely dominated by considerations of self-interest and com- 
 pletely absorbed in the pursuit of gain. But, as the Historians 
 justly point out, personal interest is far from being the sole motive, 
 even in the economic world. The motives here, as elsewhere, are 
 extremely varied : vanity, the desire for glory, pleasure afforded by 
 the work itself, the sense of duty, pity, benevolence, love of kin, or 
 simply custom. 8 To say that man is always and irremediably 
 actuated by purely selfish motives, says Knies, is to deny the 
 existence of any better motive or to regard man as a being having 
 a number of centres of psychical activity, each operating indepen- 
 dently of the other. 4 
 
 We cannot deny that the Classical writers believed that 
 ** personal interest " not in the sense of egoism, which is the name 
 given it by Knies, and which somewhat distorts their view held the 
 key to the significance and origin of economic life. But the claims 
 of the Historians are again immoderate. Being themselves chiefly 
 concerned with concrete reality in all its complexity of being, and 
 
 1 Walras, Economic politique pure. 
 
 1 Some authors would not admit complete assimilation; e.g. Wagner 
 (Orundlegung, voL i, p. 335). 
 
 1 Sohmoller especially insists on this point. * Knies, op. cti., p. 23.
 
 394 THE HISTORICAL SCHOOL 
 
 with all its distinctive and special features rather than its general 
 import, they forgot that the primary aim of political economy is 
 to study economic phenomena en masse. The Classical economists 
 studied the crowd, not the individual. If we neglect the differences 
 that occasionally arise in special cases, and allow for the personal 
 equation, do we not .find that the most constant motive to action is 
 just this personal desire for well-being and profit ? This is the 
 opinion of Wagner, who on this question of method is not quite in 
 agreement with other members of the school. In his suggestive study 
 of the different motives that influence economic conduct he definitely 
 states that the only motive that is really constant and permanent in 
 its action is this self-interest. " This consideration," he says, " does 
 something to explain and to justify the conduct of those writers who 
 took this as the starting-point of their study of economics." 1 
 
 But having admitted this, we must also recognise, not that they 
 denied the changes occasionally undergone by self-interest under the 
 pressure of other motives, as Knies suggests, but that they have 
 neglected to take sufficient account of such modifications. Some- 
 times it really seems as if they would " transform political economy 
 into a mere natural history of egoism," as Hildebrand says. 
 
 We can only repeat the remark which we have already made, 
 namely, that when this criticism was offered it was scarcely justified. 
 Stuart Mill had drawn attention to this point in his Logic ten years 
 previously. 2 " An English political economist, like his countrymen 
 in general, has seldom learned that it is possible that men in conduct- 
 ing the business of selling their goods over the counter should care 
 more about their ease or their vanity than about their pecuniary 
 gain." For his own part he ventures to say that " there is perhaps 
 no action of a man's life in which he is neither under the immediate 
 nor under the remote influence of any impulse but the mere desire 
 of wealth." 3 
 
 It is evident that Mill did not think that self-interest was 
 the one unchangeable and universal human motive. Much less 
 " egoism," for, as we have seen in the previous chapter, his " egoism " 
 includes a considerable admixture of altruism. 
 
 But here again the strictures of the Historians, though somewhat 
 exaggerated, have forced economists of other schools to be more 
 precise in their statements. The economists of to-day, as Marshall 
 remarks, are concerned " with man as he is ; not with an abstract 
 or ' economic ' man, but a man of flesh and blood." * And if the 
 
 1 A. Wagner, Grundhgung, 67, * Vol. ii, p. 502. 
 
 1 Logic, vol. ii, p. 497. * Principles, Book I, chap. 5, 9.
 
 CRITICAL IDEAS 895 
 
 economist, as Marshall points out, pays special attention to the desire 
 for gain among the other motives which influence human beings, 
 this is not because he is anxious to reduce the science to a mere 
 " natural history of egoism," but because in this world of ours money 
 is the one convenient means of measuring human motive on a large 
 scale. 1 Even the Hedonists, whose economics rest upon a calculus 
 of pleasure and pain, are careful to note that their hypothesis is just 
 a useful simplification of concrete reality, and that such simplification 
 is absolutely necessary in order to carry the analysis of economic phe- 
 nomena as far as possible. It is an abstraction imposed by neces- 
 sity, which is its sole justification, but an abstraction nevertheless. 
 
 It is just here that the final reproach comes in, namely, the charge 
 of abusing the employment of abstraction and deduction, and greater 
 stress is laid upon this count than upon either of the other two. 
 
 Instead of deduction the new school would substitute induction 
 based upon observation. 
 
 Their criticism of the deductive method is closely connected with 
 their attack upon the psychology of the older school. The Classical 
 economists thought, so the Historians tell us, that all economic 
 laws could be deduced by a simple process of reasoning from one 
 fundamental principle. If we consider the multiplicity of motives 
 actually operative in the economic world, the insufficiency of this 
 doctrine becomes immediately apparent. The result is not a 
 faithful picture, but a caricature of reality. Only by patient 
 observation and careful induction can we hope to build up an 
 economic theory that shall take full account of the complexity of 
 economic phenomena. " There is a new future before political 
 economy," writes Schmoller in 1883, in reply to a letter of Menger, 
 " thanks to the use that will be made of the historical matter, 
 both descriptive and statistical, that is slowly accumulating. It 
 will not come by further distillation of the abstract propositions of 
 the old dogmatism that have already been distilled a hundred times." * 
 The younger school especially has insisted on this ; and Menger 
 has ventured to say that in the opinion of the newer Historical school 
 " the art of abstract thinking, even when distinguished by profundity 
 and originality of the highest order, and when based upon a foundation 
 of wide experience in a word, the exercise of that gift which has in 
 other sciences resulted in winning the highest honour for the thinkers 
 seems to be of quite secondary importance, if not absolutely worth- 
 less, as compared with some elaborate compilation or other." * 
 1 Marshall, Principles, Book I, chap. 5, 7. 
 1 Zur Litteraturgeschichte, p. 279. 
 Untersuchungen iiber die Methode, p. 279.
 
 396 THE HISTORICAL SCHOOL 
 
 But the criticism of the Historical 'school confuses two things, 
 namely, the particular use which the Classical writers have made of 
 the abstract deductive method, and the method itself. 
 
 No one will deny that the Classical writers often started with 
 insufficient premises. Even when the premises were correct, they 
 were too ready to think and not careful enough to prove that their 
 conclusions were always borne out by the facts. No one can defend 
 their incomplete analysis, their hasty generalisations, or their 
 ambiguous formulae. 1 
 
 But this is very different from denying the legitimacy of abstrac- 
 tion and deduction. To isolate a whole class of motives with a view 
 to a separate examination of their effects is not to deny either the 
 presence or the action of other motives, any more than a study of 
 the effect of gravitation upon a solid involves the denial of the 
 action of other forces upon it. In a science like political economy, 
 where experiment is practically impossible, abstraction and analysis 
 afford the only means of escape from those other influences which 
 complicate the problems so much. Even if the motives chosen were 
 of secondary importance, the procedure would be quite legitimate, 
 although the result would not be of any great moment. But it is 
 of the greatest service and value when the motive chosen is one, 
 like the search for gain or the desire for personal satisfaction, which 
 exercises a preponderant influence upon economic action. 2 
 
 So natural, we may even say so indispensable, is abstraction, 
 if we are to help the mind steer its way amid the complexity 
 of economic phenomena, that the criticism of the Historical school 
 has done nothing to hinder the remarkable development which has 
 resulted from the use of the abstract method during the last thirty 
 
 1 The English economists, even the most eminent, are often mistaken, says 
 Wagner (Grundlequng, chap. 4, 4), but their errors are not to be imputed to 
 their method so much as to the use they make of it. And Menger, who so ener- 
 getically undertook the defence of deduction, further undertakes to renew the 
 Classical theories. Economic theory, says he, as constituted by the English 
 Classical school, has not succeeded in giving us a satisfactory science of economic 
 laws (Menger, loc. cit., p. 15). 
 
 1 Ci Menger, loc. cit., p. 79 : " The student of pure mechanics does not deny 
 the existence of air or friction, any more than the student of pure mathematics 
 denies the existence of real bodies, of surfaces, and lines, or the student of pure 
 chemistry denies the influence of physical forces or the physicist the presence 
 of chemical factors in actual phenomena, although each of these sciences only 
 considers one side of the real world, making an abstraction of every other aspect 
 of it. Nor does the economist pretend that men are only moved by egoism or 
 that they are infallible and omniscient because they envisage social life from 
 the point of view of the free play of individual interest uninfluenced by other con- 
 aiderations, by sin or ignorance," Wagner and Marshall take the same view.
 
 CRITICAL IDEAS 397 
 
 years. But, although the Neo-Classical school has succeeded in 
 replacing the old methods in their position of honour once more, it 
 no longer employs those methods in the way the older writers did. 
 A more solid foundation has been given them in a more exact 
 analysis of the needs which personal interest ought to satisfy. 1 And 
 the mechanism of deduction itself has been perfected by a more 
 rigid use of the ordinary logical forms, and by the adoption of 
 mathematical phraseology. 
 
 Happily the controversy as to the merits of the rival methods, 
 which was first raised by the Historical school, has no very great 
 interest at the present moment. Most eminent economists consider 
 that both are equally necessary. There seems to be a general 
 agreement among writers of different schools to consider the question 
 of method of secondary importance, and to forget the futile contro- 
 versies from which the science has gained so little. Before conclud- 
 ing this section it may be worth while to quote the opinion of men 
 who represent very different tendencies, but are entirely agreed with 
 regard to this one subject. ** Discussion of method," says Pareto, 
 " is a pure waste of time. The aim of the science is to discover 
 economic uniformities, and it is always right to follow any path 
 or to pursue any method that is likely to lead to that end." 2 " For 
 this and other reasons," says Marshall, " there always has been, 
 and there probably always will be, a need for the existence side by 
 side of workers with different aptitudes and different aims. . . . All 
 the devices for the discovery of the relations between cause and 
 effect which are described in treatises on scientific method have to 
 be used in their turn by the economist." 3 
 
 These writers generally employ the abstract method. Let us now 
 hear some of the Historians. Schmoller is the author of that oft- 
 quoted phrase, "Induction and deduction are both necessary for 
 the science, just as the right and left foot are needed for walking." * 
 
 More remarkable still, perhaps, is the opinion of Bticher, an 
 
 1 So great ia the respect for psychology among the deductive writers of to-day 
 that it has been suggested that the Austrian school should be known as the 
 Psychological school. We can say that they have done much more in this 
 direction than the Historical school. 
 
 1 Manudle di Economia -politico,, p. 24 (Milan, 1906). 
 
 1 Principles, 4th ed., Book I, chap. 3. 
 
 Handwdrtcrbuch der Staatswiesenchaften. In his Grundriss we read : " The 
 writers who figure as representatives of inductive research in recent German 
 economics are not opposed to the practice of deduction as such, but they do 
 believe that it is too often based upon superficial and insufficient principles and 
 that other principles derived from a more exact observation of facts might very 
 well be substituted for these." Everyone would subscribe to this view.
 
 398 THE HISTORICAL SCHOOL 
 
 author to whom the Historical school is indebted for some of its 
 most valuable contributions. " It is therefore a matter of great 
 satisfaction that, after a period of diligent collection of material, the 
 economic problems of modern commerce have in recent times been 
 zealously taken up again and that an attempt is being made to 
 correct and develop the old system in the same way in which it 
 arose, with the aid, however, of a much larger store of facts. For 
 the only method of investigation which will enable us to approach 
 the complex causes of commercial phenomena is that of abstract 
 isolation and logical deduction. The sole inductive process that can 
 likewise be considered namely, the statistical is not sufficiently 
 exact and penetrating for most of the problems that have to be 
 handled here, and can be employed only to supplement or control." l 
 
 III : THE POSITIVE IDEAS OF THE HISTORICAL SCHOOL 
 WHAT made the criticism of the Historians so penetrating was the 
 fact that they held an entirely different view concerning the scope 
 and aim of economics. Behind the criticism lurked the counter- 
 theory. Nothing less than a complete transformation of the science 
 would have satisfied the founders, but the younger school soon 
 discovered that so ambitious a scheme could never be carried out. 
 It is important that we should know something of the view of 
 those older writers on this question, and the way they had intended 
 to give effect to their plans. The positive contribution made by the 
 Historical school to economic study is even more important than 
 its criticisms, for it gives a clue to an entirely different point of 
 view with which we are continually coming into contact in our 
 study of economic doctrines. 
 
 The study of economic phenomena may be approached from two 
 opposite standpoints, which we may designate the mechanical and 
 the organic. The one is the vantage-ground of those thinkers who love 
 generalisations, and who seek to reduce the complexity of the economic 
 world to the compass of a few formulae ; the other of those writers who 
 are attracted by the constant change which concrete reality presents. 
 
 The earlier economists for the most part belonged to the former 
 class. Amid all the wealth and variety of economic phenomena 
 they confined their attention almost entirely to those aspects that 
 could be explained on simple mechanical principles. Such were the 
 problems of price fluctuations, the rate of interest, wages, and rent. 
 Production adapting itself to meet variation in demand, with no guide 
 1 Die Entstehung der Volkswirtschaft, Dr. Wickett's translation.
 
 POSITIVE IDEAS 899 
 
 save personal interest, looked for all the world like the intermolecular 
 action of free human beings in competition with one another. The 
 simplicity of the idea was not without a certain grandeur of its own. 
 
 But such a conception of economic life is an extremely limited 
 one. A whole mass of economic phenomena of the highest import- 
 ance and of the greatest interest is left entirely outside. The 
 phenomena of the economic world, as a matter of fact, are extremely 
 varied and changeable. There are institutions and organisations 
 without number, banks and exchanges, associations of masters and 
 unions of men, commercial leagues and co-operative societies. 
 Eternal struggle between the small tradesman and the big manu- 
 facturer, between the merchant and the combine, between the 
 peasant proprietor and the great landowner, between classes and 
 individuals, between public and private interests, between town and 
 country, is the common feature of economic life. A state rises to 
 prosperity again to fall to ruin. Competition at one moment makes 
 it superior, at another reduces its lead. A country changes its 
 commercial policy at one period to reintroduce the old regime at 
 another. Economic life fulfils its purposes by employing different 
 organs that are continually modified to meet changing conditions, 
 and are gradually transformed as science progresses and manners 
 and beliefs are revolutionised. 
 
 Of all this the mechanical conception tells us nothing. It makes 
 no attempt to explain the economic differences which separate 
 nations and differentiate epochs. Its theory of wages tells us 
 nothing about the different classes of work-people, or of their well- 
 being during successive periods of history, or about the legal and 
 political conditions upon which that well-being depends. Its theory 
 of interest tells us nothing of the various forms under which interest 
 has appeared at different times, or of the gradual evolution of 
 money, whether metallic or paper. Its theory of profits ignores 
 the changes which industry has undergone, its concentration and 
 expansion, its individualistic nature at one moment, its collective 
 trend at another. No attempt is made to distinguish between 
 profits in industry or commerce and profits in agriculture. The 
 Classical economists were simply in search of those universal and 
 permanent phenomena amid which the homo ceconomicv* most readily 
 betrayed his character. 
 
 The mechanical view is evidently inadequate if we wish to 
 delineate concrete economic life in all its manifold activity. We 
 are simply given certain general results, which afford no clue to the 
 concrete and special character of economic phenomena.
 
 400 THE HISTORICAL SCHOOL 
 
 The weakness of the mechanical conception arises out of the 
 fact that it isolates man's economic activity, but neglects his environ- 
 ment. The economic action of man must influence his surroundings. 
 The character of such action and the effects which follow from it 
 differ according to the physical and social, the political and religious 
 surroundings wherein they are operative. A country's geographical 
 situation, its natural resources, the scientific and artistic training of 
 its inhabitants, their moral and intellectual character, and even 
 their system of government, must determine the nature of its 
 economic institutions, and the degree of well-being or prosperity 
 enjoyed by its inhabitants. Wealth is produced, distributed, and 
 exchanged in some fashion or other in every stage of social develop- 
 ment, but each human society forms a separate organic unit, in 
 which these functions are carried out in a particular way, giving, 
 accordingly, to that society a distinctive character entirely its 
 own. If we want to understand all the different aspects of this life 
 we must make a study of its economic activity, not as it were in 
 vacuo, but in connection with the medium through which it finds ex- 
 pression, and which alone can help us to understand its true nature. 1 
 
 This was the first doctrine on which they laid stress : the other 
 follows immediately. This social environment cannot be regarded 
 as fixed. It is constantly undergoing some change. It is in process 
 of transformation and of evolution. At no two successive moments 
 of its existence is it quite the same. Each successive stage calls for 
 explanation, which history alone can give, Goethe has given 
 utterance to this thought in a memorable phrase which serves as a 
 kind of epigraph to Schmoller's great work, the Grundriss. "A 
 person who has no knowledge of the three thousand years of history 
 which have gone by must remain content to dwell in obscurity, 
 living a hand-to-mouth existence." We must have some knowledge 
 of the previous stages of economic development if we are to under- 
 stand the economic life of the present. Just as naturalists and 
 geologists in their anxiety to understand the present have invented 
 hypotheses to explain the evolution of the globe and of living 
 matter upon it, so must the student of economics return to the 
 distant past if he wants to get hold of the industrial life of to-day. 
 " Man as a social being," says Hildebrand, " is the child of civilisa- 
 
 1 " National life, like every other form of existence, forms a whole of which 
 the different parts are very intimately connected. Complete understanding 
 even of a single aspect of it requires a careful study of the whole. Language, 
 religion, arts and sciences, law, politics and economics must all be laid under 
 tribute." (Roscher, Principles.) Cf. also Hildebrand, Die Nationalokonomie def 
 Gegemvart und Zukunft, p. 29. This is also Kniee's thought
 
 POSITIVE IDEAS 401 
 
 tion and a product of history. His wants, his intellectual outlook, 
 his relation to material objects, and his connection with other 
 human beings have not always been the same. Geography influ- 
 ences them, history modifies them, while the progress of education 
 may entirely transform them." 1 
 
 The Historians maintained that the earlier economists by paying 
 exclusive attention to those broader conclusions which had some- 
 thing of the generality of physical laws about them had kept the 
 science within too narrow limits. Alongside of theory as they had 
 conceived of it some Historians would say instead of it there is 
 room for another study more closely akin to biology, namely, a detailed 
 description and a historical explanation of the constitution of the 
 economic life of each nation. Such is the positive contribution of 
 the school to the study of political economy, and it fairly repre- 
 sents the attitude of the present-day Historians towards the older 
 economists. 
 
 Their aim was a perfectly natural and legitimate one, and at first 
 sight, at least, seemed very attractive. But beneath its apparent 
 simplicity there is some amount of obscurity, and its adversaries 
 have thought that upon close analysis it is really open to serious 
 objections. 
 
 In the first place, is it the aim of the science to present us with 
 an exact, realistic picture of society, as the Historians loved to think ? 
 On the contrary, do we not find that a study can only aspire to 
 the name of a science in proportion as its propositions become more 
 general in their nature ? There is no science without generalisation, 
 according to Aristotle, and concrete description, however indispens- 
 able, is only a first step in the constitution of a science. A science 
 must be explanatory rather than descriptive. 
 
 Of course Historians are not always content with mere description. 
 Some Historians have attempted explanation and have employed 
 history as their organon. Is the choice a suitable one ? 
 
 " History," says Marshall, " tells of sequences and coincidences ; 
 but reason alone can interpret and draw lessons from them." * 
 
 Moreover, is there a single important historical event whose cause 
 has ceased to be a matter of discussion ? It will be a long time 
 before people cease to dispute about the causes of the Reformation or 
 the Revolution, and the relative importance of economic, political, 
 
 1 Die Nationalokonomie der Oegenwart und Zukunft, p. 29. 
 
 1 Principles, Book I, chap. 4, 1. "History," says Wagner (Grundlegung, 
 $ 83), "may well affirm the existence of causal or conditional relations, but it 
 can never prove it."
 
 402 THE HISTORICAL SCHOOL 
 
 and moral influences in determining the course of those movements 
 has yet to be assigned. The causes that led to the substitution 
 of credit for money or money for barter are equally obscure. Before 
 narrative can become science there must be the preliminary dis- 
 covery by a number of other sciences of the many diverse laws whose 
 combination gives rise to concrete phenomena. 1 Not history but the 
 sciences give the true explanation. The evolutionary theory has 
 proved fruitful in natural history simply because it took the succes- 
 sion of animal species as an established fact and then discovered 
 that heredity and selection afforded a means of explaining that 
 succession. But history cannot give us any hypothesis that can 
 rival the theory of evolution either in its scientific value or in its 
 simplicity. In other words, history itself is in need of explanation. 
 It gives no clue to reality and it can never take the place of 
 economics.* 
 
 The earlier Historians claimed a higher mission still for the 
 historical study of political economy. It must not only afford 
 an explanation of concrete economic reality, but it must also for- 
 mulate the laws of economic development. This idea is only held 
 by a few of them, and even the few are not agreed as to how it should 
 be done. Knies, for example, thinks that it ought to be sufficiently 
 general to include the economic development of all nations. Saint- 
 Simon held somewhat similar views. Others, and among them 
 Roscher, hold that there exist parallelisms in the history of various 
 nations ; in other words, that every nation in the course of its 
 economic development passes through certain similar phases or 
 stages. These similarities constitute the laws of economics. If we 
 
 1 History may, as a matter of fact, become explanatory, but only in a par- 
 ticular sense. In other words, although it cannot discover the general laws 
 regulating phenomena, it may show what special circumstances (whose general 
 laws are already supposed to be known) have given rise to some event equally 
 specialised in character. But every honest historian has to admit that such 
 explanations are definitely personal and subjective in character. For a recent 
 examination of these ideas from the pen of a historian see the profound yet 
 charming introduction contributed by Meyer to the second edition of his Oeschichte 
 dea AUerihums. Of. also Simiand, pp. 14-16. 
 
 * Cf. Marshall, Principles, Book I, chap. 6, 4, and especially Menger, 
 Untersuchungen, pp. 15-17 : " We may be said to have historical knowledge of 
 a particular phenomenon when we have traced its individual genesis, i.e. when 
 we hare succeeded in representing to ourselves the concrete circumstances 
 among which it came into being, with their proper qualifications, etc. We may 
 be said to have a theoretical knowledge of some concrete phenomenon when 
 we are enabled to envisage it as a particular instance of a certain law or regularity 
 of sequence or coexistence, i.e. when we are able to give an account of the raison 
 d'ttrc and the nature of its existence as an exemplification of some general law."
 
 POSITIVE IDEAS 403 
 
 were to study their movements in the civilisations of the past we 
 might be able to estimate their place in existing societies. 1 
 
 Neither point seems very clear. Even if we admit that there 
 is only one general law of human development we cannot forecast 
 the line of progress, because scientific prediction is only applicable 
 to recurrent phenomena. They fail just when the conditions are 
 new. Of course one can always guess at the nature of the future, 
 but divination is not knowledge. And predictions of this kind are 
 almost always false.* Historical parallelism rests on equally shaky 
 foundations. A nation, like any other living organism, passes through 
 the successive stages of youth, maturity, and old age, but we are not 
 justified in thinking that the successive phases through which one 
 nation has passed must be a kind of prototype to which all others 
 must conform. All that we can say is that in two neighbouring 
 countries the same effects are likely to follow from the same causes. 
 Production on a large scale, for example, has been accompanied 
 by similar phenomena in most countries in Western Europe. But 
 this is by no means an inevitable law. It is simply a case of similar 
 effects resulting from similar causes. Such analogies are hardly 
 worthy of the name of laws. The discovery of the law, as Wagner 
 says, 8 may be a task beyond human power ; and Schmoller, as we 
 have already seen, is of the same opinion. 
 
 One remark before concluding. There is a striking similarity 
 
 1 A full exposition of this idea is given in his Grundriss, but Knies, in the name 
 of the conception of a unique evolution, contests the view. 
 
 1 This is what M. Renouvier thinks of this conception : " If we proceed 
 to ask another question in addition to the difficult one already asked and inquire 
 as to the circumstances under which different nations have advanced or declined 
 in the path of goodness and of truth and transmitted their triumphs or their 
 defeats to the next generations, and if we support ourselves in the quest by 
 the belief that we already have some knowledge of a scientific law and conse- 
 quently of the aim of human society (this kind of knowledge generally begins with 
 formulating such aims), we shall find ourselves in the position of a religious 
 prophet who, not merely content with an inspired version of the truth, and of the 
 destiny of mankind, proceeds to expound to his auditors the necessity under 
 which both preacher and auditors are compelled to believe and to act in accord- 
 ance with what will undoubtedly come to pass. Philosophical and religious 
 imagination seeks in external observation the elements of a confidence which it 
 can no longer place in itself. History becomes a kind of inspiring divinity. But 
 although the object of the illusion is different its nature is still the same, for the 
 new deity is as little effective as were the ancient ones in the opinion of those 
 who have no faith in it, and it only inspires those who already believe." (Intro- 
 duction d la Philosophic analytique de VHistoire, 2nd ed., vol. i, p. 121.) Bergson's 
 philosophy also contests the possibility of guessing what the future may be like 
 from the character of the present. See especially Creative Evolution. 
 
 Qrvndlegung, p. 342,
 
 404 THE HISTORICAL SCHOOL 
 
 between the ideas just outlined and those of a distinguished philo- 
 sopher whose name deserves mention here, although his influence 
 upon political economy was practically nil. We refer to Auguste 
 Comte. 
 
 It is curious that the earliest representatives of the school should 
 have ignored him altogether, but just as Mill remained unknown to 
 them, so the Cours de Philosophic positive, though published in 1842, 
 remained a sealed book so far as they were concerned. Comte's 
 ideas are so very much like those of Knies and Hildebrand that some 
 Positivist economists, such as Ingram and Hector Denis, have 
 attempted to connect the Historical tendency in political economy 
 with the Positive philosophy of Comte. 1 
 
 The three fundamental conceptions which formed the basis of the 
 teaching of the Historical school are clearly formulated by Comte. 
 The first is the importance of studying economic phenomena in 
 connection with other social facts. The analysis of the industrial 
 or economic life of society can never be carried on in the ** positive " 
 spirit by simply making an abstraction of its intellectual, political, 
 or moral life, whether of the past or of the present. 2 The second is 
 the employment of history as the organon of social science. " Social 
 research," says he, "must be based upon a sane analysis of the all- 
 round development of the best of mankind up to the present moment, 
 and the growing predilection for historical study in OUT time augurs 
 well for the regeneration of political economy." He was fully per- 
 suaded that the method would foster scientific prediction a feature 
 which is bound to fuse all those diverse conditions which will form 
 the basis of Positive politics. 
 
 Comte wished to found sociology, of which political economy was 
 to be simply a branch. The Historical school, and especially Knies, 
 regarded economics in the same spirit. Hence the analogies with 
 which Knies had to content himself, but which the younger school 
 refused to recognise. But there was a fundamental difference 
 between their respective points of view, and this will help us to 
 distinguish between them. 
 
 Comte was a believer in inevitable natural laws, which, accord- 
 ing to the earlier Historians, had wrought such havoc. The 
 Historical method also, as he conceived of it, was something very 
 different from what the older or the newer Historical school took it 
 to be. 
 
 Adopting a dictum of Saint-Simon, Comte speaks of the Historical 
 
 1 Cf . Ingram, History of Political Economy, and Denis, Hiatoire de* Systlmea. 
 8 A. Comte, Cours, vol. iv, p. 198.
 
 POSITIVE IDEAS 405 
 
 method as an attempt to establish in ascending or descending series 
 the curve of each social institution, and to deduce from its general 
 outlines conclusions as to its probable growth or decline in the 
 future. This is how he himself defines the process : *' The essence 
 of this so-called historical spirit, it seems to us, consists in the rational 
 use of what may be called the social series method, or, in other words, 
 in the due appreciation of the successive stages of human develop- 
 ment as reflected in a succession of historical facts. Careful study 
 of such facts, whether physical, intellectual, moral, or political, 
 reveals a continuous growth on the one hand and an equally con- 
 tinuous decline on the other. Hence there results the possibility 
 of scientific prophecy concerning the final ascendancy of the former 
 and the complete overthrow of the latter, provided always such 
 conclusion is in conformity with the general laws of human develop- 
 ment, the sociological preponderance of which must never be 
 lost sight of." x It was in virtue of this method that Saint- 
 Simon predicted the coming of industrialism and that Comte 
 prophesied the triumph of the positive spirit over the metaphysical 
 and religious. 
 
 There is considerable difference between this attitude and the 
 Historical method as we know it, 2 and the attempt at affiliation seems 
 to us altogether unwarranted. But the coincidence between Comte's 
 views and those of Knies and Hildebrand is none the less remarkable, 
 and it affords a further proof of the existence of that general feeling 
 which prompted certain writers towards the middle of the century 
 to attempt a regeneration of political economy by setting it free 
 from the tyranny of those general laws which had nearly stifled 
 its life. 
 
 1 Cours, vol. iv, p. 328. 
 
 1 It is interesting to learn the views of historians on this point. Meyer 
 thinks that the object of history is not to discover the general laws of develop- 
 ment, but to describe and explain particular concrete events as they succeed 
 one another. Such descriptions can only be made in accordance with the rules 
 of historical criticism, but explanation is only possible with the aid of analogy. 
 " It is only by the use of analogy that the historian can explain past events, 
 especially where there are psychological motives that require analysis. The 
 explanation thus given will necessarily be of a subjective character, and from 
 its very nature somewhat problematic." Cf. Ed. Meyer, Oeschichte dea AUerthums, 
 Introduction, 2nd ed. 112 et eeq. There does not seem to be any connec- 
 tion between this method and that of Aug. Comte. One becomes still more 
 convinced of this after reading Langlois and Seignobos's Introduction aux Etudes 
 historiques or Q. Monod's study in historical method in De la Mithode dans 
 les Sciences (Paris, 1909), or, finally, the numerous articles dealing with thie 
 question of method which have appeared in the Revue de Synthese historique.
 
 406 THE HISTORICAL SCHOOL 
 
 It seems to us, however, that the Historical school is mistaken 
 if it imagines that history alone can afford an explanation of the 
 present or will ever enable us to discover those special laws which 
 determine the evolution of nations. 
 
 On the other hand, it has a perfect right to demand a place beside 
 economic science, and it is undoubtedly destined to occupy a position 
 still more prominent in the study of economic institutions, in statis- 
 tical investigation, and above all in economic history. Not only is 
 a detailed description of the concrete life of the present of absorbing 
 interest in itself, but it is the condition precedent to all speculations 
 concerning the future. The theorist can never afford to neglect the 
 minute observation of facts unless he wills that his structure shall 
 hang in the void. Most abstract economists feel no hesitation in 
 recognising this. For example, Jevons, writing in 1879, 1 gave it as 
 his opinion that " in any case there must arise a science of the 
 development of economic forces and relations." 
 
 This newer historical conception came to the rescue just when the 
 science was about to give up the ghost, and though they may have 
 failed to give us that synthetic reconstruction which is, after all, 
 within the ability of very few writers, its advocates have succeeded 
 in infusing new life into the study and in stimulating new interest in 
 political economy by bringing it again into touch with contemporary 
 life. They have done this by throwing new light upon the past and 
 by giving us a detailed account of the more interesting and more 
 complex phenomena of the present time. 2 Such work must neces- 
 sarily be of a fragmentary character. The school has collected a 
 wonderful amount of first-class material, but it has not yet erected 
 that palace of harmonious proportions to which we in our fond imagi- 
 nation had likened the science of the future. Nor has it discovered 
 the clue which can help it to find its way through the chaos of 
 economic life. This is not much to be wondered at when we remem- 
 ber the shortcomings of the method to which we have already had 
 occasion to refer. Indeed, some of the writers of the school seem 
 fully convinced of this. Professor Ashley, in an article contri- 
 buted to the Economic Journal, employs the following words : 8 
 " As I have already observed, the criticisms of the Historical school 
 have not led so far to the creation of a new political economy 
 
 1 Theory of Political Economy \ preface to the second edition, 1879. 
 
 1 Schmoller's Jahrbuck contains descriptive studies of present-day commercial 
 and industrial undertakings which are veritable models. 
 
 3 The Present Position of Political Economy, in the Economic Journal, 1907, 
 p. 481.
 
 STATE SOCIALISM 407 
 
 on historical lines : even in Germany it is only within very recent 
 years that some of the larger outlines of such an economics 
 have begun to loom up before us in the great treatise of Gustav 
 Schmoller." 
 
 In view of considerations like these one might have expected 
 that the Historical school would have shown greater indulgence to 
 the attempts made both by the Classical and by the Hedonistic 
 schools to give by a different method expression to the same instinc- 
 tive desire to simplify matters in order to understand them better. 1 
 
 CHAPTER II: STATE SOCIALISM 
 
 THE nineteenth century opened with a feeling of contempt for 
 government of every kind, and with unbounded confidence on the 
 part of at least every publicist in the virtue of economic liberty 
 and individual initiative. It closed amid the clamour for State 
 intervention in all matters affecting economic or social organisation. 
 In every country the number of public men and of economists who 
 favour an extension of the economic function of government is 
 continually growing, and to-day such men are certainly in the 
 majority. To some writers this change of opinion has seemed 
 sufficiently important to warrant special treatment as a new doctrine, 
 variously known as State Socialism or " the Socialism of the Chair " 
 in Germany and Interventionism in France. 
 
 Really it is not an economic question at all, but a question of 
 practical politics upon which writers of various shades of economic 
 
 1 We have not the necessary space in this volume to refer to the history of 
 statistics. This science, though independent of political economy, is, however, 
 such a powerful auxiliary that its progress has to some extent been parallel 
 with the growth of economics. During the last twenty years the methods of 
 interpreting statistics (we are speaking merely of observation) have been very 
 considerably improved. The logical problems involved have been studied with 
 much care, and the application of mathematics to these problems has proved 
 very fruitful. No student of the social sciences can afford to neglect such 
 mathematical theories as those of combination, correlation, degree of error, etc. 
 The history of statistics, which contains many eminent names, from Quetelet 
 to Karl Pearson, would certainly deserve a chapter in a book dealing with method, 
 although there would be some risk of giving it too statistical a bias. We must 
 rest content with referring the reader to Udny Yule's Introduction to the Theory of 
 Statistics, which constitutes what is perhaps the best recent introduction to the 
 discussion concerning the method to be employed in this social science, and forms 
 an indispensable complement to the study of the problems examined in thi 
 chapter.
 
 408 STATE SOCIALISM 
 
 opinion may agree despite extreme differences in their theoretical 
 preconceptions. The problem of defining the limits of govern- 
 mental action in the matter of producing and distributing wealth is 
 one of the most important in the whole realm of political economy, 
 but it can hardly be considered a fundamental scientific question 
 upon which economic opinion is hopelessly divided. It is clear 
 that the solution of the problem must depend not merely upon 
 purely economic factors, but also on social and political considera- 
 tions, upon the peculiar conception of general interest which the 
 individual has formed for himself and the amount of confidence 
 which he can place in the character and ability of Governments. 1 
 The problem is always changing, and whenever a new kind of 
 society is created or a new Government is established a fresh solution 
 is required to meet the changed conditions. 
 
 How is it, then, that this question has assumed such extravagant 
 proportions at certain periods of our history ? 
 
 Had the issue been confined to the limits laid down by Smith 
 it is probable that such passionate controversies would have been 
 avoided. Smith's arguments in favour of laissez-faire were largely 
 economic. Gradually, however, under the growing influence of 
 individual and political liberty, a kind of contempt for all State 
 action took the place of the more careful reasoning of the earlier 
 theory, and the superiority of individual action in matters non- 
 economic became an accepted axiom with every publicist. 
 
 This method of looking at the problem is very characteristic of 
 Bastiat. The one feature of government that interested him was 
 not the fact that it represented the general interest of the citizens, 
 but that whenever it took any action it had to employ force, 2 
 whereas individual action is always free. Every substitution of 
 State for individual action meant victory for force and the defeat 
 of liberty. Such substitution must consequently be condemned. 
 Smith's point of view is totally different. To appreciate this differ- 
 ence we need only compare their treatment of State action. In 
 
 1 Dupont-White makes the remark somewhere that the State, strictly speak- 
 ing, has only existed since 1789. It appears, then, that a State which is not 
 constitutional, democratic, and liberal has none of the virtues of the true State, 
 Such exclusion, although permissible in the publicist, is indefensible in the theorist 
 or historian. 
 
 * " The distinctive character of the State merely consists in this necessity to 
 have recourse to force, which also helps to indicate the extent and the proper 
 limits of its action. Government is only possible through the intervention of 
 force, and its action is only legitimate when the intervention of force can be 
 unown to be justifiable." (Harmonies, 10th ed., pp. 552-553.)
 
 STATE SOCIALISM 409 
 
 addition to protecting the citizens from invasion and from inter- 
 ference with their individual rights, Smith adds that the sovereign 
 should undertake " the duty of erecting and maintaining certain 
 public works and certain public institutions, which it can never be 
 for the interest of any individual, or small number of individuals, 
 to erect and maintain ; because the profit could never repay the 
 expense to any individual or small number of individuals, though it 
 may frequently do much more than repay it to a great society." l 
 The scope is sufficiently wide, at any rate. If we turn to Bastiat, on 
 the other hand, we find that the Government has only two functions 
 to perform, namely, " to guard public security and to administer 
 the common land." 2 Viewed in this light, the problem of govern- 
 mental intervention, instead of remaining purely economic, becomes 
 a question of determining the nature, aims, and functions of the 
 State, and individual temperament and social traditions play a 
 much more important part than either the operation of economic 
 phenomena or any amount of economic reasoning. It is not sur- 
 prising that some writers thought that the one aim of economics 
 was to defend the liberty and the rights of the individual ! 
 
 Such exaggerated views were bound to beget a reaction, and the 
 defence of State action assumes equally absurd proportions with 
 some of the writers of the opposite school. Even as far back as 
 1856 Dupont-White, a French writer, had uttered a protest against 
 this persistent depreciation of the State, in a short work entitled 
 Ulndlvidu et Vfilat. His ideas are so closely akin to those of the 
 German State Socialists that they have often been confused with 
 them, and it is simpler to give an exposition of both at the same 
 time. But he was a voice crying in the wilderness. Public opinion 
 under the Second Empire was very little disposed to listen to an 
 individual who, though a Liberal in politics, was yet anxious to 
 strengthen the power and to add to the econpmic prerogative of 
 the Crown. More favourable circumstances were necessary if there 
 was to be a change of public opinion on the matter. The times 
 had ripened by the last quarter of the century, and the elements 
 proved propitious, especially in Germany, where the reaction first 
 showed itself. 
 
 The reaction took the form not so much of the creation of a 
 new doctrine as of a fusion of two older currents, which must first 
 be examined. 
 
 During the course of the nineteenth century we find a number 
 
 1 Wealth of Nations, Book IV, chap. 9 ; Carman's ed., vol. ii, p. 185. 
 8 Harmonies, 10th ed., p. 656. 
 
 B.D. O
 
 410 STATE SOCIALISM 
 
 of economists who, while accepting Smith's fundamental conception, 
 gradually limit the application of his principle of laissez-faire. They 
 thought that the superiority of laissez-faire could not be scientifically 
 demonstrated and that in the great majority of cases some form 
 of State intervention was necessary. 
 
 On the other hand, we meet with a number of socialists who 
 prove themselves to be more opportunistic than their comrades, and 
 though equally hostile to private property and freedom of produc- 
 tion, yet never hesitate to address their appeals on behalf of the 
 workers to existing Governments. 
 
 State Socialism represents the fusion of these two currents. It 
 surpasses the one in its faith in the wisdom of Governments, and is 
 distinguished from the other by its greater attachment to the 
 rights of private property ; but both of them contribute some items 
 to its programme. In the first place we must try to discover the 
 source of these separate tendencies, and in the second place watch 
 their amalgamation. 
 
 I : THE ECONOMISTS' CRITICISM OF LAISSEZ-FAIRE 
 
 THE doctrine of absolute laissez-faire was not long allowed to go 
 unchallenged. From the time of Smith onward there is an un- 
 interrupted sequence of writers all of them by no means socialists 
 who ventured to attack the fundamental propositions of the great 
 Scotsman and who attempted to show that his practical conclusions 
 were not always borne out by the facts. 
 
 Smith based his advocacy of laissez-faire upon the supposed 
 identification of public and private interests. He showed how 
 competition reduced prices to the level of cost of production, how 
 supply adapted itself to meet demand in a perfectly automatic 
 fashion, and how capital in an equally natural way flowed into the 
 most remunerative occupations. 
 
 This principle of identity of interests was, however, rudely 
 shaken by the teachings of Malthus and Ricardo, although both of 
 them remained strong adherents of the doctrine of individual liberty. 
 
 Sismondi, who was the next to intervene, laid stress upon the 
 evils of competition, and showed how social inequality necessitated 
 the submission of the weak to the will of the strong. His whole 
 book was simply a refutation of Smith's providential optimism. 
 
 In Germany even, as early as 1832, that brilliant economist 
 Hermann was already proceeding with his critical analysis of the 
 Classical theories; and after demonstrating how frequently indi-
 
 THE ECONOMISTS' CRITICISM OF LAISSEZ-FAIRE 411 
 
 vidual interest comes into conflict with public welfare, and how 
 inadequate is the contribution which it can possibly make to the 
 general well-being, he declares his inability to subscribe to the 
 doctrine laid down by most of Smith's followers, namely, that 
 individual activity moved by personal interest is sufficient to meet 
 all the demands of national economy. Within the bounds of this 
 national economy l he thinks there ought to be room for what he 
 calls the civic spirit (Gemeinsinn) as well. 
 
 The next critic, List, bases his whole case upon the opposition 
 between immediate interests, which guide the individual, and the 
 permanent interests of the nation, of which the Government alone 
 can take account. 
 
 Stuart Mill, in the famous fifth book of the Principles, refuses 
 even to discuss the doctrine of identity of interests, believing 
 it to be quite untenable. On the question of non-intervention 
 he admits the validity of one economic argument only, namely, 
 the superiority of self-interest as an economic motive. But he 
 is quick to recognise its shortcomings and the exceptions to its 
 universal operation in the natural incapacity of children and 
 of the weak-minded, the ignorance of consumers, the difficulty 
 of achieving it, even when clearly perceived, without the help 
 of society as a whole, as in the case of the Factory Acts. Mill 
 also points out how this motive is frequently wanting in modern 
 industrial organisation, where, for example, we have joint stock 
 companies acting through the medium of a paid agency, or charitable 
 work undertaken by an individual who has to consider, not his own 
 interests, but those of other people. Private interest is also fre- 
 quently antagonistic to public interest, as in the case of the public 
 supply of gas or water, where the individual entrepreneur is influenced 
 by the thought of a maximum profit rather than by considerations 
 of general interest. In matters of that kind Stuart Mill was inclined 
 to favour State intervention. 8 
 
 M. Chevalier, from his professorial chair in the College de France, 
 
 1 Hermann, Staatsurirtschaftliche Unterauchungen, 1st ed., pp. 12-18. 
 
 2 A similar idea is contained in Liberty, where it is stated that " trade is a 
 social act," that the conduct of every merchant "comes within the jurisdiction of 
 Bociety," and that " as the principle of individual liberty is not involved in the 
 doctrine of Free Trade, so neither is it in most of the questions which arise 
 respecting the limits of that doctrine ; as, for example, what amount of public 
 control is admissible for the prevention of fraud by adulteration ; how far sani- 
 tary precautions, or arrangements to protect workpeople employed in dangerous 
 occupations, should be enforced on employers. . . . But that they [people] may 
 be legitimately controlled for these ends is in principle undeniable." (Chap. 5.)
 
 412 STATE SOCIALISM 
 
 extended his congratulations to Mill upon his successful restoration 
 of the legitimate duties of Governments. 1 Chevalier thought that 
 those who believed that the economic order could be set up simply 
 by the aid of competition acting through personal interest were 
 either illogical in their arguments or irrational in their aims. 
 Government was simply the manager of the national organisation, 
 and its duty was to intervene whenever the general interest was 
 endangered. But the duties and privileges of government are not 
 exactly those of the village policeman. 2 Applying this principle to 
 public works, he points out that they are more or less State matters, 
 and the guarantee for good work is quite as great when the State 
 itself undertakes to perform it as when it is entrusted to a private 
 individual. 
 
 In 1863 Cournot, whose reputation was unequal to either Mill's 
 or Chevalier's, but whose penetrating thought, despite its small 
 immediate influence, is quite important in the history of economic 
 doctrines, treats of the same problem in his Principes de la Thlorie 
 des Richesses. Going straight to the heart of the problem, he asks 
 whether it is possible to give a clear definition of this general interest 
 the economic optimum which we are anxious to realise and 
 whether the system of free competition is clearly superior to every 
 other. He justly remarks that the problem is insoluble. Pro- 
 duction is determined by demand, which depends both upon the 
 preliminary distribution of wealth and also upon the tastes of 
 consumers. But if this be the case, it is impossible to outline an 
 ideal system of distribution or to fix upon the kind of tastes that 
 will prove most favourable for the development of society. A step 
 farther and Cournot must have hit upon the distinction so neatly 
 made by Pareto between maximum utility, which is a variable, 
 undefined notion, and maximum ophelimity, " the investigation 
 of which constitutes a clearly defined problem wholly within the 
 realm of economics." 8 
 
 But Cournot does not therefore conclude that we ought to 
 abstain from passing any judgment in the realm of political economy 
 and abandon all thought of social amelioration. Though the 
 absolutely best cannot be denned, it does not follow that we cannot 
 determine the relatively good. " Improvement or amelioration is 
 possible," says he, " by introducing a change which operates upon 
 one part of the economic system, provided there are no indirect 
 
 1 Michel Chevalier, Introductory Lectures, No. 10, in Cours, vol. i, p. 221. 
 
 Cours, vol. i, pp. 211, 214 ; vol. ii, pp. 38, 115. 
 
 Pareto, Cours d' Economic politique, vol. ii, 656 (1897).
 
 THE ECONOMISTS' CRITICISM OF LAISSEZ-FAIRE 413 
 
 effects which damage the other parts of the system." l Such 
 progress is not necessarily the result of private effort. Following 
 Sismondi, he quotes several instances in which the interests of the 
 individual collide with those of the public and in which State inter- 
 vention might prove useful. 
 
 Every one of these authors in varying degrees, of course admits 
 the legitimacy of State intervention in matters economic. Liberty 
 doubtless is still the fundamental principle. Sismondi was content 
 with mere aspiration, so great did the difficulties of interven- 
 tion appear to him. Stuart Mill thought that the amis probandi 
 should rest with the innovator. Cournot considered liberty as 
 being still the most natural and simple method, and should the 
 State find it necessary to intervene it could only be in those instances 
 in which science has clearly defined the aim in view and demonstrated 
 the efficacy of the methods proposed. Every one of them has 
 abandoned liberty as a scientific principle. To Cournot it was an 
 axiom of practical wisdom ; a Stuart Mill upheld it for political 
 reasons as providing the best method of developing initiative and 
 responsibility among the citizens. They all agree that the State, 
 far from being a pis alter, has a legitimate sphere of action. The 
 difficulty is just to define this. 3 This was the task to which Walras 
 addressed himself with remarkable success in his lectures on the 
 theory of the State, delivered in Paris in 1867-68.* 
 
 And so we find that the progress of thought since the days of 
 Adam Smith had led to important modifications of the old doctrines 
 concerning the economic functions of the State. The publicists, 
 however, were not immediately converted. Even when the century 
 was waning they still remained faithful to the optimistic indivi- 
 dualism of the earlier period. The organon of State Socialism merely 
 consists of these analyses incorporated into a system. The authors 
 just mentioned must consequently be regarded, if not as the pre- 
 cursors of State Socialism, at any rate as unconsciously contributing 
 to the theory. 
 
 1 Principea, p. 422. 
 
 1 Ibid., pp. 444, 462, 521. 
 
 Stuart Mill has tried to do so in a formula that is not very illuminating : 
 " To individuality should belong the part of life in which it is chiefly the indi- 
 vidual that is interested; to society, the part which chiefly interests society." 
 (Liberty, chap. 4.) 
 
 4 Republished in hta Etude* d'Economie sociale, 1896. See a brief rlsumi 
 in our chapter on Rent.
 
 414 STATE SOCIALISM 
 
 II : THE SOCIALISTIC ORIGIN OF STATE SOCIALISM. 
 RODBERTUS AND LASSALLE 
 
 STATE Socialism is not an economic doctrine merely. It has a 
 social and moral basis, and is built upon a certain ideal of justice 
 and a particular conception of the function of society and of the 
 State. This ideal and this conception it received, not from the 
 economists, but from the Socialists, especially Rodbertus and 
 Lassalle. The aim of these two writers was to effect a kind of 
 compromise between the society of the present and that of the 
 future, using the powers of the modern State simply as a lever. 
 
 The idea of a compromise of this kind was not altogether new. 
 A faint suggestion of it may be detected more than once in the course 
 of the century, and an experiment of the kind was mooted in France 
 towards the end of the July Monarchy. At that time we find men 
 like Louis Blanc and Vidal who were at least socialists in their 
 general outlook writing to demand State intervention not merely 
 with a view to repairing the injustice of the present society, but also 
 with a view to preparation for the society of the future with as little 
 break with the past as possible. Louis Blanc was in this sense the first 
 to anticipate the programme of the State Socialists. But its more 
 immediate inspirers were Rodbertus and Lassalle, both of whom 
 belonged to that country in which its effects were most clearly seen. 
 
 Their influence upon German State Socialism cannot be exactly 
 measured by the amount of direct borrowing that took place. They 
 were linked by ties of closest friendship to the men who were 
 responsible for creating and popularising the new ideas, and it is 
 important that we should appreciate the personal influence which 
 they wielded. Rodbertus formed the centre of the group, and 
 during the two years 1862-64 he carried on an active correspond- 
 ence with Lassalle. They were brought together by the good 
 offices of a common friend, Lothar Bucher, an old democrat of 1848 
 who had succeeded in becoming the confidant of Bismarck. Strangely 
 enough, Bismarck kept up his friendship with Lassalle even when 
 the latter was most busily engaged with his propaganda work. 1 
 Wagner, also, the most eminent representative of State Socialism, 
 was in frequent communication with Rodbertus, and he never 
 failed to recognise his great indebtedness to him. Wagner himself 
 was on more than one occasion consulted by Bismarck. 
 
 But apart altogether from their connection with State Socialism, 
 
 1 For a general account of Lassalle 's life, and especially his relations with 
 Bismarck, see Hermann Oncken, Laasatte (Stuttgart, 1904).
 
 RODBERTUS 415 
 
 Rodbertus and Lassalle would deserve a place in our history. 
 Rodbertus is a theoretical writer of considerable vigour and 
 eloquence, and his thoughts are extraordinarily suggestive. Lassalle 
 was an agitator and propagandist rather than an original thinker, 
 but he has left a lasting impression upon the German labour move- 
 ment. Hence our determination to give a somewhat detailed 
 exposition of their work, especially of that of Rodbertus, and to 
 spare no effort in trying to realise the importance of the contri- 
 bution made by both of them, 
 
 1. RODBERTUS 
 
 In a history of doctrines Rodbertus has a place peculiarly his 
 own. He forms, as it were, a channel through which the ideas 
 first preached by Sismondi and the Saint-Simonians were transmitted 
 to the writers who belong to the last quarter of the century. His 
 intellectual horizon largely determined for him by his knowledge of 
 these French sources l was fixed as early as 1837, when he produced 
 his Forderungen, which the Gazette universelle d' 'Augsburg refused to 
 publish. His first work appeared in 1842, 2 and the earliest of the 
 Soziale Brief e 3 belong to 1850 and 1851. At the time these passed 
 
 1 There has been no dispute concerning the French origin of Rodbertus 's ideas 
 since the evidence was sifted byMengerin his Das Recht auf den vollen Arbeiteer* 
 trag (1st ed., 1886). ButMenger only mentions two sourcesof inspiration, Proudhon 
 and the Saint-Simonians. The text will sufficiently indicate his indebtedness 
 to the Saint-Simonians, but we think that Sismondi might well have been sub- 
 stituted for Proudhon. The only Proudhonian doctrine that is discoverable in 
 Rodbertus is the theory concerning the constitution of value. But in the second of 
 the Soziale Briefe (Schriften, vol. ii, p. 46, note) he states definitely that the idea 
 was not a borrowed one, and that he himself was the first to formulate it, although 
 he omits to state in what connection. He may be referring to a passage in his 
 Forderungen, where the idea is quite clearly expressed. Speaking of Ricardo's 
 theory of value, he says : " That theory comes to grief on a single issue, namely, 
 in regarding a thing as existing when it only exists in the mind, and treating a 
 thing as a reality when it only becomes real in the future." (Schriften, vol. iii, 
 p. 120.) It is clearly pointed out that the task of the future is to determine 
 what value is. The Forderungen, where all the master ideas of Rodbertus may 
 be studied, was published in 1837, nine years before the Contradictions iconomiquet 
 was published by Proudhon, who made his first reference to the question in that 
 work. 
 
 a Zur Erkenntnisa unserer staatswirtschaftlichen Zustdnde (New Brandenburg, 
 1842). The work was to consist of three parts, only the first of which was 
 published, and that has not been reissued since. 
 
 3 The first three Soziale Briefe, as well as the Forderungen, have been 
 republished in Schriften von Dr. Karl Rodbertus-Jagetaow (Berlin, 1899, 
 3 vols.). This is the edition we quote. Tli fourth Brief, entitled Dot 
 Kapital, was written in 1852, but was not published until after Rodbertua'i 
 death. It was translated into French in 1904 by M. Chatelain, and published by
 
 416 STATE SOCIALISM 
 
 almost unnoticed. It was only when Lassalle in his treatise in 
 1862 referred to him as the greatest of German economists, and 
 when conservative writers like Rudolf Meyer and Wagner drew 
 attention to his work, that his books received the notice which 
 they deserved. The German economists of the last thirty years 
 have been greatly influenced by him. His ideas, it is true, are 
 largely those of the earliest French socialists, who wrote before 
 the movement had lost its purely intellectual tone and become 
 involved in the struggle of the July Monarchy, but his clear logic 
 and his systematic method, coupled with his knowledge of economics, 
 which is in every way superior to that of his predecessors, gives to 
 these ideas a degree of permanence which they had never enjoyed 
 before. This " Ricardo of socialism," as Wagner 1 calls him, did 
 for his predecessors' doctrines what Ricardo had succeeded in doing 
 for those of Malthus and Smith. He magnified the good results of 
 their work and emphasised their fundamental postulates. 
 
 Rodbertus's upbringing decreed that he should not become 
 involved in that democratic and radical socialism which was 
 begotten of popular agitation, and whose best-known representative 
 is Marx. Marx considered socialism and revolution, economic 
 theory and political action, as being indissolubly one. 2 Rodbertus, 
 on the other hand, was a great liberal landowner who sat on the 
 Left Centre in the Prussian National Assembly of 1848, and his 
 political faith is summed up in the two phrases " constitutional 
 government " and " national unity." 3 The success won by the Bis- 
 marckian policy gradually drew him nearer the monarchy, especially 
 towards the end of his life. 4 His ideal was a socialist party re- 
 Messrs. Giard and Briere. Our references in the succeeding pages are to thia 
 edition. Two other articles written by Rodbarlus have been published, one 
 by R. Meyer under the title Briefe u. Sozialpolitische Aufs&lze (Berlin, 1882), 
 the other by Moritz Wirth undes the title of Kleine Schriften (Berlin, 1890). 
 For a complete bibliography of Rodbertus's work see Andler's Le, Socialisms 
 cTfitat en Attemagne (Paris, 1897). Professor Conner has written an illuminating 
 study of his political philosophy. 
 
 1 In his introduction to the Briefe von Lassalle an Rodbertiis, p. 8 (Berlin, 1878). 
 
 * On the other hand, as Menger shows, the sources of Marx's theory are English 
 rather than French another point of difference between the two socialists. 
 
 * He was for a short time Minister of Public Worship. Appointed on 
 July 4, he resigned at the end of a fortnight because his colleagues refused to 
 recognise quite as fully as he wished the rights of the Parliament of Frankfort. 
 
 * A characteristic sign of this evolution is the substitution throughout the 
 second edition of the Sociale Briefe of the word Staaitwiilz (" the will of the 
 State") for the word Volksunlle ("the people's will*'). This second edition, 
 comprising the second and third letters, was published by him in 1875 under 
 the title Zur Beleuchiung dtr sozialen Frage.
 
 RODBERTUS 417 
 
 nouncing all political action and confining its attention solely to 
 social questions. Although personally favourably inclined towards 
 universal suffrage, he refused to join Lassalle's Arbeiterverein 
 because Lassalle had insisted upon placing this article of political 
 reform on his programme. 1 The party of the future, he thought, 
 would be at once monarchical, national, and socialistic, or at any 
 rate conservative and socialistic. 2 At the same time we must 
 remember that " in so far as the Social Democratic party was aiming 
 at economic reforms he was with it heart and soul." 3 
 
 Despite his belief in the possibility of reconciling the monarchical 
 policy with his socialistic programme, he carefully avoided the 
 economic teachings of the socialists. His too logical mind could 
 never appreciate their position, and he had the greatest contempt 
 for the Socialists of the Chair. He would be the first to admit that 
 in practice socialism must content itself with temporary expedients, 
 although he cannot bring himself to believe that such compromise 
 constitutes the whole of the socialistic doctrine. He refers to the 
 Socialists of the Chair as the " sweetened water thinkers," * and he 
 refused to join them at the Eisenach Congress of 1872 the " bog 
 of Eisenach," as he calls it somewhere. He regarded the whole 
 thing as a first-class comedy. Even labour legislation, he thought, 
 was merely a caprice of the humanitarians and socialists. 5 So 
 that whenever we find him summing up his programme in some 
 such sonorous phrase as Stoat gegen Staatslosigkeit ("the State as 
 against the No-State") we must be careful to distinguish it from the 
 hazy doctrines of the State Socialists. 7 Despite himself, however, 
 he proved one of the most influential precursors of the school, 
 and therein lies his real significance. 
 
 Rodbertus's whole theory rests upon the conception of society as 
 
 1 Letter to R. Meyer, November 29, 1871. This point of view ia developed at 
 length in his " Open Letter to the Committee of the Association of German Work- 
 men at Leipzig," April 10, 1863, published by Moritz Wirth in the Kleine Schriften. 
 
 a Letter to R. Meyer, March 12, 1872. d the letters of January 23 and 
 February 3, 1871. 
 
 1 Ibid., November 30, 1871. In 1874 he proposes to offer himself as a 
 socialist candidate for the Reichstag, but recognises that the State must first of 
 all be strengthened on the military side as well as on the religious. 
 
 Ibid., October 17, 1872. * Ibid., January 6, 1873. 
 
 Ibid., March 10, 1872, and Phyaiokratie u. Anthropokratie, in Briefe u. 
 Sozialpolitische Aufsdtze, pp. 521, 522. 
 
 7 He protests vigorously against the title of Katheder Sozialist in a letter 
 of August 26, 1872. A vigorous criticism of the Socialism of the Chair, written in 
 a private letter of Rodbertus, is quoted at length by Rudolf Meyer-in his Eman- 
 dpationskampf dea Men Slcmdea, pp. 60-63 (Berlin, 1874),
 
 418 STATE SOCIALISM 
 
 an organism created by division of labour. Adam Smith, as he points 
 out, had caught a faint glimmer of the significant fact that all men 
 are linked together by an inevitable law of solidarity which takes 
 them out of their isolation and transforms an aggregate of indivi- 
 duals into a real community having no frontiers and no limits save 
 such as division of labour imposes, and sufficiently wide in scope to 
 include the whole universe. 1 As soon as an individual becomes a 
 part of economic society his well-being no longer depends upon him- 
 self and the use which he makes of the natural medium to which 
 he applies himself, but upon the activity of his fellow-producers. 
 The execution of certain social functions, which Rodbertus enume- 
 rates as follows, and which he borrows partly from Saint-Simon, 
 henceforth become the determining factors : (1) The adaptation of 
 production to meet demand; (2) the maintenance of production 
 at least up to the standard of the existing resources ; (3) the just 
 distribution of the common produce among the producers. 
 
 Should society be allowed to work out these projects spon- 
 taneously, or should it endeavour to carry out a preconceived plan ? 
 To Rodbertus this was the great problem which society had to 
 consider. The economists of Smith's school treated the social 
 organism as a living thing. The free play of natural laws must have 
 the same beneficial effects upon it as the free circulation of the 
 blood has upon the human body. Every social function would 
 be regularly discharged provided " liberty " only was secured. 
 Rodbertus thought this was a mistake. " No State," says he, " is 
 sufficiently lucky or perhaps unfortunate enough to have the natural 
 needs of the community satisfied by natural law without any 
 conscious effort on the part of anyone. The State is an historical 
 organism, and the particular kind of organisation which it possesses 
 must be determined for it by the members of the State itself. Each 
 State must pass its own laws and develop its own organisation. 
 The organs of the State do not grow up spontaneously. They must 
 be fostered, strengthened, and controlled by the State." Hence, 
 
 1 " Communion or community of labour would be a better term than divi- 
 sion of labour " (Kqpital, p. 74) ; and in another connection ! " The only real 
 division of labour is territorial division of labour" (ibid.). Elsewhere (p. 87) 
 he warns his readers against confusing the terms "social" and "national." 
 Adopting the Saint-Simonian philosophy of history, he declares history to be a 
 process of unification which brings gradually widening circles into closer unity 
 with one another (Zur Qesfihichte der romischenTribwtsteuer, in the Jahrbilcher fur 
 Nationafokonomit . Statistik, 1865, vol. v, p. 2). " The course of history is just 
 the expansion of communism." (KapitaJ, p. 85, note.) 
 
 ' Physiokratie u. Anthropokratie, in Brief e u. Sozialpolititche Aufsdtze, p. 619.
 
 RODBERTUS 419 
 
 after 1837 we find Rodbertus proposing the substitution of a 
 system of State direction * for the system of natural liberty, 
 and his whole work is an attempt to justify the introduction 
 of such a system. Let us examine his thesis and review the 
 various economic functions which we defined above. Let us also 
 watch their operation at the present day and see how differently 
 these functions would be discharged in a better organised com- 
 munity. 
 
 1. It is hardly correct to speak of production adapting itself to 
 social need under existing conditions, because production only 
 adapts itself to the effective demand, i.e. to the demand when 
 expressed in terms of money. This fact had been hinted at by 
 Smith, and Sismondi had laid considerable stress upon it; but 
 Rodbertus was the earliest to point out that this really meant that 
 only those people who already possess something can have their 
 wants satisfied. 2 Those who have nothing to offer except their 
 labour, and find that there is no demand for that labour, have no 
 share in the social product. On the other hand, the individual who 
 draws an income, even though he never did any work for it, is able 
 to make effective his demand for the objects of his desire. The 
 result is that many of the more necessitous persons must needs go 
 unsatisfied, while others wallow in luxury. 
 
 Truer word was never spoken. Rodbertus had a perfect right 
 to insist on the fundamental fallacy lurking within a system which 
 could treat unemployment that modern form of famine as simply 
 an over-production of goods, and which found itself unable to 
 modify it except through public or private charity. His remedy 
 consisted of a proposal to set up production for social need as a 
 substitute for production for demand. The first thing to be done 
 was to find out the time which each individual would be willing to 
 give to productive work, making a note of the character and quantity 
 of goods required at the same time. 8 He thought that " the wants 
 of men in general form an even series, and that the kind and 
 number of objects required can easily be calculated." 4 Knowing 
 the time which society could afford to give to production, there 
 
 1 Schriften, vol. iii, p. 216. 
 
 1 " In a social State of this description people produce, not with a view to 
 satisfying the needs of labour, but the needs of possession ; in other words, they 
 produce for those who possess." (Kapitdl, p. 161. Cf. also p. 51.) 
 
 8 " Provided we knew the time that a person could afford to devote to the 
 work of production, we could easily determine the quantity that would b 
 sufficient to satisfy the needs of everybody." (Kapital, p. 109.) 
 
 Ibid., p. 108.
 
 420 STATE SOCIALISM 
 
 would be no great difficulty in distributing the products among the 
 various producers. 
 
 This is to go to work a little too precipitately and to shun the 
 greatest difficulty of all. The uniform series of wants of which 
 Rodbertus speaks exist only in the imagination. What we really 
 find is a small number of collective needs combined with a great 
 variety of individual needs. Social need is merely a vague term 
 used to designate both kinds of wants at once. The slightest 
 reflection shows that every individual possesses quite a unique 
 series of needs and tastes. To base production upon social need is 
 to suppress liberty of demand and consumption. It implies the 
 establishment of an arbitrary scale of needs which must be satisfied 
 and which is to be imposed upon every individual. The remedy 
 would be worse than the evil. 
 
 But the opposition between social need and effective demand 
 by no means disposes of his argument. The opposition needs some 
 proving, and some explanation of the producers' preference for 
 demand rather than need ought to be offered. The explanation 
 must be sought in the fact that the capitalistic producer of to-day 
 manages his business in accordance with the dictates of personal 
 interest, and personal interest compels him to apply his instruments 
 to produce whatever will yield him the largest net product. He is 
 more concerned about the amount of profit made than about the 
 amount of produce raised. He produces, not with a view to satis- 
 fying any social need, but simply because it yields him rent or 
 profit. 1 
 
 This contrast between profit-making and productivity deserves 
 some attention. Sismondi had already called attention to it by 
 distinguishing between the net and the gross product. A number 
 of writers have treated of it since, and it holds a by no means 
 insignificant place in the history of economic doctrines. 2 
 
 1 Kajrital, p. 143. 
 
 1 The question of the net and gross product was one of the outstanding 
 problems of this period. Vidal (Repartition des Richesses, p. 219, Paris, 1846) and 
 Ott (Traitt d' Economic sociale, p. 95, 1851 ) lay stress upon it. Since then Cournot, 
 Duhring, and more recently Effertz and Landry, have handled the problem anew. 
 But each of them when he comes to define the word " productivity " defines it in 
 his own fashion, so that they do not really discuss the same question. Rodbertus, 
 as we shall have occasion to point out in the text, uses the word in a very vague 
 fashion indeed, but still it is the basis of his whole discussion. It seems to us 
 that under a regime of division of labour rentability should be the one criterion. 
 But it would be a mistake to imagine that when dwindling profits make a change 
 in the methods of production imperative, that change will be welcomed with 
 equal enthusiasm by everybody, by both master and worker alike,
 
 RODBERTUS 421 
 
 The opposition is dwelt upon in no equivocal fashion by 
 Rodbertus. This pursuit of the maximum net product is clearly 
 the producer's only guide, but the conclusions which he proceeds 
 to draw from it are somewhat more questionable. If we accept 
 his opinion that the satisfaction of social need and not of individual 
 demand is the determining factor in production, we are driven to 
 the conclusion that modern society, actuated as it is by this one 
 motive, cannot possibly satisfy every individual demand. But we 
 have already shown that the phrase " social need " has no precise 
 connotation; neither has the term "productivity," which is so 
 intimately connected with it. Further, if society has no desire to 
 impose upon its members an arbitrary scale of wants that must be 
 satisfied in other words, if demand and consumption are to remain 
 free it can only be by adopting that system which recognises a 
 difference between the present and the future " rentability " of the 
 product. This difference between the sale price and the real cost 
 of production of any commodity must, it seems to us, be recognised 
 even by a collectivist society as the only method of knowing whether 
 the satisfaction which a commodity gives is in any way commen- 
 surate with the labour involved in its production. 1 Pareto has given 
 an excellent demonstration of this by showing how collectivist society 
 will have to take account of price indications if social demand is to 
 be at all adequately supplied. 
 
 2. Turning to the other desideratum, namely, a fuller utilisa- 
 tion of the means of production, Rodbertus contents himself with 
 quoting the criticisms of the Saint-Simonians concerning the absence 
 of conscious direction which characterises the present regime and 
 the hereditary element which is such a common feature of economic 
 administration. He is in full agreement with Sismondi when the 
 latter declares that production is entirely at the option of the 
 capitalist proprietor. 2 In this matter he is content merely to follow 
 his leaders, without making any contribution of his own to the 
 subject. 
 
 3. There still remains a third economic function which society 
 ought to perform, and which Rodbertus considered the most 
 important of all, namely, the distribution of the social product. 
 An analysis of the present system of distribution was one of the 
 
 1 He is dealing merely with individual wants. Rentability is iiot the only 
 guide. Many collective wants must be satisfied, but the process is not always a 
 profitable one. The problem is to determine which are those wants. Rodbertui 
 is speaking of private wants ; he has taken good care to leave the public neda 
 aside, so that his argument applies only to the former. 
 
 Kapitai, pp. 164-166.
 
 422 STATE SOCIALISM 
 
 tasks he had set himself to accomplish, believing with Sismondi and 
 other socialists that a solution of the problem of distribution and 
 the explanation of such phenomena as economic crises and pauperism 
 constitute the most vital problems which face the science at the 
 present moment. 
 
 A just distribution, in Rodbertus's opinion, should secure to 
 everyone the product of his labour. 1 But does not the present 
 regime of free competition and private property accomplish this ? 
 
 Let us watch the mechanism of distribution as we find it 
 operating at the present time. Rodbertus's description of it is not 
 very different from J. B. Say's, and it tallies pretty closely with 
 the Classical scheme. On the one hand we have the entrepreneur 
 who purchases the services of labour, land, and capital, and sells 
 the product which results from this collaboration. The prices 
 which he pays for these services and the price he himself receives 
 from the consumer are determined by the interaction of demand 
 and supply. What remains after paying wages, interest, and rent 
 constitutes his profits. 2 
 
 The distribution of the product is effected through the mechanism 
 of exchange, and the result of its operation is to secure to the owner 
 of every productive service the approximate market value of that 
 service. Could anything be juster ? Apparently not. But if we 
 examine the social and economic hinterland behind this mechanism 
 what we do find is the callous exploitation of the worker by every 
 capitalist and landlord. The various commodities which are 
 distributed among the different beneficiaries are really the products 
 of labour. They are begotten of effort and toil largely mechanical. 
 Rodbertus did not under-value intellectual work or under-estimate 
 the importance of directive energy. But intelligent effort seemed 
 to him an almost inexhaustible force, and its employment should 
 cost nothing, just as the forces of nature may be got for nothing. 
 Only manual labour implies loss of time and energy the sacrifice 
 of something that cannot be replaced. 3 Consequently he does not 
 
 1 Rodbertus further adds that a portion of everybody's income should be 
 expended in supplying such publio needs. (Kapital, pp. 132-133.) 
 
 2 Kapital, pp. 150-160. 
 
 3 Cf. Zur Erkenntniss, pp. 7-10 : " Every economic good costs labour and 
 only labour." In the third of the Soziale Brief e he expresses this idea in a 
 slightly different form : " All economic goods are the product of labour " 
 (Schriften, vol. ii, pp. 105-106). Developing the same thought, he declares that 
 this formula means: (1) that "only those goods which have involved labour 
 should figure in the category of economic goods " ; (2) that, " economically 
 speaking, goods are regarded, not as the product of nature or of any other force, 
 but simply as the product of labour " ; (3) that " goods economically considered
 
 RODBERTUS 423 
 
 recognise the intellectual or moral effort (the name is immaterial) 
 involved in the postponement of consumption, whereby a present 
 good is withheld with a view to contributing to the sum total of 
 future good. 1 And he proceeds to define and to develop the 
 opening paragraph of Smith's Wealth of Nations : " The annual 
 labour of every nation is the fund which originally supplies it with 
 all the necessaries and conveniences of life which it annually con- 
 sumes, and which consist always either in the immediate produce 
 of that labour or in what is purchased with that produce from other 
 nations." 
 
 The difference between his attitude and Marx's is also interesting. 
 Marx was thoroughly well versed in political economy, and had 
 made a special study of the English socialists. His one object was 
 to set up a new theory of exchange, with labour as the source of all 
 value. Rodbertus, who drew his inspiration from the Saint- 
 Simonians, focused attention upon production, and treated labour 
 as the real source of every product a simpler, a truer, but a still 
 incomplete proposition. Rodbertus never definitely commits him- 
 self to saying that labour by itself creates value, but, on the other 
 hand, he never denies it. 1 Social progress, he always maintained, 
 must consist in the greater degree of coincidence 8 between the value 
 of a product and the quantity of labour contained in it. But this 
 
 are just the product of labour, carried out by means of the material operations 
 which are necessary for production." The work of industrial direction and ite 
 remuneration are regarded in the same light. Of. Schriften, vol. ii, p. 219. 
 
 1 On this point see Rist's Le Capital provient-il uniqucment du Travail t in 
 the Revue d'lSconomie politique, February 1906. 
 
 * Rodbertus expressly declares that to say that goods are the product of 
 labour is not to imply that the value of the product is always equal to what it cost 
 in the way of labour, or, in other words, that the labour spent on it does not 
 always measure its value (Schrifttn, vol. ii, pp. 104, 105). A similar state- 
 ment is made in the Forderungen (1837). In the Zur Erkenntnist (1842) 
 (pp. 129-131) he gives some of the reasons why he thinks that the value of a 
 product is not equal to the labour it has cost: (1) There is the necessity 
 for equalising the gains of capital ; (2) the price of a unit of any com- 
 modity is fixed by the price of the unit which costs most to reproduce. 
 In the second of the Soziale Briefe he repeats the statement that the labour 
 value theory is nothing better than an ideal (Kapital, Appendix, p. 279). In a 
 letter written to R. Meyer on January 7, 1872, he affirms the demonstration 
 which he had already given, " that goods do not and cannot exchange merely in 
 proportion to the quantity of labour which has been absorbed by them simply 
 because of the existence of capital " ; and he adds the significant words : " a 
 demonstration that might in case of need be employed against Marx." 
 
 8 " The coincidence between the value of the products and the quantity of 
 labour involved in their production is simply the most ambitious ideal that 
 economics has ever formulated." (Second Suzial Brief.)
 
 424 STATE SOCIALISM 
 
 is a task which the future must take in hand. 1 Again, if it be true 
 that the worker creates the product, but that the proprietors of the 
 soil and the capitalists who have had no share in its production are 
 able to manipulate exchange in such a way as to retain a portion of it 
 for themselves, it is clear that our judgment concerning the equity of 
 the present system needs some revision. This secret embezzlement 
 for the profit of the non- worker and to the injury of the diligent 
 proceeds without any outward display of violence through the 
 free play of exchange operating within a system of private property. 
 Its sole cause lies in the present social system, " which recognises the 
 claim of private landowners and capitalists to a share of the wealth 
 distributed, although they have contributed nothing towards its 
 production." * 
 
 Hence his exposition of the twofold aspect of distribution. 
 Economically exchange attributes to each of the factors land, 
 capital, and labour a portion of the produce corresponding to the 
 value of their respective services as estimated in the market. Socially 
 it often means taking away from the real producers from the 
 workers a part of the goods which their toil has created. This 
 portion Rodbertus refers to under the simple name "rent," which 
 includes both the revenue of capitalists and the income of landlords. 
 
 No economist ever put the twofold aspect of the problem in a 
 clearer light. Laying hold of the eternal opposition between the 
 respective standpoints, he emphasises the difficulties which they 
 present to so many minds. Justice would relate distribution to 
 merit, but society is indifferent provided its own needs are satisfied. 
 Society simply takes account of the market value of these products 
 and services without ever showing the least concern for their origin 
 or the efforts which they may originally have involved the weary 
 day of the industrious labourer and the effortless lounge of the 
 lazy capitalist being similarly rewarded. Rodbertus's great merit 
 was to separate this truth from the other issues so frequently confused 
 with it in the writings of the earlier economists and to bring it 
 clearly before the notice of his fellow economists. 
 
 1 Occasionally Rodbertus admits for the sake of hypothesis or demonstration 
 that prices do coincide with the labour cost ; but his essential theory has no need 
 of any such hypothesis, and it really plays quite an auxiliary or subordinate rdle. 
 It is in the course of his exposition of the theory concerning the distribution of 
 unearned income between landed proprietors and capitalists (quite an erroneous 
 theory, by the way) that he is driven to admit that " the exchange value of each 
 completed product, as well as of each portion of the product, is equal to its labour 
 value." (Third Sozial Brief, Schriften, vol. ii, p. 101.) 
 
 * Kapitai, p. 106.
 
 RODBERTUS 425 
 
 Rodbertus's criticism did not end there, although the demon- 
 stration which we have just given of the distinction between the 
 social and the purely economic point of approach to distribution 
 constitutes its essential merit. We must not omit the practical 
 conclusions which he draws from it. 
 
 What concerned Rodbertus most at least, so we imagine from 
 the standpoint which he adopted : was not the particular way 
 in which the rate of wages or interest, high or low rents, are 
 determined, but the proportion of the revenue that goes to the 
 workers and non-workers respectively. The former question is 
 a purely economic one of quite secondary importance compared 
 with this other social problem. Believing that he had already 
 shown the possibility of the workers being robbed, the problem 
 now was to determine whether this spoliation was likely to continue. 
 Does economic progress give any ground for hoping that rent or 
 unearned income will gradually disappear ? Bastiat and Carey had 
 replied in the affirmative. The proportion that goes to capital, 
 so they affirmed, is gradually becoming less, to the great advantage 
 of the labourer. Ricardo, faced with the same dilemma, had 
 come to the conclusion that with the inevitable increase in the 
 cost of producing food the landowner's share must be constantly 
 growing. Say had asked himself the same question in the earliest 
 edition of his treatise, but had found no reply. Rodbertus adopts 
 none of their solutions, but independently arrives at the con- 
 clusion that the worker's share gradually dwindles, to the advantage 
 of the other participants. 1 
 
 Theorist as he was, a simple deduction was all that was 
 needed to convince him of the truth of this view. The rate of 
 wages, we have already seen, is determined by the interaction of 
 demand and supply in the labour market. The market price of 
 labour, however, like that of any other product, is always gravitating 
 towards a normal value this normal value being none other than 
 Ricardo's necessary wage. " The share of the product that falls to 
 the lot of the producer both in an individual instance and as a 
 general rule is not measured by the amount which he himself has 
 produced, but by that quantity which is sufficient for the upkeep 
 of his strength and the upbringing of his children." * This cele- 
 
 1 " Whenever exchange is allowed to take its own course in the matter of dis- 
 tributing the national dividend, certain circumstances connected with the 
 development of society and with the growing productivity of social labour cause 
 the wages of the working classes to diminish so as to constitute a decreasing 
 fraction of the national product." (Second Sozial Brief, Schriften, vol. ii, p. 37.) 
 
 Kapital, p. 153.
 
 426 STATE SOCIALISM 
 
 brated " brazen law " became the pivot of Lassalle's propaganda, 
 although it was never definitely recognised by Marx. 
 
 Granting the existence of such a law, and admitting also that 
 the amount produced by labour is always increasing, so that the 
 mass of commodities produced always keeps growing, a very simple 
 arithmetical calculation suffices to show that the total quantity 
 obtained by the workers always remains the same, representing a 
 diminished fraction of the growing totality. 
 
 A similar demonstration affords a clue to the prevalence of 
 crises. The entrepreneur keeps adding to the mass of commodities 
 produced until he touches the full capacity of social demand. 1 
 But while production grows and expands the worker's share dwindles, 
 and thus his demand for some products remains permanently below 
 production level. The structure is giving way under the very feet 
 of the unsuspecting producer. 2 This theory of crises is simply a 
 re-echo of Sismondi, 3 and gives an explanation of a chronic evil 
 rather than of a crisis pure and simple. Its scientific value is just 
 about equal to Sismondi's other theory concerning proportional 
 distribution. 
 
 This theory upon which Rodbertus laid such emphasis had 
 already been outlined in his Forderungen, and a fuller development 
 is given in his Soziale Briefe, where he expressly states it to be the 
 fundamental point of his whole system, all else being mere scaffold- 
 ing. His one ambition all his life long was to be able to give a 
 statistical proof of it, but its importance is not nearly as great as he 
 imagined it to be. 
 
 In the first place, doubt as to the validity of the " brazen " or 
 " iron law of wages " upon which the theory is based is enter- 
 tained not merely by economists, but also by socialists. And even 
 
 1 The idea that entrepreneurs base their production upon the demand of the 
 higher classes is a somewhat novel one, but it is quite definitely stated by Rod- 
 bertus. " The classes can only influence the market in proportion to the quantity 
 of the social product which is given them. But the entrepreneurs must deter- 
 mine the quantities which they will produce, according to the size of their 
 demands." (Kapital pp. 51-52, Cf. also pp. 170-171.) It is quite obvious, on 
 the contrary, that the entrepreneurs base their production solely upon the 
 demand for the particular goods which they manufacture, and that they are quite 
 indifferent to the share which goes to the higher classes. 
 
 Kapital, p. 53. 
 
 3 We shall soon be convinced of the similarity that exists between the two 
 theories if we read the passage in the article on Balance des Consommationa 
 avec lee Productions, published by Sismondi aa an appendix to the second 
 edition of the Nouveaux Principes, vol. ii, p. 430. Rodbertus agrees with 
 Sismondi that equilibrium will be re-established in the long run, but that in the 
 meantime a. crisis may have to intervene. (Kapital, p. 171, note ; of. p, 190. supra.)
 
 RODBERTUS 427 
 
 if it were true, Rodbertus's proof would still be inconclusive, for the 
 workers' share of the total product depends not upon one fact alone, 
 but upon two the rate of wages and the number of workers. Rod- 
 bertus's error and Bastiat's are very similar. Bastiat had tried to 
 determine the capitalists' share of the total product by taking 
 account of one fact only, namely, the rate of interest, whereas he 
 ought to have taken the amount of existing capital into consideration 
 as well. 
 
 But we must admit that although the arguments used by 
 Rodbertus are scarcely more reliable than Bastiat's, his theory 
 itself is nearer the facts as judged by statistics. No amount of 
 a priori reasoning without some recourse to statistics can ever solve 
 the problem. Statistics themselves seem to prove that labour's 
 portion, in some countries at least, has shown signs of diminishing 
 since the beginning of the present century. 
 
 This does not necessarily mean that the worker must be worse 
 off, for it may well happen that a diminution in the general share 
 obtained by labour is accompanied by a growth of individual wages. 
 All that we can conclude is that wages have not increased as rapidly 
 as has capital's share, 1 but this has not prevented the workers 
 sharing in the general growth of prosperity. 
 
 Logically enough, Rodbertus proceeds to draw certain practical 
 conclusions, including the necessity for the suppression of private 
 property and of individual production. The community should be 
 the sole owner of the means of production. Unearned income must 
 go. Everyone should contribute something to the national dividend, 
 and each should share in the total produce in proportion to his 
 labour. The value of all commodities will depend upon the amount 
 
 1 Such, as we have already seen, is Colson's conclusion (Coura, vol. iii, p. 366), 
 and such is the verdict of M. Chatelain after studying the United States census 
 returns. According to Chatelain (Questions pratiques de Legislation ouvritre, 
 June and July, 1908), the American metal-workers' share in the product fell 
 from 71 to 68 per cent, between the years 1890 and 1905, while capital's share 
 increased from 28 to 32 per cent. The men's wages during the same period 
 rose from 651 dollars to 626, while the rate of interest fell from 9 to 8 per 
 cent. Despite this diminution in labour's share of the total product it is im- 
 possible to say whether the remuneration of labour in general is moving upward 
 or downward, for the working classes do not depend solely upon the wages of 
 their labour. Some of them have a little capital a very small amount, perhaps, 
 but there is no reason for thinking that it will not grow in future. 
 
 It is quite clear that this complicated question must be carefully defined. 
 Three different factors must be distinguished: (1) The individual's wage; 
 (2) labour's share in the product ; (3) the income of the working class. On this 
 problem see Edwin Caiman's article in the Quarterly Journal of Economic*, 
 1905, and his statements in his Theory of Production and Distribution 1776-1848 

 
 428 STATE SOCIALISM 
 
 of time spent on them and effort put into them ; and since the supply 
 will always adapt itself to the needs of society the measure will be 
 constant and exact, and equal distribution will be assured. 
 
 But Rodbertus recoils from his own solution, and the ardent 
 socialist becomes a simple State Socialist. What frightens him is 
 not the terrible tyranny of a system under which production and 
 even consumption would be strictly regulated. " There would be 
 as much personal freedom under a system of this kind as in any 
 other form of society," he remarks, 1 " society " evidently always 
 implying some measure of restraint. His apprehension was of 
 a different kind. He had a perfect horror of any revolutionary 
 change, and stood aghast at the lack of education displayed by the 
 masses. He realised how unwilling they were to sacrifice even a 
 part of their wages in order to enable other men to have the necessary 
 leisure to pursue the study of the arts and sciences the noblest 
 fruits of civilisation. Finally it seemed to him that illegal appro- 
 priation and the rightful ownership which results from vigorous toil 
 are too often confused by being indiscriminately spoken of as 
 private property. *' There is," says he, " so much that is right 
 mixed up with what is wrong that one goads the lawful owner into 
 revolt in trying to lay hold of the unlawful possessor." 2 
 
 Some kind of compromise should at all costs be effected. If 
 private property one of the great evils of the present day cannot 
 be got rid of without some inconvenience, cannot we possibly 
 dispense with freedom of contract, the other source of inequality ? 
 Let us assume, then, that we have got rid of free contract while 
 retaining the institution of private property. By doing this, 
 although we are not immediately able to clear away unearned 
 income, we shall have removed some of the greatest inconveniences 
 that result from it. We shall arrest the downward trend of labour's 
 remuneration, and poverty and crises will disappear together. 3 
 
 Such an attempt might be made even now. Let the State 
 estimate the total value of the social product in terms of labour 
 
 Kapital, p. 176. a Ibid., p. 187. 
 
 3 " And so I believe that just as history is nothing but a series of compromises, 
 the first problem that awaits economic science at the present moment is that of 
 effecting some kind of a working compromise between labour, capital, and 
 property." (Kapital, p. 187.) In a letter written on September 18, 1873, to 
 R. Meyer, he declares that the great problem " is to help us to pass by a peaceful 
 evolution from our present system, which is based upon private property in land 
 and capital, to that superior social order which must succeed it in the natural 
 course of history, which will bo based upon desert and the mere ownership of 
 income, and which is already showing itself in various aspects of social life, as ii 
 it were already on the point of coming into operation."
 
 RODBERTUS 429 
 
 and determine the fraction that should go to the workers. Let it 
 give to each entrepreneur in accordance with the number of workers 
 he employs a number of wage coupons, in return for which the 
 entrepreneur shall be obliged to put on the market a quantity of 
 commodities equal in value. Lastly, let the said workers, paid in 
 wage coupons, supply themselves with whatever they want from 
 the public stores in return for these coupons. The national estimate 
 would from time to time be subject to revision ; and in order that 
 the proportions should always be the same, the number of coupons 
 given to labour would have to be increased if the number of com- 
 modities produced ever happened to increase. Rodbertus's aim 
 was to give the workers a share in the general progress made, and 
 such was the plan which he laid down. 1 
 
 There is no need to emphasise its theoretical, let alone its 
 practical difficulties. We were led to mention it for a double 
 reason. In the first place, it is interesting as an attempt to effect 
 a compromise between the society of the present and the collectivism 
 of the future. Marx regards the growing servility of the worker 
 with a certain measure of equanimity as a necessary preliminary 
 to his final emancipation. Rodbertus would speed the process of 
 amelioration and would better his lot here and now. 2 It also 
 throws an interesting light upon his extraordinary confidence in the 
 all-powerful sovereignty of the State, and the ability of government 
 to bend every individual will, even the most recalcitrant, to the 
 general will. At the same tune it reveals his utter indifference to 
 individual liberty as an economic motive. 
 
 This indifference gradually merges into extreme hostility, while 
 his confidence in the centralised executive becomes all the more 
 thoroughly established. His later historical works contain an 
 exposition of an organic theory of the State which is meant to 
 justify such confidence. Just as in the animal world the higher 
 animals are found to possess the most highly differentiated organs 
 as well as the most closely co-ordinated, so in history as we 
 pass from the lower social strata to the higher ones " the State 
 advances both in magnitude and efficiency; and its action, while 
 increasing in scope, grows in intensity as well. The State in its 
 
 1 Cf. Kapital, pp. 109 et seq., and especially his article Der Normalarbeitstag, 
 which appeared in 1871 and was republished in Brief e u. Sozialpolitische Aufsatze, 
 p. 552 et seq. The idea of determining value in the way Rodbertua intended 
 was criticised by Marx in his Mis&re, de la Philosophic, d propoa of Proudhon'a 
 attempt in 1847. The socialisation of production involves the socialisation of 
 exchange as well. This is another point upon which Marx and Rodbertus differ. 
 Cf. Kapital, p. 188, note.
 
 430 STATE SOCIALISM 
 
 passage from one evolutionary stage to another presents us not 
 merely with a greater degree of complexity, each function being to 
 a greater and greater extent discharged by some special organ, but 
 also with an increasing degree of harmony. The social organisms, 
 despite their ever-increasing variation, are placed in growing depend- 
 ence upon one another by being linked to some central organ. In 
 other words, the particular grade that a social organism occupies in 
 the organic hierarchy depends upon the degree to which division of 
 labour and centralisation have been carried." l 
 
 We are thus driven back upon the fundamental question set by 
 Rodbertus at the outset of his inquiry: Can the various social 
 functions, acting spontaneously, efficiently further the good of the 
 social body, or should these functions be discharged by the media- 
 tion of a special organ, the State or Government ? There is also 
 the further question as to whether the reply which he gives is entirely 
 satisfactory. 
 
 We are immediately struck by a preliminary contradiction : 
 the economic boundaries of the community do not coincide with its 
 political boundaries. The one is the result of division of labour 
 and is coextensive with the limits set by division of labour, while 
 the second is the product of the changing conditions of history. It 
 is only logical that the economic functions of the State should be 
 performed by other organs than those of the political Government, 
 since its sphere of action is necessarily different. But it is to the 
 State, as evolved in the course of a long historical process, that 
 Rodbertus would entrust this directing power. Between Rodbertus 's 
 description of the State's economic activity and his final recourse to 
 a national monarchical State is an element of contradiction which 
 strikes us rather forcibly, especially when he comes to speak of 
 " national " socialism. 
 
 In order to demonstrate how inadequately the present social 
 organisation performs its duties, Rodbertus appeals to an ideal method 
 of discharging them which he himself has created, and he has not 
 the slightest difficulty in showing that hardly any of his ideal 
 functions are being performed at the present time. Production is 
 not based upon social need, nor is the wealth produced distributed 
 in accordance with the labour spent. But we must never forget 
 that Rodbertus's conception of the social need was extremely 
 hazy. His distribution formula, " to everyone according as he 
 produces," if applied logically is impossible, and satisfies neither 
 
 * Zur Gesrhickle, der romischen Tributsteuer, in Jahrbttcker fiir National- 
 dkonomie a. Statistik, vol. viii, pp. 446-447, note.
 
 RODBEHTUS 431 
 
 the demands of humanity nor the needs of production. Had his 
 definition of social function been less ambitious, his argument, 
 perhaps, would have been more convincing. 
 
 Let us admit, however, that the existence of an economic society 
 implies the successful accomplishment of certain functions which 
 we need not trouble to define just now. The question then arises 
 a question that implies the severest criticism of the present organisa- 
 tion : Can the control and oversight which men ought to exercise 
 over these functions be performed otherwise than through the 
 instrumentality of the State ? There was only one alternative for 
 Rodbertus extreme individualism or State control. But nature 
 and history both escape the dilemma. The biological analogy 
 has been carried too far, and most writers would be content to 
 abandon it altogether. Like most of his contemporaries, Rodbertus 
 imagined that economic individualism and personal liberty were 
 indissolubly bound together, and that it was impossible to check 
 individualism without endangering liberty. It is now realised, 
 however, that this association of ideas, like many another, is tem- 
 porary and not eternal, and the growth of voluntary associations 
 intermediate between the State and the individual is every day 
 showing it to be false. 
 
 We are now in a better position to appreciate the kind of appeal 
 which this doctrine would make to State Socialists people who are 
 essentially conservative, but nevertheless genuinely desirous of 
 seeing a larger element of justice introduced into our industrial 
 regime. The distinction drawn between politics and economic 
 socialism makes a first claim upon their respect. Then would follow 
 the organic conception of society, which is a feature of all Rodbertus's 
 writings. It was his belief that production and distribution could 
 only be regarded as social functions, and that the breakdown of 
 individualism implied a need for greater centralisation or a greater 
 degree of State control. On the other hand, the State Socialists 
 refuse to associate themselves with the radical condemnation of 
 private property and unearned income, both of which are features 
 of Rodbertus's teaching. The State Socialists set out to transform 
 the Rodbertian compromise into a self-sufficing system, and instead 
 of regarding their doctrine as a diluted form of socialism they are 
 rather inclined to treat socialism as an exaggerated development of 
 their theory. 1 
 
 * " Extreme socialism," saye Wagner, " is simply an exaggeration of that 
 partial socialism which has long been a feature of the economic and social evolu- 
 tion of all nations, especially the most civilised." (Qrundlegung, 3rd ed., p. 756.)
 
 432 STATE SOCIALISM 
 
 2. LASSALLE 
 
 Rodbertus's efforts to establish a doctrine of State Socialism 
 upon the firm foundation of a new social theory had already met 
 with a certain measure of success, but it was reserved for Lassalle 
 to infuse vitality into these new ideas. 
 
 Lassalle 's brief but brilliant political career, ever memorable for 
 the natural vigour of his eloquence, at once popular and refined, and 
 its indelible impression of a strikingly original nature aflame with a 
 passion both for thought and action, together with the romantic, 
 dramatic character of his checkered existence, lent wonderful force 
 to his utterances. In 1848, at the early age of twenty- three, he 
 was a Marxian revolutionist. The revolutionary period was 
 followed by a time of enforced inactivity, when he devoted himself 
 almost exclusively to philosophical, legal, and literary pursuits. 
 In 1862 the silence was at last broken by his re-entry into the 
 political arena. The whole political life of Germany was at that 
 moment convulsed by the half-hearted opposition which the 
 Prussian Liberal party was offering to Bismarck's constitutional 
 changes. Lassalle declared war both upon the Government and 
 upon the bourgeois Opposition upon the latter more than the 
 former, perhaps. Turning to the working classes, he urged them 
 to form a new party which would avoid all purely political questions 
 and to concentrate upon their own economic emancipation. For 
 two eventful years the whole of Germany resounded with his speeches 
 and his declamations before various tribunals, while the country 
 was flooded with his pamphlets advocating the complete establish- 
 ment of the Allgemeiner deutscher Arbeiterverein (General Association 
 of German Workers), which he had already founded at Leipzig in 
 1863. The workers of the Rhineland received with open arms the 
 agitator who thus took up in their midst the tangled skein of a 
 broken career, and welcomed him with songs and decked him with 
 garlands. The Liberal press, on the other hand, thoroughly taken 
 aback by his unexpected onslaughts, mercilessly attacked him, even 
 accusing him of having secret dealings with the Government. 
 Suddenly the clamour ceased : Lassalle died on August 31, 1864, as 
 the result of a wound which he had received in a duel, 1 and only the 
 Deutscher Arbeiterverein, the earliest embryo of the great German 
 Social Democratic party, remained as a memento of those violent 
 attacks upon individualist Liberalism. 
 
 1 George Meredith in his Tragic Comedians weaves his story round this tragic 
 adventure, giving us an admirable study of Lassalle's psychology. Cf. also 
 Lassalle, by Georges Brandes, and Oncken's Lassalle (Stuttgart, 1904).
 
 LASSALLE 483 
 
 As far as theory goes, Lassalle's socialism is hardly distinguishable 
 from Marx's. Social evolution is summed up in a stricter limitation 
 of the rights of private property, 1 which in the course of a century 
 or two must result in its total disappearance. 2 But Lassalle was 
 pre-eminently a man of action, bent upon practical results. At 
 that particular moment the German working class was only just 
 waking up to the possibility of political existence. The path that 
 it should follow was still undecided. In the year 1863 a number of 
 workmen had tried to persuade their comrades to meet together 
 in a kind of general congress. They further appealed to Lassalle 
 and to other well-known democrats for their advice concerning 
 the labour question. This gave Lassalle the opportunity he 
 required for forming a political party of his own, with himself as 
 chief. The next question was to fix upon a programme. " Working 
 men," says Lassalle, " must have something definite," * and, on the 
 other hand, " it is almost impossible to get the public to understand 
 the final object which we must keep in view." * So, without burden- 
 ing his propaganda with too remote an ideal, he concentrates all his 
 efforts upon two demands, the one political, the other economic 
 universal suffrage on the one hand and the establishment of producers' 
 associations supported by the State on the other. In order to win 
 over the masses, he invoked, not the doctrine of the exploitation of the 
 workers by the proprietors which would have alienated the middle 
 classes from him 6 but the " brazen law of wages," which is the happy 
 title by which he chose to designate the Ricardian law of wages. 
 
 Rodbertus realised the necessity for distinguishing between an 
 esoteric and an exoteric Lassalle 8 between the logical theorist of 
 'the study and the opportunist politician of the public platform, 
 
 1 Theorie aystematique des Droits acquit, vol. i, p. 274, note (Paris, 1904). 
 
 Brip.fe von iMasalle an Rodbertus, p. 46 (Berlin, 1878). 
 
 Ibid., p. 44. 
 
 4 Freilich darf man das dem Mob heut nodi nicht sayen. (Ibid., p. 46.) 
 6 " No workman will ever forget that property whenever legally acquired is 
 absolutely inviolable and just," says he in an address delivered to the workers of 
 Berlin on April 12, 1862, and published under the title of Arbeiterprogramm 
 (Schriften, vol. i, p. 197). Elsewhere he defends himself against the charge of incit- 
 ing the proletariat by claiming that his agitation was of a purely democratic 
 character, and intended to facilitate the fusion of classes (ibid., vol. ii, pp. 
 126-127). (Our quotations are taken from Pfau'a edition. We were unable to 
 obtain the latest and by far the best edition of Lassalle's works, published by 
 Bernstein.) 
 
 Wagner's introduction to Briefe von Lassalle an R<nlbertus, p. 5. Lassalle 
 has himself defined this somewhat Machiavellian attitude in a letter written to 
 Marx in 1859, in which he speaks of a drama which he had just written dealing 
 with Franz von Sickingen. " It looks like the triumph of superior realistic ability
 
 434 STATE SOCIALISM 
 
 Only to his contemporaries was the latter Lassalle really known. 
 But his letters, which have been published since his death, go to 
 show that there is at least no need to attach any greater importance 
 to his proposed reforms than he was prepared to give them himself. 
 It is not necessary to emphasise the fact that his plan was really 
 borrowed from Louis Blanc or to call attention to the letter written 
 to Rodbertus in which he declares himself quite prepared to change 
 his plan provided a better one can be found. This idea of association 
 was one that was by no means unknown to the German Liberal 
 party ; nor was it the first time that it had been preached to the 
 working classes. Lassalle's rival, Schulze-Delitzsch, had begun an 
 active campaign even as far back as 1849, and had succeeded in 
 establishing a great number of co-operative credit societies, composed 
 largely of artisans, and aiming at supplying them with cheap raw 
 materials. But such associations were to receive no support from 
 the Government. 
 
 What was new in Lassalle's scheme was just this appeal for 
 State intervention. It was his energetic protest against eternal 
 laissez-faire that impressed public opinion, and he himself was anxious 
 that it should be presented in this light. Speaking to the workers 
 of Frankfort on May 19, 1863, he declared that " State inter- 
 vention is the one question of principle involved in this campaign. 
 That is the consideration that has weighed with me, and there lies 
 the whole issue of the battle which I am about to wage." 1 
 
 He harks back to this fundamental idea in all his principal 
 writings. It was the theme of his first address delivered to the 
 workers in Berlin in 1862. It is there presented with all his cus- 
 tomary force. The bourgeois conception of the State is contrasted' 
 with the true conception, which is identical with the workers'. 
 The bourgeoisie seem to think that the State has nothing to do 
 
 when the leader of a rebellion takes account of the limited means at his disposal 
 and attempts to hide from other men the real object which he has in view. But 
 the success achieved by deceiving the ruling classes in this way puts him in 
 possession of new forces which enable him to employ this partial triumph for carry- 
 ing out his real object." (Aus dem litterarischen Nachlass von K. Marx, F. Engelg, 
 und Lassalle, vol. iv, p. 133 ; published by F. Mehring, Stuttgart, 1902.) 
 
 1 Schriften, vol. ii, p. 99. This address has been published under the 
 title of Arbeiterlesebuch. This is just the attitude of which Marx disapproved. 
 In a letter written to Schweitzer on October 13, 1868, quoted by Mehring (Au* 
 dem litterarischen Nachlass, etc., vol. iv, p. 362), he expresses himself as follows : 
 " He is too liable to be influenced by the immediate circumstances of the moment. 
 He exaggerates the trivial difference between himself and a nonentity like 
 Schulze-Delitzsch, until the issue between them, governmental intervention aa 
 against private initiative, becomes the central point of hi agitation."
 
 LASSALLE 435 
 
 except to protect the property and defend the liberties of the 
 individual a conception of State action that would be quite 
 sufficient were everybody equally strong and intelligent, equally 
 cultured and equally rich. 1 But where such equality does not 
 exist the State is reduced to the position of a " night watchman," 
 and the weak is left at the mercy of the strong. In reality the 
 State exists for quite other purposes. The history of mankind is the 
 story of one long struggle to establish liberty in the face of natural 
 forces, to overcome oppression of every kind, and to triumph over the 
 misery, ignorance, want, and weakness with which human nature 
 has always had to reckon. In that struggle the individual, in his 
 isolation, is hopeless and union becomes indispensable. This union 
 is a creation of the State, and its object is to realise the destiny of 
 mankind, namely, the attainment of the highest degree of culture 
 of which humanity is capable. It is a means of educating and of 
 furthering the development of humanity along the path of liberty. 
 The formula savours of metaphysics rather than of economics. 
 There is a striking similarity between it and the formula employed 
 by Hegel, the philosopher. 1 Lassalle was really a disciple of Hegel 
 andFichte. 3 Through the influence of Lassalle the theories of the 
 
 1 Schriften, vol. i, p. 213. 
 
 1 See, among others, the chapter entitled Hegel et la Theorie de VEtat, 
 in Levy-Briihl's L'Attemagne depute Liebnitz, especially p. 398 (Paris, 1890). 
 The State, according to Hegel, is an expression of the spirit realising itself in the 
 conscience of the world, while nature is an expression of the same spirit without 
 the conscience, an alter ego a spirit in bondage. God moving in the world has 
 made the State possible. Its foundation is in the might of reason realising itself 
 in will. It is necessary to think of it not merely as a given State or a particular 
 institution, but of its essence or idea as a real manifestation of the mind of God. 
 Every State, of whatever kind it may be, partakes of this divine essence. For 
 full information concerning the philosophical origin of State Socialism see 
 Andler's Le Socialisme (Tfitat en Allemagne (1897). 
 
 3 Fichte issued a very curious work in 1800 entitled Der geschlossene Handels- 
 staat, published in vol. iii of his complete works (Berlin, 1845), and containing 
 ideas with many points of resemblance to those of State Socialism. Fichte 
 thought that the State should not merely guarantee to every citizen his property, 
 but should first of all rear its citizens, let them build their property, and then 
 defend it. In order to do this everyone should be given the necessary means of 
 livelihood, for the one aim of all human activity is to live, and everyone here 
 has an equal right to-live (p. 402) a declaration of the right of existence. Until 
 all are so provided for no luxuries should be allowed. No one should decorate his 
 house until he feels certain that everyone has a house, and everyone should be 
 comfortably and warmly clad before anyone is elegantly dressed (p. 400). " Nor 
 is it enough to say that I can afford to pay for it, for it is unjust that one indi- 
 vidual should be able to buy luxuries while his fellow citizens have not enough 
 to procure the necessaries of life. The money with which the former purchases
 
 436 STATE SOCIALISM 
 
 German idealists came into conflict with the economists', and his 
 incomparable eloquence contributed not a little to the rising tide of 
 indignation with which the Manchester ideas came to be regarded. 
 
 HI : STATE SOCIALISM PROPERLY SO CALLED 
 
 THE years that elapsed between the death of Lassalle and the 
 Congress of Eisenach (1872) proved to be the decisive period in 
 the formation of German State Socialism. 
 
 Bismarck's remarkable coups d'ttat in 1866 and 1870 had done 
 much to discredit the political reputation of the leaders of the 
 Liberal party, who had shown themselves less than a match for the 
 Chancellor's political insight. This reacted somewhat upon 
 economic Liberalism, because it so happened that the leaders of 
 both parties were the same. 1 On the other hand, the idea of a 
 rejuvenated empire incarnate in the Iron Chancellor seemed to 
 add fresh lustre to the whole conception of the State. The Jahr- 
 biicher fur Nationalokonomie, first issued by the Historical school in 
 1863, had by this time become the recognised organ of the University 
 Economists, and had done a great deal to accustom men's minds 
 to the relative character of the principles of political economy and 
 to prepare their thoughts for an entirely new point of view. 
 
 Labour questions had also suddenly assumed an importance 
 quite undreamt of before this. The German revolution of 1848 was 
 
 his luxuries would in a rational State not be his at all." Adopting this as his 
 guiding principle, Fichte proposes to organise a State in which the members 
 of every profession, agriculturists, artisans, merchants, etc., would make a 
 collective contract with one another, in which they would promise not to en- 
 croach upon one another's labour, but would guarantee to everyone a sufficient 
 number of the goods which each has made for his own use. The State would also 
 undertake to see that the number of persons in every profession was neither too 
 few nor too many. It would also fix the price of goods. Lastly, in view of the 
 fact that foreign trade would naturally upset the equilibrium established by toa 
 contract which guaranteed security of existence to each individual, the com- 
 mercial State would have to be entirely hemmed in by tariff walls. The whole 
 work is original and interesting. A. Menger, who gives a brief risumt of it in 
 his second chapter of The Right to the Whole Produce of Labour, thinks that 
 Fichte was influenced by what he saw of the Convention during the Reign of 
 Terror, by the issue of assignats, and perhaps by Babeuf. Fichte, on the other 
 hand, takes care to point out that his commercial State is not realisable as such, 
 but that a book like his is not less useful in view of the general hints which it 
 affords a statesman. 
 
 1 It is remarkable that the majority of the commercial and financial measures 
 introduced in Germany between 1866 and 1875, such as a uniform system of 
 weights and measures, the reform of the monetary system, banks, the tariffs, etc., 
 were directly inspired by the principles of economic Liberalism.
 
 PROPERLY so CALLED 437 
 
 presumably political in character : the great capitalistic industry 
 had not reached that stage of development which characterised it 
 both in England and in France ; and it is a significant fact that 
 the two great German socialists, Rodbertus and Marx, had to go 
 abroad to either of those two countries to get their illustrations. 
 But since 1848 German industry had made great strides. A new 
 working-class community had come into being, and Lassalle had 
 further emphasised this transformation by seeking to found a party 
 exclusively upon this new social stratum. The association which 
 was thus founded still survives. Another agitation, largely inspired 
 by Marxian ideas, was begun about the same time by Liebknecht 
 and Bebel. In 1867 both of them were elected to the Reichstag, 
 and two years later they founded the Socialdemokratische Arbeiter- 
 partei (Social Democratic party), which was destined to play 
 such an important part in the history of the next thirty years. 
 
 In this way labour questions suddenly attracted attention, just 
 as they had previously done in France during the July Monarchy ; 
 and just as in France a new current of opinion unceremoniously 
 set aside by the coup d'ttat, it is true had urged upon the educated 
 classes the importance of abandoning the doctrine of absolute 
 laissez-faire and of claiming the support of Government in the 
 struggle with poverty, so in Germany an increasing number of 
 authors had persuaded themselves that a purely passive attitude 
 in face of the serious nature of the social problem which confronted 
 them was impossible, and that the establishment of some sort of 
 compact between the warring forces of capital and labour should 
 not prove too much of an undertaking for the rejuvenated vitality 
 of a new empire. 
 
 The new tendencies revealed themselves in unmistakable fashion 
 at Eisenach in 1872. A conference, which was largely composed of 
 professors and economists, of administrators and jurists, decided 
 upon the publication of a striking manifesto in which they declared 
 war upon the Manchester school. The manifesto spoke of the State 
 as " a great moral institution for the education of humanity," and 
 claimed that it should be " animated by a high moral ideal," which 
 would " enable an increasing number of people to participate in the 
 highest benefits of civilisation." l At the same time the members 
 of the congress determined upon the establishment of the Verein 
 fur Sozialpolitik, an association charged with the task of procuring 
 
 1 A copy of the text translated into French appeared in the Revue d' Economic 
 poliiique, 1892. The translation was the work of our regretted colleague Saint- 
 Marc,
 
 438 STATE SOCIALISM 
 
 the necessary scientific material for this new political development. 
 This was the beginning of the " Socialism of the Chair," as it was 
 derisively named by the Liberals on account of the great number 
 of professors who took part in this conference. The same doctrine, 
 with a somewhat more radical bias, became known as State Socialism. 
 The imparting of such a bias was the task undertaken by Wagner, 1 
 in his Grundlegung, which appeared in 1876. 2 
 
 Difficult though the task may prove, we must try to distinguish 
 between the work of the earlier economists and the special con- 
 tributions made by the State Socialists. Like all doctrines that 
 purport to sum up the aspirations of a group or an epoch and to 
 supply a working agreement between principles in themselves 
 irreconcilable, it lacks the definiteness of a purely individualistic or 
 theoretical system. Its ideas are borrowed from various sources, 
 but it is not always scrupulous in recognising this. 
 
 It is first and foremost a reaction, not against the fundamental 
 ideas of the English Classical school, as is generally believed, but 
 against the exaggerations of their second-grade, disciples, the admirers 
 of Bastiat and Cobden known to us as the " Optimists " and 
 styled the " Manchestrians " in Germany. The manifesto, drawn 
 up by Professor Schmoller at the Eisenach Congress, speaks of 
 the ** Manchester school," but makes no mention of the Classical 
 writers. 3 It is true that a great many German writers regard 
 the expressions " Smithianismus " and " Manchesterthum " as 
 
 1 In addition to Wagner we might mention Albert Schaeffle, who has shown 
 considerable literary activity, but who is more of a sociologist than an economist. 
 His great work, Ban und Leben des sozialen Korpers (1875-78), contains an organic 
 and biological theory of society, but bis best known book is the Quintessenz det 
 Sozialismus. 
 
 * Wagner's principal works, which contain an exposition both of the ideas 
 and programme of State Socialism, are Grundlegung (1st ed. 1876), translated into 
 French in 1900 under the title Fondements de Vficonomie poliiique, ; Finanz- 
 wisscnschaft ; his article Stoat in the Handworterbuch der Staatswissenschaften ; 
 and especially two articles entitled Finanzwissenschaft and Staatssozialismus, 
 published in the Zeitschrift fur die gcsammte Staatswissenschaft, 1887, pp. 37-122, 
 675-746. One might profitably consult two addresses, the one of March 29, 
 1895, Sozialismus, Sozialdemokratie, Katheder u. Staatssozialismus, the other of 
 April 21, 1892, Das neue sozialdemokratische Programm. 
 
 * It is a curious fact that Wagner's definition of the province and functions 
 of the State is not very different from Smith's, though differing considerably 
 from Bastiat's. " As a general rule," says he, " the State should take charge 
 of those operations which are intended to satisfy the wants of the citizens, but 
 which private enterprise or voluntary associations acting for the community 
 either cannot undertake or cannot perform as well or as cheaply." (Grundlegung, 
 3rd ed., 1893, 1st part, p. 916.)
 
 PROPERLY so CALLED 439 
 
 synonymous, but these are perhaps polemical exaggerations upon 
 which we ought not to lay too much stress. On the other hand, 
 Liberalism had nowhere assumed such extravagant proportions as 
 it had in Germany. Prince Smith, who is the best-known repre- 
 sentative of Liberalism after Dunoyer, was convinced that the 
 State had nothing to do beyond guaranteeing security, and denied 
 that there was any element of solidarity between economic agents 
 save such as results from the existence of a common market. " The 
 economic community, as such, is a community built upon the 
 existence of a market, and it has no facility to offer other than 
 free access to a market." * 
 
 The State Socialists, on the contrary, are of opinion that 
 there exists a moral solidarity which is much more fundamental 
 than any economic tie between the various individuals and classes 
 of the same nation such solidarity as results from the possession 
 of a common language, similar manners, and a uniform political 
 constitution. The State is the organ of this moral solidarity, and 
 because of this title it has no right to remain indifferent to the 
 material poverty of a part of the nation. It has something to do 
 besides protecting people against internal or external violence. It 
 has a real work of " civilisation and well-being " * which it ought 
 to perform. In this way State Socialism becomes reconciled to the 
 philosophic standpoint which Lassalle had chosen for it. Lassalle's 
 insistence upon the mission of Governments and the importance 
 of their historic role has been incorporated into its system, and 
 the attention that is paid to national considerations reminds one 
 of the teaching of Friedrich List. 
 
 It is impossible not to ask whether the State is capable of carrying 
 out the duties that have been entrusted to it. There is little use in 
 emphasising duty where there is no capacity for discharging it. 
 The State's incapacity as an economic agent has long been a notorious 
 fact. Wagner and his friends were particularly anxious to correct 
 this false impression, and as far as their doctrine contains anything 
 original it may most conveniently be described as an attempt to 
 rehabilitate the State. Optimists of Bastiat's genre looked upon 
 the State as the very incarnation of incapacity. The State Socialists, 
 on the other hand, regard government as an economic agent very 
 
 1 " Liberalism only recognises one task which the State can perform, namely, 
 the production of security." (Quoted by Schonberg, Handbuch der polititchen 
 Ockfmomie, 3rd ed., vol. i, p. 61. The quotation is taken from Rentzsch'a die. 
 tionary, articles on Freihandel and Handelsfreiheit.) 
 
 1 " Kultur und Wohlfahrtzweck " (Wagner, Orundlegung, p. 886.)
 
 440 STATE SOCIALISM 
 
 similar to other agents which the community employs, only a little 
 more sympathetic perhaps. Much of their argument consists of an 
 attempt to create a presumption in favour of government as against 
 the ordinarily accepted opinion which individualism had begotten. 
 Such was the nature of the task which they undertook. 
 
 Their first action was to insist upon the weaknesses of individuals. 
 Following in the wake of Sismondi and other socialists, they 
 emphasised the social inconveniences of competition, which is, 
 however, generally confused with individual liberty. 1 They also 
 insisted upon the social inequality of masters and workers when it 
 comes to a question of wage-bargaining a fact that had already 
 been noted by Adam Smith as well as upon the universal opposition 
 that exists between the weak and the strong. The inadequacy of 
 merely individual effort to satisfy certain collective wants is another 
 fact that was considerably emphasised. 
 
 As far back as the year 1856 Dupont-White, a Frenchman, 
 had complained bitterly that all the paths of civilisation remained 
 closed merely because of the existence of one obstacle the infirmity 
 and malignity of the individual. 2 He also attempted to show how 
 the collective interests of modern society are becoming increasingly 
 complex in character and of such magnitude as to be utterly beyond 
 the compass of individual thought. 3 " There are," says he in that 
 excellent formula in which he summarises the instances in which 
 State intervention may be necessary, " certain vital things which 
 the individual can never do, either because he has not the necessary 
 strength to perform them or because they would not pay him ; or, 
 again, because they require the co-operation of everybody, which 
 can never be got merely by common consent. The State is the one 
 person the entrepreneur who can undertake such tasks." * But 
 his words went unheeded. 
 
 Writing in a similar vein, Wagner invokes the testimony of 
 history in support of his State doctrine, showing us how the State's 
 functions vary from one period to another, so that one never feels 
 certain about prescribing limits to its action. Individual interest, 
 private charity, and the State have always had to divide the 
 field of activity between them. Never has the first of these, taken 
 by itself, proved sufficient, and in all the great modern states its 
 
 1 Wagner, Qrundlegung, Srded., pp. 811 etseq. ; 839etseq. The State Socialists 
 have a habit of wrongfully using the two expressions "free competition" and 
 " economic liberty " as if they were synonymous terms. See Orundlegung, p. 97. 
 
 1 Dupont-White, Ulndividu et rfitat, 6th ed., p. 9. Ibid., p. 267. 
 
 Preface to Stuart Mill's Liberty.
 
 PROPERLY so CALLED 441 
 
 place is taken by State action. To conclude that this solution 
 was useful and necessary and in accordance with the true law of 
 historical development only involved one further step.* One 
 almost unconsciously proceeds from the mere statement of a fad 
 to the definite formulation of a law. " Anyone," says Wagner, 
 "who has appreciated the immanent tendencies of evolution (i.e. 
 the essential features of economic, social, or political evolution) 
 may very properly proceed from such a historical conception of 
 social evolution to the formulation of postulates relative to what 
 ought to be." 2 In virtue of this conception there is a demand for 
 the extension of the State's functions, which may easily be justified 
 on the ground of its capacity for furthering the well-being and civilisa- 
 tion of the community. The influence of Rodbertus's thought, 
 especially his theory concerning the development of governmental 
 organs to meet the needs of a higher social development, 3 is quite 
 unmistakable in this connection. 
 
 The similarity between his views and those of Dupont- White, 
 though entirely fortuitous, perhaps, is sufficiently remarkable to 
 justify our calling attention to it. White is equally emphatic in 
 his demand that the State should exercise charity and act bene- 
 ficently. 4 He shows how the modern State has extended its 
 dominion, substituting local government for class dominion and 
 parental despotism, taking women, children, and slaves successively 
 under its care, and adding to its duties and responsibilities in 
 proportion as civilisation grows and liberty broadens downward. 
 Fresh life requires more organs, new forces demand new regulations. 
 But the ruler and the organ of society is the State. 5 In a moment 
 of enthusiasm he even goes so far as to declare that " the State 
 is simply man minus his passions ; man at such a stage of develop- 
 ment that he can commune even with truth itself, fearing neither 
 God nor his own conscience. However imperfect it may be, the 
 State is still vastly superior to the individual." * Such writing is 
 not without a touch of mysticism. 
 
 Without going the extent of admitting, as M. Wagner would 
 have us do, that the simple demonstration of the truth of historical 
 evolution is enough to justify his policy, we must commend State 
 
 Wagner, Qrundlegung, 3rd ed., pp. 892 et seq. 
 
 Finanzwisaenscha/t und Staatssozialismits, p. 106, 
 
 See supra, p. 430. 
 
 Dupont-White, Capital et Travail, p. 353 (1847); L'Individu et L'filat, 
 p. 81. 
 
 Ulndividu et VEtot, p. 65, 
 
 Ibid., pp. 163, 164. 
 K.D. *
 
 442 STATE SOCIALISM 
 
 Socialist/! for the service it has performed in combating the Liberal 
 contempt for government. If we admit the right of a central 
 power to regulate social relations, it is difficult to understand 
 why certain economic relations only should be subjected to such 
 supervision. 
 
 But the real difficulty, even when the principle is fully recognised, 
 is to define the spheres that should respectively belong to the State 
 and to the individual. How far, within what limits, and according 
 to what rules should the State intervene? We must at any rate, 
 as Wagner says, begin with a rough distribution of attributes. It 
 is impossible to proceed by any other method unless we are to 
 assume, as the collectivists seem to do, a radical change in human 
 psychology resulting in the complete substitution of a solicitude 
 for the public welfare for private interest. 
 
 Dupont- White thought the problem insoluble, 1 and Wagner is 
 equally emphatic about the impossibility of formulating an absolute 
 rule. The statesman must decide each case on its merits. He 
 does, however, lay down a few general rules. As a first general 
 principle it is clear that the State can never completely usurp the 
 place of the individual. 2 It can only concern itself with the general 
 conditions of his development. The personal activity of the individual 
 must for ever remain the essential spring of economic progress. 
 The principle is apparently the same as Stuart Mill's, but there is 
 quite a marked difference between them. Mill wished to curtail 
 individual effort as little as possible, Wagner to extend Government 
 action as much as he could. Mill insists throughout upon the nega- 
 tive role of Government ; Wagner emphasises the positive side, and 
 claims that it should help an ever-increasing proportion of the 
 population to share in the benefits of civilisation. No inconvenience, 
 Wagner thinks, would result from a little more communism in our 
 social life. " National economy should be transferred from the con- 
 trol of the individual to the control of the community in general," 
 he writes, in a sentence that might have been borrowed directly 
 
 1 " No means has as yet been suggested which will help to delimit the 
 functions of the State from those of the individual. But that is not a considera- 
 tion of any great moment, for we can always arrange matters so as to make them 
 balance roughly when it comes to a particular case." (Ulndividu et I'Stat, pp. 
 298 and 301.) Elsewhere (in his preface to Mill's Liberty) he gives it as his 
 opinion that such a delimitation is impossible, and that when we are speaking 
 of the State and the individual we are speaking of two distinct powers, such as 
 . life and law (p. vii). Law has to follow in the footsteps of life, reproving its 
 excesses and correcting its faults (p. xiii). 
 
 Wagner, Omndlegung, p. 887.
 
 PROPERLY so CALLED 443 
 
 from Rodbertus. 1 Both he and Mill are agreed that the limit of Govern- 
 ment action must be placed just at that point where it threatens to 
 cramp individual development. 8 
 
 The practical application of these ideas would affect both the 
 production and the distribution of wealth. But on this question 
 State Socialism has done little more than seize hold of ideas that 
 were current long before its day. 
 
 In the matter of distribution it takes exactly the same stand- 
 point as Sismondi. There is no condemnation either of profits or 
 interest as a matter of principle, such as is the case with the Socialists, 
 nor is there any suggestion of doing away with private property as 
 the fundamental institution of society ; but there is the expression 
 of a desire for a more exact correspondence between income and 
 effort 3 and for such a limitation of profits as the economic con- 
 juncture will allow of, and, on the other hand, for such an increase 
 of wages as will permit of a more humane existence. It is impossible 
 to disguise the fact that all this sounds very vague. 4 
 
 The State would thus undertake to see that distribution con- 
 formed to the moral sentiment of each period. Taxation was to be 
 employed as the instrument of such reforms. Dupont- White, in 
 his Capital et Travail, 6 which was written as early as the year 
 
 1 State enterprise is to be recommended wherever possible, " not only for 
 specific reasons which make the State ownership of certain industries highly 
 desirable, but also for reasons of social policy, such as the advisability of helping 
 industry to pass from a regime of individual ownership to that of communal 
 control." (Finanzwissenschaft und Staatssozialismus, p. 115.) 
 
 1 Dupont-White's individualism is as unimpeachable as Wagner's, which 
 proves that an individualist need not always be a Liberal. " The author of 
 Liberty" says he in his preface to Mill's Liberty, p. Ixxxix, " has a keen sympathy 
 for individualism, which I share to the full, though without any misgivings as to 
 the future destiny of this unalterable element. Individualism is life. In that 
 sense individualism is imperishable." 
 
 3 Cf., for example, Schmoller's open letter to von Treitschke (1874-75), 
 translated in his Politique sociale et Economic politique (Paris, 1902). To the 
 objection that the civil list of European monarchs is condemned in principle 
 Schmoller replies that he is " speaking of the average man," but that " the Hohen- 
 zollerns, when considered in this light, have no more than they deserve " (p. 92). 
 We suspect that this argument will not carry much weight outside Germany. 
 
 4 Wagner recognises the arbitrary nature of his suggestions. Theoretically, 
 he says, this method of procedure is quite legitimate, but practically it is not so 
 simple, " for the object, in short, is to employ the principles of equity and of social 
 utility, which are by no means difficult to formulate, and to transmute those 
 principles into legislative enactments, so as to put a check upon the arbitrary 
 and excessive accumulation of wealth in the hands of a few individuals, such at 
 is the case under a regime of free competition." (Finanzuriasenschaft und Stoats- 
 sozialismut, p. 719.) ' P. 398.
 
 444 STATE SOCIALISM 
 
 1847, had hit upon the precise formula in which to describe these 
 projects : " To levy a tax such as will strike the higher classes and 
 to apply the yield to help and reward labour." Wagner says just 
 the same thing. " Logically State Socialism must undertake two 
 tasks which are closely connected with one another. In the first 
 place it must raise the lower strata of the working classes at the 
 expense of the higher classes, and in the second place it must put 
 a check upon the excessive accumulation of wealth among certain 
 strata of society or by certain members of the propertied classes." x 
 
 In the matter of production State Socialism has simply been 
 content to reproduce the list given by Mill, Chevalier, and Cournot 
 of the cases in which there is no economic principle against the 
 direct control or management of an industrial enterprise by the 
 State. Speaking generally, Wagner is of the opinion that the State 
 should take upon itself the control of such industries as are of a 
 particularly permanent or universal character, or such as require 
 either uniform or specialised methods of control or are likely to 
 become monopolies in the hands of private individuals. The same 
 argument would apply to industries satisfying some general want, 
 but in which it is almost impossible to determine the exact advantage 
 which the consumer derives from them. The State administration 
 of rivers, forests, roads, and canals, the nationalisation of railways 
 and banks, and the municipalisation of water and gas, are justified 
 on the same grounds. 
 
 Such are the essential features of State Socialism, which bases its 
 appeal, not on any precise criticism of property or of unearned 
 income, such as we are accustomed to get from the socialists, but 
 entirely upon moral and national considerations. A juster distribu- 
 tion of wealth and a higher well-being for the working classes 
 appear to be the only methods of maintaining that national unity 
 of which the State is the representative. But it neither specifies 
 the rules of justice nor indicates the limits of the ameliorative 
 process. The fostering of collective effort affords another means 
 of developing moral solidarity and of limiting purely selfish action ; 
 but the maintenance of private property and individual initiative 
 seemed indispensable to the growth of production a consideration 
 which renders it inimical to collectivism. Its moral character 
 explains the contrast between the precise nature of some of its 
 positive demands and the somewhat vague character of its general 
 principles, which may be applied to a greater or lesser extent accord- 
 ing to individual preferences. It is impossible to deny the essentially 
 1 Finanzvrisaenschaft und Staatssozialitmu*, p. 718.
 
 PROPERLY so CALLED 445 
 
 subjective character of its criteria, and this affords some indication 
 of the vigorous criticism offered by the economists, who are above 
 all anxious for scientific exactitude, and the measure of enthusiasm 
 with which it has been welcomed by all practical reformers. It 
 forms a kind of cross-roads where social Christianity, enlightened 
 conservatism, progressive democracy, and opportunistic socialism all 
 come together. 
 
 But its success was due not so much to the value of its principles 
 as to the peculiar nature of the political and economic evolution 
 toward the end of the century. Its most conspicuous representa- 
 tive in Germany was Prince Bismarck, who was totally indifferent 
 to any theory of State Socialism, and who preferred to justify 
 his policy by an appeal to the principles of Christianity or the 
 Prussian Landrecht. 1 One of his great ambitions was to con- 
 solidate and cement the national unity which he had succeeded 
 in creating. A system of national insurance financed and controlled 
 by the State appealed to him as the best way of weaning the working 
 classes from revolutionary socialism by giving them some positive 
 proof of the sympathy of the Government in the shape of pecuniary 
 interest in the welfare of the empire. In a somewhat similar fashion 
 the French peasant became attached to the Revolution through the 
 sale of national property. " I consider," says Bismarck, speaking 
 of invalidity insurance, " that it is a tremendous gain for us to 
 have 700,000 annuitants among the very people who think they 
 have nothing to lose, but who sometimes wrongly imagine that 
 they might gain something by a change. These individuals would 
 lose anything from 115 to 200 marks, which just keeps them above 
 water. It is not much, perhaps, but it answers the purpose admir- 
 ably." J Such was the origin of those important laws dealing 
 with sickness, accidents, invalidity, and old age which received 
 
 1 The imperial message of November 17, 1881, announcing the celebrated 
 series of Insurance Acts admits the necessity for a more marked policy of State 
 intervention : "To lay hold of the ways and means whereby the working classes 
 may best be helped is by no means an easy task, but it is one of the highest which 
 a moral and Christian community can set its heart upon." Bismarck, in hi? 
 speech of May. 9, 1884, said : " I unhesitatingly recognise the righte of labour, and 
 so long as I occupy this place I shall uphold them. In so doing I base my plea, 
 not upon socialism, but upon the Prussian Landrecht." Section!? of Art. XIX of the 
 second part of the Prussian Landrecht (February 5, 1794) reads as follows : " To 
 such as have neither the means nor the opportunity of earning their own liveli- 
 hood or that of their family, work shall be given, adapted to their strength and 
 capacity." Despite its general tone, it did not contemplate giving relief. 
 
 1 Speech delivered on March 18, 1889, quoted by Brodnitz, Bitmarcka 
 Notional&konomische Ansichten, p. 141 (Jena, 1902).
 
 446 STATE SOCIALISM 
 
 the imperial seal between 1881 and 1889. But just because the 
 Chancellor did not consider that there was the same pecuniary 
 advantage to be derived from labour laws in the narrow sense of 
 the term that is, in laws regulating the duration of labour, Sunday 
 rest, the inspection of factories, etc. he was less favourably inclined 
 towards their extension. The personal predilection of the Emperor 
 William II, as expressed in the famous decrees of February 4, 1890, 
 was needed to give the Empire a new impetus in this direction. 
 
 Accordingly it was the intelligent conservatism of a Government 
 almost absolute in its power, but possessed of no definitely social 
 creed, that set about realising a part of the programme of the State 
 Socialists. In England and France and the other countries where 
 political liberty is an established fact similar measures have been 
 carried out at the express wish of an awakening democracy. The 
 working classes are beginning to find out how to utilise for their 
 own profit the larger share of government which they have recently 
 secured. Progressive taxation, insurance, protective measures for 
 workmen, more frequent intervention of Government with a view 
 to determining the conditions of labour, are just the expressions 
 of a tendency that operates independently of any preconceived plan. 
 
 The regulation of the relationship between masters and work- 
 men gave to State Socialism a legislative bias. Governments and 
 municipalities have long since extended their intervention to the 
 domain of production, the new character of social life rather than 
 any social theory being again the determining motive. Public 
 works, such as canals, roads, and railways, have multiplied enor- 
 mously in the course of the nineteenth century, thanks to the 
 existence of new productive forces. The demand for public services 
 has increased because of the increasing concentration of population. 
 Communal life keeps encroaching upon what was formerly an 
 isolated, dispersive existence, and community of interest is extending 
 its sway in village and borough as well as in the great city and the 
 nation at large. Industry also is being gradually linked together, and 
 , the area of free competition is perforce becoming narrower. In the 
 labour market, as well as in the produce and the money markets, 
 concentration has taken the place of dispersion. Monopoly is 
 everywhere. Collective enterprise, instead of being the exception, 
 tends to be the rule, and public opinion is gradually being reconciled 
 to the idea of seeing the State the " collective being "par excellence 
 becoming in its turn industrial. 
 
 Under conditions such as these it was impossible that the 
 doctrine of State Socialism should not influence public opinion.
 
 PROPERLY so CALLED 447 
 
 State Socialism has the peculiar merit of being able to translate 
 the confused aspirations of a new epoch in the history of politics and 
 economics into practical maxims without arousing the suspicions 
 of the public to the extent that socialism generally does. Legis- 
 lators and public men generally have been supplied with the necessary 
 arguments with which to defend the inauguration of that new policy 
 upon which they had secretly set their hearts. A common ground 
 of action is found for parties that are generally opposed to one 
 another and for temperaments that are usually incompatible. That 
 is the outstanding merit of a doctrine that seems eminently suitable 
 for the attainment of tangible results. 
 
 And so by a curious inversion of functions by no means excep- 
 tional in the history of thought, State Socialism at the end of the 
 century finds itself playing the part of its great adversary, the 
 Liberal Optimism of the early century. One of the outstanding 
 merits of that earlier Liberalism was the preparation it afforded for 
 a policy of enfranchisement or liberty, which was absolutely necessary 
 for the development of the industrial regime. And so it became the 
 interpreter of the great economic currents of the time. In pursuance 
 of this exclusive task all traces of its scientific origin disappeared, 
 the elaboration of economic theory was neglected, and the habit of 
 close reasoning so essential to systematic thinking was Abandoned. 
 In a somewhat similar manner State Socialism has become 
 the creed of all those who desire to put an end to the abuses 
 of economic liberty in its extremer aspects, or such as are generally 
 concerned about the miserable condition of an increasing number 
 of the working classes. Absorbed in immediate matters of this 
 kind, the promoters of State Socialism have managed to influence 
 practical politics without shedding much light upon economic 
 theory. And now they in their turn find their system threatened 
 by the fate which awaits all political doctrines. Even at the present 
 moment one is tempted to ask whether this growing multiplicity of 
 State function is not in danger of arousing on the part of consumers, 
 entrepreneurs, and workmen a general feeling of contempt for the 
 economic capacity of the State. 
 
 In conclusion, we must note another characteristic fact. Whereas 
 during the greater part of the nineteenth century the attacks of 
 Socialism were directed against Liberalism and economic orthodoxy, 
 Neo-Marxian syndicalism is concentrating its attention almost 
 exclusively upon State Socialism. Sorel emphasises the similarity 
 that exists between Marxism and Manchesterism, and on more 
 then one point he finds himself in agreement with a " Liberal "
 
 448 STATE SOCIALISM 
 
 like Pareto. On the other hand, no words are sufficiently vigorous 
 to express his condemnation of the partisans of social peace and 
 interventionism, which appear to him to corrupt the working classes. 
 Syndicalist working men have on more than one occasion shown 
 their contempt for the State by refusing to avail themselves of 
 measures passed on their behalf old-age pensions, for example. 
 This attitude is perhaps due to the influence of the anarchists upon 
 the leaders of French syndicalism. 
 
 The fusion of these two currents of ideas the Neo-Marxian and 
 the anarchist and their effect in turning the attention of the French 
 working classes away from State Socialism, is an interesting fact 
 whose political results will by no means prove negligible. 1 
 
 1 The well-known German economist Professor Lexis has unfortunately not 
 been mentioned in this chapter, for the GSttingen professor has the misfortune 
 of being neither a State Socialist nor a member of the Historical school. Hia 
 works, dealing with various topics money, the population theory, and general 
 economic theory are scattered through a number of reviews and other publica- 
 tions, especially the Jahrbucher fur Nationaldkonomie und Statistik, Schonberg'a 
 Handbuch, and the great Handwarterbuch der Staatswi&stnschaften. His writings 
 are distinguished not only by a definitely scientific method of treatment, but 
 also by a remarkable clearness of thought. While appearing to continue the 
 tradition of the Classical school, he takes care to reject the optimistic conclusions 
 which are too often regarded as an inseparable element of that tradition. In 
 1900 Lexis gave us a general resume of his teaching in the AUgemeine Volks- 
 tvirtschaftslehre, where he treats of the economic world as concerned merely 
 with the circulation of goods. In addition to an interesting theory of crises, 
 upon which we cannot dwell just now, the most original part of the work consists 
 of a theory concerning the method of distributing the social product between 
 workers and capitalists. Lexis thinks that all material goods are produced by 
 labour and measurable in terms of labour. The problem then is to determine 
 where the capitalist gets his income. The capitalist's profit is not the result of 
 exploitation, as Marx thought, but is simply what is added to the sale price a 
 sum corresponding to the capitalist's interest is added to the sum representing 
 the workmen's wages. Profit originates in the sphere of circulation. But how 
 will this increased sale price benefit the capitalists, seeing that under existing 
 conditions the workers can only buy the equivalent of the products which they 
 have already helped to produce ? We need to remember, however, that they 
 produce for the capitalist as well as for themselves, and with the money thus 
 obtained the working classes are enabled to buy whatever they need at market 
 prices, i.e. at a price that includes interest, which constitutes the capitalist's 
 profit. Whenever the capitalists themselves purchase goods made by them- 
 selves they are reciprocally benefiting one another. Their class position is not 
 modified by such procedure, for each entrepreneur simply draws profits in propor- 
 tion to his capital. And so we avoid the most serious objection which can be 
 raised to Marx's theory. This explanation of the surplus value received by 
 the capitalists is at least very ingenious. Lexis has been mostly influenced 
 by Marx and Rodbertus, and has attempted a fusion of their more vigorous 
 conceptions. Despite the objections that might be raised to it, the work it 
 certainly one of the most original of recent years.
 
 MARXISM 449 
 
 CHAPTER III: MARXISM 
 
 I: KARL MARX 1 
 
 EVERYONE knows of the spell cast over the socialism of the last 
 
 forty years by the doctrines of Karl Marx and the contempt with 
 
 1 Karl Marx, generally spoken of as a Jew, was born on May 5, 1818, of 
 Jewish parents who had been converted to Protestantism. Born of a respect- 
 able bourgeois family and wedded to the daughter of a German baron, few 
 would have predicted for him the career of a militant socialist. Such was to be 
 his lot, however. In 1843, at the age of twenty -five, the authorities having 
 suppressed a newspaper which he was conducting, he fled to Paris, and thence 
 to Brussels. Returning to Germany during the Revolution of 1848, in which 
 he took an active part, he was again expelled, and this time took refuge in London 
 (1849). Here he spent the rest of his life (about thirty years), leaving for Franco 
 a short time before his death in 1883. He died at London on March 14 in that year. 
 
 Although Marx was one of the founders and directors of the famous associa- 
 tion known as the " International," which was the terror of every European 
 Government between 1863 and 1872, he was not a mere revolutionary like his 
 rival Bakunin, nor was he a famous tribune of the people like Lassalle. He 
 was essentially a student, an affectionate father, like Proudhon, an indefatigable 
 traveller, and a man of great intellectual culture. 
 
 The best known of his works, which is frequently quoted but seldom read, 
 is Das Kapital, of which the first volume the only one publkhed during his life- 
 time appeared in 1867. The other two volumes were issued after his death, 
 in 1885 and 1894, through the efforts of his collaborator Engels. 
 
 This book has exercised a great influence upon nineteenth-century thought, 
 and probably no work, with the exception of the Bible and the Pandects, has given 
 rise to such a host of commentators and apologists. Marx's other writings, though 
 much less frequently quoted, are also exceedingly important, especially La 
 Miser e de la Philosophic, published in 1847 in answer to Proudhon's Les Contra- 
 dictions Sconomiques ; Zur Kritik der politischen Oekonomie (1869); and par- 
 ticularly the Communist Manifesto, published in January 1848. The Manifesto 
 is merely a pamphlet, and at first it attracted scarcely any attention, but Labriola 
 goes so far as to say not without some exaggeration, perhaps- -that " the date of 
 its publication marks the beginning of a new era " (Essai eur la C nception 
 materialiste de VHistoire, p. 81). At any rate, it is the breviary of modern 
 socialism. There is scarcely a single one of its phrases, each of which stings like 
 a dart, that has not been invoked a thousand times. The Programme of the 
 Communist Manifesto is included in Ensor's Modern Socialism. 
 
 It is a much -debated question as to whether Karl Marx was influenced by 
 French socialists, and if so to what extent. On the question of his indebtedness 
 to Pecqueur and Proudhon see Bourgnin's article in La Revue d'Sconomie poli- 
 tique, 1892, on Des Rapports entre Proudhon et K. Marx.. Proudhon's work, 
 at any rate, was known to him, for one of his books was a refutation of the 
 doctrines of the petit bourgeois, as he called him. Certain analogies between 
 the works of these two writers to which we shall have to call attention will 
 help us to appreciate the extent to which Marx is indebted to Proudhon. Bat, 
 as Anton Menger has pointed out, we must seek Marx's antecedents among
 
 450 MARXISM 
 
 which this newer so-called scientific socialism refers to the earlier of 
 Utopian kind. But what is even more striking than the success of 
 Marxian socialism is its want of sympathy with the heretical 
 doctrines of its predecessors the Communists and Fourierists, and 
 the pride it takes in regarding itself as a mere development or 
 rehabilitation of the great Classical tradition. 
 
 To give within the limits of a single chapter a risumi of a doctrine 
 that claims to review and to reconstruct the whole of economic 
 theory is clearly impossible, and we shall merely attempt an exami- 
 nation of two of Marx's more essential doctrines, namely, his 
 theory of surplus labour and value and his law of automatic appro- 
 priation, more familiarly but less accurately known as the law of 
 concentration of capital. The first is based upon a particular con- 
 ception of exchange value and the second upon a special theory 
 of economic evolution. To employ Comtean phraseology, the one 
 belongs to the realm of economic statics, the other to the domain 
 of economic dynamics. 
 
 1. SURPLUS LABOUR AND SURPLUS VALUE 
 
 The laborious demonstration which follows will become clearer if 
 we remind ourselves of the objects Marx had in view. Marx's aim was 
 to show how the propertied class had always lived upon the labour of 
 the non-propertied classes the possessors upon the non-possessing. 
 This was by no means a new idea, as we have already made its 
 acquaintance in the writings of Sismondi, Saint-Simon, Proudhon, 
 and Rodbertus. But the essence of the criticism of these writers 
 was always social rather than economic, the institution of private 
 property and its injustice being the chief object of attack. Karl 
 Marx, on the other hand, deliberately directed the gravamen of 
 the charge against economic science itself, especially against the 
 conception of exchange. He endeavours to prove that what we 
 call exploitation must always exist, that it is an inevitable outcome 
 of exchange an economic necessity to which both master and man 
 must submit. 
 
 It is convenient to begin with an examination of economic value. 
 Marx lays down the doctrine that labour is not merely the measure 
 
 English socialists, in the works of writers like Thompson especially. Nor 
 must we forget his friend and collaborator Friedrich Engels, who for the sake 
 of his master has been content to remain in the background. Engels col- 
 laborated in the publication of the famous Manifesto in 1848, and it was 
 he who piously collected and edited Karl Marx's posthumous work. It is 
 difficult to know exactly what part he played in the development of Marx's ideas, 
 but it is highly probable that it was considerable.
 
 SURPLUS LABOUR AND SURPLUS VALUE 451 
 
 and cause of value, but that it is also its substance. We have 
 already had occasion to note how Ricardo was somewhat favourably 
 inclined to the same view, though hardly willing to adopt it. There 
 is no such hesitation on the part of Marx : it is all accepted in a 
 characteristically thorough fashion. Of course, he does not deny 
 that utility is a necessary condition of value and that it is really the 
 only consideration in the case of " value in use." But utility alone 
 is not enough to explain value in exchange, since every act of 
 exchange implies some common element, some degree of identity 
 between the exchanged commodities. This identity is certainly not 
 the result of utility, because the degree of utility is different in every 
 commodity, and it is this difference that constitutes the raison d'etre 
 of exchange. The common or homogeneous element which is 
 contained in commodities themselves heterogeneous in character 
 is the quantity of labour, great or small, which is contained in them. 
 The value of every commodity is simply the amount of crystallized 
 human labour which it contains, and commodities differ in value 
 according to the different quantities of labour which are " socially 
 necessary to produce them." l 
 
 Let us take the case of a working man, an employee in any 
 kind of industry, working ten hours a day. 
 
 What will be the exchange value of the produce of his labour ? 
 It will be the equivalent of ten hours' labour, whether the com- 
 modity produced be cloth or coal or what not. And since the 
 master or the capitalist, as Marx always calls him, in accordance 
 with the terms of the wage bargain, reserves for himself the right of 
 disposing of that commodity, he sells it at its real value, which is 
 the equivalent of ten hours' labour. 
 
 1 Mar* calls attention to the fact that even Aristotle was puzzled by this 
 common element which exchanged objects seemed to possess, and by the fact 
 that exchange appeared to make them of equal value. We say that 5 beds 
 1 house. " What is that equal something, that common substance, which admits 
 f the value of the beds being expressed by a house ? Such a thing, in truth, 
 cannot exist, says Aristotle. And why not T Compared with the beds the 
 house does represent something equal to them, in so far as it represents what is 
 really equal, both in the beds and the house. And that is human labour." 
 (Kapital, p. 29 ; Moore and Aveling's translation to which the Translator is 
 indebted for the succeeding quotations also. 
 
 " If we make abstraction from its use-value we make abstraction at the same 
 time from the material elements and shapes that make the product a use-value. 
 ... Its existence as a material thing is put out of sight. Neither can it any 
 longer be regarded as the product of the labour of the joiner, the mason, the 
 spinner, or of any other definite kind of productive labour . . . there is nothing 
 left but what is common to them all ; all are reduced to one and the same sort 
 of labour human labour in the abstract." (Ibid., p. 6.)
 
 452 MARXISM 
 
 The worker himself is cut off with a wage which simply repre- 
 sents the price which the capitalist pays for his labour force (Arbeits- 
 kraft), and the capitalist reserves to himself the right of disposing 
 of the commodity at his own good pleasure. Its value is determined 
 in the same way as that of every other exchangeable commodity. 
 Labour-force or manual labour is just a commodity, and its value 
 is determined by the number of hours of labour necessary for its 
 production. 1 
 
 " The quantity of labour necessary to produce the labour- force " 
 is a somewhat formidable expression, and it is very difficult for any 
 one who is beginning a study of Marx to appreciate its significance, 
 but it is very essential that we should try, since everything turns 
 upon a clear understanding of this phrase. But it is really not so 
 mysterious after all. Suppose that instead of the labour of an 
 artisan we take the work of a machine. No engineer would be 
 surprised if we asked him the running expenses of that machine, 
 and he might reply that it was costing one or two tons of coal per 
 hour or eight or twelve per diem ; and since the value of the coal 
 merely represents a certain amount of human labour on the part 
 of the coal-miner, there would be no difficulty in expressing it in 
 terms of labour. Under the wage system the labourer is simply a 
 machine, differing from the latter merely in the smaller quantity 
 of wealth which he produces. The value of an hour's labour or a 
 day's toil can be measured by the quantity of necessaries required 
 to keep the worker in full productive efficiency during that period. 
 Every employer who pays wages in kind which is still the case in 
 agriculture always makes that kind of calculation, and even when 
 the worker is paid a money wage things are much the same, for 
 the money simply represents the cost of those necessaries. 
 
 Let us proceed a step farther. The value of the commodities 
 necessary for the upkeep of labour is never equal to the value of 
 the produce of that labour. In the instance given it would not equal 
 the value of ten hours' labour perhaps not even five. Human 
 
 1 " The capitalist epoch is therefore characterized by this, that labour-power 
 takes in the eyes of the labourer himself the form of a commodity which is 
 his property ; his labour consequently becomes wage-labour. . . . Given the 
 individual, the production of labour-power consists in his reproduction of himself 
 or his maintenance. For his maintenance he requires a given quantity of the 
 means of subsistence. Therefore the labour -time requisite for the production 
 of labour -power reduces itself to that necessary for the production of those 
 means of subsistence : in other words, the value of labour -power is the value 
 of the means of subsistence necessary for the maintenance of the labourer." 
 (Kapital, p. 149.)
 
 SURPLUS LABOUR AND SURPLUS VALUE 458 
 
 labour under normal conditions always produces more than the 
 mere value of the goods consumed. 1 
 
 This is the crux of the problem. The mystery surrounding 
 capitalist production is at last solved. The value produced by the 
 labourer passes into the hands of the capitalist, who disposes of it 
 and gives back to the labourer enough to pay for the food con- 
 sumed by him during the time he was producing the commodity. 
 The difference goes into the capitalist's pocket. The product is 
 sold as the equivalent of ten hours' labour, but the labourer 
 receives the equivalent of five hours only. Marx speaks of this as 
 surplus value (Mehrwerth), a term that has become exceedingly 
 popular since. 2 
 
 Thus the capitalist gets ten hours' labour out of the work- 
 man and only pays him for five, 3 the other five hours costing 
 him nothing at all. During the first five hours the workman produces 
 the equivalent of his wages, but after the end of the fifth hour he 
 is working for nothing. The labour of this extra number of hours 
 during which the surplus value is being produced and for which the 
 worker receives nothing Marx calls surplus labour. By that he 
 
 1 This demonstration implies that the wages drawn by the worker is neces- 
 sarily only just equal to the value of the means of his subsistence. It is the 
 old classic law of Tu; got and Ricardo over again, which Lassalle, Marx's con- 
 temporary and rival, graphically called the "brazen law of wages." We are simply 
 given a more scientific demonstration of it, that is all. 
 
 The demonstration is based upon a postulate which ought first to have been 
 proved, namely, that the quantity of labour necessary to keep the worker alive 
 is always less than the quantity which he provides for his master. But what 
 is there to prove that a man who works ten hours a day does not require all 
 those ten hours to produce sufficient for his upkeep 7 Is there some natural 
 law that supports this contention ? Marx simply regards it as an axiom and 
 attempts no proof. Everyone would admit it to be true in a general way 
 as a kind of empirical law. For were it true that man's labour was wholly 
 absorbed by the necessaries of life there would be no increase of numbers, no 
 saving of capital, and civilisation, which is the product of leisure, would never 
 have been possible. 
 
 What we have here is the Fhysiocratio " net product " once again, with this 
 difference, that instead of being confined to agricultural labour it in now regarded 
 as an attribute of labour of every kind. 
 
 * See p. 184 for what is said of Sismondi and his conception of " increment 
 value." 
 
 8 It is necessary to point out that this proportion, which gives half the value 
 to hand labour, leaving 100 per cent, surplus value, is put forward merely for 
 the sake of illustration. Some Marxians, however, among whom is Jules Guesde, 
 claim that this is actually the proportion in practice. Marx himself would 
 probably have been more moderate in his estimate, because in one part of his 
 thesis he accepts the statement of English manufacturers who declared that it 
 was just the last hour that gave them their profits.
 
 454 MARXISM 
 
 means the supererogatory labour which yields nothing to the worker, 
 but merely involves an extra tax upon his energies and simply 
 increases the capitalist's fortune. 
 
 Naturally the capitalist's interest is to augment this surplus value 
 which goes to swell his profits. This can be effected in a number of 
 ways, and an analysis of some of these processes is one of the most 
 characteristic features of the Marxian doctrine. This analysis may 
 be summed up under two main divisions. 
 
 1. The first method is to prolong the working day as much 
 as possible in order to increase the number of hours of surplus 
 labour. If the number of working hours can be increased from 
 ten to twelve the surplus will automatically grow from five to seven. 
 This is exactly what manufacturers have always tried to do. Factory 
 legislation, however, has forced some of them to limit the number 
 of hours, and this has resulted in checking the growth of surplus 
 value somewhat. But this check applies only to a limited number 
 of industries. 
 
 2. A second method is to diminish the number of hours necessary 
 to produce the worker's sustenance. Were this to fall from five to 
 three it is clear that the surplus would again rise from five to seven. 
 Such reduction is possible through the perfection of industrial 
 organisation or through a reduction in the cost of living, a result 
 which is usually effected by means of co-operation. 1 The capitalist 
 also often manages to bring this about by setting up philanthropic 
 institutions or by employing women and children, who require less 
 for their upkeep than adults. Women and children have been taken 
 from the house and the task of housekeeping and cookery has 
 been left in the hands of the men. But laws regulating the employ- 
 ment of women and children have again defeated these tactics. 2 
 
 1 The development of machinery, according to the Marxian theory, tends 
 to reduce the cost of living, and consequently the price of labour, by producing 
 cheaper clothes, furniture, etc., and to a lesser extent cheaper food. 
 
 By parity of reasoning ought it not to reduce the price of goods produced 
 by the wage-earner and so lower the surplus value ? We must be careful, 
 however, not to confuse a reduction in the price of each unit with a reduction 
 in the total value of the articles produced by machinery. A yard of cloth pro- 
 duced by a modern loom has not the same value as a yard produced by an old 
 hand -loom. But the value of the total quantity produced each day must be 
 equal to the value produced by hand, provided the same number of hours have 
 been spent upon its production. 
 
 * Marx points out that there are other ways of increasing the amount of work 
 done and of adding to the surplus value, such as the speeding up of labour. 
 Speeding up does not increase the value of the goods, because the value depends 
 upon the time spent upon them, and not upon the intensity of the effort put 
 forth, but it does lower the cost of production.
 
 SURPLUS LABOUR AND SURPLUS VALUE 455 
 Such is a very brief summary of Marx's demonstration. Its 
 real originality lies in the fact that it does not consist of commonplace 
 recriminations concerning the exploitation of workers and the greed 
 of exploiters, but shows how the worker is robbed even when he 
 gets all that he is entitled to. 1 It cannot be said that the capi- 
 talist has robbed him. He has paid him a fair price for his labour ; 
 that is, he has given it its full exchange value. The conditions of 
 the wage bargain have been observed in every particular : equal 
 value has been given in exchange for equal value. Given the 
 capitalistic regime and the free competition of labour, the result 
 could not be otherwise. The worker, perhaps, may be surprised 
 at this unexpected result, which only secures him half the value 
 of his labour, but he can only look on like a bewildered spectator. 
 Everything has passed oft quite correctly. The capitalist, no doubt, 
 is a shrewd person, and knows that when he buys labour power he 
 has got hold of a good thing, because it is the only merchandise which 
 possesses the mysterious capacity of producing more value than it 
 itself contains. 2 He knows this beforehand, and, as Marx says, 
 it is " the source of considerable pleasure to him." " It is a par- 
 ticularly happy condition of things when the buyer is also allowed 
 to sell it wherever and whenever he likes without having to part 
 with any of his privileges as a vendor." The result is that the worker 
 has no means of defence either legal or economic, and is as helpless 
 as a peasant who has sold a cow in calf without knowing it. 
 
 Hitherto we have spoken only of labour. But the outstanding 
 personage in the book the hero of the volume is capital, whose 
 
 1 " Our friend Money-bags . . . must buy his commodities at their value, 
 must sell them at their value, and yet at the end of the process must withdraw 
 more value from circulation than he threw into it at starting. . . . These are 
 the conditions of the problem. Hie Rhodus / hie adUal" (Kapital, p. 145.) 
 Cf. p. 215, where something is said about the different phases through which 
 the idea of exploitation has passed. 
 
 Although Marx never says that the worker is actually robbed by the capi- 
 talist, but simply that the capitalist profits by circumstances which he is power- 
 less to change, that has not prevented him treating the capitalist somewhat 
 harshly and unjustly even, judging from his own point of view. He speaks 
 of the capitalist as " a vampire which thrives upon the blood of others and 
 becomes stouter and broader the more blood it gets." He might have added 
 that no blame could be attached to the vampire, seeing that it only obeyed 
 the tendencies of its nature. 
 
 1 " By turning his money into commodities that serve as the material elemente 
 of a new product, and as factors in the labour process by incorporating living 
 labour with their dead substance, the capitalist at the same time convert* value 
 i.e. past, materialized, and dead labour into capital, into value big with 
 value, a live monster that is fruitful and multiplies." (Hid., p. 176.)
 
 456 MARXISM 
 
 name appears on the title-page. Our exposition of the Marxian 
 doctrine of production would accordingly be very incomplete if we 
 omitted to make reference to his treatment of capital. 
 
 Taken by itself capital is, of course, sterile, for it is understood 
 that labour is the sole source of value. But labour cannot produce 
 unless it consumes a certain proportion of capital, and it is important 
 that we should understand something of the combination of capital 
 and labour. 
 
 Marx distinguishes between two kinds of capital. The first 
 serves for the upkeep of the working-class population, either in 
 the way of wages or direct subsistence. The older economists 
 referred to it as the Wages Fund, and Marx calls it " variable capital." 
 If this kind of capital does not directly take part in production, it is 
 this fund, after all, when consumed by labour that begets value and 
 the surplus which is attached to it. 
 
 That other kind of capital which directly assists the productive 
 activity of labour by supplying it with machinery, tools, etc., 
 Marx calls " constant capital." This latter kind of capital, which 
 is not absorbed or vitalized by labour, does not result in the 
 production of surplus value. It simply produces the equivalent of 
 its value, which is the sum total of all the values absorbed during 
 the time when it was being produced. This constant capital is 
 evidently the crystallized product of labour, and its value, like that 
 of any other product, is determined solely by the number of hours 
 of labour it has taken to produce. This value, whether it include 
 the cost of producing the raw material or merely the cost of labour 
 employed in elaborating it, should be rediscoverable in the finished 
 product. But there is nothing more no surplus. The economists 
 refer to this as depreciation, and everyone knows that depreciation 
 implies no profits at any rate. 1 
 
 It seems quite obvious that it is to the interest of the capitalist 
 to employ only variable capital, or at least that it will pay him 
 to reduce the amount of constant capital used to the irreducible 
 minimum. 2 But we are here met with an anomaly which is the 
 
 1 A potter working with his hands makes a vase in ten hours ; each vase, 
 then, costs ten hours' labour. The same potter decides to make a wheel a 
 species of fixed capital. Setting up the wheel was a hundred hours' task. If he 
 still continues to produce only one vase per diem, which is a perfectly absurd 
 proposition, for he would never have gone to the trouble of making the wheel 
 if it did not mean some advantage to him, the value of each vase will now be 
 10 hours + 100 hours divided by , which is the number of vases he would have 
 produced had he not wasted his time making a wheel. 
 
 1 Take two industries, A and B. each employing a capital of 1000. In A the
 
 SURPLUS LABOUR AND SURPLUS VALUE 457 
 
 despair of all Marxian commentators, and which must have caused 
 Marx himself some amount of embarrassment, if we may judge 
 by the laborious demonstration which he gives. 1 
 
 If fixed capital is really unproductive, how is it that modern 
 production is always increasing the quantity of fixed capital which it 
 employs, until this has now become one of its most familiar features ? 
 Is it because it yields less profit than that yielded by the smaller 
 handicrafts or agriculture ? Again, how are we to account for the 
 variation in the rates of profit in different industries according to 
 the different quantities of capital employed, seeing that it is an 
 axiom of political economy that under a regime of free competition 
 with equal security for everybody the returns on different capitals 
 should everywhere be the same ? 
 
 Marx replies by saying that the rate of profit is the same for all 
 capitalists within the country, but that this rate is the average 
 of the different rates in all the different industries. In other words, 
 it is the rate that would obtain if every industry in the country 
 employing varying amounts of fixed and circulating capital formed 
 a part of one whole. It must not be thought of as a kind of statistical 
 average, but simply as a kind of average which competition brings 
 about. The result is other than might have been expected. 2 Those 
 
 amount of fixed capital is 100 and circulating 900. In B the fixed 900 
 and the circulating 100. Admitting that surplus value is at the rate of 100 
 per cent., as in the example chosen just now, the total surplus value in A will 
 be 900, equal to a profit of 90 per cent, on a capital of 1000. B, on the other 
 hand, will only make 100 profit, which is equal to 10 per cent. 
 
 1 This explanation only appears in the later volumes, which were published 
 after his death. 
 
 It is true that Marx had drawn attention to the contradiction in the first 
 volume, but no explanation was forthcoming until the later volumes appeared. 
 Having stated that the greater quantity of surplus value is the direct result of 
 the greater proportion of circulating capital employed, he proceeds : " This 
 law clearly contradicts all experience based on appearance. Everyone knows 
 that a cotton -spinner who, reckoning the percentage on the whole of his applied 
 capital, employs much constant and little variable capital, does not, on account 
 of this, pocket less profit or surplus value than a baker who relatively sets in 
 motion much variable and little constant capital. For the solution of this 
 apparent contradiction many intermediate terms are as yet wanted, as from the 
 standpoint of elementary algebra many intermediate terms are wanted to demon- 
 strate that $ may represent an actual magnitude. . . . Vulgar economy, which, 
 indeed, has really learnt nothing, here, as everywhere, sticks to appearance* 
 in opposition to the law which regulates and explains them." (Kapital,p. 274.) 
 
 It is probable that Marx was not very well satisfied with his explanation, 
 which may account for his reluctance to publish it during his lifetime. 
 
 1 In the example just given suppose A and B represent the total industry of 
 the country : the whole nati al industry will be made up of 900 + 100
 
 458 MARXISM 
 
 industries which have a large amount of variable capital agriculture, 
 for example find themselves with just the average rate of return, 
 but draw much less in the way of surplus value than they had 
 expected, and so Marx refers to them as undertakings of an inferior 
 character. On the contrary, those industries which possess a large 
 amount of constant capital draw more than their capital had 
 led them to hope for, and Marx refers to them as industries of a 
 superior character. 1 Hence those industries which employ a con- 
 siderable amount of machinery expand at the expense of the others. 
 It is because the latter kind find themselves in a more favourable 
 position, or, in other words, realize greater profits, that they do 
 employ surplus labour, from which surplus value is naturally 
 derived. 2 
 
 While admiring the ingenuity of the dialectics, we must not 
 blind ourselves to the simple fact which Marx was so anxious to hide, 
 but which is nevertheless implicit in all this, namely, that the rate 
 of profit, which means also the value of the goods, is regulated by 
 competition that is, by demand and supply but bears no relation 
 to the quantity of labour employed. We must also remember that 
 the entrepreneur, far from seeing his profits diminish as he employs 
 less human labour, finds them increasing. This contradiction is 
 
 circulating capital and 100 + 900 fixed 2000 altogether. If the surplus 
 value be at the rate of 100 per cent, of the circulating capital, the total capital 
 value will be 900 + 100 =- 1000 on a capital of 2000, or a percentage of 50. 
 
 1 Taking the example given on p. 427, the mean of 900 + 100 500, and 
 industry A, instead of 90 per cent., will draw only 50 per cent, profit, while 
 industry B, instead of drawing only 10 per cent., will draw 50 per cent. 
 
 1 We have indifferently employed the terms " profit " and " surplus value " 
 simply because the former is a much more familiar word. But we must warn 
 the reader against thinking that the two terms are synonymous. The surplus 
 value is all that part of the value of the produce which is over and above the 
 expenses of labour involved in its production that enormous slice which becomes 
 the property of every class in society except the workers, not merely the employers, 
 but merchants, landlords, etc. ; while profit is that part of the surplus value 
 which the employers of labour keep for their own use. The rate of profit also 
 is something quite different from the percentage of surplus value, as we shall 
 see later. 
 
 We must call attention once more to the different interpretations which have 
 been given of the term " profit." Marx and the English economists take the 
 word to comprise the whole revenue of capital under a regime, of free competition, 
 no distinction being drawn between profit properly so called and interest. To- 
 day we understand by profit the income drawn by the entrepreneur as distinct 
 from the capitalist as the result of certain favourable circumstances, notably 
 imperfect competition. 
 
 It would be absurd to speak of a law of equality of profit, seeing that profit, 
 as we have defined it, is, like rent, a differential revenue.
 
 LAW OF CONCENTRATION OR APPROPRIATION 459 
 
 just one of those flaws that finally cause the downfall of the majestic 
 edifice so laboriously raised by Marx. 
 
 2. THE LAW OF CONCENTRATION OR APPROPRIATION 
 
 THE law of concentration of capital, 1 which can only be interpreted 
 
 in the light of economic history, is an attempt to show that the 
 
 regime of private property and personal gain under which we live 
 
 is about to give place to an era of social enterprise and collective 
 
 property. 8 Let us try to follow the argument as given by 
 
 Marx. 
 
 Again must we cast back our thoughts to a period before the 
 earliest beginnings of capital in the sixteenth century a period 
 when, according to the socialists, there existed neither capital nor 
 capitalist. Capital in the economic sense of a mere instrument of 
 production must have existed even before this time, but the socialists 
 are of opinion that it had quite a different significance then, and 
 it is important that we should appreciate their point of view. Their 
 employment of the term is closely akin to the vulgar use of the word 
 as anything that yields a rent, and yields the said rent as the result, 
 
 1 We are fully aware of the fact that our method of approach must appear 
 absurd from the Marxian standpoint, because it lays Marx open to the charge 
 of starting with a preconceived idea, much after the style of economists like 
 Bastiat, for example. Such a method, it is contended, is utterly unscientific 
 and unworthy of a great mind like Marx's. 
 
 However great he may have been, we cannot help thinking that, in common 
 with most scientists, he discovered just what he was looking for, and it would 
 be difficult to prove that Marx was not a socialist long before he began the 
 writing of Kapital, even long before he had constructed a system at all. 
 
 Our object in stating the conclusion first of all is to help the reader to an 
 understanding of the argument, but it is quite open to anyone who thinks 
 differently to say that Marx had not the least idea where the analysis would 
 lead him. 
 
 1 The general use of the term " collectivism " is largely due to Marx. While 
 '* collectivism " occurs almost on every page of the Manifesto, the term " com- 
 munism," on the other hand, is never once employed. 
 
 James Guillaume, in the preface to the second volume of Bakunin's works, 
 p. xxxvi, gives the following account of the origin of the word " collectivism " : 
 " At the fourth General Congress of the International, held at Bale in 1869, almost 
 every delegate voted in favour of collective property. But there were two 
 distinct opinions cherished by the delegates present. The German-Swiss, the 
 English, and the German delegates were really State communists. The Spanish, 
 Belgian, French-Swiss, and most of the French delegates were federal or anarchist 
 communists who took the name of collectivists. Bakunin belonged to the 
 second group, and to this group also belonged the Belgian Paepe and the French 
 Varlin." Bakunin always spoke of himself as a collectivist and not a com- 
 munist, and in this respect he differs from Marx. The habit of thinking that 
 all anarchists are communists is largely due to Kropotkin.
 
 460 MARXISM 
 
 not of the capitalist's labour, but of the toil of others. But undei 
 the guild system which preceded this condition of things the majority 
 of the workers possessed most of the instruments of production 
 themselves. 
 
 Then follows a description of a series of changes which we cannot 
 attempt to study in detail, but which forms a singularly dramatic 
 chapter in the writings of Marx. New means of communication 
 are established and new markets opened as the result of important 
 mechanical discoveries coupled with the consolidation of the great 
 modern States. The rise of banks and of trading companies, together 
 with the formation of public debts, all this resulted in the concen- 
 tration of capital in the hands of a few and the expropriation of the 
 small proprietor. 
 
 But all this was only a beginning. If capital in this newer sense 
 of an instrument for making profit out of the labour of others was 
 ever to come into its own and develop, if the surplus labour and 
 surplus value of which we have given an analysis were really to 
 contribute to the growth and upkeep of this capital, it was necessary 
 that the capitalist should be able to buy that unique merchandise 
 which possesses such wonderful qualities in the open market. But 
 labour-force can never be bought unless it has been previously 
 detached from the instruments of production and removed from its 
 surroundings. Every connexion with property must be severed, 
 every trace of feudalism and of the guild system must be removed. 
 Labour must be free that is, saleable ; or, in other words, it " must 
 be forced to sell itself because the labourer has nothing else to sell." 
 For a long time the artisan was in the habit of selling his goods 
 to the public without the intervention of any intermediary, but 
 a day dawned when, no longer able to sell his products, he was 
 reduced to selling himself. 1 
 
 The creation of this new kind of property based upon the labour 
 of others meant the extinction of that earlier form of property 
 founded upon personal labour and the substitution for it of the 
 modern proletariat. This was the task to which the bourgeoisie 
 resolutely set itself for about three centuries, and its proclamation 
 of the liberty of the labourer and the rights of man is just its 
 paean of victory. Its task was accomplished. The expropriated 
 
 1 " We think we can perceive a change in the physiognomy of our dramatis 
 personas. He who before was the money-owner now strides in front as capi- 
 talist ; the possessor of labour-power follows as his labourer. The one with an 
 air of importance, smirking, intent on business ; the other timid and holding 
 back, like one who is bringing his own hide to market and has nothing to expect 
 but abiding." (Kapital, p. 155.)
 
 LAW OF CONCENTRATION OR APPROPRIATION 461 
 
 artisan who was already swelling the ranks of the proletariat seemed 
 an established fact. 
 
 In reality this end was only partially accomplished even in the 
 more capitalistic countries, but that there is a general movement in 
 that direction seems clear in view of the following considerations. 
 
 (a) The most suggestive fact in this connexion is the growth of 
 production on a large scale, resulting in the employment of machinery 
 and in the rise of new forms of organisation such as trusts and 
 cartels, new systems that were unknown in Marx's day, but which 
 have helped to confirm his suspicions. These trusts and cartels 
 are especially important from a social point of view because they 
 not onty absorb the capital of the small independent proprietor, but 
 swallow the medium-sized industry as well. This wonderful expan- 
 sion of production on a large scale means a corresponding growth in 
 the numbers of the proletariat, and capitalism, by increasing the 
 number of wage-earners, helps to swell the ranks of its own enemies. 
 " What the bourgeoisie produces, above all, therefore, are its own 
 gravediggers." 1 
 
 (b) Over-production is another fruitful method. A contraction 
 of the market results in a superabundance of workmen whose services 
 are always available. They form a kind of industrial reserve army 
 upon which the capitalist may draw at his pleasure at one moment 
 indiscriminately taking on a number of them, and throwing them 
 back on to the streets again as soon as the demand shows signs of 
 slackening. 8 
 
 (c) The concentration of the rural population in towns is another 
 contributing factor. This movement itself is the result of the 
 disappearance of the small holder and the substitution of pastoral 
 for arable farming, the outcome of it all being an addition to the 
 ranks of the expropriated proletariat of an increasing number of 
 hitherto independent proprietors and producers. 
 
 Such is the advent and growth of capitalism. It comes into the 
 world " with bloody putrescence oozing out of every pore." How 
 different is the real history of capital from the idyllic presentation to 
 which we are treated by the economists 1 They love to picture it 
 as the slowly accumulated fruit of labour and abstinence, and the 
 coexistence of the two classes, the capitalists and the workers, 
 is supposed to date from an adventure that befell them both a few 
 
 1 Manifesto, 1. 
 
 * One of the chief objects of the trusts is the avoidance of over-production, 
 but that does not mean less unemployment ; on the contrary, a part of their 
 policy consist* in closing down certain establishment* which appear to be un- 
 necessary.
 
 462 MARXISM 
 
 days after creation, when the good and the wise decided to follow 
 the high road of capitalism and the idle and vicious the stony path 
 of toil. 
 
 In reality capitalism is the outcome of class struggle a struggle 
 that will some day spell the ruin of the whole rSgime, when the 
 expropriators will themselves be the expropriated. We are given 
 no details as to how this is to be accomplished, and this abstention 
 from prophecy distinguishes Marx from the Utopian socialists of the 
 last two thousand years. His one object was to show how those 
 very laws that led to the establishment of the regime would some 
 day encompass its ruin. 1 The force of circumstance seemed to 
 make self-destruction inevitable. " The capital regime," writes 
 one Marxian socialist, " begets its own negation, and the process 
 is marked by that inevitability which is such a feature of all natural 
 laws." 2 The following facts are deduced as proofs that this process 
 of self-destruction is already in course of being accomplished. 
 
 (a) Industrial crises, whether of over-production or under- 
 consumption, have already become a chronic evil. The fact that 
 to some extent they are to be regarded as the direct outcome of the 
 capitalist system of production cannot prevent their damaging that 
 system. The continual growth of fixed at the expense of circu- 
 lating capital, involving as it does the substitution of machinery for 
 hand labour, must also involve a continual reduction of the surplus 
 value. In order to counteract this tendency the capitalists find 
 themselves forced to keep ahead with production ; they are driven 
 to rely upon quantity, as they put it. The workers, on the other 
 hand, find that it is gradually becoming impossible for them to buy 
 the products of their labour with the wages which they get, because 
 they never get a wage which is equal to the value of the product of 
 their labour. Moreover, they periodically find themselves out of 
 employment altogether and almost on the verge of starvation. 
 Proudhon, as we have already seen, laid considerable stress upon 
 this, and it is one of the instances in which Marx is obviously 
 influenced by Proudhon. 
 
 The idea which underlies the Marxian theory is that every crisis 
 involves a readjustment of the equilibrium between fixed and circu- 
 lating capital. The growth of the former, though continuous, is 
 not always uniform, and whole sections of it may occasionally 
 be found to be without solid foundation which would warrant such 
 expansion. But the crises which result in the destruction of these 
 
 1 See the Manifesto for an eloquent statement of this. 
 1 Labriola.
 
 LAW OF CONCENTRATION OR APPROPRIATION 463 
 
 speculative accretions give a new spirit to the creation of further 
 surplus value, which results in the creation of further fixed capital 
 and more crises, and so the process goes on. 1 
 
 (b) The growth of pauperism, which is the direct outcome of 
 crises and want, is another factor. "The bourgeoisie is unfit any 
 longer to be the ruling class in society, and to impose its conditions 
 of existence upon society as an overriding law. It is unfit to rule 
 because it is incompetent to assure an existence to its slave within 
 his slavery, because it cannot help letting him sink into such a state 
 that it has to feed him instead of being fed by him." 
 
 (c) The rapid multiplication of joint stock companies is the 
 final buttress with which the Marxians have strengthened their 
 contention. Under the joint stock principle the right of property 
 is simply reduced to the possession of a few strips of paper giving 
 the anonymous owner the right to draw dividends in some commer- 
 cial concern or other. Profit is seen in all its nakedness as a dividend 
 which is wholly independent of all personal effort and produced 
 entirely as the result of the workers' drudgery. The duty of per- 
 sonally supervising the methods of production and of opening up 
 new and better ways of manufacturing, which served to disguise 
 the real character of the individual employer and to justify his 
 existence, is no longer performed by the owner, but falls to the lot 
 of two new functionaries, the parasitic company director on the 
 one hand and the salaried official on the other. 
 
 Once the whole industry of a country becomes organized on a 
 joint stock basis or, better still, once it passes over into the 
 hands of a trust, which is simply a manifestation of the joint-stock 
 principle at its highest expropriation will be a comparatively 
 simple matter. By a mere stroke of the pen property hitherto 
 held by private shareholders will be transferred into the custody 
 of the State with hardly a change in the economic mechanism itself. 
 
 Thus the expropriation of the bourgeoisie will be a much easier 
 task than was the expropriation of the artisan by the bourgeois a 
 few centuries ago. In the past it was a case of the few subjugating 
 the many, but in the future the many will overwhelm the few 
 thanks to the law of concentration. 
 
 But what is to be the outcome of the Marxian programme (we 
 cannot speak of its aim or ideals, for Marx scorned such terms) ? 
 The general opinion seems to be that it involves the abolition of 
 private property, and that the opinion is not altogether without 
 foundation may be seen from a perusal of the Manifesto, where we 
 1 Kapital, p. 647. ' Manifesto, f 1.
 
 464 MARXISM 
 
 read that " the theory of the Communists may be summed up in the 
 single sentence : Abolition of private property." 1 
 
 The Manifesto also explains in what sense we are to understand 
 this. The private property which so much needs suppressing is 
 not the right of the worker to the produce of his own toil, but the 
 right of others to appropriate for themselves the produce of that 
 labour. This is private property as they understand it. They 
 think, however, it would be better to call it bourgeois property, and 
 they feel quite confident that it is destined to disappear under a 
 collectivistic rigime. As to a man's right to the product of his 
 own labour, that surely existed formerly, before the peasant and the 
 craftsman were overwhelmed by capitalism and replaced by the 
 proletariat. Collectivism, far from destroying this kind of property, 
 will rather revive it, not in the antiquated individualistic form of 
 letting each man retain his own, which is obviously impossible 
 under division of labour arid production on a large scale, but of 
 giving to every man a claim upon the equivalent of what he has 
 produced. 2 
 
 This twofold task can only be accomplished by undoing all that 
 capitalism has done ; by taking from the capitalists the instruments 
 of production which they now possess and restoring them to the 
 workmen, not individually that would be impossible under modern 
 conditions but collectively. To adopt the formula which figures 
 at the head of the party's programme, this means the socialisation 
 of the means of production land, including surface and subsoil, 
 factories and capital. The produce of everyone's labour, aftei 
 allowing for certain expenses which must be borne by the com- 
 munity as a whole, will be distributed according to each one's 
 labour. Surplus labour and surplus value will thus disappear 
 simultaneously. 
 
 1 Engels in his preface to the Manifesto admits that one of its objects was 
 " to announce the inevitable and imminent downfall of bourgeois property." 
 
 Nowadays, however, it is more usual to characterise the aim of collectivism 
 as an attempt to abolish the wage-earning class abolition of property being 
 simply a step towards that. This is how Labriola writes in his Essai sur la 
 Conception mat&rialiste (2nd ed., p. 62) : " The proletariat must learn to con- 
 centrate upon one thing, namely, the abolition of the wage-earner." 
 
 It is well to remember that such is also the aim of the Associationists, the 
 co-operators, and the Radical Socialists. They proceed, however, from the oppo- 
 site point of view, and would multiply property rather than abolish it, thinking 
 that the latter process would merely universalise the wage-earner. 
 
 s " Communism deprives no man of the power to appropriate the products 
 of society. All that it does is to deprive him of the power to subjugate the 
 labour of others by means of such appropriation." (Manifesto, 2.)
 
 THE MARXIAN SCHOOL 465 
 
 This expropriation of the capitalists will be the final stage, for, 
 unlike the preceding movements, it will not be undertaken for the 
 benefit of a single class not even for the benefit of the workers. 
 It will be for the interest of everybody alike, for the benefit of the 
 nation as a whole. It will also be adequate to cope with the change 
 which industry has recently undergone ; in other words, both 
 production and distribution will be on a collective basis. 
 
 II : THE MARXIAN SCHOOL 
 
 AFTER this summary exposition of the principal theories of Karl 
 Marx, we must now try to fix the general character of the school 
 that bears his name l and to distinguish it from the other socialist 
 schools that we have already studied. 
 
 (a) In the first place, it proudly claims for its teaching the title 
 of scientific socialism, but much care must be exercised hi interpret- 
 ing the formula. No economist has ever shown such contempt or 
 betrayed such passion in denouncing Phalanst^res, Utopias, and 
 communistic schemes of every kind. To think that the Marxians 
 should add to the number of such fantastic dreams 1 What they 
 claim to do, as M. Labriola points out (may the shades of Fourier 
 forgive their presumption !), is to give a thoroughly scientific 
 demonstration of the line of progress which has actually been fol- 
 lowed by civilised societies.* Their one ambition is to gauge the 
 
 1 To say that Karl Marx was the leader of a great socialist school is hardly 
 the way to describe him, for it is necessary that we should remember that the 
 vast majority of those who consider themselves socialists are more or less his 
 disciples. The other socialist schools, the anarchists, the Fabians, the Collinsiflte, 
 and the followers of Henry George, cut a very poor figure beside his. 
 
 The bulk of his adherents is drawn either from Germany or Russia, England 
 being the country which has done least to swell the ranks of his followers. In 
 France the pure doctrine has been vigorously preached since 1878 by MM. Jules 
 Gueede and Lafargue the latter of whom is Marx's son-in-law. But a great 
 many French socialists, though collectivists in name, refuse their adhesion to 
 the Marxian doctrine in all its rigidity. They have accepted three of his main 
 principles the socialisation of the means of production, class war, and inter- 
 nationalism but reject his theory of value and his materialistic conception of 
 history. Moreover, they show no desire to break with the French socialist 
 tradition, which was pre-eminently idealistic. Benoit Malon, the founder of the 
 Revue aocialiste (1885), was one of the earliest representatives of French collec- 
 tivism, and among his successors may be reckoned M. George Renard and 
 Fourniere. 
 
 * Labriola, Essai sur la Conception materialiste de VUisloire, p. 24. The 
 Saint-Simonians had already made a similar claim. It is hardly fair to class 
 them among the Utopians, and some Marxians are quite ready to admit their 
 claim to priority in this matter.
 
 466 MARXISM 
 
 significance of the unconscious evolution through which society has 
 progressed and to point the goal towards which this cosmic process 
 seems to be tending. 
 
 The result is that the Marxian school has a conception of natural 
 laws which is much nearer the Classical standpoint than that of its 
 predecessors. Of this there can be no doubt. The Marxian theories 
 are derived directly from the theories of the leading economists of 
 the early nineteenth century, especially from Ricardo's. Marx is in 
 the line of direct succession. Not only is this true of the labour- 
 value theory and of his treatment of the conflict between profits and 
 wages, but it also applies to his theory of rent and to a whole host 
 of Ricardian doctrines that have been absorbed wholesale into the 
 Marxian philosophy. And, paradoxical as it may sound, his abstract 
 dogmatic method, his obscure style, which encourages disciples 
 to retort that the critics have misunderstood his meaning and to 
 give to many a passage quite an esoteric significance, is of the very 
 essence of Ricardo. 1 Marx's theories are, of course, supported by 
 a wealth of illuminating facts, which unfortunately have been 
 unduly simplified and drawn upon for purely imaginary conclusions. 
 We have already had occasion to remark that Ricardo also owes 
 a good deal more to the observation of facts than is generally 
 believed, and his practice of postulating imaginary conditions is 
 of course notorious. The impenitent Marxian who still wishes 
 to defend some of the more untenable theories of Marx, such as 
 his doctrine of labour-value, generally finds himself forced to admit 
 that Marx had supposed (the use of suppositions is an unfailing 
 proof of Ricardian influence) the existence of society wherein labour 
 would be always uniform in quality. 2 
 
 1 Georges Sorel, one of Marx's disciples, writing in no derogatory spirit, we 
 may be certain, expresses himself as follows : " Our experience of the Marxian 
 theory of value convinces us of the importance which obscurity of style may 
 lend to a doctrine " a remark that is applicable to other writers besides Marx. 
 
 2 See Sorel's article, Lea Polemiques pour V Interpretation du Marxisme, in 
 the Revue internationale de Sociologie, 1900, p. 248. There is no such thing as 
 a theory of value in the accepted sense of the term in Marx. What we have 
 is a theory of economic equilibrium which would only be true of a very rudi- 
 mentary kind of society. It is assumed, for example, that all industries are 
 equally easy or difficult, that all the workers are of one type, that ten men 
 working for one hour will produce the same amount of wealth no matter what 
 task they are engaged upon. It is this equality that enables comparison to be 
 made between one commodity and another, and this constitutes their value. 
 We are simply treated to an abstraction which shows that with the exercise 
 of a little ingenuity it is at least possible to reconcile the theory of time-value 
 and the theory of market price.
 
 THE MARXIAN SCHOOL 467 
 
 Marxism is simply a branch grafted on the Classical trunk. 
 Astonished and indignant as the latter may well seem at the sight 
 of the strange fruit which its teaching has borne, it cannot deny 
 the fact that it has nourished it with its own life-blood. " Das 
 Kapital" as Labriola notes, " instead of being the prologue to 
 the communal critique, is simply the epilogue of bourgeois eco- 
 nomics." 1 
 
 Not only has Marxism always shown unfailing respect for political 
 economy even when attacking individual economists, who are 
 generally accused of inability to grasp the full significance of their 
 own teaching, but, strangely enough, it betrays an equal affection 
 for capitalism. 2 It has the greatest respect for the task which it 
 has already accomplished, and feels infinitely grateful for the revo- 
 lutionary part (such are the words used) which it has played in 
 preparing the way for collectivism, which is almost imperceptibly 
 usurping its place. 8 
 
 But the Marxians have one serious quarrel with the older econo- 
 mists. It seemed to them that the earliest writers on political 
 economy never realized the relatively transient nature of the social 
 organism which they were studying. This was possibly because 
 they were conservative by instinct and had the interest of the 
 bourgeois at heart. They always taught, and they fully believed it, 
 that private property and proletarianism were permanent features 
 of the modern world, and that social organisation was for ever 
 destined to remain upon a middle-class foundation. They were at 
 least unwilling to recognize that this also, like the rest, was simply a 
 historical category, and, like them, also was destined to vanish. 4 
 
 1 Conception materialiste, p. 91. Sorel says : " Marxism is really much 
 more akin to the Manchester doctrine than to the Utopian. We must never 
 forget this." (La Decomposition du Marxisme, p. 44.) 
 
 1 " The bourgeoisie, historically, has played a most revolutionary part. . . . 
 The bourgeoisie cannot exist without constantly revolutionising the instruments 
 of production, and thereby the relations of production, and with them the 
 whole relations of society. . . . All fixed, fast-frozen relations, with their train 
 of ancient and venerable prejudices and opinions, are swept away, all new- 
 formed ones become antiquated before they can ossify, all that is solid melta 
 into air, all that is holy is profaned." (Manifesto, 1.) 
 
 Besides, the Marxians themselves have tried to prove that capital is actively 
 undermining its own existence, which is surely the ne plus ultra of the revolu- 
 tionary temperament. 
 
 " The result is that capital has managed to solve problems which the Utopians 
 tackled in vain. It has also given rise to conditions which permit of an entrance 
 into a new form of society. Thus socialism will not need to invent new machinery 
 or to get people accustomed to them," etc. (Sorel, foe. eft., p. 41.) 
 
 1 " The economists regard the feudal institutions as artificial, the bourgeois
 
 468 MARXISM 
 
 (b) The Marxian school also differs from every previous socialist 
 school in the comparative ease with which it has eschewed every 
 consideration of justice and fraternity, which always played such 
 an important role in French socialism. It is interested, not in the 
 ideal, but in the actual, not in what ought to be, but in what is likely 
 to be. " The theoretical conclusions of the communists are in ric 
 way based on ideas or principles that have been invented, or dis- 
 covered by this or that would-be universal reformer. They merely 
 express, in general terms, actual relations springing from an existing 
 class struggle, from a historical movement going on under our very 
 eyes." 1 
 
 To economic facts they attributed an importance altogether 
 transcending their influence in the economic sphere. Their belief 
 was that the several links which unify the many-sided activities of 
 society, whether in politics, literature, art, morality, or religion, 
 are ultimately referable to some economic fact or other. None of 
 them but is based upon a purely economic consideration. Most 
 important of all are the facts relating to production, especially to 
 the mechanical instruments of production and their operation. If 
 we take, for example, the production of bread and the successive 
 stages through which the mechanical operation of grinding has 
 passed from the hand-mill of antiquity to the water-mill of the Middle 
 Ages and the steam-mill of to-day, we have a clue to the parallel 
 development of society from the family to the capitalistic system 
 and from the capitalistic to the trust, with their concomitants 
 slavery, serfdom, and proletarianism. This affords a far better 
 explanation of the facts than any bourgeois cant about " the growth 
 of freedom " or humbug of that nature. These are the real founda- 
 tions upon which every theory has to be reared. This material- 
 istic conception of history, 2 implying as it does a complete philosophy 
 of history, is no longer confined to the purely economic domain. 
 
 {is natural. The existing economic ties, in their opinion, are elemental laws that 
 must always bind society. . . . They have had some history, that is all we can 
 really say." (Marx, Misert de la Philosophic, pp. 167-168.) 
 
 1 Manifesto, 2. 
 
 * Whenever they change their method of production men also change their 
 whole social outlook. " The hand-mill gave us the servile State ; the steam- 
 mill is the parent of the industrial, capitalist State." (Misere de la Philosophic, 
 2nd ed., p. 156.) This oft-repeated phrase contains a picturesque antithesis 
 rather than a scientific formula of historical materialism. In his preface to his 
 Kritik der politischen Oekonomie Marx expresses himself with much more modera- 
 tion. The following is the most important passage of that celebrated page 
 (p. 6): 
 
 " In the course of their efforts at production men enter into certain definite
 
 THE MARXIAN SCHOOL 469 
 
 Taken in the vulgar sense, it seems to involve the exclusion of 
 every moral and every humanitarian consideration. As Schaffle 
 put it in that oft-quoted phrase of his, it means reducing the social 
 question to a " mere question of the belly." The French socialists 
 find the doctrine somewhat difficult to swallow, and they hardly 
 display the same reverence for Marx as is shown in some other 
 countries. 1 
 
 The orthodox Marxians immediately proceed to point out that 
 such criticism is useless and shows a complete misunderstanding of 
 Marx's position. Materialism in the Marxian sense (and all his 
 terms have a Marxian as well as the ordinary significance) does not 
 exclude idealism, but it does exclude ideology, which is a different 
 thing. No Marxian has ever advocated leaving mankind at the 
 mercy of its economic environment ; on the contrary, the Marxian 
 
 and necessary relations which may be wholly independent of their own individual 
 preferences such industrial ties being, of course, correlative to the state of their 
 productive forces. Taken together, all these links constitute the economic struc- 
 ture of society. In other words, it supplies a basis upon which the legal and 
 political superstructure is raised, and corresponding to it are certain social forms 
 which depend upon the public conscience. The method of producing commo- 
 dities, speaking generally, fixes the social, political, and intellectual processua 
 of life. A man's conscience has less to do with determining his manner of life 
 than has his manner of life with determining the state of his conscience." 
 
 The word " fixes," even when qualified by " speaking generally," seem* 
 a little pronounced, and Marxism has substituted the term " explained," 
 which is somewhat nearer the mark. Labriola says that " it merely represents 
 an attempt to explain historical facts in the light of the economic substructure." 
 (Conception materialiste, p. 120.) 
 
 This materialistic conception is developed in a very paradoxical fashion in 
 Loria's La Constitution sociale. He shows how all history and every war, 
 whether of Guelph or of Ghibelline, the Reformation and the French Revolution, 
 and even the death of Christ upon Calvary, rest upon an economic basis. In 
 Loria's opinion, however, this basal fact is not industrialism, but the various 
 types of land systems. See the chapter on Rent. 
 
 It would not be correct to regard Marxism as a mere expression of fatalism 
 or out-and-out determinism. The Marxian pretends to be, and as a matter of 
 fact he really is, a great believer in will-power. Once the workers see where their 
 interests really lie he would have them move towards that goal with irresistible 
 strength. It is not always even necessary to define the end quite clearly before 
 beginning to move. " Everything that has happened in history has, of course, 
 been the work of man, but only very rarely has it been the result of deliberate 
 choice and woll-considered planning on his part." (Labriola, Conception 
 matirialiste, p. 133.) Elsewhere: "The successive creation of different social 
 environments means the development of man himself." (Ibid., pp. 131-132.) 
 
 It would be beyond the scope of this work to enter into a metaphysical 
 discussion of these theories, however much one would like to. 
 
 See the works of MM. Jaures, Etude* tocialistes ; George Renard, Le Rtyimt 
 ; Fourniere, L'Individu, F Association, et I'Stat.
 
 470 MARXISM 
 
 i 
 
 builds his faith upon evolution, which implies man's conscious, but 
 not very successful, effort to improve his economic surroundings. 1 
 The materialistic conception of history apparently is simply an 
 attempt at a philosophy of human effort. 2 Criticism of such elusive 
 doctrines is not a very easy task. 
 
 (c) The socialism of Karl Marx is exclusively a working-class 
 gospel. This is its distinctive trait and the source of the power it 
 wields. To some extent it also explains its persistence. Other 
 socialist systems have been discredited and are gone, but the Marxian 
 gospel no longer, of course, the sublime masterpiece it was when 
 its author first expounded it has lost none of its ancient vigour, 
 despite the many transformations which it has undergone. 
 
 The socialists of the first half of the nineteenth century embraced 
 all men without distinction, worker and bourgeois alike, within 
 their broad humanitarian schemes. Owen, Fourier, and Saint-Simon 
 reckoned upon the co-operation of the wealthy governing classes to 
 found the society of the future. Marxism implies a totally different 
 standpoint. There is to be no attempt at an understanding with 
 the bourgeoisie, there must be no dallying with the unclean thing, 
 and the prohibition is to apply not only to the capitalists, but also 
 to the intellectuals 3 and to the whole hierarchical superstructure 
 that usually goes by the name of officialdom. Real socialism aims 
 at nothing but the welfare of the working classes, which will only 
 become possible when they attain to power. 
 
 It may, of course, be pointed out that socialism has always 
 involved some such struggle between rich and poor, but it is equally 
 
 1 Labriola, op. cit. Vandervelde (L'Idealisme Marxists, in La Revue socialiste, 
 February 1904) says that " upon final analysis it will be found that Marx's whole 
 argument rests upon a moral basis, which is that justice requires that every man 
 should get all that he produces." 
 
 M. Landry, in a book of lectures delivered by different authors entitled 
 Etudes sur la Philosophic morale au XI Xe Siecle (p. 164), is of an entirely different 
 opinion. He thinks that Marx's moral basis is simply potentiality. La othei 
 words, everything that has been created in the ordinary course of economic 
 development is moral, everything that has been destroyed is immoral. 
 
 1 Hence the alliance of the Marxians with what appears to be a directly 
 opposite philosophy that of William James and Bergson (see Guy Grand, La 
 Philosophic syndicaliste). 
 
 ' Manifesto. It is impossible to do away with the intellectuals altogether, 
 but they may be reduced to the rank of mere wage-earners. " The Marxians 
 always regarded revolution as the special privilege of the producers, by 
 whom, of course, they understood the manual workers, who, accustomed as 
 they are to nothing but the factory regime, would force the intellectuals also to 
 supply some of the more ordinary wants of life." (Sorel, Decomposition dv 
 Marxisme, p. 51.)
 
 THE MARXIAN SCHOOL 471 
 
 correct to say that the battle has hitherto been waged over the 
 question of just distribution. Beyond that there was no issue. 
 But in the Marxian doctrine the antagonism is dignified with the 
 name of a new scientific law, the "class war" the worker against^ 
 the capitalist, the poor versus the rich. The individuals are the 
 same, but the casus belli is quite different. " Class war " is a 
 phrase that has contributed not a little to the success of Marxism, 
 and those who understand not a single word of the theory and 
 this applies to the vast majority of working men will never forget 
 the formula. It will always serve to keep the powder dry, at any 
 rate. 
 
 " Class war " was not a new fact. " The history of all hitherto 
 existing society is the history of class struggles." * But although 
 it has always existed, it cannot continue for ever. And the great 
 struggle that is now drawing nigh and which gives us such a tragic 
 interest in the whole campaign will be the last. The collectivist 
 regime will destroy the conditions that breed antagonism, and so 
 will get rid of the classes themselves. Let us note in passing 
 that this prophecy is not without a strong tinge of that Utopian 
 optimism which the Marxians considered such a weakness in the 
 earlier French socialism. 
 
 (d) A final distinction of Marxism is its purely revolutionary or <-- 
 catastrophic character, which is again unmistakably indicated by its 
 adoption of " class war " as its watchword. But we have only to 
 remind ourselves that the adjective " revolutionary " is applied by 
 the Marxians to ordinary middle-class action to realize that the term 
 is employed in a somewhat unusual fashion. 
 
 The revolution will result in the subjection of the wealthier 
 classes by the working men, but all this will be accomplished, not 
 by having recourse to the guillotine or by resorting to street rioting, 
 but in a perfectly peaceful fashion. The means may be political 
 and the method even within the four corners of the law, for the 
 working classes may easily acquire a majority in Parliament, seeing 
 that they already form the majority of the electors, especially 
 in those countries that have adopted universal suffrage. The 
 
 1 Manifesto, 2. It is necessary that we should be reminded of the 
 fact that the Saint-Simonians had already emphasised the antagonism by 
 speaking, not of rich and poor, but of idlers and workers. The differentiation, 
 that is to say, was economic. The Marxian distinction is quite different, for 
 the Saint-Simonians included within the category workers, bankers, and 
 employers, for example, who are excluded by the Marxians. In some cases 
 the Saint-Simonians thought they had even better claims to inclusion than th 
 ordinary worker.
 
 472 MARXISM 
 
 method may be simply that of economic associations of working 
 men taking all economic services into their own hands. 1 
 
 The final catastrophe may come in yet another guise, and most 
 Marxians seem to centre their hopes upon this last possibility. This 
 would take the form of an economic crisis resulting in the complete 
 overthrow of the whole capitalist regime a kind of economic felo 
 de se. We have already noted the important place which crises 
 hold in the Marxian doctrines. 
 
 But if Marxism does not necessarily involve resort to violence, 
 violent methods are not excluded. Indeed, it considers that some 
 measure of struggle is inevitable before the old social forms can 
 be delivered of the new before the butterfly can issue from the 
 chrysalis. " Force is the birth-pangs of society." 2 
 
 This is not the place for false sentimentalism. Evil and suffering 
 seem to be the indispensable agents of evolution. Had anyone been 
 able to suppress slavery or serfdom or to prevent the expropriation 
 of the worker by the capitalist, it would have merely meant drying 
 up the springs of progress and more evil than good would probably 
 have resulted. 3 Every step forward involves certain unpleasant 
 conditions, which must be faced if the higher forms of existence 
 are ever to become a reality. And for this reason the reform 
 of the bourgeois philanthropist and the preaching of social peace 
 would be found to be harmful if they ever proved at all successful. 
 There is no progress where there is no struggle. This disdainful 
 indifference to the unavoidable suffering involved in transition is 
 inherited from the Classical economists, and provides one more point 
 of resemblance between the two doctrines. Almost identical terms 
 were employed by the Classical economists when speaking of com- 
 petition, of machinery, or of the absorption of the small industry 
 by a greater one. In the opinion of the Marxians no attempt at 
 improving matters is worthy the name of reform unless it also 
 
 1 The first of these means, namely, the acquiring of public works by the 
 State, is spoken of as unified socialism in Prance, whereas the second, which relies 
 upon direct action without the assistance of any political organisation, is known 
 as syndicalism and is represented by the Confederation g6nerale du Travail 
 (see p. 480). 
 
 * Marx, Misire de la Philosophie. " What does the word ' revolt ' imply T 
 Simply disobedience to law. But what are these laws that govern our lives T 
 They are just the products of bourgeois society and of the institutions which 
 they are supposed to defend. Revolution will simply mean replacing these 
 laws by others which will have an entirely different kind of justification." 
 
 1 " It is the worst side of things that begets movement and makes history 
 by begetting strife.'' (Ibid., 2nd ed., p. 173.)
 
 THE MARXIAN CRISIS AND THE NEO-MARXIANS 473 
 
 speeds the coming revolution. " But it can shorten and lessen the 
 birth-pangs." * 
 
 III : THE MARXIAN CRISIS AND THE NEO-MARXIANS 
 
 To speak of Neo-Marxism, which is of quite recent growth, is to 
 anticipate the chronological order somewhat, but some such proce- 
 dure seems imperative in the interests of logical sequence. It has 
 the further merit of dispensing with any attempt at criticism, a 
 task which the Neo-Marxians a have exclusively taken upon their 
 own shoulders. 
 
 The two phases of the crisis must needs be kept distinct. The 
 one, which is predominantly critical or reformative, if that phrase 
 be preferred is best represented by M. Bernstein and his school. 
 The other, which is more or less of an attempt to revive Marxism, 
 has become current under the name of Syndicalism. 
 
 1. THE NEO-MARXIAN REFORMISTS 
 
 If we take Marx's economic theories one by one as we have done, 
 we shall find that there is nothing very striking in any of them, 
 and that even the most important of them will not stand critical 
 scrutiny. We might even go farther and say that this work of 
 demolition is partly due to the posthumous labours of Marx himself. 
 It was the publication of his later volumes that served to call atten- 
 tion to the serious contradiction between the later and the earlier 
 sections of his work. Marxism itself, it seems, fell a prey to that 
 law of self-destruction which threatened the overthrow of the whole 
 capitalistic regime. Some of Marx's disciples have, of course, tried 
 to justify him by claiming that the work is not self-contradictory, 
 but that the mere enumeration of the many conflicting aspects of 
 capitalistic production strikes the mind as being contradictory. 8 If 
 this be so, then Kapital is just a new edition of Proudhon's Con- 
 tradictions tconomiques, which Marx had treated with such biting 
 ridicule. And if the capitalist rlgime is really so full of contradic- 
 tions that are inherent in its very nature, how difficult it must be 
 
 1 Preface to Kapital, p. xix. 
 
 * For the evolution of Marxism see Sombart's lively volume Sozialismus 
 und sozialt. Bewegung im 19 Jahrhundert (6th ed., 1908), and also Georges Sorel, 
 La Decomposition du Marxisme (1908). 
 
 * Labriola, Socialisme et Philosophic, p. 29. Others declare more unmis- 
 takably still that "these obscure formula [the writer is thinking of surplui 
 labour] lead to equivocation and must be banished from the science altogether." 
 (Sorel, Revue internationale de Sociologie, 1900, p. 270.) 
 
 K.D.
 
 474 MARXISM 
 
 to tell whether it will eventuate in collectivism or not and how 
 very rash is scientific prophecy about annihilation and a final 
 catastrophe ! 1 
 
 The fundamental theory of Marxism, that of labour- value, appears 
 to be abandoned by the majority of modern Marxians, who are 
 gradually veering round and adopting either the " final utility " or 
 the " economic equilibrium " theory. 2 Even Marx himself, despite 
 his formal acceptance of the labour-value theory, is constantly 
 obliged to admit not explicitly, of course that value depends 
 upon demand and supply. 3 Especially is this the case with profits, 
 as we have already had occasion to remark. What appears as an 
 indisputable axiom in the first volume is treated as a mere working 
 hypothesis in the later ones. 
 
 But seeing that the other Marxian doctrines the theories of 
 surplus value and surplus labour, for example are mere deductions 
 from the principle of labour-value, it follows that the overthrow of 
 the first principle must involve the ruin of the other two. If labour 
 does not necessarily create value, or if value can be created without 
 labour, then there is no proof that labour always begets a surplus value 
 and that the capitalist's profit must largely consist of unremunerated 
 
 1 M. Sorel says of the revolutionary movement that everything connected 
 with it is very improbable. (Decomposition du Marxisme.) 
 
 1 The Italian syndicalist Arthur Labriola (Revue socialiste, 1899, vol. i, 
 p. 674) writes as follows : " While we Marxians are trying to repatch the 
 master's cloak political economy is making some headway every day. If we 
 compare Marx's Kapital with Marshall's Principles chapter by chapter, that is 
 to say we shall find that problems which required a few hundred pages in the 
 Kapital are solved in a few lines by Marshall." B. Croce (Materialism*) storico 
 ed Economia marxistica, 1900, p. 105) writes thus : "I am strongly in favour 
 of economic construction along Hedonistic lines. But that does not satisfy the 
 natural desire for a sociological treatment of profits, and such treatment is 
 impossible unless we make use of the comparative considerations suggested 
 by Marx." Lastly, Sorel, in Saggi di Critica del Marxismo (1903, p. 13) 
 says : " It is necessary to give up the attempt to transform socialism into a 
 science." 
 
 1 Especially in that passage to which Bernstein calls attention : " According 
 to the law of value not merely must one devote the socially necessary amount 
 of time to the production of each commodity, but each group of commodities 
 must have such extra effort spent upon it as the nature of the commodity or 
 the character of the demand requires. The first condition of value is utility or 
 the satisfaction of some social need that is, value in use raised to euch a degree 
 of potentiality as shall determine the proportion of total social labour to each 
 of the various kinds of production." (Kapital, vol. iii.) 
 
 Bernstein adds : " This admission makes it impossible to treat the themes 
 of Gossen, of Jevons, and of Bohm-Bawerk as so many insig uficant irrelevancies. 
 (Die Voraussetzungen dee Sozialismtu.)
 
 THE MARXIAN CRISIS AND THE NEO-MARXIANS 475 
 
 labour. The Neo-Marxians in reply point to the fact that surplus 
 labour and surplus value do exist, else how could some individuals 
 live without working? They must obviously be dependent upon 
 the labour of others. 1 All this is very true, but the fact had been 
 announced by Sismondi long before, and the evil had been denounced 
 both by him and the English critics. It is the old problem of 
 unearned increment which formed the basis of Saint-Simon's 
 doctrine and Rodbertus's theory, and which has been taken up quite 
 recently by the English Fabians. 
 
 It is difficult to see what definite contribution Marx has made to 
 the question, and the old problem as to whether workers are really 
 exploited or not and whether the revenues obtained by the so-called 
 idle classes correspond to any real additional value contributed by 
 themselves still remains unsettled. We can only say that his 
 historical exposition contains several very striking instances which 
 seem to prove this exploitation, and that this is really the most 
 solid part of his work. 
 
 Passing on to the law of concentration the vertebral column 
 of the Marxian doctrine we shall find upon examination that it is 
 in an equally piteous condition. The most unsparing critic in 
 this case has been a socialist of the name of Bernstein, who has 
 adduced a great number of facts a many of them already advanced 
 by the older economists which go to disprove the Marxian theory. 
 It may be impossible to deny that the number of great industries is 
 increasing rapidly and that their power is growing even more rapidly 
 than their numbers, but it certainly does not seem as if the small 
 proprietors and manufacturers were being ousted. Statistics, on 
 the contrary, show that the number of small independent manu- 
 facturers (the artisans who, according to Marxian theory, had begun 
 to disappear as far back as the fourteenth century) is actually 
 increasing. Some new invention, such as photography, cycling, 
 or the application of electricity to domestic work, or the revival of 
 an industry such as horticulture, gives rise to a crowd of small 
 industries and new manufactures. 
 
 But concentration as yet has scarcely made an appearance 
 even in agriculture, and all the efforts of the Marxians to make 
 
 1 " The surplus-value theory may be true or it may be false, but that will 
 make no difference to the existence of surplus labour. Surplus labour is a fact 
 of experience, demonstrable by observation, and requires no deductive proof." 
 (Bernstein, foe. tit., p. 42. ) That Marx did not treat it with quite the same indif- 
 ference is evident from the fact that the whole theory ia developed, not inci- 
 dentally in the course of the work, but at the very opening of the book. 
 
 1 In the book already quoted, which was published in 1899.
 
 476 MARXISM 
 
 this industry fit in with their theory have proved utterly useless. 
 America as well as Europe has been laid under tribute with a view 
 to supplying figures that would prove their contention. The 
 statistics, however, are so confusing that directly opposite conclu- 
 sions may be drawn from the same set of figures. The amount of 
 support which they lend to the Marxian contention seems very 
 slight indeed. On the whole they may be said to lend colour to 
 the opposite view that the number of businesses is at least keeping 
 pace with the growth of population. Were this to be definitely 
 verified it would set a twofold check upon the Marxian theory. Not 
 only would it be proved that petite culture is on the increase, but it 
 would also be found that it is on the increase simply because it is 
 more productive than " the great industry." 
 
 But suppose for the sake of hypothesis that we accept the law 
 of concentration as proved. That in itself is not enough to justify 
 the Marxian doctrine. To do this statistics proving an increasing 
 concentration of property in the hands of fewer individuals are also 
 necessary ; but in this case the testimony of the figures is all in the 
 opposite direction. We must not be deceived by the appearance 
 of that new species, the American millionaire. There are men who 
 are richer than the richest who ever lived before, but there are also 
 more men who are fairly rich than ever was the case before. The 
 number of men who make a fortune not a very great one, perhaps, 
 but a moderate-sized or even a small one is constantly growing. 
 Joint stock companies, which according to the Marxian view afforded 
 striking evidence of the correctness of his thesis, have, on the con- 
 trary, resulted in the distribution of property between a greater 
 number of people, which proves that the concentration of industry 
 and the centralisation of property are two different things. Or 
 take the wonderful development of the co-operative movement and 
 reflect upon the number of proletarians who have been transformed 
 into small capitalists entirely through its instrumentality. To 
 think that expropriation in the future will be easier because the 
 number of expropriated will be few seems quite contrary to facts. 
 It looks as if it were the masses, whose numbers are daily increasing, 
 who will have to be expropriated, after all. More than half the 
 French people at the present day possess property of one kind or 
 another movable property, land, or houses. And yet the collec- 
 tivists never speak except with the greatest contempt of these 
 rag-ends and tatters of property, fondly imagining that when the 
 day of expropriation comes the expropriated will joyfully throw 
 their rags aside in return for the blessings of social co- proprietorship.
 
 THE MARXIAN CRISIS AND THE NEO-MARXIANS 477 
 
 Apparently, however, the Marxians themselves no longer believe all 
 this. Their language has changed completely, and just now they 
 are very anxious to keep these rags and tatters in the hands of their 
 rightful owners. 
 
 The changes introduced into the programme as a result of this 
 have transformed its character almost completely. When it was 
 first drawn up and issued as a part of the Communist Manifesto 
 nearly fifty years ago everybody expected that the final disappearance 
 of the small proprietor was a matter of only a few years, and that 
 at the end of that time property of every description would be 
 concentrated in the hands of a powerful few. This continuous 
 expropriation would, of course, swell the ranks of the proletariat, 
 so that compared with their numbers the proprietors would be a 
 mere handful. This would make the final expropriation all the easier. 
 With such disparity in numbers the issue was a foregone conclusion, 
 no matter what method was employed, were it a revolution or merely 
 a parliamentary vote. 
 
 Unfortunately for the execution of this programme, not only do 
 we find the great capitalist still waxing strong, which is quite in 
 accordance with the orthodox Marxian view, but there is no evidence 
 that the small proprietor or manufacturer is on the wane. The 
 Marxian can scarcely console himself with the thought that the 
 revolution is gradually being accomplished without opposition when 
 he sees hundreds of peasant proprietors, master craftsmen, and 
 small shopkeepers on every side of him. Nor is there much chance 
 of forcing this growing mass of people, which possibly includes the 
 majority of the community even now, to change its views. We can 
 hardly expect them to be very enthusiastic about a programme that ' 
 involves their own extinction. 
 
 A distinction has obviously been drawn between two classes of 
 proprietors. The socialisation of the means of production is only to 
 apply to the case of wealthy landowners and manufacturers on a 
 large scale to those who employ salaried persons. But the property 
 of the man who is supporting himself with the labour of his own 
 hands will always be respected. The Marxians defend themselves 
 from the reproach of self-contradiction and opportunism by stating 
 that their action is strictly in accordance with the process of evolu- 
 tion. You begin by expropriating those industries that have arrived 
 at the capitalistic and wage-earning stage. The criterion must be 
 the presence or otherwise of a surplus value. 
 
 The conclusion is logical enough, but one would like to know 
 what is going to become of the small independent proprietor. Will
 
 478 MARXISM 
 
 he be allowed to grow and develop alongside of the one great pro- 
 prietor the State ? We can hardly imagine the two systems 
 coexisting and hopelessly intermingled, as they would have to be, 
 but still with freedom for the individual to choose between them. 
 The collectivists have at any rate made no attempt to disguise 
 the fact. They look upon it merely as a temporary concession to 
 the cowardice of the small proprietor, who will presently willingly 
 abandon his own miserable bit of property in order to share in the 
 benefits of the new regime, or who will at any rate be put out of 
 the running by its economic superiority. But since the prospects 
 do not seem very attractive to those immediately concerned, it 
 may be as well to dispense with any further consideration of the 
 subject. 
 
 But there is another question. What has become of the class 
 struggle in Neo-Marxism ? The doctrine, though not altogether 
 denied, is no longer presented as a deadly duel between two classes 
 and only two, but as a kind of confused milee involving a great 
 number of classes, which makes the issue of the conflict very uncer- 
 tain. The picture of society as consisting merely of two super- 
 imposed layers is dismissed as being altogether too elementary. On 
 the contrary, what we find is increasing differentiation even within 
 the capitalist class itself. There is a perpetual conflict going on 
 between borrower and lender, between manufacturer and merchant, 
 between trader and landlord, the last of which struggles is especially 
 prominent in the annals of politics. It has a long history, but in 
 modern times it takes the form of a political battle between the Con- 
 servative and Liberal parties, between Whigs and Tories. These 
 undercurrents complicate matters a great deal, and on occasion they 
 have a way of dramatically merging with the main current, when 
 both parties seek the help of the proletariat. In England, for 
 example, the manufacturers succeeded in repealing the Corn Laws, 
 which dealt a hard blow at the landed proprietors, who in turn 
 passed laws regulating the conditions of labour in mines and factories. 
 In both cases the working classes gained something tertius gaudens / 
 Then there are the struggles among the working classes them- 
 selves. Not to speak of the bitter animosity between the syndicate 
 rouges and the syndicate jaunes, there is the rivalry between syndi- 
 calists and non-syndicalists, between skilled workmen and the 
 unskilled. As Leroy-Beaulieu remarks, not only have we a fourth 
 estate, but there are already signs of a fifth. 
 
 And what of the great catastrophe ? The Neo-Marxians no 
 longer believe in it. The economic crises which furnished the 

 
 THE MARXIAN CRISIS AND THE NEO-MARXIANS 479 
 
 principal argument in support of the catastrophic theory are by no 
 means as terrible as they were when Marx wrote. They are no longer 
 regarded as of the nature of financial earthquakes, but much more 
 nearly resemble the movements of the sea, whose ebb and flow may 
 to some extent be calculated. 
 
 And the materialistic conception of history ? " Every unbiased 
 person must subscribe to that formula of Bernstein : The influence 
 of techni co-economic evolution upon the evolution of other social 
 institutions is becoming less and less." * What a number of proofs 
 of this we have ! Marxism itself furnishes us with some. The 
 principle of class war and the appeal to class prejudice owe much 
 of the hold which they have to a feeling of antagonism against 
 economic fatalism. In other words, they draw much of their 
 strength from an appeal to a certain ideal. It is, of course, true 
 that facts of very different character, economic, political, and moral, 
 react upon one another, but can anyone say that some one of them 
 determines all the others ? Economists have been forced to recog- 
 nise this, and the futile attempt to discover cause or effect has 
 recently given place to a much more promising search for purely 
 reciprocal relations. 
 
 It is by no means easy to determine how much Marxism there 
 is in Neo-Marxism. " Is there anything beyond the formulae which 
 we have quoted, and which are becoming more disputable every 
 day ? Is it anything more than a philosophical theory which 
 purports to explain the conflicts of society ? " a Bernstein tells us 
 somewhere that socialism is just a movement, and that " the move- 
 ment is everything, the end is nothing." * 
 
 2. THE NEO-MARXIAN SYNDICALISTS 
 
 Doctrinaire Marxism seemed languishing when a number of 
 professed disciples found a fresh opportunity of reviving its ideals 
 and of justifying its aims in a new movement of a pre-eminently 
 working-class character known as Syndicalism. 
 
 Our concern is not with the reformist movement, occasionally 
 spoken of as Trade Unionism, which constitutes the special province 
 of M. Bernstein and the Neo-Marxians of his school, 4 but rather with 
 
 1 Sorel, Lea Polimiques pour V Interpretation du Marxisme, in the Revue inter- 
 nationale de Sociologie, 1900. 
 
 1 Sorel, Decomposition du Marxisme, p. 33. 
 
 * Socialism* et Social-dimocratie, p. 234. We have recently been told that 
 syndicalism is just a literal application of Bergson's philosophy. 
 
 4 This point of view is very neatly expressed in an article of M. Berth's 
 (Mouvement aoc.ialiste, May 1908, p. 393) : " From a purely negative or critical
 
 480 MARXISM 
 
 militant syndicalism, which as yet scarcely exists anywhere except 
 in France and Italy, and which in France is represented by the 
 Confederation generale du Travail. 
 
 What connection is there between Marxism and syndicalism ? 
 Of conscious, deliberate relationship there is scarcely any. The men 
 who direct the Confederation have never read Marx, possibly, and 
 would hardly concern themselves with the application of his doctrines. 
 On the other hand, we have recently been told that the programme 
 of the Confederation generale du Travail (C.G.T.) is in strict con- 
 formity with the Marxian doctrine ; that since the reforming passion 
 has so seized hold of the Neo-Marxians as to drive them to undermine 
 the older doctrine altogether, it is necessary to turn to the new school 
 to find the pure doctrine. They make the further claim of having 
 aroused new enthusiasm for the Marxian doctrines. 
 
 (a) In the first place they have re-emphasised the essentially 
 proletarian character of socialism. Not only is there to be no 
 dealing with, capitalist or entrepreneur, but no quarter is to be given 
 to the intellectuals or the politicians. The professional labour 
 syndicate is to exclude everyone who is not a workman, and it 
 has no interest at heart other than that of the working class. 1 
 Contempt for intellectualism is a feature of Marxism, and so is the 
 emphasis laid upon the beauty and worth of labour, not of every 
 kind of labour, but merely of that labour which moulds or transforms 
 matter that is, of purely manual labour. 
 
 No institution seems better fitted to develop class feeling 
 that is, the sense of community of interests binding all the prole- 
 tarians together against the owners than the syndicat. Organisa- 
 tion is necessary if social consciousness is to develop. This is as 
 true in the economic as it is in the biological sphere, and this is why 
 the syndicat is just what was needed to transform the old socialistic 
 
 point of view we agree with Bernstein rather than the orthodox Kaufcsky. But 
 what does Bernstein propose to substitute for the revolutionary ideal impractic- 
 able as it was of the German Social Democratic party ? The alternative 
 offered is a simple democratic, reformist evolution, a political or economic 
 development which would just be a pale imitation of the bourgeois Liberal regime, 
 which it is hoped would result in the emancipation of the workers by getting rid 
 of bourgeois Liberalism altogether. The complete democratisation of politics and 
 economics would, it is hoped, effect the necessary improvement. On this point 
 we syndicalists must definitely part company with Bernstein and his confreres, 
 for what we want is not a mere evolution, but a revolutionary creation of new 
 aocial forms." 
 
 1 " An organisation of producers who will be able to manage their own affairs 
 without having recourse to the superior knowledge which the typical bourgeois 
 ic supposed to possess." (Sorel, Decomposition du Marxisme, pp. 60-61.]
 
 THE MARXIAN CRISIS AND THE NEO-MARXIANS 481 
 
 conception into real socialism. Marx could not possibly have fore- 
 seen the vast potentialities of the syndicat. If he had only known 
 it how his heart would have rejoiced ! The Neo-Marxians can 
 never speak of syndicalism without going into raptures. No other 
 new source of energy seems left in this tottering middle-class system. 
 But syndicalism has within it the promise of a new society, of a new 
 philosophy, even of a new code of morality which we may call 
 producers' ethics, which will have its roots in professional honour, 
 in the joy that comes from the accomplishment of some piece of 
 work, and in their faith in progress. 1 
 
 (6) New stress has been laid upon the philosophy of class war, 
 and a fresh appeal has been made for putting it into practice. The 
 only real, sensible kind of revolution is that which must sooner or 
 later take place between capitalists on the one hand and wage- 
 earners on the other, and this kind of revolution can only be effected 
 by appealing to class feeling and by resorting to every instrument 
 of conflict, strikes, open violence, etc. All attempts at establishing 
 an understanding with the bourgeois class, every appeal for State 
 intervention or for concessions, must be abandoned. Explicit trust 
 must be placed in the method of direct action. 2 
 
 Strife is to be the keynote of the future, and in the pending 
 struggle every trace of bourgeois legalism will be ruthlessly swept ^ 
 aside. The fighting spirit must be kept up, not with a view to the 
 
 1 " Revolutionary syndicalism is the great educative force which contem- 
 porary society has at its disposal to prepare it for the tasks which await it." 
 (Sorel, Reflexions sur la Violence, p. 244 ; 1909.) 
 
 " In the general ruin of institutions something new and powerful will remain 
 intact. This will be what is generally known as the proletarian soul, which 
 it is hoped will survive the general reassessment of moral values, but that will 
 depend on the energy displayed by the workers in resisting the corruption of 
 the bourgeoisie and in meeting their advances with the most unmistakable 
 hostility." (Ibid., p. 253.) 
 
 It is altogether a different point of view from that of the consumer, the 
 shareholder, or the " literary idler," who are only interested in the success of 
 buyers' social leagues, or in consumers' societies. Cf. p. 342. 
 
 1 This incessant struggle is what Sorel has named violence, which he thinks is 
 peculiarly healthy. " I have shown," says he, " that proletarian violence has 
 an entirely different significance from that usually attributed to it by politicians 
 and amateur students of society." It is incorrect, however, to say that he is 
 in favour of sabotage. " Sabotage," says Sorel, " belongs to the old regime. 
 but does nothing to set the worker in the way of emancipation." (Mouvemei t 
 socialiste, 1905, November 1 and 15.) 
 
 One cannot fail to see the antagonism which exists in France between the 
 Sooialistcs Unifies (which is largely recruited from the old Marxian party) 
 arid the syndicalists, who condemn both universal suffrage and parliamentary 
 action, 
 n>. Q'
 
 482 MARXISM 
 
 intensification of class hatred, but simply in order to hand on 
 the torch. 
 
 The struggle has hitherto been the one concern of the revolutionary 
 syndicalists. Unlike the socialists, they have never paid any 
 attention either to labour or to social organisation. All this has, 
 fortunately, been done by the capitalist, and all that is required 
 now is simply to remove him. 1 
 
 (c) Nor has the catastrophic thesis been forgotten. This time 
 it has been revived, not in the form of a financial crisis, but in 
 the guise of a general strike. What will all the bourgeois general- 
 ship, all the artillery of the middle class, avail in a struggle of 
 that kind ? What is to be done when the worker just folds his 
 arms and instantly brings all social life to a standstill, thus proving 
 that labour is really the creator of all wealth ? And although 
 one may be very sceptical as to the possibility of a general strike 
 the scepticism is one that is fully shared in by the syndicalists 
 themselves still this " myth," as Sorel calls it, must give a very 
 powerful stimulus to action, just as the Christians of the early 
 centuries displayed wonderful activity in view of their expectation 
 of the second coming of Christ. 
 
 The word " myth " has been a great success, not so much among 
 working men, to whom it means nothing at all, but among the 
 intellectuals. It is very amusing to think that this exclusively 
 working-class socialism, which is not merely anti-capitalist, but also 
 violently anti-intellectual, and which is to " treat the advances of 
 the bourgeoisie with undisguised brutality," is the work of a small 
 group of " intellectuals " possessed of remarkable subtlety, and 
 even claiming kinship with Bergsonian philosophy. 8 A myth 
 perhaps ! But what difference is there between being under the 
 dominion of a myth and following in the wake of a star such as 
 guided the wise men of the East, or being led by a pillar of flame 
 or a cloud such as went before the Israelites on their pilgrimage 
 towards the Promised Land ? 8 Such faith and hope borrowed from 
 
 1 " One no longer thinks of drawing up a scheme which shall determine the 
 way in which people in the future are to seek their own well-being. The problem 
 now is how to complete the revolutionary education of the proletarian." (Sorel, 
 Decomposition du Marxisms, introduction, p. 37.) 
 
 * This group is represented by the review called Le Mouvement socialise, 
 which is controlled by M. Lagardelle. Sorel has withdrawn from the group and 
 is now leading a campaign in favour of Catholic nationalism. 
 
 The recent literature of syndicalism is very extenslre. We have already 
 mentioned M. Guy Grand's La Philosophic Syndicalistt. 
 
 ' Riflexions sur la Violence, p. xxacv. We must note, however, that M. Sorel 
 protests against any confusion being made between the myth as he understands
 
 DOCTRINES INSPIRED BY CHRISTIANITY 488 
 the armoury of the triumphant Church of the first century, such a 
 conception of progress which swells its followers with a generous, 
 almost heroic passion, puts us out of touch with the historic mate- 
 rialism so dear to the heart of Marx and brings us into line with the 
 earlier Utopian socialists whom he so genuinely despised. Sorel 
 recognises this. " You rarely meet with a pure myth," says he, 
 " without some admixture of Utopianism." 
 
 CHAPTER IV: DOCTRINES THAT OWE THEIR 
 INSPIRATION TO CHRISTIANITY 
 
 EVERYONE who knows the Bible at all or has the slightest acquaint- 
 ance with the writings of the early Fathers must have been struck 
 by the number of texts which they contain bearing upon social and 
 economic questions. And one has only to recall the imprecations 
 of the prophets as they contemplate the misdeeds of merchants and 
 the greed of land-grabbers, or strive to catch the spirit of the parables 
 of Jesus or the epistles of the Fathers concerning the duty of the rich 
 towards the poor a point emphasised by Bossuet in his sermon 
 on The Eminent Dignity of the Poor or dip into the folios of the 
 Canonists or the Sumrna of Aquinas, to realise how imperative were 
 the demands of religion and with what revolutionary vehemence its 
 claims were upheld. 1 
 
 But not until the middle of the nineteenth century do we meet 
 with social doctrines of a definitely Christian type, and not till 
 then do we witness the formation of schools of social thinkers who 
 place the teaching of the Gospel in the forefront of their programme, 
 hoping that it may supply them with a solution of current economic 
 problems and with a plan of social reconstruction. 2 It is not 
 difficult to account for their appearance at this juncture. Their 
 primary object was to bear witness to the heresy of socialism, and 
 the nature of the object became more and more evident as socialism 
 
 it and Utopian socialism. The myth is obviously superior in the fact that it 
 cannot be refuted, seeing that it is merely the expression of a conviction. See 
 pp. xxv and 218 of the same work. 
 
 1 We need only recall the doctrine of usury and the legislation on the ques- 
 tion all of it the outcome of Canonist teaching. 
 
 1 A Catholic professor long since forgotten of the name of de Coux wrote as 
 follows in a book entitled Easai d" Economic politique, published in 1832: "The 
 practical application of Catholicism would result in the finest system of social 
 economy that the world has ever seen."
 
 484 DOCTRINES INSPIRED BY CHRISTIANITY 
 
 tended to become more materialistic and anti-Christian. It became 
 the Church's one desire to win back souls from the pursuit of this new 
 cult. It was the fear of seeing the people her own people enrol 
 themselves under the red flag of the Anti-Christ that roused her 
 ardour. 1 But to regard it as a mere question of worldly rivalry 
 would be childish and misleading. Rather must we see in it a 
 reawakening of Christian conscience and a searching of heart as 
 to whether the Church herself had not betrayed her Christ, and in 
 contemplation of her heavenly had not forgotten her earthly mission. 
 which was equally a part of her message ; whether in repeating the 
 Lord's Prayer for the coming of the Kingdom and the giving of daily 
 bread she had forgotten that the Kingdom was to be established 
 on earth and that the daily bread meant, not charity, but the wages 
 of labour. 
 
 Both doctrines and schools are of a most heterogeneous character, 
 ranging from authoritative conservatism to almost revolutionary 
 anarchism, and it will not be without some effort that we shall 
 include them all within the limits of a single chapter. But it is 
 not impossible to point to certain common characteristics, both 
 positive and negative, which entitle us to regard them all as members 
 of one family. 
 
 As a negative trait we have their unanimous repudiation of 
 Classical Liberalism. This does not necessarily imply a disposition 
 to invoke State aid, for some of them, as we shall see, are opposed 
 even to the idea of a State. Neither does it imply a denial of a 
 " natural order," for under the name of Providence and as a 
 manifestation of the will of God the " order " was a source of 
 perennial delight to them. But man was to them an outcast without 
 lot or portion in the " order." Fallen and sinful, bereft of his 
 freedom, it was impossible that of himself he should return to his 
 former state of bliss. To leave the natural man alone, to deliver 
 him over to the pursuit of personal interest in the hope that it 
 might lead him to the good or result in the rediscovery of the lost 
 way of Paradise, was clearly absurd. It was as futile in the economic 
 as it was in the religious sphere. On the contrary, the Christian 
 schools maintained that the " natural " man, the old man, the 
 
 1 " Catholicism alone has the necessary cohesion and power to withstand 
 socialism, which has been erected upon the ruins of the Liberal system." (Comte 
 de Mun, La Question sociale au XI Xe Sitele, 1900.) 
 
 " There is no need to think of the Church as a kind of gendarme in cassock 
 flinging itself against the people in the interest of capital. Rather it should be 
 understood that it is working in the interests and solely for the defence of the 
 weak." (Comte de Mun, Discours, April 1893.)
 
 DOCTRINES INSPIRED BY CHRISTIANITY 485 
 
 first Adam of the New Testament, must somehow be got rid of 
 before room could be found for the new man within us. Every 
 available force, whether religious, moral, or merely social, must be 
 utilised to keep people from the dangerous slope down which egoism 
 would inevitably lead them. 1 
 
 The new doctrines are also distinct from socialism, despite the fact 
 that their followers frequently outbid the socialists in the bitterness of 
 their attacks upon capital and the present organisation of society. 
 They refuse to believe that the creation of a new society in the sense 
 of a change in economic conditions or environment is enough. The 
 individual must also be changed. To those who questioned Christ 
 as to when the Kingdom of God should come, He replied, "The 
 kingdom of God cometh not with observation . . . for, behold, the 
 kingdom of God is within you," and His answer is witness to the 
 fact that social justice will only reign when it has achieved victory 
 over human hearts. Social Christianity must never be compared 
 with the socialism of the Liberals or the Associationists, for the latter 
 believed man to be naturally good apart from the deteriorating 
 effects of civilisation. Nor must it ever be classed with the col- 
 lectivism of Marx, which has its basis in a materialistic conception 
 of history and class war. Some of these Christian authors, it is 
 true, regard State Socialism with a certain degree of favour and 
 would possibly welcome co-operation, but to most of them legal 
 coercion does not seem very attractive and they prefer to put their 
 faith in associations such as the family, the corporation, or the 
 co-operative society. We could hardly expect otherwise, seeing 
 that every church is an organisation of some kind or other. The 
 Catholic Church especially, whatever opinion we may have of it, is 
 at once the greatest and the noblest a&sociation that ever existed. 
 Its bonds are even stronger than death. The Church militant 
 below joins hands with the Church triumphant above, the living 
 praying for the dead and the dead interceding for the living. 
 
 1 The Social Christians somewhere make the remark that even if the orthodox 
 account of creation is destined to disappear before the onslaughts of the evolu- 
 tionary theory and Adam makes way for the gorilla, the problem would merely be 
 intensified, for it would still b necessary to get rid of the " old man." " We live," 
 says Brunetiere, " in the strength of the victories won over the more primitive 
 instincts of our nature " (Revue dea Deux Mondts, May I, 1895). 
 
 Kidd in his Social Evolution, a work which attracted gi at attention when it 
 was first published in 1894, attempts to apply the Darwinian theory to Chris- 
 tianity. He accepts the Darwinian hypothesis that the struggle for existence 
 and natural selection constitute the mainsprings of progress. But the struggle 
 may demand, or the selection involve, the sacrifice of individual to collective 
 interest, and the only force which can inspire such sacrifice is religion.
 
 486 DOCTRINES INSPIRED BY CHRISTIANITY 
 
 . From a constructive standpoint they defy classification. They 
 have a common aspiration in their hope of a society where all men 
 will be brothers, children of the one Heavenly Father, 1 but many 
 are the ways of attaining this fraternal ideal. In the same spirit 
 they speak of a just price and a fair wage much as the Canonists 
 of the Middle Ages did. In other words, they refuse to regard 
 human labour as a mere commodity whose value varies according 
 to the laws of supply and demand. The labour of men is sacred, 
 and Roman law even refused to recognise bartering in res sacras. 
 But when it becomes a question of formulating means of doing this, 
 the ways divide. Numerous as are the Biblical texts which bear upon 
 social and economic questions, they are extraordinarily vague. At least 
 they seem capable of affording support to the most divergent doctrines. 
 Some might consider it a mistake to devote a whole chapter to 
 these doctrines, seeing that they are moral rather than economic, 
 and that, with perhaps the exception of Le Play, who is only indirectly 
 connected with this school, we have no names that can be compared 
 with those already mentioned. But not a few intellectual move- 
 ments, are of an anonymous character. The importance of a 
 doctrine ought not to be measured by the illustrious character of 
 its sponsor so much as by the effect which it has had upon 
 the minds of men. No one will be prepared to deny the influ- 
 ence which these doctrines have exercised upon religious people, an 
 influence greater than either Fourier's, Saint-Simon's, or Proudhon's. 
 Moreover, they are connected with the development of important 
 economic institutions, such as the attempt to revive the system of 
 corporations in Austria, the establishment of rural banks in Germany 
 and France, the development of co-operative societies in England, 
 the growth of temperance societies, the agitation for Sunday rest, etc. 
 Nor must we forget that the pioneers of factory legislation, the 
 founders of workmen's institutes, men like Lord Shaftesbury in 
 England, Pastor Oberlin, and Daniel Legrand the manufacturer, 
 were really Christian Socialists. 
 
 I : LE PLAY'S SCHOOL 
 
 LE PLAY'S school is very closely related to the Classical Liberal, 
 
 some of its best known representatives actually belonging to both. 
 
 1 It was no Christian Socialist, but Auguste Comte, the founder of Positivism, 
 who wrote : " The original equality of men is not a doctrine founded simply upon 
 the observation of social facts. It was only clearly affirmed for the first time by 
 Christianity." (Traiti de Politique, vol. i, p. 407.) 
 
 2 Frederic Le Play (1806-82) was a mining engineer, and was educated at the 
 fJcole polytechnique. He subsequently became a professor at the Ecole des Mines
 
 LE PLAY'S SCHOOL 487 
 
 There is the same antipathy to socialism and the same dread of 
 State intervention. 
 
 But it is not difficult to differentiate from the more extreme 
 Liberal school which finds its most optimistic expression in the 
 works of certain French writers. The cardinal doctrine of that 
 school, namely, that individual effort is alone sufficient for all things, 
 finds no place in Le Play's philosophy. Man, it seemed to him, 
 was ignorant of what his own well-being involved. In the realm 
 of social science no fact seemed more persistent or more patent 
 than error. Every individual appeared to be born with a natural 
 tendency to evil, and he picturesquely remarks that " every netf 
 generation is just an invasion of young barbarians that must be 
 educated and trained. Whenever such training is by any chance 
 neglected, decadence becomes imminent." 1 
 
 Among the errors more particularly denounced by Le Play were 
 the special idols of the French bourgeois the " false dogmas of 
 '89 " as he calls them. 2 It seemed to him that no society could 
 ever hope to exist for any length of time and still be content with 
 the rule of natural laws, which merely meant being ruled by the 
 untamed instincts of the brute. It must set to and reform itself. 
 Hence his book is entitled Social Reform, and the school which 
 he founded adopted the same title. 
 
 Some kind of authority is clearly indispensable ; the question 
 is what it should be. The old paterfamilias relation immediately 
 suggests itself as being more efficacious than any other, seeing that 
 
 and a Counseiller d'fitat. In 1855 he published a collection of monographs dealing 
 with working-class families under the title of Lea Ouvriera europ&ens, in one volume 
 (the second edition, which appeared in 1877, consisted of six volumes). In 1864 
 he published an exposition of his social creed in La Reforme sociale, a book that 
 Montalembert declared to be " the most original, the most courageous, the most 
 useful, and altogether the most powerful book of the century." It hardly deserves 
 such extravagant praise, perhaps, but it is true that many of its more pessimistic 
 prophecies concerning the future of France have been very curiously verified. 
 
 In 1856 Le Play founded La Societe d'Fxxmomie sociale, which since 1881 has 
 been responsible for the publication of La Reforme sociale. He organised the 
 Universal Exhibition in 1867, and was one of the first to arrange exhibitions of 
 social work. For a resume of his life and work see Frederic Le Play d'aprea lui- 
 meme, by Auburtin (Paris, 1906). 
 
 1 Programme des Unions de la Paix sociale, chap. 1. 
 
 1 " The gravest and most dangerous error of all, and one that has been the 
 parent of all our revolutions, is the false principle which the innovators of 1789 
 would put into practice and which affirms the original perfection of mankind. It 
 also encourages the belief that a society composed of ' natural ' men would enjoy 
 peace and happiness without any effort at all, and that these desiderata are just the 
 spontaneous outcome of every free society."
 
 488 DOCTRINES INSPIRED BY CHRISTIANITY 
 
 it is founded in nature and not on contract or decree, and springs 
 from love rather than coercion. The family group under the 
 authority of its chief, which was the sole social unit under the 
 patriarchal system, must again be revived in the midst of our 
 complex social relations. But parental control cannot always be 
 relied upon, for the parent is frequently engrossed with the other 
 demands of life, and there is positive need for some social authority. 
 This new social authority will not be the State that is, if Le Play 
 can possibly avoid it. The first chance will be given to " natural " 
 authorities those authorities which rise up spontaneously. The 
 nobility is well fitted for the task where it exists. In the absence of 
 nobility, or where, as was unfortunately the case in France, they 
 were impervious to a sense of duty, society must fall back upon the 
 landed proprietors, the employers, and persons of ripe judgment 
 men who hardly deserve the title of savants, but nevertheless with 
 considerable experience of life. Failing these it could still appeal 
 to the local authorities, to those living nearest the persons concerned, 
 to the parish rather than the county, the county rather than the 
 State. State intervention is indispensable only when all other 
 authorities have failed in the enforcement of Sunday observance, 
 for example, where the ruling classes have shown a disposition to 
 despise it. The necessity for State intervention is evidence of 
 disease within the State, and the degree of intervention affords some 
 index of the extent of the malady. l 
 
 Seeing that he attaches such importance to the constitution of 
 the family, Le Play is also bound to give equal prominence to the 
 question of entail, which determines the permanence of the family. 
 Herein lies the kernel of Le Play's system. He distinguishes three 
 types of families : 
 
 1. The patriarchal family. The father is the sole proprietor, or, 
 more correctly, he is the chief administrator of all family affairs. 
 At his death all goods pass by full title to the eldest son. Such is 
 the most ancient form of government of which we have any 
 record. It is the political counterpart of the pastoral regime, 
 and both may still be seen in full operation on the Russian 
 steppes. 
 
 2. The family group. Children and grandchildren no longer 
 remain under paternal authority throughout life. With a single 
 exception they leave the family hearth and proceed to found new 
 
 1 " It is the great misfortune of France that the family should be immersed in 
 the commune, the commune in the department, the department in the State." 
 (L(t It if or me sociale, vol. iii, Book VIL)
 
 LE PLAY'S SCHOOL 489 
 
 homes. Whoever remains at home becomes the heir, after first 
 becoming his father's associate during the latter's lifetime. He 
 becomes the new head of the family by paternal wish, and not of 
 legal right or necessity. The property thus passes to the worthiest, 
 to him who is thought best able to preserve it. It is this rtgimc, 
 Le Play thinks, that explains the extraordinary stability of China ; 
 and the same system, though somewhat shaken, is the source of 
 England's strength and vitality. There were some parts of France 
 where, in spite of the Civil Code, a similar system was still in vogue. 
 There was one such family in particular, that of the Pyrenean 
 peasant Melouga, whose history showed a wonderful continuity, 
 and the story of that family recurs as a kind of leitmotiv through 
 the whole of the writings of Le Play and his immediate disciples. 
 The Melouga family has since become extinct. 
 
 8. The unstable family, where all the children, as soon as they 
 arrive at maturity, quit the home and set up for themselves. At 
 the father's death the family, already scattered, is completely dis- 
 solved. The patrimony is divided equally between all its members, 
 and any business which the father may have possessed, whether 
 agricultural or industrial, goes into immediate liquidation. This is 
 the regime born of individualism which is characteristic of all 
 modern societies, especially France. 
 
 Le Play's sympathy is entirely with the second, for the family 
 group seems to hold the balance evenly between the two antagonistic 
 forces which are both indispensable for the welfare of society, 
 namely, the spirit of conservatism and the spirit of innovation. 
 Under the patriarchal system the former preponderates, 1 while 
 under the regime of the unstable family it is utterly wanting. The 
 latter reminds us of Penelope's web each generation making a 
 fresh beginning. But this periodical division of wealth fails to 
 give the desired degree of equality, for the removal of every 
 trace of solidarity between the members means that the one may 
 become rich and the other sink into poverty. Everyone fights for 
 his own hand. Moreover, when children only remain with their 
 parents for just a short period of tutelage there is a -powerful incentive 
 given to race-suicide, as is clearly shown in the case of France. As 
 soon as the offspring find themselves in a position of self-sufficiency 
 
 1 " It [the patriarchal regime] in all matters relating to economic action or 
 to social life shows greater attachment to the past than concern for the future. 
 Obedience is the keynote rather than initiation. The family group tends to arrest 
 the enterprise which would characterise the action of the more independent 
 members of the family in a somewhat freer atmosphere." (La Riformt locialt, 
 Book III.)
 
 490 DOCTRINES INSPIRED BY CHRISTIANITY 
 
 they leave the old home, just as the young animal does. Under 
 such circumstances it is clearly to the interest of parents to have 
 as few children as possible. 1 
 
 The family group, on the other hand, entrusts its traditions and 
 their preservation to the keeping of the child who remains at home, 
 Those who leave have their way to make, and become heirs of that 
 industrial spirit which has made England the mistress of the world. 
 True fraternal equality is also preserved, for the old home always 
 remains open a harbour of refuge to those who fail in the industrial 
 struggle. To mention but one instance, the " old maid," whose lot 
 is often exceedingly hard, need never be without a home. 
 
 Apart from moral reform, there seemed only one way of estab- 
 lishing the family group in France, namely, by greater freedom of 
 bequest, or at the very least by increasing the amount of goods that 
 may be given to any one child, so that a father might be able to 
 transmit the whole of his land or his business to any one of his 
 children on condition that the heir fairly indemnified each of his 
 brothers should their respective shares be insufficient. 2 
 
 A father's authority over his children is an indispensable element 
 in the stability of society, and a master's authority over his men, 
 though derivative in character, is scarcely less so. The continuance 
 of social peace largely depends upon the latter, and the preservation 
 of social peace should be the essential aim of social science. 3 We 
 are continually meeting with the expression " social peace " in the 
 writings of Le Play and his school, and the associations which they 
 founded became known as " Unions of Social Peace." 
 
 Play's first essay, an admirably planned Exposition of Social 
 Economics, was published in 1867. The sole object of its author 
 was to further the establishment of such institutions as were likely 
 to promote understanding among all persons employed in the 
 production of the same goods. We might even be tempted to say 
 that the whole co-partnership movement started by Dollfus at 
 
 1 " In short, I have never met with a social organisation which to the same 
 extent vitiates the laws both of nature and morality." 
 
 1 Le Play, who had some influence over Napoleon IH, tried to get him to 
 consent to some such modification of the Civil Code. But the Emperor, though 
 favourably inclined, and despot as he was, dared not alienate public sympathy in 
 the matter. And really fathers seldom exercise the full authority which the law 
 gives them even now. The evil, then, if it is an evil, is deeper than Le Play 
 imagined, and seems to be moral rather than legal. 
 
 3 " Human societies should aim not so much at the creation of wealth as such, 
 but rather at increasing the well-being of mankind. Well-being includes daily 
 bread, but it does not exclude social peace." (Claudio Jannet in a lecture on Lea 
 Quaire Scales cT Economic tociale.)
 
 LE PLAY'S SCHOOL 491 
 
 Mulhouse in 1850 with the utterance of the famous phrase, " The 
 master owes something to the worker beyond his mere wages," was 
 inspired by Le Play. 1 Le Play pinned his faith to the benevolent 
 master. It was quite natural that the apostle of the family group 
 should regard the factory as possessing a great deal of the stability 
 and many of the other characteristics of the family, such as its quasi- 
 permanent engagements 2 and its various grades of working men 
 all grouped together under the authority of a well- respected chief. 
 
 Le Play's thesis that the salvation of the working classes can 
 only come from above seems to have even less foundation than the 
 opposite doctrine of syndicalism, which claims that their deliver- 
 ance is in their own hands, and it was once for all refuted in a 
 brilliant passage of Stuart Mill's : 3 "No times can be pointed out 
 in which the higher classes of this or any other country performed 
 a part even distantly resembling the one assigned them in this 
 theory. All privileged and powerful classes as such have used 
 their power in the interest of their own selfishness. ... I do 
 not affirm that what has always been must always be. This at 
 least seems to be undeniable, that long before the superior classes 
 could be sufficiently inspired to govern in the tutelary manner 
 supposed, the inferior classes would be too much improved to be so 
 governed." 
 
 Besides the master and the State there was still another factor 
 of social progress which is of prime importance at the present time, 
 namely, working men's unions. One might reasonably have expected 
 a more sympathetic treatment for them at Le Play's hands, especially 
 when we remember that they were proscribed by the " false dogmas 
 of '89." But he had little faith in union, whether a corporation or 
 a co-operative society. 4 Trade unionism especially seemed rather 
 useless, because it tended to destroy the more natural and more 
 efficient organisation which appeared to him to be merely an exten- 
 sion of the family group. It is true that Le Play never saw unionism 
 
 1 We most remember that these were the orthodox views then. Villerme, 
 writing in 1840 in his celebrated Tableau de VStat moral et physique de Ouvriers, 
 thought it was the employers really who could best improve the circumstances 
 and character of the workers. 
 
 1 We get some idea of the importance which he attributed to the per- 
 manence of engagements when we realise that he contemplated the abolition of 
 slavery with a measure of regret. (La Reforme eociale.) 
 
 * Principles, Book IV, chap. 7. 
 
 * " Among the panaceas advocated in our time none has been more criticised 
 than ' association.' From a practical point of view these societies seem to 
 present none of the advantages ordinarily associated either with complete in- 
 dependence or with a well-managed business concern."
 
 492 DOCTRINES INSPIRED BY CHRISTIANITY 
 
 in operation, but it is hardly probable that he would have modified 
 his opinion. At any rate, the attitude of his disciples is not much 
 more favourable. 
 
 One feels tempted to say that there is nothing very new in all 
 this. The remark would have been particularly gratifying to Le 
 Play, who considered that invention was impossible in social 
 science and that what he himself had done was merely to make a 
 discovery. 
 
 The discovery of " the essential constitution of humanity," as 
 he called it, was, he thought, the outcome of his methods of observa- 
 tion. His method was really always more important than his 
 doctrine. It has always enjoyed a considerable measure of success, 
 and it seems to-day as if it would survive the doctrine. Le Play 
 was brought up as a mining engineer and had travelled extensively. 1 
 Twenty years of his life had been spent in this way, and during 
 that period he had travelled over almost the whole of Europe, even 
 as far as the Urals. It was while staying in the neighbourhood of 
 those mountains that he conceived the idea of writing monographs 
 dealing with individual families belonging to the working classes, 
 a method of investigation which he is never weary of contrasting 
 with that other " disdainful method of invention." 2 
 
 To write a family monograph 3 d la Le Play is not merely to relate 
 its history, to describe its mode of life, and to analyse its means of 
 subsistence, but also to sum up its daily life in a kind of double- 
 entry book-keeping where every item of expenditure is carefully 
 compared and balanced with the receipts. But there is much 
 that is artificial and a great deal that is childish in this seemingly 
 mathematical precision, where not merely economic wants but such 
 needs as those of education, of recreation, and of intemperance, 
 virtues as well as vices, are catalogued and reckoned in terms of 
 s. d. Its advantage lies in its holding the attention of the observer, 
 
 1 " I have frequently posted as much as 1000 kilometres in order to con- 
 sult some eminent landowner living on the confines of Europe." (Letter to M. de 
 Eibbes, October 3, 1867.) 
 
 1 " This method is based upon a careful observation of each fact and its past 
 history. Nothing is left to the imagination, the presupposition, or the prejudices 
 of the observer. It is essentially scientific and exact." (La Reforme en Europe.) 
 
 1 These monographs appeared first of all, as we have seen, in his great work 
 on the European workmen in 1855. The work has been carried on by his disciples 
 and the results incorporated in the Ouvriers des Deux Mondes, which already 
 numbers above a hundred volumes. They have also employed the method in 
 writing monographs on industries and communes, etc. 
 
 The method requires supplementing by reference to statistics of population and 
 wages, which can only be supplied, of course, by Governments.
 
 LE PLAY'S SCHOOL 493 
 
 even when he is a mere novice at the work, by obliging him to put 
 something in every column and allowing nothing to escape his 
 notice. 1 
 
 But when Le Play proceeds to declare that this method has 
 revealed the truth to him and helped him to formulate the doctrines 
 of which we have just given a risumi it really seems as if he were 
 making a great mistake. Actually it has only revealed what Le Play 
 expected to find ; in other hands it might have yielded quite different 
 results. He declares that it has proved to him that only those 
 families which are grouped under paternal authority and which obey 
 the Ten Commandments are really happy.' That may be, but 
 how would he define a happy family ? " A happy family is one that 
 dwells in unity and abides in the love of God." He has thus armed 
 himself with a definite a priori criterion of happiness ; 3 but there 
 is nothing to prove that the unstable disorganised family of the 
 Parisian factory hand may not be infinitely more happy than the 
 family group of Melouga or the patriarchal family of the Bashkirs 
 of Turkestan. 
 
 A comparison has often been drawn between Le Play's school 
 and the German Historical school. It is pointed out th'at both 
 schools lay great emphasis upon the method of observation and 
 focus attention upon the institutions of the past, and that to some 
 extent they both represent a reaction against Liberalism and Classical 
 optimism. But the resemblance is wholly superficial. At bottom 
 the two schools are not merely different, but even divergent. The 
 German school seeks the explanation of the present in the past, 
 while Le Play's school is merely out to learn a few lessons. The 
 one studies the germ which is to develop and to bear fruit, while 
 the other admires the type and the model to which it thinks it 
 
 1 " The comparison of receipts and expenditure should help to discover any 
 oversight, just as the weight of a chemical substance both before and after an 
 experiment helps to determine the nature of the chemical reaction." (Bureau, 
 UGSuvre d 1 Henri de. TourviUe.) 
 
 1 With a good deal of candour he admits offering a reward to anyone who 
 could ahow him a single happy family except under conditions of this kind* 
 " But," he adds, " all my efforts proved fruitless." (Let Ouvriert europient, 
 vol. iv, introduction.) 
 
 When Le Play teaches us that the essential condition of society impliea 
 A double foundation the Decalogue and paternal authority, 
 A twofold link religion and sovereignty, and 
 Three kinds of material the community, private property, and em. 
 
 plovers, 
 
 we cannot help thinking that the so-called method of observation has a very 
 pronounced trait of dogmatism in its constitution.
 
 494 DOCTRINES INSPIRED BY CHRISTIANITY 
 
 necessary to conform. The one is evolutionary, the other traditional, 
 and the conclusions of the former are radical in the extreme, and 
 even socialistic, while those of the latter are usually conservative. 
 
 And so Play's true position is in the chapter dealing with Social 
 Christianity, and not among the writers of the Historical school. 
 
 His unshaken belief in the natural propensity of man to evil 
 and error is sufficient to give him his place. But we must beware 
 of confusing his doctrine with that of the Social Catholics, for, 
 unlike them, he is rather prone to invoke the authority of the 
 Mosaic law, especially the Decalogue, and to take his illustrations 
 from England, which is a Protestant country, or from China or 
 Mohammedan lands. His importance among authorities on social 
 questions is not very great, but his attitude towards Church and 
 clergy was on the whole defiant, 1 and the plan of reform of which 
 we have just given an outline is very different from that of the 
 Social Catholics. 
 
 There was a schism in the school in 1885. The " Unions of Social 
 Peace," with their organ, La Ri forme sociale, have on the whole 
 remained faithful to the programme as outlined in this chapter. 
 The dissenting branch, on the other hand, with M. Demolins and 
 the Abbe de Tourville as leaders, has developed the doctrine on its 
 ultra-individualistic or Spencerian side, so that only in origin can it 
 be regarded as at all connected with the school of Le Play. 
 
 The " School of Social Science," as it is called at least, that is 
 the name it has given to its review claims that it is still faithful to 
 the method of the master. It even goes so far as to say that Le Play 
 was ignorant of the full possibilities of this method, and condemns 
 his failure to establish a positive science by means of it. In reality, 
 however, the master's method has quite a subordinate rdle in the 
 activities of this new school, for the simple reason that it is practically 
 useless except for the production of monographs. The new school 
 arranges its facts according to their natural relations, and attempts 
 to link the study of social science to the study of geographical 
 environment. 2 The study of environment receives some attention 
 in the works of Le Play himself, but it has assumed much greater 
 importance since then. To give but a single instance, the new 
 
 1 " The principal object to aim at here is the limitation of the ecclesiastical 
 personnel with a view to keeping them all fully employed," as he adds later on. 
 He had the same antipathy to religious congregations as he had to other forma 
 of association. 
 
 " No social phenomenon can ever be explained if it is taken out of its own 
 setting. All social science ia based upon this law." (Demolins, La Classification 
 sociale.)
 
 SOCIAL CATHOLICISM 495 
 
 school attempts to show how the configuration of the Norwegian 
 fiord, the almost complete absence of arable land, and the consequent 
 recourse to fishing as a means of livelihood, even the very dimensions 
 of their sea-craft, have helped to fix the type of family and even the 
 political and economic constitutions prevalent among the Anglo- 
 Saxon race. In a similar fashion, the vast steppes of central and 
 southern Asia have begotten a civilisation of their own. It is 
 the Historical materialism of the Marxian school reappearing in 
 the more picturesque and more suggestive guise of geographical 
 determinism. 1 
 
 The new school, however, is not very favourably inclined to 
 Le Play's programme of social reform, especially its teaching con- 
 cerning the family. Their aim is not the preservation of the 
 family, but the placing of each child in a position to found a family 
 of his own as soon as possible. Their object is neither family 
 nor communal solidarity, but self-help, not the family group, but 
 the single individual family, not the English, but the American 
 home. Demolins is an ardent believer in the struggle for existence, 
 and no one has ever professed greater contempt for the solidarist 
 doctrine. " Social salvation, like eternal life," says he, " is 
 essentially a personal affair " a singularly heterodox declaration, 
 by the way, for if salvation is a purely personal matter of what use 
 is the Church ? 2 
 
 II : SOCIAL CATHOLICISM 
 
 THE term "Catholic Socialism," which is occasionally employed as 
 an alternative to the above title, is objected to by the majority 
 of Catholics as being excessively restrictive. The generic term 
 " Christian Socialism " was first employed by a Frenchman, Francis 
 Huet, in a book entitled Le Regne social du Christianismc, published 
 in 1853. 3 
 
 1 The similarity noted here has given rise to emphatic protests on the part 
 of certain members of this school. There is no need to take offence at the 
 epithet, however, provided we are careful to distinguish it from philosophic 
 materialism and recognise that it does not necessarily exclude idealism. 
 
 1 This branch of the school, of which Tourville and Demolins were the earliest 
 leaders, has given us several excellent books. Demolins' own work on the 
 superiority of the Anglo-Saxons caused quite a stir. Then there is M. de Rousiers' 
 book on producers' industrial unions, and P. du Maroussem's. We would 
 also specially mention Paul Bureau's Le Control de Travail (1902), La Participation 
 aux Bknificet, and La Crvse. morale, des Temps nouveaux. Bureau's work is charac- 
 terised by precise impartial analysis of facts combined with great moral fervour. 
 
 Huet was a professor at Ghent, which accounts for his being considered a 
 Belgian, just as Walras is generally considered a Swiss.
 
 496 DOCTRINES INSPIRED BY CHRISTIANITY 
 
 But at least two other authors, namely, Buchez in his Essai 
 (Tun Traitt complet de Philosophic au point de vue du Catholicism* 
 et du Progres (1838-40), and the fugitive Abbe de Lamennais in La 
 Question du Travail (1848), can lay considerable claims to priority 
 in the matter. Buchez was the founder of the Co-operative Associa- 
 tion of Producers (1832), and Lamennais outlined a scheme of 
 co-operative banks almost exactly like those afterwards established 
 in Germany by Raiffeisen. 1 
 
 Present-day Catholicism, however, shows no great desire to honour 
 any of them. The one ambition of these three republicans was to 
 effect a union between the Church and the Revolution. 8 The most 
 advanced of the Social Catholics of to-day, on the other hand, would 
 be well satisfied could they establish some kind of understanding 
 between the Church and democracy. Such at least is the programme 
 recently laid down by M. Marc Sangnier, the founder of the Sillon. 
 
 About the same time we find Monseigneur von Ketteler, Bishop 
 of Mayence, preaching a doctrine which drew its inspiration, not 
 from " the false dogmas of '89," but from the institutional life 
 of the Middle Ages, from the guilds and the other corporative 
 associations, which are minutely described by him and his disciples, 
 especially Canon Moufang and the Abbe Hitze. Some such insti- 
 tutional activity was again to form the corner-stone of Social 
 Catholicism. 3 
 
 1 He was the first to emphasise the importance of borrowers combining. 
 Only in this way can the poor hope to offer some real security. " How is it that 
 the worker cannot borrow ? Simply because he has no security to offer except 
 just his work in the future. That future guarantee can only become real and 
 certain by means of combination. Union eliminates the uncertainty which 
 hitherto made the security worthless and the loan impossible." (La Question du 
 Travail, p. 25.) 
 
 " The problem is to outline a state of society where working men will work 
 only for themselves and not for others ; where none will reap but has already 
 sown, and where each will enjoy the fruits of his own labour." (Ibid.) 
 
 1 " Christianity and revolution as far as humanity is concerned have identical 
 aims, and the one is the natural outcome of the other." (Buchez, Traite de la 
 Politique, vol. ii, p. 504.) 
 
 * Moufang's principal writings were published in 1864 under the title of Le 
 Question ouvriere et le Christianisme. He could never make up his mind as be- 
 tween the corporative and the co-operative ideal, however. The latter was very 
 much to the front just then, not only in France, but also with the English 
 Christian Socialists and with the German socialist Lassalle. This was before the 
 co-operative movement was eclipsed by trade unionism. 
 
 Hitze, however, shows none of his master's hesitation, but emphatically 
 declares that " the solution of the social question is essentially and exclusively 
 bound up with a reorganisation of trades and professions. We must have the 
 mediaeval regime of corporations re-established a regime which offers a better
 
 SOCIAL CATHOLICISM 497 
 
 During the period of the Second Empire most of the Social 
 Catholics seem to have fallen asleep, but they were aroused from 
 their slumbers by the disaster of 1870. The Comte Albert de Mun 
 proved the inspirer this time, and his noble eloquence, which led 
 to the formation of unions of Catholic working men, was instru- 
 mental in giving the movement a vigorous start. The same period 
 witnessed the appearance of L 1 Association catholique, a review which 
 took as its programme the study of economic facts in a Catholic 
 spirit an object that has always been kept steadily in view. 
 
 Organisation in the form of corporations was given first place in 
 the Social Catholic programme. 1 Le Play's corner-stone the family 
 organisation was not rejected, but they considered that though 
 the family was to remain the basis for moral reform a wider associa- 
 tion of an economic character must serve as a basis for economic 
 reform. 
 
 At first sight this may seem somewhat surprising. The con- 
 nection between these professional associations and the teaching of 
 the Gospel is not very evident, nor is it very clear how such organisa- 
 tions could ever hope to Christianise society. But although the 
 Gospels know nothing of a corporative or any other rigime we must 
 not forget their prominence during the Middle Ages when the 
 authority of the Church was in the ascendant. As long as this 
 regime lasted what we understand as the social question the vexed 
 problem as to whether we possess sufficient moral strength to 
 keep the peace between capital and labour never presented itself. 
 The problem is, of course, somewhat different to-day, but its solution 
 may possibly require the exercise of similar virtues, namely, obedience 
 to a detailed system of organisation coupled with a feeling of brother- 
 hood the chastening of the whole complexity of social relations by 
 the spirit of Christianity. 
 
 solution of the social problem than any which existed either before or after. Of 
 course times have changed, and certain features of the mediaeval rigime would 
 need modification. But some such corporative rtgime, conceived in a more 
 democratic spirit must form the economic basis." (Capital and Labour.) 
 
 i " We must direct all our private initiative and concentrate public attention 
 upon this one reform the corporative reorganisation of society." (Programme 
 de VCEnvre des Cerdes ouvriera, April 1894.) 
 
 Co-operative association is dismissed altogether. The Social Catholics 
 have especially little sympathy with the small retail co-operative stores, because 
 they threaten the existence of the small merchant and the small artisan 
 types of individuals that are dear to the heart of the Catholics. On the other 
 hand, it shows iteelf very favourably inclined towards co-operative credit, because 
 of the possibility of assisting the classes already referred to the shopkeeper and 
 the small merchant.
 
 498 DOCTRINES INSPIRED BY CHRISTIANITY 
 
 Some of their opponents have not hesitated to charge these 
 Catholics with a desire to return to the feudalism of the Middle Ages, 
 which is of course utterly false. What the Social Catholics wished 
 to do was to build up the new social structure upon the basis of 
 the modern trade union, or upon syndicalism ; and the proof 
 that the foundation is not at any rate too narrow lies in the 
 fact that the new schools of socialists can conceive of none better. 
 With this as the foundation they looked forward not merely to 
 the development of a new society, but also to the rise of a 
 new ethic. The fact that they forestalled the socialists in this 
 respect shows that the Social Catholics were at least not hopelessly 
 antiquated. 
 
 Early in the history of the movement they tried to organise a 
 kind of mixed syndicat consisting both of masters and men, because 
 this seemed to them to offer the best guarantee for social peace. 
 But the results proved disappointing, and they were soon forced to 
 relinquish that idea and to content themselves with a separate 
 organisation of masters and men co-operating only in matters 
 relating to the regulation of work or the settling of differences. 1 
 Such collateral unions, it was at first thought, would gradually 
 become the organs of labour legislation, and the State would entrust 
 them with the discharge of that function because of their greater 
 freedom in the making of experiments. All questions affecting 
 the interests of a trade, the hours of labour, Sunday observance, 
 apprenticeship, the sanitary condition of the workshops, the labour 
 of women and children, and even the rate of wages paid, instead 
 of being regulated as they are at present by brutal, inflexible laws 
 which are seldom suited to meet every individual case, would 
 henceforth be settled by the union, and the rules of the union would 
 be incumbent upon all the members of the trade or profession, 
 both masters and men. Everyone would be free to enter the union 
 or to decline membership just as he chose, but no member would be 
 allowed to violate the rules of the union or to lower the conditions 
 
 1 In 1894 the Congress of Catholic Circles which met at Rheims declared that, 
 " without minimising the difficulties which stand in the way of extending the 
 mixed syndicats, the formation of such syndicate must be our chief aim." In 1904 
 Father Rutten, one of the leaders of the Belgian Catholic Syndical movement, in 
 a report on the syndicalist movement writes as follows : " We do not despair 
 of the mixed syndicat, which in theory we certainly think is nearest perfection. 
 But we must not blind ourselves to facts, and whether we will or no we have to 
 admit that at the present moment the mixed syndicat in ninety industries out of 
 every hundred seems quite Utopian." (Quoted by Dechesne, Syndicats Ouvriert 
 Ixlges, p. 76 1 ; 1906.)
 
 SOCIAL CATHOLICISM 499 
 
 of labour in any way. "Free association within an organised 
 profession," such is the formula. 1 
 
 To those Liberals who feign indignation at seeing purely private 
 institutions thus invested with legislative authority it may be 
 answered that the " labour union " so constituted forms an associa- 
 tion which is as natural and as necessary understanding by this 
 that it is independent of the voluntary conventions of the parties 
 interested as one based upon community of residence. Everybody 
 admits that the inhabitants of the commune ought to submit to 
 the rule of the organised majority. What difference would it make 
 if the majority thus organised constituted a corporation rather 
 than a commune ? 2 
 
 Some go so far as to regard these professional associations 
 as possessed of an important political role, and would even go the 
 length of making this new corporative unit the basis of a newfranchise 
 for the election of at least one of the two Chambers. 
 
 It is not very easy, perhaps, to get a clear idea of what a society 
 built upon a plan of this kind would really be like, but the difficulty 
 is no greater in this case than in some others. 
 
 In the first place it would have to be a society professing the 
 Catholic faith. 3 Should the enemies of religion or even the in- 
 
 1 Such is the programme as outlined especially in Austria, which is one of the 
 countries where Social Catholicism seems fairly powerful. As a matter of fact, 
 the corporative rlgime has never quite disappeared there, and for some years now 
 attempts have been made to revive it in the smaller crafts. The new corporation 
 would take the form of a centralised organisation, whose regulations would be 
 obligatory upon all the members of the craft. 
 
 1 " The commune has always been organised. Is there any reason why the 
 trade should not be T In both cases special relations are established, special 
 needs arise, there are frequent conflicts and occasional harmony between the 
 different interests. But all of them are nevertheless intimately bound together, 
 and the links connecting them must be co-ordinated on some regular plan if every 
 one is to be safe, and free to follow his own bent." (Henri Lorin, Principe* de 
 V Organisation profe&sionnette, in L' Association catholique, July 16, 1892.) 
 
 To this it might be replied that the majority generally makes the law for the 
 commune, but that in the case of a free corporation it is often the minority that 
 rules. To which it might be retorted that the so-called majority is often not 
 better than a minority of the electors, and a very small minority indeed of the 
 whole inhabitants who of course include women, who generally have no votes. 
 Moreover, as soon as the rules of the syndicat became really obligatory the 
 majority if not the whole of the workers in the trade would be found within the 
 union. 
 
 Father Antoine writes as follows in his Court d' Economic sociale, p. 154 : " The 
 social question can never be completely solved until we have a complete revival of 
 Christian morals." Still more categorical is the declaration of M. LeonHarmel 
 in V Association catholique for December 1889 : " We can see only one remedy,
 
 500 DOCTRINES INSPIRED BY CHRISTIANITY 
 
 different by any chance ever gain the upper hand in the social unit 
 the whole structure would immediately fall to the ground. Its 
 realisation, accordingly, is quite hypothetical. 
 
 It would also be a society founded upon brotherhood in the full 
 sense of the term. The only real brotherhood is that founded 
 upon the fatherhood of God, and not upon any socialistic conception 
 of equality. But even brotherhood and a common parentage may 
 not be sufficient to prevent irregularities, and the family relation 
 in addition to this almost inevitably implies the rights of the 
 youngest and the duties of the oldest. Within the corporative unit 
 already outlined true equality would always reign, for the humblest, 
 meanest task would be of equal dignty with the most exalted 
 office in the State, and everyone would be content and even proud 
 to live where God had placed him. 1 
 
 Such a society would be a pure hierarchy. All the authority 
 and responsibility, all the duties involved, would be on the master's 
 side. On the worker's side would be rights respected, life assured 
 on the minimum level, and a re-establishment of family life. 2 
 
 Social Catholicism further undertook to disprove the first article 
 in the socialist creed, namely, that " the emancipation of the workers 
 can only be accomplished by the workers themselves." It main- 
 tained that, on the contrary, this object could only be accomplished 
 by the help of the masters and of all the other classes in society, 
 not excluding even the non-professional classes, landed proprietors, 
 rent-receivers, and consumers generally, 3 all of whom ought to be 
 
 and that is that the authority of the Pope should be recognised all the world 
 over, and his ruling accepted by all people." 
 
 The annual study reunions which go by the name of Its Semainza societies, 
 and which afford one of the best manifestations of the kind of activities which 
 Social Christianity gives rise to everywhere, are not so exclusive. Economic 
 questions of all kinds are discussed, but the programme is not strictly Catholic 
 at all, and the basis is wide enough to include everyone who is a professed 
 Christian. 
 
 1 " The corporations which would be set up under the aegis of religion would 
 aim at making all their members contented with their lot, patient in toil and 
 disposed to lead a tranquil, happy life " (sua sorte contentos, operumque patientes 
 / ad quietam ac tranquillam vitam agendam inducant). (Encyclical of Leo XII, 
 December 28, 1878, called the Quod Apostolici. See History of Corporations, by 
 M. Martin Saint-Leon.) 
 
 1 "The corporation is simply the model of the Church. Just as for the 
 Church all the faithful are equal in the sight of God, so here. But equality ends 
 there. For the rest it is a hierarchy." (Segur-Lamoignon, L' Association oailwlique., 
 July 13, 1894.) 
 
 * The Ligue sociale d'Acheteurs, founded in Paris in 1900, is of Social Catholic 
 inspiration.
 
 SOCIAL CATHOLICISM 501 
 
 informed of the responsibilities which their different positions 
 impose upon them and of the special duty which is incumbent upon 
 all men of making the most of the talents with which the Master 
 has entrusted them. 
 
 The German Christliche Gewerkvereine, which gets most of its 
 recruits among the Catholics, is already taking an important part 
 in German political life and is doing something to counterbalance 
 the " Reds," or the revolutionary socialists. They advocate the union 
 of masters and men, but are extremely anxious not to be confused 
 with the ** Yellows," or those who advocate mixed unions. In other 
 words, they are independent both of the masters and the socialists. 
 
 State intervention might be necessary at first in order to estab- 
 lish the corporative regime, but once founded it would naturally 
 monopolise all the legislative and police power which affects labour 
 in any way, especially in the matter of fixing wages, 1 arranging 
 pensions, etc. The legislature would still find ample material to 
 exercise its powers upon outside these merely professional interests, 
 especially in regulating the rights of property, prohibiting usury, 
 protecting agriculture, etc. 2 
 
 " The State," says the Immortale Dei, an Encyclical of Pope 
 Leo XIII repeating a text of St. Paul " is the minister of God 
 for good." Elsewhere St. Paul declares that the Law is the 
 schoolmaster to bring us unto Christ, and if we paraphrase this to 
 mean that the function of law is to lead men to a higher conception 
 of brotherhood we have a fairly exact idea of what Social Catholicism 
 considered to be the function of the State. Occasionally the party 
 has betrayed signs of more advanced tendencies which would bring 
 it more into line with modern socialism. But for the most part 
 such indications have been of the nature of individual utterances, 
 which have generally resulted in the formal disapproval of Rome 
 and the submission of the rebel. 
 
 1 " More important ven than free will, whether of masters or of men, is that 
 higher and more ancient law of natural justice which demands that wages should 
 always be sufficient to enable the worker to lead a sober and honest life. But 
 lest the public authority in this case, as in some other analogous cases, such aa 
 the question of the length of the working day, should unwisely intervene, and in 
 view of the great variety of circumstances, it is better that the solution should 
 be left in the hands of the corporations or the unions." (Encyclical, Rerum 
 Novarum, 1891.) 
 
 1 The Social Catholics wherever found are usually Protectionists, the reason 
 being that they think their " corporative regime, could never be kept going without 
 some protection against foreign competition," and also because moat of their 
 adherents are drawn from the ranks of the agricultural unions. (Programme dt 
 VQSuvre de Cerclet ouvrieri, Art. 7.)
 
 502 DOCTRINES INSPIRED BY CHRISTIANITY 
 
 It was M. Loesewitz in 1888 who made the first violent attack 
 upon the so-called productivity theory of capital in L' Association 
 catholique. 1 It caused quite a sensation at the time, and provoked 
 a disapproving reply from the Comte de Mun. Afterwards, however, 
 the article became the programme of a party known as " Les jeunea 
 Abbes." Nor must we omit to mention the growth of the Sillon, 
 founded in 1890, the political ambition of whose members is the 
 reconciliation of the Church and democracy and even republicanism, 
 and whose economic aim is the abolition of the wage-earner and his 
 master. 2 This is also the aim of the syndicalists, and Article 2 of 
 the Confederation generate du Travail (C.G.T.) declares that one of 
 the avowed objects of the federation is the disappearance of the 
 wage-earner and the removal of his master. Instead of seeking a 
 solution of the problem in the parallel action of syndicate of men 
 on the one hand and of masters on the other, it would suppress the 
 latter altogether, leaving the men the right of possessing their own 
 instruments of production and of keeping intact the produce of their 
 labour. It is true that the Sillon is under the ban of the Pope, but 
 this essentially syndicalist movement is still in existence. 
 
 If the Catholic school has experienced some difficulty in throwing 
 out a left wing it has never been without a right wing which has 
 always shown a predilection for the masters. " The problem is not 
 how to save the worker through his own efforts, but how to save 
 him with the master's co-operation " the benevolent master of 
 Le Play's school over again. 3 The right wing, moreover, thinks that 
 
 1 "The so-called productivity of capital, which constitutes the greatest 
 iniquity of profit-making society, and which is from an economical point of view 
 the final cause of social suffering, is nothing better than a word invented to hide 
 the real fact, namely, the appropriation of the fruits of labour by those who 
 possess the instruments of labour." (Loesewitz, Legitlation du Travail, in 
 L' Association catholique, 1886.) 
 
 1 Extract from a report of a meeting of the Sillon, November 1907 : 
 
 " MABO SANGNMB. The social transformation which we desire to see, com- 
 rades, will aim, not at absorbing the individual, but rather at developing him. 
 We want the factories, the mines, and the industries in the possession, not of 
 the State, but of groups of workers. 
 
 " AN INTEEBUPTEB. That is socialism. 
 
 " MABO SANGNIEB. You can call it socialism if you like. It makes no 
 difference to me. But it is not the socialism of the socialists, of the centralising 
 socialists. We don't want to set the proletarians free from the control of the 
 masters to put them under the immediate control of one great master, the 
 State ; we want the proletarians themselves, acting collectively, to become their 
 own masters." 
 
 * Milcent, in L' Association catholique, 1897, vol. ii, p. 58. There is a Catholic 
 Social school which is Liberal and individualist in its tendencies, and which is
 
 SOCIAL PROTESTANTISM 503 
 
 the existing institutions would prove quite equal to a solution of the 
 so-called social question if they were once thoroughly permeated 
 with the Christian spirit or if the leaders really knew how to deal 
 with the people. 
 
 Ill: SOCIAL PROTESTANTISM 
 
 BELIEF in the essentially individualistic nature of Protestantism 
 is fairly widespread. 1 For confirmation there is the emphasis it has 
 always laid upon the personal nature of salvation and its denial of 
 the necessity for any mediator between God and man, save only 
 the Man Christ Jesus, whereas Roman Catholicism teaches that only 
 through the Church that great community of the faithful is salva- 
 tion ever possible. Protestantism is the religion of self-help, and 
 naturally enough its social teaching is somewhat coloured by its 
 theological preconceptions. Nor must we lose sight of its con- 
 nection with middle-class Liberalism ; and thus while in politics it 
 is generally regarded as belonging to the left, in matters economic it 
 is generally on the extreme right.* 
 
 Whatever truth there may be in this attempt to sum up its 
 doctrine and history, we shall find as a matter of actual fact that on 
 economic grounds it is much more advanced than the Social Catholic 
 school ; and its extreme left, far from being content with the extinc- 
 tion of the proletariat, also demands the abolition of private property 
 and the establishment of complete communal life. 
 
 Social Protestantism, or Christian Socialism as it is known in 
 England, has a birthday which may be determined with some degree 
 of accuracy. It was in the year 1850 that there was founded in 
 England a society for promoting working men's associations, having 
 for its organ a paper entitled The Christian Socialist.* Its best 
 
 represented by such writers aa the late Charles Perin, professor at Louvain, 
 author of La Richesse and La Socialisme chritien, and by M. Bambaud, author 
 of Court d'Histoire des Doctrines. Nor ought we to forget their connection 
 with the development of agricultural credit banks of the Raiffeisen type which 
 have been established in Germany, France, and Italy although their inception 
 in Italy is largely the work of a Jew named Wollemborg. 
 
 1 Such, for example, is the opinion of Nitti in his book on Catholic Socialism, 
 and because of that rather unsatisfactory reason he only devotes a few pages to it. 
 
 1 There are several historical considerations that may with advantage be 
 kept in mind in dealing with this subject, such as, for example, the notable fact 
 that while the Catholic Church has always been opposed to usury, it was Calvin 
 and Calvinists like Saumaise and the ancient jurist Dumoulin who first justified 
 the practice of taking interest. 
 
 The Christian Socialist was preceded by another paper called Polities for 
 the People, founded in 1848, which may be taken as the birthday of the move-
 
 504 DOCTRINES INSPIRED BY CHRISTIANITY 
 
 known representatives were Kingsley and Maurice, who subsequently 
 became respectively professors of history and philosophy at Cam- 
 bridge. A small number of lawyers also joined the society, among 
 whom Ludlow, Hughes, and Vansittart Neale are the most familiar 
 names. Kingsley was much in the public eye just then, not only 
 because of his impassioned eloquence, but also on account of the 
 success of his novel Alton Locke, which is perhaps the earliest piece of 
 socialistic fiction that we possess. It is the story of a journeyman 
 tailor and his sufferings under the sweating system the horrors 
 of which were thus revealed to the public for the first time. 1 
 
 The object which the Christian Socialists 2 had in view, as we 
 have already seen, was the establishment of working men's associa- 
 tions. What type they should adopt as their model was not very 
 easily determined. The trade unions, little known as yet, were just 
 then struggling through the convulsions of their early infancy. 
 Moreover, they were exclusively concerned with professional matters, 
 with the struggle for employment and the question of wages, and 
 altogether did not seem very well fitted to develop the spirit of 
 sacrifice and love which was indispensable for the realisation of 
 their ideal. Neither did the co-operative associations of consumers 
 seem very attractive. True they had attained to some degree of 
 success at Rochdale, but they were inspired by the teaching of 
 Owen, which was definitely anti-Christian. The fact also that they 
 merely proposed to make life somewhat less costly and a little more 
 comfortable implied a certain measure of stoicism which hardly 
 
 ment. In any case the date is significant in view of the contemporary revolution 
 in France. 
 
 It is only just to note that Charming, the American pastor, who died in 1842, 
 was one of the pioneers. His writings on social questions are still read. 
 
 Those who wish for more information either on the history or on the other 
 aspects of Social Christianity should consult the New Encyclopaedia of Social 
 Reform, published in America. 
 
 1 The following year Charles Kingsley preached a sermon in London which 
 caused such a sensation that the vicar of the parish felt bound to protest against 
 its tone even during the service. In the course of the sermon Kingsley remarked 
 that any social system which enabled capital to become the possession of a 
 few, which robbed the masses of the land which they and their ancestors had 
 cultivated from time immemorial, and reduced them to the condition of serfs 
 working for daily wage or for charity, was contrary to the spirit of the Kingdom 
 of God, as revealed in Christ. The sermon was afterwards published under 
 the title of The Church's Message to the Workers. 
 
 1 Maurice declared that everyone who is a Christian must also be a socialist. 
 But the significance of the word " socialist " has changed somewhat since then. 
 According to Maurice, " The motto of the socialist is co-operation ; of the 
 n ti -socialist, competition."
 
 SOCIAL PROTESTANTISM 505 
 
 fitted them to be the chosen vessels of the new dispensation. And 
 so the Christian Socialists naturally turned their attention to pro- 
 ducers' associations, just as the earliest Social Catholics had done 
 before them. But it would be a mistake to imagine that, they owed 
 anything to Buchez, whom they appear to have ignored altogether. 
 The reawakened interest in the possibilities of association which 
 exercised such a fascination over John Stuart Mill in 1848 had 
 touched their imagination, and Ludlow, one of their number, had 
 the good fortune to be resident in Paris, and so witnessed this glorious 
 revival. Such associations seemed to be just the economic instru- 
 ments needed if a transformation was ever to be effected, and the 
 very process of establishing them, it was hoped, would supply 
 a useful means of discipline in the subordination of individual to 
 collective interests. But the process of disillusion proved as rapid 
 as it was complete. Contrary to what was the case in France, it 
 cannot be said that they were ever really attempted in England. 
 
 But the work of the "Association " had not been altogether in 
 vain. Defeated in its attempts to arouse the worker from his lethargy, 
 and thwarted in its efforts by legal restrictions of various kinds, it 
 began a campaign in favour of a more liberal legislation in matters 
 affecting the welfare of the working classes. The result was the 
 passing of the Industrial and Provident Societies Acts of 1852-62, 
 which conferred legal personality for the first time upon co-operative 
 associations, with consequent benefit to themselves and to other 
 working men's associations. 
 
 The Christian Socialists thought that the methods by which their 
 ideals might be attained were of quite secondary importance. Ex- 
 perience had taught them that voluntary association or legislation 
 even by itself could never be of much avail until the whole mental 
 calibre of the worker was changed. 1 What they strove for above 
 all else was moral reform, and whenever they use the word '* co- 
 operation " they conceive of it not merely as a particular system 
 of industry, but rather as the antithesis of the competitive regime 
 or as the negation of the struggle for existence. Their thoughts are 
 admirably summed up in a letter of Ludlow's to Maurice written 
 
 1 " There is no doubt about association being the form which industrial 
 government will take in future, and I have no doubt as to it* success, but a pre- 
 liminary training extending possibly over a couple of generations is necessary 
 before the worker has the requisite ability or moral strength to make use of it." 
 (Kingsleyinl856.) 
 
 And this is how State intervention appealed to him : " The devil is alwayi 
 ready to urge us to change law and government, heaven and earth even, bat 
 takes good care never to suggest that we might change ourselves." 
 
 B.D. *
 
 506 DOCTRINES INSPIRED BY CHRISTIANITY 
 
 from Paris in March 1848, in which he speaks of the necessity for 
 " Christianising socialism." 
 
 Christian Socialism in England, though it has survived its 
 founders, has been obliged to change its programme. It has 
 abandoned the idea of a producers' association, but still advocates 
 other forms of co-operation. Just now its chief demand is for a 
 reorganisation of private property, which is a particularly serious 
 question in England, where the land is in the hands of a comparatively 
 few people. In the words of the Psalmist, the Christian Socialists 
 often cry out, " The earth is the Lord's," and they are never weary of 
 pointing out how under the Mosaic law the land was redistributed 
 every forty-nine years with a view to bringing it back to its original 
 owners. And so it finds itself supporting the doctrines of Henry 
 George, who may himself be classed as one of the Christian Socialists. 1 
 There is also the Institutional Church, with its network of organisa- 
 tions for the satisfaction of the material, intellectual, and moral needs 
 of the worker, which is becoming a prominent feature of modern 
 English Church life. Moreover, several of the Labour leaders Keir 
 Hardie, for example are earnest Christians. The Federation of 
 Brotherhoods, which to-day includes over 2000 societies, with a 
 membership of over a million working men, combines an ardent 
 evangelical faith with a strong advocacy of socialism. 2 
 
 In the United States of America Christian Socialism is still more 
 aggressive and outspoken in its attacks upon capitalism. The 
 earliest society of Christian Socialists was founded at Boston in 
 1889. Since then these associations have multiplied rapidly. The 
 latest of them defines its objects in the following terms : " To help 
 the message of Jesus to permeate the Christian Churches and to 
 show that socialism is necessarily the economic expression of the 
 Christian life." A little farther on it declares itself persuaded 
 " that the ideal of socialism is identical with that of the Church, 
 and that the gospel of the co-operative commonwealth is the Gospel 
 of the Kingdom of God translated into economic terms." 3 
 
 1 The official organ of the Christian Social Union, which is definitely con- 
 nected with the Church of England, is the Economic Review, published at Oxford 
 not to be confused with the Economic Journal, which is published in London 
 by the Royal Economic Society. 
 
 * E. Gounelle, Le Mouvement des Fraternites. 
 
 9 Mr. Josiah Strong, director of the Institute of Social Service at New York. 
 is the publisher of a review called The Gospel of the Kingdom, which has for its 
 programme " the study of economic facts in the light of the Gospel," and in 
 which he maintains that " if the world is ever to be Christianised industry must 
 \)2 Christianised first of all, On the question of unemployment, for example, he
 
 SOCIAL PROTESTANTISM 507 
 
 For the other extreme the extreme right we must look to 
 Germany. In 1878 Pastors Stocker and Todt founded the Christian 
 Social Working Men's Party, which, despite its title, drew most of 
 its recruits from the middle classet. Later on Stocker became 
 Court preacher, and during his occupation of that post this kind of 
 socialism found such favour in official quarters that he was able to 
 say that it was his personal conviction that a social revolution 
 was within the bounds of practical politics. 1 But in 1890 the 
 Emperor William II dismissed his pastor, and Christian Socialism 
 immediately lost its official status.* 
 
 At the Congress of Erfurt in 1896 two young pastors of Frankfort 
 named Naumann and Goehre 3 tried to win the adherence of the 
 working classes by endeavouring to give the Protestant churches a 
 more distinctively socialist bias. But the suggestion was condemned 
 by the official Lutheran Church, the masters opposed it, and it 
 received but very slight support from the Social Democrats. Alto- 
 gether the movement proved abortive, and the pastors have long 
 since turned aside to other interests. 
 
 In Switzerland also the movement is making considerable 
 headway, and in Professor Ragaz and Pastors Kutter * and Pfliiger, 
 the latter of whom has recently been made a deputy, it has found 
 advocates whose views are at any rate sufficiently advanced. 
 
 refers us to Matthew xx, 6, and on the still more vexed question of the closed or 
 open shop we are referred to 1 Corinthians xii, 16, 26. We must also mention 
 Rausohenbusch's eloquent book, Christianity and the Social Crisis. 
 
 The well-known economist Professor Richard T. Ely is another of the leaders 
 of this movement. Nor must we omit Herron, who caused some sensation 
 by declaring that it is necessary to go well beyond collectivism, which 
 he thinks altogether too conservative and reactionary. He adds that Karl 
 Marx is a crusted Tory compared with Jesus, " for any one who accepts private 
 property in any form whatsoever, even in matters of consumption, must reject 
 Christ." 
 
 1 At a conference held at Geneva in 1891. At this conference M. Stocker 
 defined his programme as follows : " We do not believe that we can do anything 
 without the State, but we also believe in the spirit of association. We have 
 told the masters that their duty is to make some sacrifice for the sake of 
 solving the question in a way that will be agreeable to their men. We have 
 also told the workers that they must work hard, economically, and conscientiously, 
 even if they never obtain a better situation." 
 
 1 He was formally repudiated by the Emperor in 1896 in a telegram addressed 
 to a powerful employer, Baron Stumm. 
 
 Goehre is the author of a work entitled Three Months in a Workshop. 
 The book has been a great success and has produced a crop of imitations. 
 
 * Kutter's book Sie Mussen caused quite a flutter. The author attempts to 
 show that the socialists are to-day the real disciples of Christ, but have been dis- 
 owned by the Church.
 
 508 DOCTRINES INSPIRED BY CHRISTIANITY 
 
 In France there is at least one there may possibly be more 
 Social Protestant school. But as it only includes a small fraction of 
 Protestantism, which is itself in a hopeless minority, its influence is 
 not very great. There are several important social movements, 
 however, such as the crusades against alcoholism and pornography, 
 the revival of co-operation and the demand for the erection of 
 " People's Palaces " known as Solidaritis which are entirely 
 due to the activities of this school. An association for the 
 inductive study of social questions was founded in 1887 by Pastor 
 Gouth, another pastor named Tomy Fallot being its president and 
 inspirer. 1 At first the demands of this group were extremely 
 moderate, co-operation being their only mode of action and solidarity 
 their social doctrine. 2 This new doctrine of solidarity, although 
 rather belonging to the Radical wing, being the very antithesis of 
 Christian charity, as we shall see by and by, has been enthusiastically 
 welcomed by the Social Protestants. The Protestants even claim 
 that it was originally their own peculiar doctrine, and that other 
 schools merely borrowed it ; for where can be found a fuller expres- 
 sion of the law of solidarity than the two Christian doctrines of the 
 fall and redemption of man ? " For as in Adam all die, even so in 
 Christ shall all be made alive." 
 
 Curiously enough there is another group of young pastors who 
 closely resemble what is known in Catholic circles as the Abbots' Party. 
 They are dissatisfied with the moderate claims of the Catholics as a 
 whole, and like their American colleagues they demand the establish- 
 ment of a form of collectivism. 3 They think, at any rate, that the 
 
 1 For the past twenty years M. de Boyve, the leader of the co-operative 
 movement in France, has been the president, which confirms us in the suspicion 
 that the two schools had a common parentage, both really springing from the 
 Ecole de Nimes. Periodical congresses are held in connection with it, and it 
 also has a review called Le Christianisme Social. 
 
 1 Pastor Tomy Fallot, the initiator of this movement, indicates the path 
 that should be followed thus : " The essential thing is to get a rough outline of 
 that perfect type which is known as co-operation. Just now it seems the only 
 thing that contains a prophecy of better times." (V 'Action Bonne.) Compare 
 this with Maurice's formula. 
 
 " We are Social Christians because we are solidarists. In our search for 
 solidarity we have found the Messiah and His Kingdom. Solidarity is the lay- 
 man's term, the Kingdom of God the theologian's, but the two are the same." 
 (Gounelle, U Avant-Garde, 1907.) 
 
 * This group found its earliest recruits among the young pastors who ministered 
 in the great industrial towns (M. Wilfred Monod at Rouen and M. Gounelle at 
 Roubaix, for example), and thus found itself in close touch with poverty, suffer- 
 ing, and discontent. But several laymen have also joined it, among them being a
 
 SOCIAL PROTESTANTISM 509 
 
 question of property ought to come up for consideration almost 
 immediately. 
 
 In short, it seems true to say that in almost every country Social 
 Christianity is gradually evolving into Christian Socialism, and the 
 change of title is an index to the difference of attitude. In other 
 words, Social Protestantism accepts the essential principles of 
 international socialism, such as the socialisation of the means of 
 production, class war, and internationalism, and endeavours to show 
 that they are in complete accordance with the teaching of the 
 Gospels. 
 
 But the stress which it lays upon the necessity for moral reform 
 saves Social Protestantism from being hopelessly confused with 
 collectivism, and the fact that it believes that individual salvation 
 is impossible without social transformation helps to distinguish it 
 from individual Protestantism. 1 Conversion implies a change of 
 environment. What is the use of preaching chastity when people 
 have to sleep together in the same room without distinction of age 
 or of sex ? " Society," says Fallot, " ought to be organised in such 
 a fashion that salvation is at least possible for everyone." " The 
 regime of the great industry," says M. Gounelle, "is the greatest 
 obstacle to the salvation of sinners that the religion of Christ 
 has yet met." Protestant Socialism remains individualistic in the 
 sense that while seeking to suppress individualism in the form of 
 egoism as a centripetal force, it wishes to uphold it and to strengthen 
 it as a principle of disinterested activity as a centrifugal force. It 
 takes for its motto those words of Vinet which may be found carved 
 on the pedestal of his statue at Lausanne : " I want man to be his 
 own master in order that he may give better service to everybody 
 else." a 
 
 son of the economist who was regarded as the doyen of the Liberal school 
 Frederic Passy. 
 
 The Christian Socialist group publishes a journal of its own, entitled UEtpoir 
 du Monde. 
 
 1 " For I could wish that myself were accursed from Christ for my brethren,' 
 writes St. Paul ; in other words, ' I do not want to be saved alone, and I shall be 
 completely saved only when humanity as a whole has been saved.' And so the 
 evangelical doctrine would subordinate the full realisation of my personal 
 salvation to the salvation of others." (W. Monod, La Notion apostolique du 
 Salut.) 
 
 Or, as he epitomises it elsewhere, " It is useless to speak of giving ourielvti 
 until we are certain that we own ourselvei."
 
 510 DOCTRINES INSPIRED BY CHRISTIANITY 
 
 IV : THE MYSTICS 
 
 No review of Christian Social doctrines, however summary, can 
 afford to omit the names of certain eminent writers who, though 
 belonging to none of the above-mentioned schools, and having no 
 definite standing either as socialists or economists, being for the 
 most part litterateurs, historians, and novelists, have nevertheless 
 lent the powerful support of their eloquence to the upholding of 
 somewhat similar doctrines. 1 
 
 Tolstoy and Ruskin are the best known representatives of this 
 movement on the borderland of Social Christianity, although they 
 are by no means the only ones. 2 These two grand old men, who 
 both died at an advanced age, appeared to their contemporaries in 
 much the same light as the prophets of old did to Israel. True 
 descendants of Isaiah and Jeremiah, they exultantly prophesied the 
 downfall of capitalism the modern Tyre and Si don and announced 
 the coming of the New Jerusalem the habitation of justice. Their 
 language even is modelled on Holy Writ, and Ruskin, we know, was 
 from his youth upwards a diligent reader of the Bible. 3 Both of 
 them condemn the Hedonistic principle and denounce money as an 
 instrument of tyranny which has resulted in setting up something 
 like a new system of slavery, 4 and they both advocate a return to 
 manual labour as the only power that can free the individual and 
 regenerate social life. They differ, however, in their conception of 
 future society, which to Ruskin must be aristocratic, chivalrous, and 
 heroic, while Tolstoy lays stress upon its being equalitarian, com- 
 munal, and above all ethical. The one looks at society from the 
 
 1 Ruskin himself did not think that his doctrines were only of slight importance. 
 The introduction to Munera Pulveris (1862) contains the following words j " The 
 following pages contain, I believe, the first accurate analysis of the laws of Political 
 Economy which has been published in England." 
 
 See also the preface to Unto This Last, which has for its sub-title " Four Essays 
 on the First Principles of Political Economy." 
 
 1 There are a great number of novels dealing with social questions. For the 
 English novels bearing on this topic see M. Cazamian, Le. Roman social. 
 
 * So much was this the case with Ruskin that Mme. Brunhea has published 
 book called Ruskin et la Bible, and Tolstoy on his side has an edition of 
 the Gospels to his credit which is said to be much nearer the original than the 
 ordinary version of the canon. 
 
 See Fora Clavigera, passim. Tolstoy writes in a similar strain. Money is 
 just a conventional sign giving the right or the possibility of claiming the service 
 of others. But although money is all-powerful in the matter of exploiting the 
 worker it is quite useless when it comes to a question of furthering his well-being. 
 There is a curious development of this thesis in Tolstoy's What is to be Done f
 
 THE MYSTICS 511 
 
 standpoint of an aesthete, the other from that of a muzhik : the one 
 would breed heroes, the other saints. 
 
 Thomas Carlyle also deserves mention. Among the numerous 
 books which he wrote we may mention, among others, his French 
 Revolution (1837) and his Heroes and Hero-worship. Chronologically 
 he precedes both Tolstoy and Ruskin, and his influence upon 
 economic thought was greater than either of theirs. But we 
 could hardly put him among the Christian Socialists because of his 
 extreme individualism, and if he were to be given a place at all it 
 would be with such writers as Ibsen and Nietzsche. His economic 
 ideas, however, run parallel to Ruskin's ; and nowhere except 
 perhaps in the choruses of the old Greek tragedies do we get any- 
 thing approaching the passion which is displayed in their declamations 
 against the present economic order. 1 
 
 Carlyle is possibly the strongest adversary that the old Classical 
 school ever encountered. It was he who spoke of political economy 
 as " the dismal science." That abstract creation of the Classicists, 
 the economic man, afforded him endless amusement, and he very 
 aptly described their ideal State as '* anarchy plus the police- 
 man." He is no less fierce in his denunciation of laissez-faire as a 
 social philosophy. 8 But he left us no plan of social reconstruction, 
 being himself content to wait upon individual reform a trait which 
 brings him into intimate connection with the Christian Socialists. 3 
 
 Ruskin, on the other hand, has given us a programme of social 
 regeneration which might be summarised as follows : * 
 
 1. Manual labour should be compulsory for everybody. His 
 readers were reminded of those words of St. Paul, " If any would 
 not work, neither should he eat." He thought it both absurd and 
 
 1 " All this baa oome of the spreading of that thrice accursed, thrice impious 
 doctrine of the modern economist, that To do the best for yourself, is finally 
 to do the beat for others.' Friends, our great Master said not so." (Ruskin, 
 Crown of Wild Olive, Lecture II). 
 
 * Especially in that celebrated passage I " It [Political Economy] sounds 
 with Philosophico-Politice-Economic plummet the deep dark sea of troubles, 
 and having taught us rightly what an infinite sea of troubles it is sums up with 
 the practical inference and use of consolation that nothing whatever can be 
 done in it by man, who has simply to sit still and look wistfully to ' time and 
 general laws,' and thereupon without so much as recommending suicide coldly 
 takes its leave of us." (Chartism.) 
 
 * " If thou ask again . . . What is to be done ? allow me to reply : By thee, 
 for the present, almost nothing. . . . Thou shalt descend into thy inner man, 
 and see if there be any traces of a soul there ; till then there can be nothing 
 done ! . . . Then shall we discern, not one thing, but, in clearer or dimmer 
 sequence, a whole endless host of things that can be done. Do the first of these." 
 (Ptut and Present. Book I, chap. 4.) * Bee particularly Fora Clavigtro.
 
 512 DOCTRINES INSPIRED BY CHRISTIANITY 
 
 immoral that a man should live in idleness merely by using money 
 inherited from his ancestors to pay for the services of his fellow-men. 
 Life is the only real form of payment ; in other words, labour ought 
 to be given in return for labour. To live upon the fruits of dead 
 labour is surely absurd and contradictory. And it must be real 
 human labour. Machinery of all kinds must be renounced except 
 that which may be driven by wind or water natural forces which, 
 unlike coal, do not defile, but rather purify. 
 
 Ruskin wanted labour to be artistic, and he longed to see the 
 artisan again become an artist as he was in the Middle Ages (which is 
 a somewhat hasty generalisation perhaps). In practice this is not 
 very easy. Some of his immediate disciples have set' up as artistic 
 bookbinders, but the number of people who can find employment 
 at such trades must be exceedingly few. 
 
 Tolstoy, on the other hand, does not strive for artistic effect. 
 His heart is set upon rural work, which he magnificently describes as 
 " bread work," and which seemed to him sufficiently noble without 
 embellishment of any kind. 
 
 2. Work for everyone is the natural complement and the neces- 
 sary corrective of the preceding rule of no idleness and no unem- 
 ployment. In society as at present organised everybody is not 
 obliged to work, while some individuals are obliged to be idle. 1 This 
 monstrous inequality must be remedied. There would be no 
 difficulty about finding plenty of work for everyone if everyone did 
 something. Under such a system there would be no unemployment, 
 although there would be more leisure for some. 
 
 8. Labour would no longer be paid for according to the exigencies 
 of demand and supply, which tend to reduce manual work to the 
 level of a mere commodity. It would be remunerated according to 
 the eternal principles of justice, which would not of necessity imply an 
 appeal to any written law, but solely to custom, which even now 
 fixes the salaries of doctors, lawyers, and professors. In these 
 professions there are no doubt some individual inequalities, but 
 there is also the norm, and it is a breach of professional etiquette 
 to take less than this. The norm does occasionally find expression 
 in the rules of the association, and in some such way Ruskin would 
 fix not merely a minimum but also a maximum wage. Whatever 
 profession a person follows, whether he be workman, soldier, or 
 merchant, he should always work not merely for profit but for the 
 
 1 " Why, the four-footed worker has already got all that this two-handed one 
 IB clamouring for, and you say it is impossible." (Carlyle, Past and Present, 
 chap. 3 ; and see also Chartism, chap. 4.)
 
 THE MYSTICS 513 
 
 social good. He must, of course, be suitably rewarded if his position 
 as a worker is to be maintained and the work itself efficiently 
 performed, but it can never be done if gain becomes the end and 
 labour merely the means. 
 
 4. The natural sources of wealth land, mines, and waterfalls 
 
 and the means of communication should be nationalised. 
 
 5. A social hierarchy graded according to the character of the 
 services rendered should be established. The gradation must be 
 accepted in no intolerant spirit, and must be respected by everybody. 
 Chivalry is as necessary in an industrial as in a military society, and 
 a new crusade against Mammonism l should be preached both far 
 and wide. 
 
 6. Above all else must come education not mere instruction. 
 What needs developing above everything is a sense of greatness, a 
 love of beauty, respect for authority, and a passion for self-sacrifice. 
 What especially need acquiring are the faculties of admiration, of 
 hope, and of love. 2 
 
 Only the last item on the programme seems anywhere near 
 realisation, but that by itself would justify our reference to Ruskin's 
 scheme. Not only has the suggestion resulted in the creation of 
 working men's colleges at Oxford and of Ruskin Colleges elsewhere, 
 but it has also given rise to the garden city movement. These 
 new cities are built with the express purpose of relieving the worst 
 features of industrial life, and are so planned as not to interfere in 
 any way either with the beauties of nature or with the health of 
 the citizens. 8 
 
 Ruskin speaks of himself somewhere as an out-and-out com- 
 munist, but his communism had also a touch of the aristocrat and 
 the aesthete about it which possibly proved a recommendation in 
 English society. Tolstoy is a much more thoroughgoing com- 
 munist, and is violently opposed to " that low, bestial instinct which 
 men call the right of private property." * His cry was " Back to the 
 
 1 This was the ideal which he had in mind in founding the Guild of St. George. 
 See an article by Professor Marshall, The Social Possibilities of Economic Chivalry, 
 in the Economic Journal, March 1907. There ia no reference to Buskin in it, 
 however. 
 
 1 When the Christian Socialists in 1854 organised a course of lecture* for 
 working men in London Ruskin volunteered to give a few addresses, not on social 
 economics or on history, but on drawing. 
 
 * One naturally thinks first of such industrial villages as Bournville and Port 
 Sunlight. But in 1903 an entirely new city of this kind was begun at Letch- 
 worth, Herts. The idea has recently undergone a considerable development 
 by a society that owes ita inspiration to Ruskin. 
 
 4 Story of a Horte, in his Fir* Stories (1861).
 
 514 DOCTRINES INSPIRED BY CHRISTIANITY 
 
 land," and the practice of coaration; his ideal the mir. He was 
 not anxious to know that everyone was working at some trade or 
 other, but he thought everyone ought to produce his own food, 
 which is the one inevitable law of human existence. Division of 
 labour, which has been so extravagantly praised by economists, he 
 thought of as a mere machination of the devil enabling men to evade 
 the Divine commandment. At any rate it should only be adopted 
 when the need for it arises, and after consultation with all the parties 
 interested, and not indiscriminately, as is at present the case, with 
 competition, over-production, and crises as the result. 1 
 
 If we are to take Tolstoy's words literally, as he suggested we 
 should take Christ's words, then the society that he dreamt of is 
 very far beyond even the communist ideal. More towns, more 
 commerce, more subdivision of trades, more money, more art for 
 art's sake such was to be the economic Nirvana of the communists. 
 
 1 See a book entitled Labour, which consists of the meditations of a muzhik 
 called Bondareff upon those words of Genesis, " In the sweat of thy face shalt thou 
 eat bread," followed by a long commentary by Tolstoy.
 
 BOOK Y : RECENT DOCTRINES 
 
 IN the earlier sections of this work no special difficulty was experi- 
 enced in giving the essential traits of the economic thought of each 
 period. But on the threshold of this last book we naturally feel 
 some trepidation. The newer theories can scarcely be said to have 
 fallen into their true perspective, and their full import is not clear 
 to us contemporaries. Here, if anywhere, we shall run the risk of 
 being arbitrary in our choice. It seems to us, however, that the 
 economic thought of the end of the nineteenth and the beginning 
 of the twentieth centuries reveals at least four dominant tendencies. 
 
 1. In the first place there is a quite unexpected revival of 
 theoretical studies. Pure economic theory, which had been de- 
 liberately neglected by the Historical school, by the State and 
 Christian Socialists, was in 1875 again taken up by a group of eminent 
 writers who flourished in England, France, and Austria. With the 
 aid of conceptions that had not been in current use since the days of 
 Condillac, coupled with the application of the mathematical 
 method, which had not been attempted since the time of Cournot, 
 they have succeeded in substituting an attractive and ingenious 
 theory of prices for the somewhat halting hypothesis put forth by 
 the Classical theorists. The success of the method in other fields 
 of economic inquiry is every day enhancing its reputation. A 
 number of writers both in America and Europe (excepting France, 
 perhaps) are engaged upon this task, following in the wake of 
 Walras, of Jevons, and of Menger. Diagrams, algebraical formulae, 
 and subtle reasoning again characterise the works of economists. 
 Pure economics, so much decried since the days of Ricardo, has 
 once more justified its claim to a position of honour, and despite 
 keen opposition it is attracting attention everywhere. From the 
 point of view of economic science this is the most notable fact of 
 recent years. 
 
 2. Parallel with this has gone on a profound change in socialism. 
 We have already shown in the course of the preceding book the 
 transformations undergone by Marx's ideas at the hands of even 
 his own followers. The decline is equally evident everywhere else. 
 All pretension to set up a proletarian in opposition to a bourgeois 
 economics has been renounced. " It is necessary," says M. Sorel 
 somewhere, " to abandon every thought of transforming socialism 
 
 515
 
 516 RECENT DOCTRINES 
 
 into a science." In fact, French syndicalists, English Fabians, 
 and German revisionists have rallied with more or less good grace 
 to the scientific ideas of Pareto, Marshall, or Bohm-Bawerk. But 
 the real reason for this change of attitude is the strong desire to 
 devote themselves with greater vigour to the social and political 
 demands of socialism. The general strike, the creation of syndicate, 
 the establishment of co-operative societies, and the problems of 
 municipal socialism are attracting more and more attention, whereas 
 the theory of surplus value is falling into the background. Even 
 more striking still, as we shall see, is the attempt made by some 
 of them, especially the advocates of land nationalisation to recon- 
 cile Liberalism and socialism upon the basis of a doctrine that is 
 Classical par excellence the theory of rent. 
 
 8. This is not the only change that socialism has undergone. 
 The ideal of collectivism which long prevailed among the working 
 classes was that of a centralised sovereign authority, and the active 
 part taken by the collectivist party in the legislative and even in the 
 administrative work of some countries still further encouraged this 
 belief. But the old revolutionary spirit, always individualistic to 
 the core, was still alive, especially in the Latin countries, and it 
 began to show signs of impatience at the turn things had taken. 
 And so we witness among the working classes a revival of Liberalism, 
 harsh and violent in its expression perhaps, and doubtless very 
 different from the founders'. Smith and Bastiat would have some 
 difficulty in recognising it, and with a view to avoiding confusion 
 with the older doctrine it has assumed the name libertaire, but is 
 generally known by the no less authentic title of " anarchism." This 
 tendency towards extreme individualism and anarchy, of which there 
 is unmistakable evidence even in the annals of the International, has 
 gained the ascendancy over the working classes, leaving a deep 
 mark upon the recent syndicalist movement in France and Italy. 
 At the same time there has also appeared among writers of the 
 bourgeois class a kind of philosophical and moral anarchism which 
 affords further proof of the revival of individualism. 
 
 4. Owing to these transformations in the theories of individualism 
 and socialism, that other doctrine which in an earlier book went by 
 the name of State Socialism has also undergone a change. In 
 France, at any rate, it has reappeared under the name of Solidarism, 
 which attempts a justification of State intervention by basing 
 it on new foundations and confining it within just limits. It 
 thus really represents an effort at synthesising individualism and 
 socialism.
 
 THE HEDONISTS 517 
 
 These are the main currents which we have attempted to describe 
 in the following chapters. By describing them as recent doctrines 
 our aim was not to emphasise the date of their appearance which 
 indeed is often in the distant past but to show that they are merely 
 a fresh effort to rejuvenate the older theories of which they are 
 the latest manifestation. We might perhaps have borrowed a term 
 from another domain and referred to them as modernist doctrines 
 did it not seem rash to group under a perfectly definite term con- 
 ceptions that are so very diverse in character and which have nothing 
 more than a chronological order binding them together. 
 
 CHAPTER I : THE HEDONISTS 
 
 I : THE PSEUDO-RENAISSANCE OF THE 
 CLASSICAL SCHOOL 
 
 IF we are to give this new doctrine its true setting we must return 
 for a moment to our study of the Historical school. The criticism 
 of that school, as we have already seen, was directed chiefly against 
 the method of the Classical writers. The faith which their pre- 
 decessors had placed in the permanence and universality of natural 
 law was scornfully rejected, and the possibility of ever founding a 
 science upon a chain of general propositions emphatically denied. 
 Political economy, so it was decreed, was henceforth to be con- 
 cerned merely with the classification of observed facts. 
 
 It would not have been difficult to foretell that the swing of the 
 pendulum in accordance with that strange rhythm which is such 
 a feature of the history of thought would at the opportune moment 
 cause a reversion to the abstract method. That is exactly what 
 happened. Just at the moment when Historical study seemed to 
 be triumphantly forging ahead that is, about the years 1872-74 
 several eminent economists in Austria, England, Switzerland, and 
 America suddenly and simultaneously made their appearance with 
 an emphatic demand that political economy should be regarded 
 as an independent science. They brought forward the claims 
 of what they called pure economics. Naturally enough there 
 ensued the keenest controversy between the champions of the 
 two schools, notably between Professors Schmoller and Karl 
 Menger. 
 
 The new school had one distinctive characteristic. In its search 
 for a basis upon which to build the new theory it hit upon the
 
 518 THE HEDONISTS 
 
 general principle that man always seeks pleasure and avoids pain, 
 getting as much of the former with as slight a dilution of the 
 latter as he possibly can. 1 A fact of such great importance and 
 one that was not confined to the field of economic activities, but 
 seemed present everywhere throughout nature in the guise of the 
 principle of least resistance, could scarcely have escaped the notice 
 of the Classical theorists. They had referred to it simply as 
 " personal interest," but to-day we speak of it as Hedonism, 
 from the Greek fiSovrj (pleasure or agreeableness). Hence the 
 name Hedonists, by which we have chosen to designate these two 
 schools. 
 
 The elimination of all motives affecting human action except 
 one does not imply any desire on the part of these writers to deny 
 the existence of others. They simply lay claim to the right of 
 abstraction, without which no exact science could ever be con- 
 stituted. In other words, they demand the right of eliminating 
 from the field of research every element other than the one which 
 they wish to examine. The study of the other motives belongs to 
 the province of other social sciences. The homo osconomicus of the 
 Classicals which has been the object of so much derision has been 
 replaced on its pedestal. But it has in the meantime undergone 
 such a process of simplification that it is scarcely better than a 
 mere abstraction. Men are again to be treated as forces and 
 represented by curves or figures as in treatises on mechanics. The 
 object of the study is to determine the interaction of men among 
 themselves, and their reaction upon the external world. 
 
 We shall also find that the new schools arrive at an almost 
 identical conclusion with the old, namely, that absolutely free 
 competition alone gives the maximum of satisfaction to everybody. 
 Allowing for the differences in their respective points of view, to 
 which we shall refer later on, what is this but simply a revival of 
 the great Classical tradition ? 
 
 Little wonder, then, that we find a good deal of sympathy shown 
 for the old Classical school. Indeed, it is throughout regarded with 
 almost filial piety. 2 
 
 1 " Pleasure and pain are undoubtedly the ultimate objects of the calculus of 
 economics. To satisfy our wants to the utmost with the least effort, to procure 
 the greatest amount of what is desirable at the expense of the least that is un- 
 desirable, in other words, to maximise pleasure, is the problem of economics." 
 (Stanley Jevons, Theory of Political Economy, p. 40.) 
 
 2 " The errors of the Classical school are, so to speak, the ordinary diseases 
 of the childhood of every science." (Bohm-Bawerk, The Austrian Economists, in 
 Annals of the American Academy of Political and Social Science January 1891.)
 
 PSEUDO-RENAISSANCE OF THE CLASSICAL SCHOOL 510 
 
 This does not mean that the Classical doctrine is treated as 
 being wholly beyond reproach, although it does mean that the 
 new school could scarcely accuse it of being in error, seeing that 
 it comes to similar conclusions itself. But what it does lay to the 
 charge of the older writers is a failure to prove what they assumed 
 to be true and a tendency to be satisfied with a process of reasoning 
 which too often meant wandering round in a hopeless circle. 
 Especially was this the case with their study of causal relations, 
 forgetting that as often as not cause was effect and effect cause. 
 The attempt to determine which is cause and which effect is clearly 
 futile, and the science must rest content with the discovery of 
 uniformities either of sequence or of coexistence. 
 
 This applies especially to the three great laws which form the 
 framework of economic science, namely, the law of demand and 
 supply, the law of cost of production, and the law of distribution, 
 none of which is independent of the others. Let us review them 
 briefly. 
 
 The law stating that " price varies directly 'with demand and 
 inversely with supply " possessed just that degree of mathematical 
 precision necessary to attract the attention of the new writers. In 
 fact, it just served for the passage from the old to the new economics. 
 But no sooner was the crossing effected than the bridge was destroyed. 
 Little difficulty was experienced in pointing out that this so-called 
 law which had been considered to be one of the axioms of political 
 economy, the quid inconcussum upon which had been raised all the 
 superstructure of economic theory, was an excellent example of that 
 circular reasoning of which we have just spoken. There was a 
 considerable flutter among the economists of the mid-nineteenth 
 century when they found themselves forced to recognise this. 
 However true it may be that price is determined by demand and 
 supply, it is equally true that demand and supply are each in their 
 turn determined by the price, so that it is impossible to tell which 
 is cause or which is effect. Stuart Mill had already noted this 
 contradiction, and had attempted correction in the way already 
 described (p. 359). But he was ignorant of the fact that Cournot 
 had completely demolished the formula by setting up another in its 
 place, namely, that " demand is a function of price." * The sub- 
 stitution of that formula marks the inauguration of the Hedonistic 
 calculus. Demand is now shown to be connected with price by a 
 kind of see-saw movement, falling when prices rise and rising when 
 prices fall. Supply is equally a function of price, but it operates in 
 
 1 Recherche* w let Principe* mathematique* de la Thiorie det Riehesae*.
 
 520 THE HEDONISTS 
 
 the opposite fashion, moving part passu with it rising as it rises 
 and falling as it falls. Thus price, demand, and supply are like 
 three sections of one mechanism, none of which can move in 
 isolation, and the problem is to determine the law of their inter- 
 dependence. 
 
 This does not by any means imply that there is no longer any 
 place in economics for the law of demand and supply. It has 
 merely been given a new significance, and the usual way of expressing 
 it nowadays is by means of a supply and demand curve, which 
 simply involves translating Cournot's dictum into figures. 
 
 The same is true of the law stating that cost of production 
 determines value. There is the same petitio principii here. It is 
 easy enough to see, on the contrary, that the entrepreneur regulates 
 his cost of production according to price. The Classical school 
 had realised this as far as one of the elements in the cost of pro- 
 duction was concerned, for it was quite emphatic in its teaching 
 that price determined rent, but that rent did not determine price. 
 It is just as true of the other elements. In other words, the second 
 law is just as fallible as the first. It is obviously imperative that 
 the vain quest for causal relations should be abandoned and that 
 economists should be content with the statement that between 
 cost of production and price there exists a kind of equilibrating 
 action in virtue not of any mysterious solidarity which subsists 
 between them, but because the mere absence of equilibrium due 
 either to a diminution or an increase in the quantity of products 
 Immediately sets up forces which tend to bring it back to a position 
 of equilibrium. This interdependent relation, which is extremely 
 important in itself and upon which the Hedonists lay great store, 
 is simply one example taken from among many where the value 
 of one thing is just a function of another. 
 
 Similar criticism applies to the law of distribution, to the 
 Classical doctrine of wages, interest, and rent. The way the Classical 
 writers treated of these questions was extraordinarily naive. Take 
 the question of rent. You just subtract from the total value of 
 the product wages, interest, and profit, and you are left with 
 rent. Or take the question of profit. In this case you will have 
 to subtract rent, if there is any, then wages and interest, the other 
 component elements, and what remains is profit. Bohm-Bawerk 
 wittily remarks that the saying that wages are determined by the 
 product of labour apparently only amounts to this that what 
 remains (if any) after the other co-operators have had their share 
 is wages. Each co-partner in turn becomes a residual claimant
 
 521 
 
 and the amount of the residuum is determined by assuming that 
 we already know the share of the other claimants ! l 
 
 The new school refuses any longer to pay honour to this ancient 
 trinity. It is impossible to treat each factor separately because of 
 the intimate connection between them, and their productive work, 
 as the Hedonists point out, must necessarily be complementary. 
 In any case, before we can determine the relative shares of each 
 we must be certain that our unknown x is not reckoned among 
 the known. This naturally leads them on to the realm of mathe- 
 matical formulae and equations. 
 
 All the Hedonists, however, do not employ mathematics. The 
 Psychological school, especially the Austrian section of it, seems to 
 think that little can be gained by the employment of mathematical 
 formulae. Some of the Mathematical economists, on the other hand, 
 are equally convinced of the futility of psychology, especially of 
 the famous principle of final utility, which is the corner-stone of 
 the Austrian theory. 8 
 
 For the sake of clearness it may be better to take the two branches 
 the Psychological and the Mathematical separately. 
 
 II : THE PSYCHOLOGICAL SCHOOL 
 
 THE feature of the Psychological school is its fidelity to the doctrine 
 of final utility, whatever that may mean. 3 The older economists 
 
 1 Let P = value of product and x, y, z represent wages, interest, and rent 
 respectively, then + y + z P, which is insoluble. 
 
 Nor does it seem much more hopeful when written out thus : 
 
 x = P - (y + z) 
 
 y = P - (x + z) 
 
 - P - ( + y) 
 
 *' The theory of economic equilibrium is quite distinct from the theory of 
 final utility, although the public are apt to confuse them and to think that they are 
 both the same." (Vilfredo Pareto, ISEconomie pure, 1902.) 
 
 The name varies a little with different authors and in different countries. 
 " The final degree of utility " is the term used by Jevona, " marginal utility " by 
 the Americans, " the intensity of the last satisfied want " by Walras. Walras 
 also speaks of it as " scarcity," using the term in a purely subjective fashion to 
 denote insufficiency for present need. This very plethora of terms suggest* a 
 certain haziness of conception. The term "marginal" seems clearer than 
 the term " final," although in some oases it may be impossible to oust the 
 
 latter. 
 
 It appears that the first suggestion of final utility in the senne in which it is 
 employed by the Psychological school is due to a French engineer of the name of 
 Dupuit. He threw out the suggestion in two memoirs entitled La Meture >de 
 dei Travaux public* (1844) and ISUtilitl At* Voiu de Communication
 
 522 THE HEDONISTS 
 
 had got hold of a similar notion when they spoke of value in use, 
 but instead of preserving the idea they dismissed it with a name, 
 and it was left to the Psychological school to revive it in its present 
 glorified form. 
 
 It must not be imagined that the term is employed in the usual 
 popular sense of something beneficial. All that it connotes is 
 ability to satisfy some human want, be that want reasonable, 
 ridiculous, or reprobatory. Bread, diamonds, and opium are all 
 equally useful in this sense. 1 
 
 Nor must we fall into the opposite error of thinking of it as 
 the utility of things in general. Rather is it the utility of a parti- 
 cular unit of some specific commodity relative to the demand of 
 some individual for that commodity, whether the individual in 
 question be producer or consumer. It is not a question of bread 
 in general, but of the number of loaves. To speak of the utility of 
 bread in general is absurd, and, moreover, there is no means of 
 measuring it. What is interesting to me is the amount of bread 
 which I want. This simple change in the general point of view 
 
 (1849), both of which were published in the Annales des Fonts et Chaussees, 
 although their real importance was not realised until a long time afterwards. 
 Gossen also, whose book is referred to on p. 529, was one of the earliest to 
 discover it. 
 
 In its present form it was first expounded by Stanley Jevons in his Theory of 
 Political Economy, and by Karl Menger in his Grundsdtze der Volkswirtschaft- 
 lehre (1871). Walras's conception of scarcity, which is just a parallel idea, was 
 made public about the same time (1874). Finally Clark, the American economist, 
 in his Philosophy of Value, which is of a somewhat later date (1881), seems to 
 have arrived at a similar conclusion by an entirely different method a remark- 
 able example of simultaneous discoveries, which are by no means rare in the 
 history of thought. 
 
 Despite its cosmopolitan origin, the school is generally spoken of as the 
 Austrian school, because its most eminent representatives have for the most 
 part been Austrians. Among these we may mention Karl Menger, already 
 referred to, Professor Sax (Das Wesen und die Aufgabe der Nationalokonomie, 
 1884), Wieser (Der naturliche Werth, 1889), and of course Bohm-Bawerk 
 (author of Orundzuge der Theorie des wirthschaftlichen Qiiterwerths, in Jahr- 
 bilcher fur Nationalokonomie, 1886, and the well-known book on capital and 
 interest). 
 
 Lately, however, the doctrine seems to havj changed its nationality and 
 become wholly American. The American professors J. B. Clark, Patten, Irving 
 Fisher, Carver, Fetter, etc., are assiduous students of marginal utility, apply- 
 ing the conception not only to problems of capital and interest, but also to the 
 question of distribution. 
 
 1 To escape the confusion which would result from employing the same term 
 in two such very different senses a confusion that is inevitable however one 
 may try to avoid it Pareto has substituted the word " ophelimity," and Gide 
 in his Principles (1883) " desirability."
 
 THE PSYCHOLOGICAL SCHOOL 523 
 
 has effectively got rid of all the ambiguities under which the Classical 
 school laboured. 1 
 
 1. The first problem that suggests itself in this connection is 
 this : Why is the idea of value inseparable from that of scarcity ? 
 Simply because the utility of each unit depends upon the intensity 
 of the immediate need that requires satisfaction, and this intensity 
 itself depends upon the quantity already possessed, for it is a law 
 of physiology as well as of psychology that every need is limited 
 by nature and grows less as the amount possessed increases, until 
 a point zero is reached. This point is called the point of satiety, 
 and beyond it the degree of utility becomes negative and desire is 
 transformed into repulsion. 2 Hence the first condition of utility 
 is limitation of supply. 
 
 So long as people held to the idea of utility in general it was 
 impossible to discover any necessary connection between utility 
 and scarcity. It was easy enough to see that an explanation that 
 was not based upon one or other of these two ideas was bound to 
 be unsatisfactory, but nobody knew why. As soon as the connec- 
 tion between the two was realised, however, it became evident that 
 utility must be regarded as a function of the quantity possessed, 
 and that this degree of utility constitutes what we call value. 
 
 2. Just as the notion of final utility solved one of the most 
 difficult problems in economics, namely, why water, for example, 
 has less value than diamonds, it also helped to clear up another 
 mystery that had perplexed many economists from the Physiocrats 
 downward, namely, how exchange, which by definition implies the 
 equivalence of the objects exchanged, can result in a gain for both 
 parties. Here at last is the enigma solved. In an act of exchange 
 attention must be focused not upon the total but upon the final 
 
 1 " The idea of final utility is the ' open sesame,' the key to the most compli- 
 cated phenomena of economic life, affording a solution of its most difficult 
 problems." (Bohm-Bawerk, The Austrian Economists, in Annals of the American 
 Academy of Political and Social Science, 1891.) 
 
 2 Condillac had already drawn attention to this fact (see p. 48), and Buffon 
 had noted it even before that. " The poor man's coin which goes to pay for the 
 necessaries of life and the last coin that goes to fill the financier's purse are in 
 the opinion of the mathematician two units of the same order, but to the moralist 
 the one is worth a louis, the other not a cent." (Esaai d'Arithmetique morale.) 
 
 The connection between quantity and demand is best expressed by means of 
 a curve either of utility or of demand (see p. 632). Along the horizontal line let 
 the figures 1, 2, 3, 4 denote the quantities consumed, and from each of these 
 points draw a vertical line to denote the intensity of demand for each of these 
 quantities. The height of the ordinate decreases more or less rapidly M the 
 quantity increases, until at last it falls to zero.
 
 524 THE HEDONISTS 
 
 utility. The equality in the case of both parties lies in the balance 
 between the last portion that is acquired and the last portion that 
 is given up. 
 
 Imagine two Congoese merchants, the one, A, having a heap 
 of salt, and the other, B, a heap of rice, which they are anxious to 
 exchange. As yet the rate of exchange is undetermined, but let 
 them begin. A takes a handful of salt and passes it on to B, who 
 does the same with the rice, and so the process goes on. A casts 
 his eye upon the two heaps as they begin mounting up, and as the 
 heap of rice keeps growing the utility of each new handful that is 
 added keeps diminishing, because he will soon have enough to 
 supply all his wants. It is otherwise with the salt, each successive 
 handful assuming an increasing utility. Now, seeing that the utility 
 of the one keeps increasing, while that of the other decreases, 
 there must come a time when they will both be equal. At that 
 point A will stop. The rate of exchange will be determined, and 
 the prices fixed by the relative measures of the two heaps. At that 
 moment the heap of rice acquired will not have for A a much greater 
 utility than has the heap of salt with which he has parted. 
 
 But A is not the only individual concerned, and it is not at all 
 probable that B will feel inclined to stop at the same moment as A ; 
 and if he had made up his mind to stop before A had been satisfied 
 with the quantity of rice given him no exchange would have been 
 possible. We must suppose, then, that each party to the exchange 
 must be ready to go to some point beyond the limit which the other 
 has fixed in petto. This point can only be arrived at by bargaining. 1 
 
 1 It is in cases of this kind that figures become handy. If we take two curves, 
 an ascending one to represent the utility of each handful of salt parted with, and 
 a descending one to represent the utility of each handful of rice acquired, the two 
 curves must necessarily intersect, seeing that one is just the inverse of the other. 
 The point of intersection marks the place where the utilities of the two exchanged 
 handf uls are exactly equal. 
 
 We must be careful not to confuse matters, however. It is not suggested that 
 the final utilities in the case of the two co-exchangers are equal. There is no 
 common measure by which the desires of different persons can be compared, and 
 no bridge from one to the other. What is implied is that the final utility of both 
 commodities for the same person are the same. The balance lies between two 
 preferences of the same individual. The actual market exchange is just the 
 resultant of all these virtual exchanges. 
 
 The Austrian chools in its explanation makes use of a hypothesis known as 
 the double limit, which does not seem to be absolutely indispensable; seeing that 
 other economists of the same school Walras, for example appear to get on well 
 enough without it. They seem to think of buyers and sellers drawn up in two 
 rows facing one another. Every one of the sellers attributes to the object 
 which he possesses and which he wants to sell a certain utility different from hia
 
 THE PSYCHOLOGICAL SCHOOL 525 
 
 8. Another question that requires answering is this : How is it 
 that there is only one price for goods of the same quality in the 
 same market ? Once it is clearly grasped that the utility spoken 
 of is the utility of each separate unit for each separate individual 
 it will be realised that there must be as many different utilities as 
 there are units, for each of them satisfies a different need. But 
 if this is the case, why does a person who is famishing not pay a 
 much higher price for a loaf than a wealthy person who has very 
 little need for it ? or, why do I not pay more when I am hungry than 
 when I am not ? The reason is that it would be absurd to imagine 
 that goods which are nearly identical and even interchangeable 
 should have different exchange values on the same market and 
 especially for the same person. This law of indifference, 1 as it is 
 called, is derived from another law to which the Psychological 
 school rightly attaches great importance, and which constitutes 
 one of its most precious contributions to the study of economics, 
 namely, the law of substitution. This law implies that whenever 
 one commodity can be exchanged for another for the purpose of 
 satisfying the same need, the commodity replaced cannot be much 
 more valuable than the commodity replacing it. 1 
 
 For what is substitution but mutual exchange ? And exchange 
 
 neighbour's. Each buyer in the same way attributes to that object which he 
 desires to buy a degree of utility which is different from that which his neighbour 
 puts upon it. The first exchange, which will probably have the effect of fixing 
 the price for all the other buyers and sellers, will take place between the buyer 
 who attributes the greatest utility to the commodity he has to sell, and who is 
 therefore least compelled to sell, and the buyer who attributes the least utility to 
 the commodity he wishes to buy and who is therefore least tempted to buy. At 
 first sight it seems impossible that the party as a whole should be bound by the 
 action of the two individuals who show the least inclination to come to terms. 
 It would be more natural to expect the first move to take place between the seller 
 who is forced to sell and because of his urgency is content with a price of 10. 
 per bushel, say, and the buyer who feels the strongest desire to buy and who 
 rather than go without would be willing to give 30. for it. But upon considera- 
 tion it will be found that the price is indeterminate just because these two are 
 ready to treat at any price. The most impatient individual will surely wait to 
 see what terms the least pressed will be able to make, and it is only natural that 
 those who are nearest one another should be the first to come together. These 
 two co-exchangists who control the market are known as the " limiting couple." 
 
 1 It was Stanley Jevons who gave it this expressive name. It is meant to 
 imply that if two objects which fulfil very different needs, perhaps, can be inter- 
 changed, they cannot have very different values. 
 
 * The law of substitution applies not merely to different objects which 
 atisfy the same need, but also to objects which supply different needs, provided 
 those needs are to any extent interchangeable to tea as a substitute for wines, to 
 coffee as a substitute for both, to travel as a substitute for the life of a country 
 gentleman.
 
 52(5 THE HEDONISTS 
 
 implies equality, so that if there is a series of interchangeable goods 
 none of them can be of greater value than any of the rest. 
 
 Consequently, if an individual has at his disposal 100 glasses 
 of water, which is easily available everywhere except in the Sahara, 
 perhaps, no one of these glasses, not even that one for which he 
 would be willing to give its weight in gold were he very thirsty and 
 that the only glassful available, will have a greater value than has 
 the hundredth, which is worth exactly nothing. The hundredth is 
 always there ready to be substituted for any of the others. 
 
 But the best way of getting a clear idea of final utility is not 
 to consider the value of the object A, but of the object B, which 
 can replace it. It becomes evident, then, that if I am about to lose 
 some object, A, which I value a good deal but which can be per- 
 fectly replaced by another object, B, that object A cannot be much 
 more valuable than B ; and if I had the further choice of replacing 
 it by C, C being less valuable than B, then A itself cannot be much 
 more valuable than C. 1 
 
 We arrive, then, at this conclusion : The value of wealth of every 
 kind is determined by the value of its least useful portion that is, 
 by the least satisfaction which any one portion of it can give. 
 
 Hitherto we have been concerned with the notion of final utility 
 as applied to the problems of value and exchange, but has it the 
 same effect when applied to problems of production, distribution, 
 or consumption ? The Hedonists have no doubt as to the answer, 
 for what are production, distribution, and consumption but 
 modifications of exchange ? 
 
 Take production, for example. How is it that under a system of 
 free competition the value of the product is regulated by its cost 
 of production ? It is because a competitive regime is by every 
 definition a regime where at any moment one product may be 
 exchanged for another of a similar character, the similarity in this 
 case being simply the result of a certain transformation of the raw 
 material. The law of substitution is operative here, and the reason 
 why cost of production regulates value is that the cost of production 
 at any moment represents the last interchangeable value. 
 
 The same is true of consumption, as we can see if we only watch 
 the way in which each of us distributes his purchases and arranges 
 his expenditure. There is evident everywhere an attempt to get 
 
 1 " The enjoyment derived from the least enjoyable unit is what we under- 
 stand by final utility." (Bohm-Bawerk, The Austrian Economists, in the Annals 
 of the American Academy of Political and Social Science, 1891.)
 
 THE PSYCHOLOGICAL SCHOOL 527 
 
 the best out of life to get all the enjoyment which our different 
 incomes may be made to yield ; here spending more on house-room 
 and less on food, there curtailing on amusement and extending on 
 charity, until a rough kind of equilibrium is reached where the final 
 utility of the last exchanged objects or, if another phrase be 
 preferred, the intensities of the last satisfied needs are equal. If 
 the coin spent in purchasing the last cigar does not yield the same 
 pleasure as the same coin yields when spent on a newspaper, the 
 newspaper will in future probably take the place of the cigar. 
 Consumption seems really to be a kind of exchange, with conscience 
 for mart and desires as buyers and sellers. 1 
 
 Nor is the realm of distribution even beyond the reach of the 
 utility theory. Its application to the problems of interest, wages, 
 and rent is largely the work of American economists, especially of 
 J. B. Clark. It is quite impossible for us to give an exposition of 
 the subtle analyses in which the quarterly reviews of the American 
 universities take such a delight, and which undoubtedly afford a 
 very welcome relaxation in an atmosphere so charged with prag- 
 matism and realism. But we must just glance at the theory of 
 wages. Wages, like other values, must be determined by final 
 utility. But the final utility of what, and for whom ? The final 
 utility of the services which the worker renders to the entrepreneur. 
 Following other factors of production, the final productivity of the 
 workers will determine their wages. That is, their final utility 
 is fixed by the value produced by the marginal worker no matter 
 how worthless he may be who only just pays the entrepreneur. 
 The value produced by this almost supernumerary worker not only 
 fixes the maximum which the employer can afford to give him, 
 
 1 The new school deduces a very curious conclusion from this law of 
 indifference. Although there is only one price for all corn buyers, say, the 
 final utility of the corn for each individual is by no means the same. Let us 
 assume that the price is 20*., but one of the buyers, rather than go without, would 
 possibly have given 25s. for it, and others might have been willing to give 24*. , 23. , 
 22s., etc. Every one of those who ex hypothesi only pay 20s. gains a surplus which 
 Professor Marshall has called consumer's rent (Principles, Book III, chap. 6). 
 He has given it that name in order to facilitate comparison with producer's 
 rent, which had gained notoriety long before the Hedonistic school arose. Both 
 are due to similar causes, namely, the existence of differential advantages 
 which give rise to a substantial margin between the selling price and the cost of 
 production. 
 
 Really, however, the similarity is simply a matter of words, because consumer's 
 rent is purely subjective, whereas producer's rent is a marketable commodity. 
 It would be better to say simply that in many cases of exchange it is not correct 
 to argue that because the prices are equal the satisfaction given to different 
 persons is necessarily equal.
 
 528 THE HEDONISTS 
 
 but also the wages given to all the other workers who can take his 
 place, i.e. who are employed upon the same kind of work as his, 
 although they may produce much more than he does ; just as in the 
 case of the 100 glasses of water the least valuable glassful deter- 
 mines the value of all the rest. 1 
 
 Thus is the productivity theory of wages at once confirmed and 
 corrected. But this time it is the productivity of the least pro- 
 ductive worker, of the individual who barely keeps himself. No 
 wonder the theory has lost its optimistic note. Somehow or other 
 it does not seem very different from the old " brazen law." 
 
 The rate of interest follows a similar line the marginal item of 
 capital fixing the rate. It is even more true of capital, which is 
 more completely standardised, with the result that the principle of 
 substitution works much more easily. 2 
 
 Rent is treated at greater length in the next chapter. 
 
 Gradually we begin to realise how the observation of certain facts 
 apparently of a worthless or insignificant character, such as the 
 substitution of chicory for coffee or the complete uselessness of a 
 single glove, enabled the Psychological school to propound a number 
 of general theories such as the law of substitution and the doctrine 
 of complementary goods which shed new light upon a great number 
 of economic questions. There is something very impressive about 
 this deductive process that irresistibly reminds one of the genie of 
 the Thousand and One Nights, who grew gradually bigger and 
 bigger until he finally reached the heavens. But then the genie 
 was nothing but flame. It still remains to be seen whether this is 
 equally true of the Hedonistic theories. 
 
 Ill : THE MATHEMATICAL SCHOOL 
 
 THE Mathematical school is distinguished for its attachment to 
 the study of exchange, from which It proposes to deduce the whole 
 of political economy. Its method is based upon the fact that 
 
 1 It is scarcely necessary to point out that if workers are not really inter- 
 changeable on account of their different capacities the law can no longer be said 
 to hold good, since it always presupposes free competition, whereas in this case we 
 have a personal monopoly. 
 
 1 It is not quite the same when the capital is fixed, for the law of substitution 
 is no longer applicable in that case, and the incomes are very different. 
 
 1 It must not be supposed that in applying the term " school " to these 
 writers we wish to suggest that they have a common programme. All we mean 
 is that they make use of the same method. 
 
 It is generally recognised to-day that the school dates from the appearance
 
 THE MATHEMATICAL SCHOOL 529 
 
 every exchange may be represented as an equation, A = B, which 
 expresses the relation between the quantities exchanged. Thus the 
 first step plunges us into mathematics. 
 
 However true this may be, the application of the method must 
 necessarily be very limited if it is always to be confined to exchange. 
 It is, however, a mistake to suppose that this is really the case, and 
 one of the most ingenious and fruitful contributions made by the new 
 school was to show how this circle could be gradually enlarged so as 
 to include the whole of economic science. 
 
 Distribution, production, and even consumption are included 
 within its ambit. Let us take distribution first and inquire what 
 wages and rent are. In a word, what are revenues ? A revenue is 
 the price of certain services rendered by labour, capital, and land, 
 
 of Cournot's Recherches aur Us Principe* mathematiques de la TMorie des Richestet 
 (1838). Cournot, who was a school inspector, died in 1877, leaving behind 
 him several philosophical works which are now considered to be of some 
 importance. The story of his economic work affords an illustration of the 
 kind of misfortune which awaits a person who is in advance of his age. For 
 several years not a single copy of the book was sold. In 1863 the author tried 
 to overcome the indifference of the public by recasting the work and omitting 
 the algebraical formulae. This time the book was called Principcs de la Thiorie 
 des Richesses. In 1876 he published it again in a still more elementary form, 
 and under the title of Revue sommaire des Doctrines cconomiques, but with 
 the same result. It was only shortly before his death that attention was 
 drawn to the merits of the work in a glowing tribute which was paid to him by 
 Stanley Jevons. 
 
 Gossen's book, Entwickelung der Oesetze des menschlichen Verkehrs, which 
 appeared much later (1853), was equally unfortunate. The author remained an 
 obscure civil servant all his life. His book, of which there is still a copy in 
 the British Museum the only one in existence possibly was accidentally 
 discovered by Professor Adamson, and Stanley Jevons was again the first to 
 recognise its merits. A brief resume of the work will be found in our chapter 
 on Rent. 
 
 Stanley Jevons (died 1882) belongs both to the Mathematical and to the Final 
 Utility school. His charming book, The Theory of Political Economy, dates from 
 1871. 
 
 Leon Walras, who is persistently spoken of as a Swiss economist just because 
 he happened to spend the greater part of his life at the University of Lausanne, 
 also known as the School of Lausanne, was in reality a Frenchman. His Elements 
 d'Economie politique pure, of which the first part appeared in 1874, contains a full 
 exposition of Mathematical economics. 
 
 To day the Mathematical method can claim representatives in every country : 
 Marshall and Edgeworth in England, Launhardt, Auspitz, and Lieben in Germany, 
 Vilfredo Pareto and Barone in Italy, Irving Fisher in the United States, and 
 Bortkevitch in Russia. France, however, the country of Cournot and Walras, 
 has no Mathematical economists, unless we mention Aupetit, whose work, Thiorie 
 de la Monnaie, although dealing with a special subject, contains a general 
 introduction.
 
 530 THE HEDONISTS 
 
 the agents of production, and paid for by the entrepreneur as the 
 result of an act of exchange. 
 
 And what is production ? It is but the exchanging of one 
 utility for another a certain quantity of raw materials and of 
 labour for a certain quantity of consumable goods. Even nature 
 might be compared to a merchant exchanging products for labour, 
 and Xenophon must have had a glimpse of this ingenious theory 
 when he declared that ** the gods sell us goods in return for our 
 toil." The analogy might be pushed still farther, and every act of 
 exchange may be considered an act of production. Pantaleoni puts 
 it elegantly when he says that " a partner to an exchange is 
 very much like a field that needs tilling or a mine that requires 
 exploiting." 1 
 
 And what are capitalisation, investment, and loan but the 
 exchange of present goods and immediate joys for the goods and 
 enjoyments of the future ? 
 
 It was a comparison instituted between the lending of money 
 and an ordinary act of exchange that led Bohm-Bawerk to formulate 
 his celebrated theory of interest. Bohm-Bawerk, however, is a repre- 
 sentative of the Austrian rather than the Mathematical school. 
 
 Even consumption that is, the employment of wealth implies 
 incessant exchanging, for if our resources are necessarily limited 
 that must involve a choice between the object which we buy and 
 that which with a sigh we are obliged to renounce. To give up an 
 evening at the theatre in order to buy a book is to exchange one 
 pleasure for another, and the law of exchange covers this case just 
 as well as any other. 2 It is the same everywhere. To pay taxes is to 
 give up a portion of our goods in order to obtain security for all 
 the rest. The rearing of children involves the sacrifice of one's own 
 well-being and comfort in exchange for the joys of family life and 
 the good opinion of our fellow-men. 
 
 It is not impossible, then, to discover among economic facts 
 
 1 Des Differences d'Opinion entre Sconomistea (Geneva, 1897), inserted in Scritti 
 varii di Economia, pp. 1-48 (1904). 
 
 2 Value itself, the pivot of Classical economics, is simply a link in exchange with 
 the new school, and thus it loses all its subjectivity ; and since it is not a thing at 
 all, but merely an expression, it would be ridiculous to struggle to find its cause, 
 foundation, or nature, as the older writers did. This is why Jevons proposed to 
 banish the word altogether and to employ the term " ratio of exchange " instead. 
 And Aupetit insists that " the expression ' value ' is to-day devoid of content . . . 
 and seems doomed to disappear from the scientific vocabulary altogether. There 
 is no great harm in omitting this parasitical element as we have done, and 
 in treating economic equilibrium as an entity without ever employing the ten? 
 value.' " (Thtorie dt la Monnaie, p. 85.)
 
 THE MATHEMATICAL SCHOOL 581 
 
 certain relations which are expressible in algebraical formulae or 
 even reducible to figures. The art of the Mathematical economist 
 consists in the discovery of such relations and in putting them forth 
 in the form of equations. 
 
 For example, we know that when the price of a commodity goes 
 up the demand for it falls off. Here are two quantities, one of 
 which is a function of the other. 1 Let us see how the law of demand 
 in its amended form would express this. 
 
 If along a horizontal line A B we take a number of fixed points 
 equidistant from one another to represent prices, e.g. 1, 2, 3, 4, 5 . . 10, 
 and from each of these points we draw a vertical line to represent 
 the quantity demanded at that price, and then join the summits of 
 these vertical lines, which are known as the ordinates, we have a 
 curve starting at a fairly high point representing the lowest prices 
 and gradually descending as the prices rise until it becomes 
 merged with the horizontal, at which point the demand becomes nil.* 
 
 What is very interesting is that the curve is different for different 
 products. In some cases the curve is gentle, in others abrupt, 
 according as the demand, as Marshall puts it, has a greater or lesser 
 degree of elasticity. Every commodity has, so to speak, its own 
 characteristic curve, enabling us, at least theoretically, to recognise 
 that product among a hundred. 3 
 
 1 If demand be represented by d and price by p, then d =-/ (p) ; i.e. demand is 
 a function of price. 
 
 Geometrical figure* can always take the place of equations, for every 
 equation can be expressed in the form of a curve. Geometrical representation 
 makes a quicker appeal to the eye, and it is extremely useful where people 
 are not conversant with the calculus which is frequently employed by Cournot 
 and other Mathematical writers. But it is hardly as fruitful, for a geometrical 
 figure can only trace the relation between two quantities, one of which is 
 fixed and the other is variable, or between three at most, when two would be 
 variable. Even in this case recourse would be necessary to projections, and the 
 figures in that case would not be very clear. In the case of algebraical formulae, 
 on the other hand, we can have as much variation as we like provided we have as 
 many equations as there are variables. 
 
 * Dupuit, the engineer, was the first to make use of a demand curre. 
 Cournot, who refers to it as the law of sale, gives an admirable illustra- 
 tion of its operation in the case of bottles of medicinal waters of wonderful 
 curative power. At a very low price the demand and consequently the sale 
 would be very great, though not infinite because of the limit which exists 
 for each want. At a very high price it would be nil. Between the two extreme* 
 would be several intermediate curves. We cannot deal with all the ingenious 
 deductions which Cournot makes concerning monopoly and the greater or leuer 
 discord between monopoly and the genera! interest. 
 
 1 The demand curve is generally concave, and this characteristic form if 
 juat the geometrical expression of the well-known fact that when prices are low
 
 532 
 
 THE HEDONISTS 
 
 We would naturally expect the supply curve to be just the 
 inverse of the demand curve, rising with a rising price and descending 
 with a falling one, so that by the time the price is zero supply is nil, 
 whereas the demand is infinite. 1 
 
 enough to be accessible to everybody the sales increase rapidly, because lean 
 purses being much more numerous than fat ones a slight lowering of the level of 
 prices will bring the commodity within the reach of a fresh stratum of people. It 
 may take different forms, however. For some products, such as common salt, a 
 considerable fall in the price will not result in a large increase in the sales. In 
 the case of diamonds a great fall in price may cause a falling off in demand because 
 they hare become too cheap. The supply curve, on the other hand, is generally 
 convex, because the supply, which only enters upon the scene at a certain point, 
 is very sensible to price movements, going up rapidly with a slight increase in 
 price. Its upward trend is soon arrested, however, because production cannot 
 keep up the pace. It is even possible that the supply may fall off at the 
 next point, for the simple reason that there is no more of the commodity 
 available. 
 
 1 Below on the same diagram is traced a demand and a supply curve. 
 
 The figures along the horizontal line denote price, along the vertical the 
 quantity demanded. In the given figure when price is 1, quantity demanded is 
 VI, and with the price at 7 the quantity demanded falls to zero. 
 
 The dotted curve represents the supply. When price is 1, supply is nil. 
 When price is 10, supply mounts up to IV. Exchange obviously must take 
 place just where demand and supply are equal, i.e. at b, which marks the point 
 of intersection of the two lines, when the amount demanded is equal to the 
 quantity offered and the price is 6. 
 
 The vertical lines are called ordinatcs, and X the axis of the ordinates. 
 Distances along X are called abscissae. Each point on the curve simply marks 
 the intersection of these, of the ordinates and the abscissae. This is true of the
 
 THE MATHEMATICAL SCHOOL 533 
 
 But it is not quite correct to regard it as merely the inverse of 
 the demand curve. A supply curve is really a much more 
 complicated affair, because supply itself depends upon cost of 
 production, and there are some kinds of production agriculture, 
 for example where the cost of production increases much more 
 rapidly than the quantity produced. In industry, on the other 
 hand, the cost of production decreases as the quantity produced 
 increases. 
 
 Mathematical political economy, not content with seeking 
 relations of mutual dependence between isolated facts, claims to be 
 able to embrace the whole field within its comprehensive formulae. 
 Everything seems to be in a state of equilibrium, and any attempt 
 to upset it is immediately corrected by a tendency to re-establish it. 1 
 To determine the conditions of equilibrium is the one object of 
 pure economics. 
 
 The most remarkable attempt at systematisation of this kind 
 was made by Professor Walras, who endeavoured to bring every 
 aspect of the economic world within his formula, a task almost 
 as formidable as that attempted by Laplace in his Mtcanique 
 celeste. 2 
 
 Let us imagine the whole of society included within one single 
 room, say the London Stock Exchange, which is full of the tumult 
 of those who have come to buy and sell, and who keep shouting 
 their prices. In the centre, occupying the place usually taken up 
 by the market, sits the entrepreneur, a merchant or manufacturer 
 or an agriculturist, as the case may be, who performs a double 
 function. 
 
 On the one hand he buys from producers, whether rural or urban, 
 landlords, capitalists, orworkers, what Walras calls their "productive 
 
 point a, for example, where the perpendicular denotes the price (1 ) and the other 
 line the number of units sold, in this case VI. 
 
 Though in the diagram we have considered the ordinates to represent price 
 and the abscissae quantities, the reverse notation would work equally well. 
 
 1 Mathematical economics also studies other forms of equilibrium which are 
 much more complicated and not quite so important perhaps, relating as they do 
 to conditions of unstable equilibrium. 
 
 1 Note Pareto's terms of appreciation (Economic pure, 1902, p. 11) : " Walras 
 was the first to show the importance of these equations, especially in the 
 case of free competition. This capital discovery entitles him to all the praise 
 that we can give him. The science has developed a good deal since then, and 
 will undoubtedly develop still more in the future, but that will not take away from 
 the importance of Walras's discovery. Astronomy has progressed very con- 
 siderably since Newton published his Principia, but far from detracting from 
 the merits of the earlier work it has rather enhanced ite reputation."
 
 534 THE HEDONISTS 
 
 services," that is, the fertility of their lands, the productivity of their 
 capital or their labour force, and by paying them the price fixed by 
 the laws of exchange he determines the revenue of each ; to the 
 proprietor he pays a rent, to the capitalist interest, to the workman 
 wages. But how is that price determined ? Just as at the Exchange 
 all values whatsoever are determined by the law of demand and 
 supply, so the entrepreneur demands so many services at such and 
 such a price and the capitalist or workman offers him so many at 
 that price, and the price will rise or fall until the quantity of services 
 offered is equal to the quantity demanded. 
 
 The entrepreneur on his side disposes of the manufactured goods 
 fashioned in his factory or the agricultural products grown on his 
 farm to those very same persons, who have merely changed their 
 clothes and become consumers. As a matter of fact the proprietors, 
 capitalists, and workers who formerly figured as the vendors of 
 services now reappear as the buyers of goods. And who else did we 
 expect the buyers to be ? Who else could they be ? 
 
 And in this market the prices of products are determined in just 
 the same fashion as we have outlined above. 
 
 All at once, however, a newer and a grander aspect of the 
 equilibrium comes to view. Is it not quite evident that the total 
 value of the productive services on the one hand and the total value 
 of the products on the other must be mathematically equal ? The 
 entrepreneur cannot possibly receive in payment for the goods 
 which he has sold to the consumers more than he gave to the same 
 persons, who were just now producers, in return for their services. 
 For where could they possibly get more money ? It is a closed 
 circuit, the quantity that comes out through one outlet re-enters 
 through another. 
 
 With the important difference that it keeps much closer to facts, 
 the explanation bears a striking resemblance to Quesnay's Tableau 
 tconomique. 1 
 
 1 If this is to be taken as literally true, we have this curious result : the 
 entrepreneur, receiving for the products which he sells just exactly what he paid 
 foi producing them, makes no profit at all. 
 
 Both Walras and Pareto fully admit the paradoxical nature of the statement. 
 Of course it is understood that it can only happen under a regime of perfectly 
 free competition, care being also taken to distinguish between profits and in- 
 terest, a thing that is never done, apparently, by English economists, who treat 
 both interest and profit as constituent elements of cost of production. 
 
 But this is not so wonderful as it seems at first sight. It simply means a 
 return to the well-known formula that under a regime of free competition selling 
 price must necessarily coincide with cost of production. 
 
 This does not prevent our recognising the existence of actual profits. Profit!
 
 THE MATHEMATICAL SCHOOL 585 
 
 We have two markets in juxtaposition, 1 the one for services and 
 the other for products, and in each of them prices are determined by 
 the same laws, which are three in number: 
 
 (a) On the same market there can be only one price for the same 
 class of goods. 
 
 (6) This price must be such that the quantity offered and the 
 quantity demanded shall exactly coincide. 
 
 (c) The price must be such as will give maximum satisfaction to 
 the maximum number of buyers and sellers. 
 
 All these laws are mathematical in character and involve problems 
 of equilibrium. 
 
 In some such way would the new school reduce the science of 
 economics to a sort of mechanism of exchange, basing its justifica- 
 tion upon the contention that the Hedonistic principle of obtaining 
 the maximum of satisfaction at the minimum discomfort is a purely 
 mechanical principle, which in other connections is known as the 
 
 are to be regarded as the result of incessant oscillations of a system round some 
 fired point with which it never has the good fortune actually to coincide. Accord- 
 ing to this conception they are but the waves of the sea. But the existence of 
 waves is no reason for denying a mean level of the ocean or for not taking that 
 mean level as a basis for measuring other heights. Some day, perhaps, equilibrium 
 will become a fact, and profits will vanish. But if that day ever does dawn 
 either upon the physical or the economic world, all activity will suddenly cease, 
 and the world itself will come to a standstill. 
 
 1 A full exposition of Walras's system involves the supposition not only of 
 two but of three markets interwoven together. On the actual market where 
 goods are exchanged the quantity of these commodities depends upon the 
 quantity of productive services, land, capital, and labour, and the quantity of these 
 productive services, at least the quantity of capital, depends to a certain extent 
 upon the creation of new capital, which in turn depends upon the amount of 
 saving. The third market, then, is that of capitalisation. Since the new capital 
 can only be paid for out of savings, i.e. out of that part of the revenue which 
 has been employed in other ways than in buying consumable commodities, the price 
 of capital must be such as to equal the quantity saved and the quantity of new 
 capital demanded. If saving exceeds the demand the price will fall, etc. 
 
 To say that the price of capital has gone up is to say that the rate of interest 
 or the reward of saving has fallen. But a fall in the rate of interest will check 
 saving. The result will be a change of equilibrium, the price of new capital 
 will fall, the rate of interest will go up, etc. 
 
 Briefly, then, the total maximum utilities on the one hand and the price on 
 the other, these are the two conditions determining equilibrium in the economic 
 world, no matter whether it be products or services or capital. " The same 
 thing in true of gravity in the physical world, which varies directly with the 
 mass and inversely with the square of the distance. Such is the twofold condi- 
 tion which determines the movement of the celestial bodies. ... In both 
 cases the whole science may be represented by a formula consisting of only two 
 lines. Such a formula will include a great number of facto," (Walras, Sconomu 
 politique pure, p. 306.)
 
 536 THE HEDONISTS 
 
 principle of least resistance or the law of conservation of energy. 
 Every individual is regarded simply as the slave of self-interest, just as 
 the billiard-ball is of the cue. It is the delight of every economist 
 as of every good billiard-player to study the complicated figures 
 which result from the collision of the balls with one another or with 
 the cushion. 1 
 
 Another problem of equilibrium is to discover the exact propor- 
 tion in which the different elements combine in production. Jevons 
 compares production to the infernal mixture which was boiled in 
 their cauldron by the witches in Macbeth. But the ingredients are 
 not mixed haphazard, and Pareto thinks that they conform to a law 
 analogous to the law known in chemistry as the law of definite 
 proportions, which determines that molecules shall combine in certain 
 proportions only. The combination of the productive factors is 
 perhaps not quite so rigidly fixed as is the proportion of hydrogen 
 and oxygen which goes to form water. Similar results, for example, 
 may be obtained by employing more hand labour and less capital, or 
 more capital and less hand labour. But there must be some certain 
 proportion which will yield a maximum utility, and this maximum 
 is obtainable in precisely the same way as in other cases of equilibrium 
 that is, by varying the " doses " of capital and labour until the final 
 utility in the case both of capital and labour becomes equal. Gene- 
 rally speaking, this is the law that puts a limit to the indefinite expan- 
 sion of industry, for whenever one element runs short, be it land or 
 capital, labour or managing ability or markets, all the others are 
 directly affected adversely and the undertaking as a whole becomes 
 more difficult and less effective. Pareto rightly enough attaches the 
 greatest importance to this law, and we have only to remember that 
 it is the direct antithesis of the famous law of accumulation of 
 capital to realise its full significance. 
 
 There are several other cases of interdependence to which the 
 new school has drawn attention, as, for example, that of certain 
 complementary goods whose values cannot vary independently. 
 What is the use of one glove or one stocking without another, of 
 a motor-car without petrol, of a table service without glasses ? 
 
 1 Professor Edgeworth employs a similar comparison, speaking of the 
 economic man as a charioteer and of social science as consisting of a chariot 
 and some such charioteer (Mathematical Psychics, p. 15). ' ' Mecanique Sociale ' 
 may one day take her place along with ' Mecanique Celeste,' throned each upon 
 the double-sided height of one maximum principle, the supreme pinnacle of 
 moral a* of physical science." (Ibid., p. 12.) 
 
 Pareto regards political economy as a study of the balance between desires 
 and the obstacles which stand in the way of their satisfaction.
 
 CRITICISM OF THE HEDONISTIC DOCTRINES 537 
 Not only is this true of consumption goods; it also applies to 
 production goods. The value of coke is necessarily connected with 
 the value of gas, for you cannot produce the one without the other, 
 and this applies to all by-products. The possibility of utilising a 
 by-product always lowers the price of the main commodity. 
 
 IV : CRITICISM OF THE HEDONISTIC DOCTRINES 
 
 THE triumph of the new doctrines has been by no means universal. 
 England, Italy, and Germany, and even the United States, where 
 one would least expect enthusiasm for abstract speculation, have 
 supplied many disciples, and several professorial chairs and learned 
 reviews have been placed at their disposal. But up to the present 
 France seems altogether closed to them. Not only was Walras, 
 the doyen of the new school, forced to leave France to find in foreign 
 lands a more congenial environment for the promulgation of his ideas, 
 but until recently it would have been quite impossible to mention a 
 single book or a single course of lectures given either in a university or 
 anywhere else in which these doctrines were taught or even criticised. 1 
 We might have understood this antipathy more easily if France, 
 like Germany, had already been annexed by the Historical school. 
 There would have been some truth in a theory of incompatibility 
 of tempers under circumstances of that kind. But the great 
 majority of French economists were still faithful to the Liberal 
 tradition, and one might naturally have expected a hearty wel- 
 come for a school that is essentially Neo-Classical and pretends 
 nothing more than to give a fuller demonstration of the theories 
 already taught by the old masters. 2 
 
 1 During the last few years we have had, of coarse, M. Colson's great book on 
 political economy, which contains a mathematical treatment of demand and 
 supply, M. Landry's exposition of the Austrian theory in his Manuel d'ficono- 
 mique, and M. Antonelli giving a special course on Walras's system at the College 
 libre des Sciences sociales. We have already referred to Aupetit's book on money. 
 We must also mention the translations of the Manual of Political Economy of 
 Vilfredo Pareto and of Jevons'B Theory of Political Economy. 
 
 2 M. Paul Leroy-Beaulieu is particularly severe upon the Mathematical 
 method. " It is a pure delusion and a hollow mockery. It has no scientific 
 foundation and is of no practical use. It is as much a gamble as the scramble for 
 prizes at the table at Monte Carlo. . . . The so-called curve of utility or demand 
 is of no earthly use, for if the price of wine goes up the consumption of beer or 
 cider will increase, that is all." (Traiti d'cnomie politique, voL i, p. 85 ; voL iii, 
 p. 62.) 
 
 This last criticism is somewhat unexpected, for we have already seen that tiw 
 Hedonists are very far indeed from ignoring the law of substitution. If they did 
 not actually discover it they immensely amplified it. And it is very probable
 
 538 THE HEDONISTS 
 
 The mere fact, however, that they presumed to draw fresh lessons 
 or to deduce new principles from those already formulated by the 
 older writers appeared an unwarranted interference with doctrines 
 that had hitherto seemed good enough for everyone. Criticism of 
 that kind, of course, is not worth serious attention. 
 
 An easier line of criticism, and one very frequently adopted, 
 is to maintain that the wants and desires of mankind are incapable 
 of measurement and that mathematical causations can never be 
 reconciled with the doctrine of free will. But such claims as 
 these were never put forward by the Mathematical school. On 
 the contrary, it has always recognised that every man is free to 
 follow his own bent trahit sua guemque voluptas merely inquiring 
 how man is to act if he is to obtain the maximum satisfaction 
 out of the means at his disposal and to overcome the obstacles 
 that stand in his way. Neither has it ever ventured to say that 
 such and such a man is forced to sell corn or to buy it, but simply 
 that if he does buy or sell it will be with a determination to make 
 the best of the bargain, and that such being the case the buying or 
 selling will take place in such and such a fashion. It further claims 
 that the action of a number of individuals under similar circumstances 
 is equally calculable. So is the movement of the balls on the 
 billiard-table, but that does not interfere with the liberty of the 
 players. 1 
 
 Nor do they pretend to be able to measure our desires. What 
 they do and it is not so absurd after all, because we are all doing 
 it is to express in pounds, shillings, and pence the value we put 
 upon the acquisition or loss of an object that satisfies our desire. 
 Moreover, the Mathematical school does not make much use of 
 
 that if there had been a contradiction between their doctrines and this law it 
 would not have escaped them. Moreover, we note that beer and cider have their 
 demand corves : cann'ot wine have one as well ? Having to pass from one to 
 the other does undoubtedly complicate matters, and the Mathematical economist 
 frequently finds himself obliged to juggle not with one but with two or three balls. 
 But this is just the kind of difficulty which is amenable to mathematical treat- 
 ment nay, even, perhaps, demands it. The connection between the values of 
 complementary or supplementary goods is one of the problems that has been 
 most thoroughly investigated by the Hedonists. See Pantaleoni, Economia pura. 
 
 A criticism of Mathematical economics may be found in an article by M. 
 Simiand entitled La Methode positive en Science economique (Revue de Meta- 
 pliysique ft de Morale, November 1908), and a good reply in La Methode mathi- 
 matique en ficonomie politique, by M. Bouvier. 
 
 1 Walras put it well when he wrote as follows : " We have never tried to 
 analyse the motives of free human beings. We have simply tried to give a 
 mathematical expression of the result." (Sl&ments d'Sconomie volitique pure 
 p. 232.)
 
 CRITICISM OF THE HEDONISTIC DOCTRINES 539 
 
 numbers, but confines itself to algebraical notation and geometrical 
 figures that is, to the consideration of abstract quantities. To 
 write down a problem in the form of a mathematical equation is 
 to show that the problem can be solved and to give the conditions 
 under which solution is alone possible. Beyond this the economist 
 never goes. He never tries to fix the price of corn, whatever it may 
 be ; he leaves that to the speculators. 1 
 
 From the other side that is, from the historians, interventionists, 
 solidarists, socialists comes criticism which is quite as bitter and 
 not a whit easier to justify. The Hedonistic doctrine appears to 
 them simply as a fresh attempt to restore the optimistic teaching 
 of the Manchester school, with its individualism and egoism, its 
 free competition and general harmony, its insidious justification of 
 interest, rent, and starvation wages in the name of some imaginary 
 entity which they call marginal utility. In short, it looks just like 
 another proof of the thesis that the present economic order is the best 
 possible a proof that is all the less welcome seeing that it claims 
 to be scientific and mathematically infallible. 
 
 This sort of criticism is nothing less than caricature. It would 
 be futile to deny that the new school has undertaken the task of 
 carrying on the work of the Classical writers, but what possible 
 harm can there be in that ? The royal road of science often turns 
 out to be nothing better than a very narrow path but it does 
 lead somewhere. There would be no progress in economic science 
 or in any other if every generation were to throw overboard all 
 the work done by its predecessors. What the Hedonistic school 
 has tried to do is to distinguish between the good and the bad 
 work of the Classical writers and to retain the one while rejecting 
 the other. 
 
 The main object of the equilibrium and final utility theories is 
 not to justify the present economic regime, but merely to explain it, 1 
 which is quite a different matter. But it does happen in this case 
 that the explanation justifies the conclusion that under the conditions 
 of a free market the greatest good of the greatest number would natu- 
 rally be secured. The term "good," however, is used in a purely 
 Hedonistic and not in the ethical sense. No attention is paid to 
 
 1 " We do not know exactly what it is that binds the function and the variable 
 together, or the intensity of the satisfied need to the quantity already consumed. 
 But for every item on the one side we feel certain that there must be a corre- 
 sponding item on the other." (Aupetit, Theorie de la Monnaie, p. 42.) 
 
 2 For a vigorous refutation of this criticism gee two articles by Rist entitled 
 Sconomie optimiste and Economic scitntifique. in the Revue de Mitaphysiqw et dt 
 Morale, for July 1904 and September 1907.
 
 540 THE HEDONISTS 
 
 the pre-existing conditions of the exchange, and none is bestowed 
 upon its possible consequences. The old-time bargain between 
 Esau and Jacob, when the former sold his birthright for a mere 
 mess of pottage, gave the maximum of satisfaction to both, even 
 to Esau, of whom it is related that he was at the point of death, 
 and to whom accordingly the pottage must have been of infinite 
 value. Even if Jacob had offered him a bottle of absinthe instead 
 the result would have been equally satisfactory from a Hedonistic 
 standpoint. The theory takes as little account of hygiene as it 
 does of morals. 
 
 The Hedonist, by way of amendment, might suggest that Esau 
 would have made a better bargain if there had been, not one, but 
 several Jacobs offering the pottage, which helps to explain why 
 they are so partial to competition and so strongly opposed to 
 monopoly. 1 No Hedonist would deny that Esau was exploited by 
 Jacob ; but, on the other hand, they would point out that there is 
 no necessity to imagine that society is made up only of Esaus and 
 Jacobs. 2 
 
 The same thing applies to Bohm-Bawerk's celebrated theory 
 of interest. Indeed, Bohm-Bawerk quite definitely states that he 
 merely wants to discover some explanation of interest, but does not 
 anticipate that he will be able to justify it, and in that spirit he 
 condemns the ethical justifications that were attempted some 
 centuries back. His object is to show that interest is neither due 
 to the productivity of capital nor to the differential advantages 
 enjoyed by its possessor. Neither is it a tax levied upon the 
 exploited borrower : it is simply a time-payment. In other words, 
 it represents the difference between the value of a present good 
 and the same good on some future occasion. It is just the result 
 of exchanging a present good for a future one. A hundred francs 
 a year hence are not equal in value to a hundred francs here and 
 now. To make them equal we must either add something by way 
 of interest to the future item or take away something by way of 
 discount from the present one. 3 
 
 1 Or he will argue, perhaps, that the market would have been much more 
 favourable to Esau if Jacob had had more pottage than he could easily have dis- 
 posed of a case where even monopoly might offer some advantage to the buyer. 
 
 * "For purposes of demonstration," says Pareto, "we have assumed the 
 existence of private property. But to assume on the strength of the conclusion 
 which we have established that a rigime, of private property gives the maximum 
 of well-being would clearly be to beg the question." 
 
 3 This doctrine is not accepted even by all the Hedonists. Walras especially 
 is very critical in the fourth edition of his ficonomie pure. M. A. Landez in his
 
 CRITICISM OF THE HEDONISTIC DOCTRINES 541 
 
 Turning to the theory of wages, according to which the wages 
 of each class of producers is supposed to be determined by the 
 productivity of the marginal worker in that class, we are struck by 
 the fact that it is only a little less pessimistic than the old " brazen 
 law." What it really implies is that the marginal worker the 
 worker whom the entrepreneur is only just induced to employ 
 consumes all that he produces. 
 
 The Hedonistic school, in short, has no theory of distribution, 
 neither does it seem very anxious to have one. It speaks, not of 
 co-sharers, but of productive services, whose relative contributions 
 it is interested to discover. But it is one thing to know exactly 
 what fraction of the work is due to a certain unit of capital or a 
 given individual workman, and quite another to know whether 
 workers or capitalists are being unfairly treated. 
 
 The best proof that the Hedonists are not mere advocates of 
 laissez-faire is the general attitude of the leaders. It is true that 
 the Austrian school has always shown itself quite indifferent to the 
 social or working-class question, 1 as it is sometimes called, but it 
 certainly has a perfect right to confine itself to pure economics 
 if it wishes. The other leaders of the school, however, have clearly 
 shown that the method followed need involve no such approval or 
 acquiescence. Not to mention Stanley Jevons, who in his book 
 Social Reform makes a very strong case for intervention, we 
 have also Professor Walras, who stands in the front rank of agrarian 
 socialists. Leaving aside merely utilitarian considerations, he 
 points out that in the interest of justice, which, as he has been 
 careful to emphasise, involves quite a different point of view, he 
 wants to establish a regime of absolutely free competition. But 
 how is this to be accomplished ? Merely by means of laissez-faire, 
 as the old Liberal school had thought ? Not at all. It can only 
 be done through the abolition of monopoly of every kind, and land 
 monopoly, which is the foundation of every other, must go first. 
 
 Intirit du Capital (1904) and Irving Fisher in The Sate of Interest (1907) have tried 
 if not to demolish it at least to correct it by giving a more subtle analysis of the 
 motives determining a preference for a future income as compared with a present 
 one. This time-preference, of course, varies according to the fortune of each and 
 other circumstances. 
 
 1 We have already remarked on this in the case of M. Bohm-Bawerk. 
 is another respect in which the Hedonists have shown themselves faithful to the 
 Classical tradition. The necessity for separating the art from the science of 
 political economy, pure economics from applied, was especially emphasiecd by 
 Courcelle-Seneuil and Cherbuliez. Pareto put it well when he said that 1 
 maximum of ophelimity can be put in the shape of an equation, but the man] 
 nf justice can not.
 
 542 THE HEDONISTS 
 
 The reform advocated in his Economic sociale consists of two 
 items, land nationalisation and the abolition of all taxation. The 
 two items are intimately connected because the rents now become 
 the possession of the State will take the place of the taxes, and the 
 object of both is the same, namely, the extension of free competition 
 by securing to every citizen the full produce of his work. Under 
 existing conditions the producer is doubly taxed in the first place 
 by the landowner and then by the State. 1 Moreover, when we 
 remember that the point of equilibrium in Walras's system occurs 
 just where the selling price exactly coincides with the cost of pro- 
 duction in other words, where profit is reduced to zero we begin 
 to realise how far it is from anything in the nature of an apology 
 for the present condition of things. 
 
 Vilfredo Pareto, another representative of this school, although 
 ultra-individualistic in his opinions and extremely hostile to inter- 
 ventionism or solidarity, takes good care not to connect his personal 
 opinion with the Hedonistic doctrines. 'As a matter of fact he 
 thinks that, theoretically at least, the maximum of well-being might 
 be equally attainable under a collectivist regime, although he does 
 not think that collectivism is yet possible. But this opinion is 
 founded upon " ethical and other considerations which are quite 
 outside the scope of economics." 2 
 
 M. Pantaleoni, who soars higher still into the realm of pure, 
 transcendental science, ventures to declare that the substitution 
 of purely altruistic motives for merely selfish ones would involve 
 about as much change in the calculation as would the substitution 
 throughout of a plus for a minus sign in an algebraical equation. 
 All extremes meet. Complete disinterestedness and absolute egoism 
 would necessarily work out very much the same. Devotion to 
 duty would replace the clamour for rights ; sacrifices would be 
 exchanged instead of utilities. But the laws determining their 
 
 1 This system, according to Walras, would possess another advantage in that 
 it would facilitate the establishment of free trade, which is an ideal of the science. 
 The chief difficulties would thus be avoided, such as unequal import duties and 
 unequal degree of fertility. "Free trade has always involved the absence of 
 duties, and the nationalisation of land would further result in the free movement 
 of capital and labour to whatever place might prove most advantageous to 
 them." (La Paix par la Justice sociale et par le Libre- Schange, in Questions 
 pratiques de Legislation ouvriere, September-October 1907.) 
 
 1 The same is true of American economists, where the use of the Hedonistic 
 method is by no means confined to one school. Professor Clark employs it, and 
 he is rather inclined to Bet up an apology for the present economic order and to 
 trust to the efficacy of free competition. But Professor Patten also makes use of 
 it, and he is an interventionist of the extreme type.
 
 CRITICISM OF THE HEDONISTIC DOCTRINES 543 
 
 exchange would still be the same. The Hedonists are not so much 
 concerned with the morality of such laws as with the productive 
 capacity of a given economic state, just as in the case of a piece of 
 machinery the engineer's sole concern is to gauge the output of that 
 machine. 
 
 But the most serious criticism passed upon the work of the 
 school is that at the end of the reckoning nothing has been discovered 
 that was not already known, to which the Hedonists reply that they 
 have at least succeeded in making certain what was only tentative 
 before. The discovery of truth appears to be an intermittent 
 process, and the first vague presentiment is often as useful as the 
 so-called scientific discovery. Astronomy, which is the most perfect 
 of the sciences, has progressed just in this way. The older economists 
 felt fully convinced that the rtgime of free competition was best, but 
 they gave no reason for the faith that was in them and no demonstra- 
 tion of the conditions under which the doctrine was true. Such a 
 demonstration the Mathematical economists claim to have given by 
 showing that a rtgime of free competition is the only one where a 
 maximum of satisfaction is available at a minimum of sacrifice for 
 both parties. The same consideration applies to the law of demand 
 and supply, the law of indifference, cost of production, wages, 
 interest, rent, etc. To have given an irrefutable demonstration of 
 theories that were formerly little better than vague intuitions * or 
 amorphous hypotheses is certainly something. We may laugh as 
 much as we like at the homo ceconomicus, who is by this time little 
 better than a skeleton, but it is the skeleton that has helped the 
 science to stand upright and make progress. It has helped forward 
 the process from the invertebrate to the vertebrate. 
 
 But admitting that all these doctrines have been definitely 
 proved, as the Hedonists claim they have, is the science going to 
 profit as much as they thought by it ? Somebody has remarked 
 that mathematics is a mere mill that grinds whatever is brought to 
 it. The important question is, What is the corn like? In this case 
 it consists of a mass of abstractions a number of individuals 
 actuated by the same selfish motives, alike in what they desire to 
 get and are willing to give, 2 the assumed ubiquity of capital and 
 labour, facility for substitution, etc. It is possible enough that the 
 
 i Economics will become a science when it can say that " what was just now 
 nothing better than an intuition can now be fully proved." (Walras, Economic 
 politique pure, p. 427.) 
 
 " It ia necessary to apply the law of the variation of intensity of need t 
 each separate individual in relation to each one of his needs." (Aupetit, I* 
 Monnaie, p. 93.)
 
 544 THE HEDONISTS 
 
 flour coming from the mill may not prove very nutritious. When 
 ground out the result would at any rate be as unlike reality as the 
 new society outlined by Fourier, the Saint-Simonians, or the 
 anarchists, and its realisation quite as improbable, unless we pre- 
 suppose an equally miraculous revolution. The Hedonists frankly 
 recognise this, and in this respect they show themselves superior to 
 the Classical economists, who when they talk of free competition 
 believe that it actually exists. 1 
 
 But however sceptical they are about the possibility of ever 
 realising all this, they are somewhat emphatic about the virtues of 
 the new method, and they are not exempt, perhaps, from a certain 
 measure of dogmatic pride which irresistibly reminds one of the 
 Utopian socialists. Could we not, for example, imagine Fourier 
 writing in this strain : " What has already been accomplished is 
 as nothing compared with what may be discovered " (by the applica- 
 tion of the mathematical method) ; 2 or "The new theories concern- 
 ing cost of production have the same fundamental importance in 
 political economy that the substitution of the Copernican for the 
 Ptolemaic system has in astronomy"? 3 We have already called 
 attention to the comparison of Walras's system with Newton's 
 Principia all of which rather savours of enthusiasm outrunning 
 judgment. 
 
 While recognising the very real services which the Mathematical 
 and Austrian schools have rendered to the science, and admitting 
 that they mark an era in the history of economics which can never be 
 forgotten, we cannot do better than conclude with the advice of an 
 economist who is himself an authority both in the Mathematical 
 and Classical schools, and who is therefore well qualified to judge : 
 " The most useful applications of mathematics to economics are 
 those which are short and simple and which employ few symbols ; 
 and which aim at throwing a bright light on some small part of the 
 great economic movement rather than at representing its endless 
 complexities." * 
 
 1 It is only those Hedonists who claim to be able to establish an exact science 
 that make use of the mathematical and abstract method to the total exclusion 
 of the historical and biological method. Professor Marshall expressly declares 
 himself in favour of the biological method, and would advocate employing 
 diagrams and curves as little as possible (Economic Journal, March 1898, p. 50). 
 
 1 Pareto, Qiorncdi degli Economist, September 1901. 
 
 3 Bohm-Baw^rk, the Austrian Economists, he. cit. On the other hand, one of 
 the disciples of this school, M. Landry, writes : " To-day the Austrian school is 
 Bomewhat played out " (L'Ecole economique, in Rivistadi Scienza, 1907). At the 
 end of thirty years ! not a very long life. 
 
 Marshall, Distribution and Exchange, in Economic Journal, March 1898.
 
 THE THEORY OF RENT 545 
 
 CHAPTER II : THE THEORY OF RENT AND 
 ITS APPLICATIONS 
 
 THE revival of interest in Classical theories, of which mention was 
 made in the last chapter, cannot be passed over without a special 
 reference to the theory of rent. The theory of rent has always 
 held a prominent place in economic science, especially during the 
 earlier years of the nineteenth century, and the recent developments 
 it has undergone are significant equally from a theoretical as from 
 a practical standpoint. 
 
 Theoretically it has been shown that the concept rent, which 
 for a long time was supposed to be indissolubly bound up with a 
 particular economic phenomenon, namely, the revenue of landed 
 proprietors, is capable of several applications and extensions, some 
 of which might throw considerable light into more than one obscure 
 corner of the economic world. Particularly does it seem applicable 
 to a kind of revenue of which we hardly heard mention until recently 
 that is, the profits of the entrepreneur as distinct from the interest 
 of the capitalist. 
 
 Practically also it is very important. Rent is " unearned 
 increment " par excellence. In other words, it is a revenue for 
 which the receiver has ostensibly done nothing. One can well 
 imagine what fruitful ground for socialistic theories this must be I 
 And, as a matter of fact, all systems of land nationalisation or of 
 socialisation of rent and they are by no means few in number 
 trace descent from the old Ricardian theory. 
 
 What we propose to do in this chapter is to examine the doctrine 
 of rent in its twofold aspect, inquiring in the first place what 
 developments it has recently undergone as a scientific theory, 
 and, secondly, how it is proposed to apply this theory with a view 
 to reforming society. The chief aim in view is, of course, to glean 
 some knowledge of recent theories, but to do this we shall often 
 find ourselves obliged to follow the stream backward towards 
 its source in Mill or Ricardo, for in many cases it is the only way 
 of appreciating the development of ideas. 
 
 I: THE THEORETICAL EXTENSION OF THE 
 CONCEPT RENT 
 
 IN a former chapter we were led to investigate the utterly futile 
 attempts made both by Carey and Bastiat to undermine the Ricardian 
 
 E.D. '
 
 546 THE THEORY OF RENT 
 
 theory of rent. Open to criticism the theory certainly is, but in 
 their anxiety to do away with it altogether these critics were led to 
 deny that the land had any value at all. 
 
 But this denial has been refuted in no equivocal fashion by the 
 emergence of what is perhaps the most striking phenomenon in 
 nineteenth-century history, namely, the fabulous prices paid for 
 land in the neighbourhood of large cities. The last century was 
 pre-eminently the century of big towns. No other epoch hi history 
 can point to such growth of urban centres. England, America, 
 Germany, and to a lesser degree France, have all had a share in 
 this development. One result of this rapid agglomeration of popula- 
 tion hi restricted areas has been a wonderful growth of rents, or 
 unearned increment. A quarter of an acre of land in the city of 
 Chicago which was bought in 1880 for $20, at a time when the 
 population was only fifty, and which in 1836 was sold for $25,000, 
 was valued at $1,250,000 at the time of the International Exhibition 
 in 1894. It has been calculated that the increase in ground-rents 
 in London between 1870 and 1895 is represented by no less a sum 
 than 7,000,000. Hyde Park, bought by the City of London in 1652 
 for 17,000, is to-day valued at about 8,000,000. M. d'Avenel states 
 that in Paris a piece of land belonging to the Hdtel Dieu which was 
 valued at 6 fr. 40 c. a square metre in 1775 is worth 1000 fr. to-day, 1 
 and M. Leroy-Beaulieu mentions a piece of land in the neighbourhood 
 of the Arc de Triomphe which between 1881 and 1904, i.e. in twenty- 
 three years, has doubled its value and is now selling at 800 fr. a 
 metre as compared with 400 fr. formerly. 1 We have merely quoted 
 a few isolated examples, but they may be regarded as typical. 
 
 Carey and Bastiat have not made many converts, evidently. 
 The majority of economists have either accepted Ricardo's theory 
 or, having been induced to examine his position thoroughly, have 
 been led to develop it, but none of them has denied the reality of 
 the income derived from land. Hence the very curious twofold 
 evolution which the theory presents. 
 
 On the one hand there has been discovered a whole series of 
 differential revenues analogous to the rent of land, which, according 
 to the expression of a great contemporary economist, "is not a 
 thing by itself, but the leading species of a large genus." 8 On the 
 
 1 Our figures are taken from the well-informed pamphlet of M. Einaudi, 
 La Municipalitation du Sol dans lea Grande* Vittes (Girard et Briere, 1898), re-- 
 printed from Devenir social. 
 
 1 P. Leroy-Beaulieu, L'Art de placer et gerer sa Fortune, p. 34. 
 
 1 Marshall, Principles, preface to the first edition.
 
 THEORETICAL EXTENSION OF RENT 547 
 
 other hand (and this second line of development is perhaps more 
 curious than the first), while Ricardo considered that the rent of 
 land was an economic anomaly resulting from special circumstances, 
 such as the unequal fertility of the land or the law of diminish- 
 ing returns, modern theorists regard it simply as the normal 
 result of the regular operation of the laws of value. The rent 
 of land and similar phenomena seem to fit in with the general 
 theory of prices, and the theory of rent so laboriously constructed 
 by the Classical school falls into the background as being com- 
 paratively useless. Despite its prestige throughout the nineteenth 
 century, in a few more years it will be regarded as a mere historical 
 curiosity. 
 
 This double evolution is the result of simultaneous efforts on 
 the part of a great number of economists. It is almost impossible 
 to trace a regular sequence of advances from one to the other, and 
 we shall content ourselves with a mere mention of the names of 
 those who have contributed most to it, their actual words being 
 quoted whenever possible. 1 
 
 (a) In the first place, we have a number of differential revenues 
 which are exactly analogous to the rent of land. Equal quantities, 
 or, as the English economists prefer to put it, equal doses of capital 
 and labour applied to different lands yield different revenues : such 
 was the classic statement of the law of rent. Ricardo attributed 
 the existence of rent to the presence of particular phenomena apper- 
 taining only to land, such as diminishing returns, unequal fertility, 
 greater or lesser distance from a market. But it has long been 
 realised that agriculture is by no means the only domain in which 
 capital and labour yield unequal returns. 
 
 All natural sources of wealth mines, salt-works, and fisheries 
 give rise to exactly similar phenomena. Their productivity is not 
 identical, their fertility (if the term is permissible) presents the same 
 differences and their position relative to a market the same variety 
 as in the case of cultivated lands. Consequently every mine, every 
 salt- work and fishery that is not on the margin of cultivation yields 
 a differential revenue or rent because of its greater productivity 
 or more convenient situation. Ricardo had recognised this in 
 
 1 There is a good account of the evolution of which we have given a brief 
 ritume in a work published as far back as 1868, entitled Versuch tiner Kritischen 
 Dogmengeschichte der Orundrente, by Edward Berens (Leipzig), but especially 
 in La Theorie de la Rente et son Extension recente, by Paul Frezouls (Montpellier, 
 1908), and in the very interesting articles of Heir Schumpeter, Das Renten- 
 primip in der Vertheilungslehre, which appeared in Schmoller'a Jahrbiich in 
 1907, pp. 31 and 691.
 
 548 THE THEORY OF RENT 
 
 the case of mines, and Stuart Mill insisted upon its farther 
 extension. 1 
 
 Further, land is not employed for tilth only ; it is also frequently 
 used for building purposes. The services which it renders in this 
 connection are not less important than the others, and between 
 different sites there are as many distinctions as there are between 
 the various grades of cultivated lands. Their commercial produc- 
 tivity, if we may so put it, is by no means uniform. " The ground- 
 rent of a house in a small village is but a little higher than the rent 
 of a similar patch of ground in the open fields, but that of a shop 
 in Cheapside will exceed this by the whole amount at which people 
 estimate the superior facilities of money-making in the more crowded 
 place. In this way the value of these sites is governed by the 
 ordinary principles of rent." a 
 
 But why even confine attention to land and its uses ? Degrees 
 of productivity and differences of returns are equally evident in 
 the case of capital. The machinery in one shop may be better, the 
 organisation more efficient, division of labour more fully developed 
 than in another because of the relatively greater abundance of 
 capital, with the result that the production in the one case will 
 exceed the production in the other, resulting in a supplementary 
 gain in the case of the first shop. 3 Similarly, the production of 
 
 1 Ricardo's Principles, chap. 3, "On the Rent of Mines." Cf, Stuart Mill, 
 Principles, Book IDE, chap. 5, 3. 
 
 1 Stuart Mill, loc. cit. 
 
 * This fact was noted by Hermann even as far back as 1832 in his very 
 remarkable Staatstoirtschaftliche Unterauchungen (Munich, 1832), p. 166 : " A 
 phenomenon that is exactly analogous to rent becomes manifest whenever a 
 country employs imported machinery the multiplication of which is difficult, 
 possibly because the producing country discourages such exportation. [Such 
 was the case with English machinery at the time Hermann wrote.] . . . Suppose 
 now that the price of the commodity manufactured with the aid of such machinery 
 goes up. If the country under consideration can only manufacture with machi- 
 nery that is more expensive but less efficient because of its defective character, 
 the cost of production will still be higher than if the best [foreign] machinery 
 were employed. The result is that the proprietors of the latter retain such 
 advantages as the rise in price had secured them." Mangoldt (in Die Lehre 
 vom Unternehmergewinn, Leipzig, 1855) expresses his view in a somewhat similar 
 fashion : " Rent shows itself clearest and on the largest scale in the case of 
 agricultural land, but it is equally evident wherever the difficulty of multiplying 
 capital prevails or where it can only be replaced by other capital of a more expen- 
 sive character or a less productive yield." Ricardo himself possibly had the 
 rent of capital in mind when he said : " The exchangeable value of all com- 
 modities, whether they be manufactured or the produce of the mines or the 
 produce of land, is always regulated, not by the less quantity of labour that 
 will suffice for their production under circumstances highly favourable, and
 
 THEORETICAL EXTENSION OF RENT 549 
 
 one worker as compared with another is frequently unequal. One 
 man without any greater effort may get through more work than 
 another, and the earnings of that man will exceed those of the other, 
 so that even a workman may enjoy a supplementary gain of the 
 nature of a differential rent. And not among workmen only do 
 aptitudes differ, but also among entrepreneurs. Rent of ability 
 plays an important role in determining the different degrees of 
 success experienced by different undertakings and the unequal 
 revenues which they yield. " The extra gains which any producer 
 or dealer obtains through superior talents for business or superior 
 business arrangements are very much of a similar kind." That 
 is how Mill l expressed it, content merely to repeat an idea which 
 Senior had expressed in his Political Economy as early as the year 
 1836, where he applies the term " rent " to " all peculiar advantages 
 of extraordinary qualities of body and mind." 2 
 
 The simple suggestion thrown out by Mill and Senior has long 
 since been developed into a full-blown theory by Francis Walker, 
 the American economist. The conception of profits as the 
 remuneration of the entrepreneur's exceptional skill is examined 
 in his Treatise on Political Economy, and is further treated in 
 considerable detail in the Quarterly Journal of Economics for April 
 1887. 3 
 
 We have already commented upon the optimistic tendencies of 
 certain American economists. Carey was a case in point; so is 
 Walker. In a work entitled The Wages Question, published in 
 1876, Walker made a successful attack upon that most pessimistic 
 of theories, the wages fund, and forced economists to recognise that 
 to some extent at any rate the wages depended upon the produc- 
 tivity of the undertaking. But to show the possibility of wages 
 
 exclusively enjoyed by those who have peculiar facilities of production, but 
 by the greater quantity of labour necessarily bestowed on their production by 
 those who have no such facilities, by those who contrive to produce them under 
 the most unfavourable circumstances meaning by the most unfavourable cir- 
 cumstances the most unfavourable under which the quantity of produce required 
 renders it necessary to carry on the production." (Principles, p. 37.) English 
 writers, however, seldom speak of the rent of capital. Rent with them always 
 signifies income due, not to the intervention of man ; but to the natural resources 
 of production. 
 
 1 Principles, Book III, chap. 5, 4. 
 
 1 " But as it is clearly a surplus, the labour having been previously paid 
 for by average wages, and that surplus the spontaneous gift of nature, we have 
 thought it most convenient to term it rent." (Quoted by Cannan, Production 
 and Distribution, p. 198.) 
 
 * In an article entitled TJif Source of Business Profit.
 
 550 THE THEORY OF RENT 
 
 growing with the increased productivity of industry was hardly 
 enough to satisfy sensitive consciences. Walker was particularly 
 anxious to foil the socialists by showing that profit is not the out- 
 come of exploitation, and it was with a view to such demonstration 
 that the doctrine of rent was so greedily seized upon. 
 
 By the term " profit " Walker understands the special remunera- 
 tion of the entrepreneur, 1 omitting any interest which he may draw 
 as the possessor of capital. This distinguishes him from the majority 
 of English economists, who, contrary to Continental practice, have 
 always persisted in confusing the functions of the entrepreneur 
 and the capitalist. Neither is he content to regard his work as 
 confined to simple business arrangement and superintendence, 
 which would result in his being paid a salary equal to that of a 
 managing director. His work is altogether of a more dignified 
 character, and consists largely in anticipating the fluctuations of 
 the market and in organising production to meet them in a word, 
 in adapting supply to demand. The entrepreneur is the true 
 leader of economic progress a real " captain of industry." 2 
 
 All this implies, says Walker, differences in industrial revenues 
 exactly analogous to the differences in agricultural incomes. Some 
 industries yield no profit at all beyond remunerating capital and 
 labour at the normal rate and leaving enough for the entrepreneur 
 to prevent his abandoning the undertaking altogether. Other 
 industries yield a little more, and by imperceptible gradations we 
 pass from such mediocre undertakings to more prosperous ones, and 
 finally reach those that yield immense profits. The question then 
 arises as to whether such abnormal profits in any way represent 
 
 1 Walker is one of the first of the English-speaking economists to make this 
 distinction and to employ the term " profit " in a narrow sense, distinguishing 
 it from interest on the one hand and wages on the other. He even went so far 
 as to subtract the wages of superintendence and direction because this work 
 of supervision could be delegated to others (Wages Question, 2nd ed., 1891, 
 pp. 230, etc.), while the special function performed by the entrepreneur, namely, 
 the adaptation of supply to demand, requires special remuneration, which he 
 proposes to call profit. It is a little odd that a writer who seemed completely 
 isolated should be shown, after all, to share the views of other economists. 
 Walker declares that save his own father, Amasa Walker, he knew of no economist 
 who had distinguished between capitalist and entrepreneur. But J. B. Say had 
 already made the same distinction, which had been adopted by all Continental 
 economista even as far back as the beginning of the nineteenth century. 
 
 * This is how Walker summarises his duties: "To furnish also technical 
 skill, commercial knowledge, and powers of administration ; to assume responsi- 
 bilities and provide against contingencies ; to shape and direct production, 
 and to organise and control the industrial machinery." (The Wages Question, 
 p. 246.)
 
 THEORETICAL EXTENSION OF KENT 55 1 
 
 wages that have been withheld from the workers. This is not at 
 all likely because wages are often highest where profits are greatest. 
 Cceteris paribus, the probability is that the greater profit in the 
 one industry as compared with another implies the greater capacity 
 of the entrepreneur in the one case than in the other. The superior 
 income is a pure surplus like the rent of land. " Under free and 
 full competition," says Walker, " the successful employers of labour 
 would earn a remuneration which would be exactly measured, in 
 the case of each man, by the amount of wealth which he could 
 produce, with a given application of labour and capital, over and 
 above what would be produced by employers of the lowest industrial, 
 or no-profits, grade, making use of the same amounts of labour and 
 capital, just as rent measures the surplus of the produce of the 
 better lands over and above what would be produced by the same 
 application of labour and capital to the least productive lands 
 which contribute to the supply of the market, lands which them- 
 selves bear no rent." : 
 
 Walker's theory contains a good deal of truth, although it is 
 not, perhaps, quite as new as he thought it was. The opinions of 
 Mill and Senior have already been referred to, and more than one 
 Continental economist, from J. B. Say to Mangoldt, and including 
 Hermann, 2 have propounded similar views. Nor has the doctrine 
 ever been completely triumphant in economic circles. Most con- 
 temporary writers, no doubt, regard profit as a kind of rent, due 
 partly, but only partly, to the personal ability of the entrepreneur.* 
 Other economists such as Marshall, 4 for example think that they 
 can trace some other elements as well, such as insurance against risk 
 and payment for the necessary expenses of training the entrepreneur* 
 
 1 Walker, Quarterly Journal of Economic*, April 1887, p. 278. 
 
 1 Hermann, Untersuchungen, p. 206 ; for J. B. Say cf. supra, p. 113. 
 
 8 Pantaleoni (Economia pura, Part III, chap. 4) seems to be the only 
 economist who accepts Walker's theory without any reservation. 
 
 4 For his criticism of Walker see the Quarterly Journal of Economics, 1887, 
 p. 479, and the Principles, 4th edition, p. 705, note. In conformity with English 
 tradition, Marshall includes within profits any interest upon such capital as the 
 entreprentur possesses. 
 
 1 Pantaleoni makes the same distinction : " Profits," says he, " may be the 
 result of superior ability acquired either by assiduous study or prolonged pre- 
 paration. In that case we are dealing, not with a kind of rent, but with a species 
 of profit which may be very remunerative but which is nevertheless amenable to 
 a very different law from that which generally regulates the investment of capital." 
 (Economia pura, Part HI, chap. 4.) On the other hand, Pantaleoni refuses 
 to recognise the existence of an element of insurance against risk as an item in 
 profits, because, as he point* out, if the premium has been carefully reckoned up
 
 552 THE THEORY OF RENT 
 
 Walras, on the other hand, omits these last two items and points 
 out that under static conditions the entrepreneur would neither 
 gain nor lose. The sole source of profit, then, are those " dynamic " 
 rents which are the result, so to speak, of the perpetual displacements 
 of equilibrium in a progressive society. But these dynamic rents 
 are extremely varied in character and bear no relation to the personal 
 qualities of the entrepreneur. 
 
 Clark l and others, although subscribing to Walras's dictum 
 that profits are really composed of rents, think that there may be 
 static as well as dynamic rents and that Walras's hypothesis of 
 a uniform net cost for all undertakings is altogether too abstract. 
 Only in the case of the marginal producer, whose expenses are highest, 
 is there anything like equilibrium between costs and price. The 
 other producers even when there is no such thing as a temporary 
 displacement of equilibrium, are able to make substantial incomes 
 out of the various species of differential rents already mentioned 
 proximity to market, better machinery, greater capital, etc. Marshal] 
 speaks of such incomes as composite rent. 2 
 
 Walker's theory has evidently not been accepted without con- 
 siderable reservations. And we need only remind ourselves of 
 the way in which dividends are usually distributed among share- 
 holders to realise the inadequacy of his conception of rent and the 
 exaggerated nature of his attempted justification. Would anyone 
 suggest, for example, that such dividends are merely the result of 
 exceptional ability ? 3 
 
 This attempted explanation of profit affords, perhaps, the most 
 interesting illustration of the extension of the concept rent, although 
 it is by no means the only one. The Ricardian theory, worked out 
 to its logical conclusion, reveals the interesting fact that there are 
 as many kinds of rents as there are different situations in the 
 economic world. Whenever it becomes necessary to unravel the 
 mystery surrounding individual inequalities of income recourse is 
 
 and compared with the risk, "it ought on an average to be equal to it at the 
 end of a certain number of years, so that the net rent would become equal to 
 Ecro." (Ibid.) 
 
 1 Of. Distribution of Wealth (1899) and Essentials of Economic Theory (1908). 
 
 1 Moreover, the entrepreneur may find himself forced to yield a part of 
 this composite rent either to the landlord or to the capitalist from whom he 
 has borrowed his capital or to the workers by whose superior ability he has 
 benefited. The difficult question of determining what proportion ought to 
 be given in this way is discussed by Marshall in his Principles, Book V, chap. 10, 
 4 ; Book VI, chap. 8, 9. 
 
 ' Walker might answer by saying that the dividend is simply the interest 
 upon the capital. But we can hardly bring ourselves to believe this.
 
 THEORETICAL EXTENSION OF RENT 553 
 
 had to a generalised theory of rent. " All advantages, in fact, 
 which one competitor has over another, whether natural or acquired, 1 
 whether personal or the result of social arrangements . . . assimilate 
 the possessor of the advantage to a receiver of rent." * Something 
 of the variety of concrete life is thus reintroduced into the Classical 
 theory of distribution, although all this was at first rigidly excluded 
 by the doctrine of equality of interest and uniformity of wages.* 
 The theory of rent is an indispensable complement of the Classical 
 theory of distribution, giving the whole thing a much more realistic 
 aspect. It is, as it were, the keystone of the whole structure. 
 
 (6) But the theory has also undergone another species of trans- 
 formation. Ricardo conceived of rent as essentially a differential 
 revenue arising out of the differences in the fertility of soils. 4 Were 
 all lands equally fertile there would be no rent. The same remark 
 applies to the various species of rent discovered since then. There 
 is always some inherent difference which explains the emergence 
 of rent, such as the greater suitability of a building site, the greater 
 vigour of the worker, or the superior intelligence of the entrepreneur. 
 They are all of a type. Entrepreneurs who produce the same article, 
 workmen toiling at the same trade, capitals employed in the same 
 kind of undertaking, may be grouped in an order of diminishing 
 productivity, much as Ricardo grouped the various species of lands. 
 The last entrepreneur of the series, the last worker, or the last item 
 of capital each earns just enough to keep them at that kind of 
 employment. All the others produce more, and, seeing that they 
 all sell their goods or services at the same price, they draw a rent 
 which is greater than the income enjoyed by the others by the 
 difference between their productivity and that of the last of the 
 series. The whole economic world seems to be under the dominion of a 
 kind of law of unequal fertility, not of lands merely, but of capital 
 and individual capacity as well a law which is sufficiently general 
 
 1 This word " acquired " is not quite in conformity with the pure theory of 
 rent, for if these advantages are acquired the remuneration thus received should 
 be considered merely as interest upon capital spent. 
 
 1 Stuart Mill, Principles, Book III, chap. 6, 4. 
 
 1 " Wages and profits represent the universal elements in production, while 
 rent may be taken to represent the differential and peculiar : any difference in 
 favour of certain producers, or in favour of production in certain circumstances, 
 being the source of a gain, which, though not called rent unless paid periodically 
 by one person to another, is governed by laws entirely the same with it." (Ibid., 
 Book III, chap. 5, 4.) 
 
 "Rent, it should be remembered, is the difference between the produce 
 obtained by equal portions of labour and capital employed on land of the same 
 or different qualities." (Ricardo, Principles, chap. 9.)
 
 554 THE THEORY OF RENT 
 
 in its application to explain all inequalities in the revenues of the 
 different factors of production. 
 
 We cannot help feeling the artificiality of this conception and 
 wondering whether the differences in revenues are not capable of 
 explanation upon the basis of a simpler and more general principle. 
 Is it impossible to take account of them directly and to treat them 
 as something other than an exception or an anomaly ? One cannot 
 avoid asking such questions, and the reply is not far to seek. 
 
 Doubts arise as soon as we realise that land may yield rent 
 apart from any inequality in its fertility. " If the whole land of a 
 country were required for cultivation, all of it might yield a rent," 
 says Stuart Mill. 1 Apparently all that is needed is an intense demand 
 and a supply that is never equal to that demand, so that the price is 
 permanently above the cost of production. 2 In such a case even 
 the worst land assuming that all is not of equal fertility would 
 yield a rent. Mill was of opinion that this rarely happened in 
 the case of land, but was by no means uncommon in the case of 
 mines. 8 Obviously, then, rent is not merely the outcome of unequal 
 fertility, and the cause must be sought elsewhere. Stuart Mill had 
 obviously foreseen this when he said that " a thing which is limited 
 in quantity is still a monopolised article." * 
 
 1 Principles, Book II, chap. 16, 2. 
 
 a Ricardo had already made use of the following argument : " Suppose that 
 the demand is for a million of quarters of corn, and that they are the produce 
 of the land actually in cultivation. Now, suppose the fertility of all the land 
 to be so diminished that the very same lands will yield only 900,000 quarters. 
 The demand being for a million of quarters, the price of corn would rise, and 
 recourse must necessarily be had to land of an inferior quality sooner than if 
 the superior land had continued to produce a million of quarters." (Principles, 
 chap. 32, p. 246.) Towards the end of his life Ricardo seems to have been more 
 favourably inclined to a conception of rent somewhat closer akin to J. B. 
 Say's. Compare the curious quotations given in Fr^zouls, op. cit., p. 21. 
 
 ' " A commodity may no doubt, in some contingencies, yield a rent even 
 under the most disadvantageous circumstances of its production ; but only 
 when it is, for the time, in the condition of those commodities which are abso- 
 lutely limited in supply, and is therefore selling at a scarcity value which 
 never is, nor has been, nor can be a permanent condition of any of the great 
 rent-yielding commodities." (Principles, Book HI, chap. 6, 4.) For the 
 position with regard to mines see the same chapter, 3. 
 
 In this case Stuart Mill seems to compare rent to a monopoly revenue : 
 " A thing which is limited in quantity, even though its possessors do not act in 
 concert, is still a monopolised article." (Ibid., Book II, chap. 16, 2.) The 
 expression, though adopted by several other writers, is not quite accurate. 
 In the case of a monopoly the owners fix the quantity which they will produce 
 beforehand with a view to getting a maximum of profit. But this cannot apply to 
 landowners. At any rate, if there is any monopoly it must be an incomplete one.
 
 THEORETICAL EXTENSION OF RENT 555 
 
 But if such be the explanation of rent on land which is the last 
 to be put under cultivation, what is the explanation in the case of 
 better lands ? We are not sure that Stuart Mill foresaw this problem. 
 
 This is how he explains the emergence of rent on land No. 1. 
 Production having become insufficient to meet demand, prices go 
 up ; but it is only when they have reached a certain level a level, 
 that is to say, sufficiently high to secure a normal return on the 
 capital and labour employed that these lands will be brought under 
 cultivation. 1 
 
 The cause of rent in this case is obviously the growth of demand 
 and not the cultivation of land No. 2, because the cultivation only 
 took place when the prices had risen. 1 Moreover, the effect of this 
 cultivation will be rather to check than to encourage the growth 
 of rent by arresting this upward trend of prices through increasing 
 the quantity of corn on the market. The rent of land No. 1 is 
 consequently a scarcity rent which results directly from an increased 
 demand and is independent of the quality of the land. The real 
 cause of rent on all lands, whether good or bad, is really the same, 
 namely, the insufficiency of supply to meet demand. 
 
 A similar process of reasoning might be applied to the other 
 differential rents already mentioned, and the conclusion arrived 
 at is that rent, whatever form it take, is not an anomaly, but a 
 perfectly normal consequence of the general laws of value. Whenever 
 any commodity, from whatever cause, acquires scarcity value and 
 its price exceeds its cost of production, there results a rent for the 
 seller of that product. Such is the general formula, and therein we 
 have a law that is quite independent of the law of diminishing 
 returns and of the unequal fertility of land. 8 
 1 Stuart Mill, Principle*, Book III, chap. 5, 1. 
 
 1 Such was the argument employed by J. B. Say in the course of a contro- 
 versy with Ricardo. " It is perfectly obvious that if the needs of society raise 
 the price of corn to such a level as to permit of the cultivation of inferior lands 
 which yield nothing beyond wages for the workmen and profits on the capital, 
 then that demand on the part of society, coupled with the price which it can 
 afford to pay for the corn, allows of a profit on the most fertile or best situated 
 lands." (Traitt, 6th edition, p. 410.) Continuing, he remarks : " David Ricardo 
 in the same chapter clearly shows that the profit from land is not the cause but 
 the effect of the demand for corn, and the reasons which he adduces in support 
 of this view may be turned against him to prove that other items in cost of 
 production, notably the wages of labour, are not the cause but the effect of the 
 current price of goods." Ricardo himself seemed on the point of being converted 
 to this view. See p. 654, note 2. 
 
 The theory of economic equilibrium enables us to give a still better demon- 
 stration of the general nature of this theory of rent. On this point we may refer 
 to Pareto's Court and Sensi's La JWta detta Rendita (Rome, 191-).
 
 556 THE THEORY OF RENT 
 
 But the issue was not decided at a single stroke. English political 
 economy is so thoroughly impregnated with Ricardian ideas that 
 it still adheres to the conception of a differential rent. Continental 
 economists, on the other hand, have always regarded it as a more 
 or less natural result of the laws of demand and supply. J. B. Say 
 had long since made the suggestion that the existence of rent is due 
 to the needs of society and the prices which it can afford to pay 
 for its corn. 1 A German economist of the name of Hermann, a 
 professor at Munich, in his original and suggestive work, Staatswiri- 
 schaftliche Untersuchungen, published in 1832, claims that the 
 rent of land is simply a species of the income of fixed capital. 
 Whereas circulating capital, because of its superior mobility, has 
 almost always a uniform rate of interest, fixed capital, which has 
 not that mobility and which cannot be increased with the same 
 facility, has a revenue which is generally greater than that of circu- 
 lating capital. This surplus revenue or rent, instead of being a 
 mere transitory phenomenon, might easily become permanent 
 provided the new fixed capital which enters into competition with it 
 has a lesser degree of productivity. Such precisely is the case with 
 land. 2 A little later another German of the name of Mangoldt 
 defined rent as a scarcity price which does not benefit all the factors 
 of production equally, but only those which cannot be readily 
 increased in amount. And rent appears in the guise of a differential 
 revenue simply because scarcity is always relative and is frequently 
 kept in check by substitutes which generally give a smaller margin 
 of profit. 3 Schaffle, in a work partly devoted to the subject of rent, 4 
 
 1 Of. supra, p. 555, note 2. 
 
 1 Hermann, Staatswirtschaftliche Untersuchungen, Part V : Vom Geurinn. 
 Even in the preface he declares that the doctrine of the rent of land must be 
 regarded as a particular instance in the exposition of the law governing the 
 returns from fixed capital in general. 
 
 * Mangoldt, Die Lehre vom Unternehmergewinn (Leipzig, 1855), pp. 109 et aeq. 
 
 4 Die nationalokonomische Theorie der ausschliessenden Absatzverhdltnisse 
 (Tubing&i) a work in which he attempts a justification of rents in general 
 and of the rent of land in particular. Rent he regards as the reward offered 
 to anyone who knows how to utilise either his personal capacity or his capital 
 or land in a way that is particularly advantageous to society. It supplies 
 an allurement that acts as the source of all progress and of all economic activity, 
 a sort of natural right of ownership which society spontaneously confers upon 
 those individuals who know how to serve society, and which competition causes 
 to disappear at the opportune moment. The rent of land can be justified on 
 this ground wherever legislation has not made an abuse of it. This new claim 
 on behalf of rent is very interesting, and those who regard rent as exclusively 
 unearned increment may ponder over this new characteristic of unearned 
 incomes.
 
 THEORETICAL EXTENSION OF RENT 557 
 
 published in 1867, insists on the idea that the soil furnishes rent 
 not because it is a gift of nature, but simply because of its immobility 
 and the impossibility either of removing it or of increasing its quan- 
 tity. Finally, Karl Menger, in his Grundsatze der V olkswirtschaftslchrc y 
 published in 1872, in outlining the foundations of the modern doctrine 
 of value, assimilated the theory of rent to the general theory of 
 prices by categorically declaring that " the products of land as far 
 as the nature of their value is concerned afford no exception to the 
 general rule, which applies to the value of the services of a machine 
 or a tool, of a house or a factory, or any other economic good." x 
 
 The only difference, apparently, which recent economists recog- 
 nise between rents conceived of in this fashion is their greater or 
 lesser duration. The rent furnished by a first-class machine will 
 disappear very readily because new machines can be turned out 
 to compete with it. But when the rent is due to superior natural 
 qualities, whether of land or of men, the element of rent will not 
 be so easily got rid of. To borrow a phrase of Pareto's, we may 
 say that the rent will be of a more or less permanent character, 
 according to the ease with which savings can be transformed into 
 capital of a more or less durable kind. 8 Dr. Marshall sums up his 
 subtle analysis of the problem under consideration as follows : " In 
 passing from the free gifts of nature through the more permanent 
 improvements in the soil, to less permanent improvements, to farm 
 and factory buildings, to steam-engines, etc., and finally to the less 
 durable and less slowly made implements we find a continuous series 
 [of rents]." 
 
 1 P. 148. 
 
 * " The sum paid for the use of land differs in no material respect from the 
 Bura paid for the use of other kinds of capital a machine, for example. Although 
 the land or the machine has to be returned to its rightful owner in the same 
 condition as it was received, one ought to pay something just because such 
 capitals are economically scarce ; in other words, the amount existing at any 
 one time or place is not greater than the demand. What differentiates land 
 from machinery, is that savings might easily be employed in turning out new 
 machinery, but cannot very well increase the quantity of land in existence, or 
 at any rate cannot transform existing soils in a manner that is profitable." 
 (Pareto, Coura d'ficonamie politique, vol. ii, 769.) Marshall makes use of 
 analogous terms : " If the supply of any factor of production is limited, and 
 incapable of much increase by man's effort in any given period of time, then the 
 income to be derived from it is to be regarded as of the nature of rent rather 
 than profits in inquiries as to the action of economic causes during that period ; 
 although for longer periods it may rightly be regarded as profits which are 
 required to cover part of the expenses of production and which therefore directly 
 enter into those expenses." (Principles, 1st ed.. Book VI, ohap. 3, 1.) 
 
 Ibid., Book VI, chap. 3, f 7.
 
 558 THE THEORY OF RENT 
 
 The series, we might add, may be extended to a point at which 
 rent becomes negative, i.e. until the conditions of demand and 
 supply become such that the factor of production which previously 
 yielded a supplementary revenue no longer gives even the normal 
 rate of remuneration. Thtinen had suggested the possibility of a 
 negative rent, and the idea has been further developed by Pareto. 
 
 These modern writers seem to regard rent simply as a result 
 of the ordinary operation of the laws of supply and demand. The 
 concept rent has been generalised so that it can no longer be regarded 
 as a curiosity or an anomaly. The law of diminishing returns 
 loses much of its economic importance, and even the Ricardian theory 
 which is based upon it seems imperilled. After the numerous 
 polemics to which it has given rise, it seems as if this theory, along 
 with the Classical theory of value, were about to be relegated to the 
 class of doctrines in which the historian is still interested but which 
 are apparently of little practical value, 1 
 
 II : UNEARNED INCREMENT AND THE PROPOSAL TO 
 CONFISCATE RENT BY MEANS OF TAXATION 
 IT does not appear that Ricardo fully realised the damaging conse- 
 quences which would ensue if the doctrine of rent ever happened 
 to be made the basis of an attack upon the institution of private 
 property. He was quite satisfied with the inference which he had 
 
 1 Did space permit, this would be the place to refer to the latest glori* 
 tication of the doctrine of rent, which is to be found in Clark's Distribution 
 of Wealth, published in 1899. In that work, upon the strength of which 
 the author enjoys a well-deserved reputation, revenues of various kinds are 
 successively treated as rents. Imagine a fixed amount of capital applied 
 along with successive doses of labour : each new dose of labour will produce 
 less than the preceding one, while the production of the last dose regulates 
 the remuneration of all the rest. But the product of the preceding doses is 
 greater than that of the last, and a surplus value will be produced which will 
 represent the product of capital and which will be exactly analogous to rent. 
 Or suppose, on the other hand, that the quantity of labour is fixed and applied 
 along with successive doses of capital ; the productivity of the latter will in 
 this case go on decreasing, and since the revenue of each dose will be propor- 
 tionate to its productivity, any surplus left over will be of the nature of rent 
 due to labour. There are other ingenious discussions which cannot be referred 
 to in a note of this kind. But in our opinion the theory of economic equilibrium 
 affords a simpler explanation of distribution, and the kind of optimism to which 
 Clark's theory gives rise seems hardly justified. His attempt to combine the 
 idea of marginal productivity with the law of diminishing returns is a further 
 proof of the persistent influence exerted by Ricardian ideas upon English- 
 speaking economists.
 
 UNEARNED INCREMENT 559 
 
 drawn from it in support of the free importation of corn, and did 
 not feel called upon to defend the rent of land any more than the 
 interest of capital, both of which seemed inseparable from a concep- 
 tion of private property. 
 
 Other writers proved more exacting. Despite the numerous 
 exceptions met with in actual life, the feeling that all forms of 
 revenue ought to be justified by some kind of personal effort on the 
 part of the beneficiary is fairly deeply rooted in our moral nature. 
 But according to the Ricardian theory the rent of land is a kind of 
 income got without corresponding toil a reward without merit, 
 and as such it is unjust. Such seems to be the logical conclusion of 
 the Ricardian thesis. 
 
 The conclusion thus established is further confirmed by the 
 natural feeling that not only is rent unjust, but the whole institution 
 of private property as well. This feeling is one which all of us 
 share (except those fortunate individuals who happen to be land- 
 lords, perhaps !), and is, of course, much older than any doctrine 
 of rent. Movable property is generally the personal creation of 
 man, the result of the toil or the product of the savings, if not of the 
 present possessor', at least of a former one. But land is a gift of 
 nature, a bountiful creation of Providence placed at the disposal 
 of everyone without distinction of wealth or of station. Proudhon's 
 celebrated dictum is known to most people : " Who made the land ? 
 God. Get thee hence, then, proprietor." l That line of argument 
 is really very old, and Ricardo unwittingly gave it new strength. 
 
 The idea of a natural right to the land and of a common interest 
 in it is the instinctive possession of every nation. But in England 
 the feeling seems more general than elsewhere, because, possibly, of 
 the number of large proprietors and of the serious abuses to which 
 the system has given rise. It seems rooted in the legal traditions 
 of the nations. " No absolute ownership of land," writes Sir 
 Frederick Pollock, " is recognised by our law-books except in the 
 Crown. All lands are supposed to be held, immediately or mediately, 
 of the Crown, though no rent or services may be payable, and no 
 grant from the Crown on record." a Even as far back as the 
 seventeenth century, Locke, in his work On Civil Government, had 
 ventured to declare that God had given the land as common 
 property to the children of men. 
 
 As one approaches the end of the eighteenth century the demands 
 that all lands unlawfully taken from the public should be again 
 
 1 Proudhon, Qu'est-ce que la Propritii, p. 74. 
 Pollock. The Land Laws, p. 12.
 
 560 THE THEORY OF RENT 
 
 restored to it become much more frequent. Sometimes the demand 
 is put forward by otherwise obscure writers, but occasionally it 
 finds support in distinguished and influential quarters. In 1775 
 a Newcastle schoolmaster of the name of Thomas Spence, in the 
 course of a lecture given before the Philosophical Society of that 
 town, proposed that the parishes should again seize hold of the land 
 within their own area. Thereupon he was obliged to flee to London, 
 where he carried on an active propaganda in support of these ideas, 
 achieving a certain measure of success. In 1781 a distinguished 
 professor of the University of Aberdeen of the name of Ogilvie pub- 
 lished an anonymous essay on the rights of landed proprietorship, 
 wherein confiscation was proposed by taxing the whole of the value 
 of the soil which was not due to improvements effected by pro- 
 prietors. But little notice was taken of his suggestions, despite the 
 fact that they had won the approval of Reid the philosopher. Tom 
 Paine, in a pamphlet published in 1797, gave expression to similar 
 ideas, 1 and the same views were put forward in a book published in 
 1850 by a certain Patrick Edward Dove. 2 The following year 
 Herbert Spencer, in his book Social Statics, claimed that the State in 
 taking back the land would be " acting in the interests of the highest 
 type of civilisation " and in perfect conformity with the moral law. 
 It is true that in a subsequent work he took pains to point out that 
 all that can be claimed for the community is the surface of the 
 country in its original unsubdued state. " To all that value given to 
 it by clearing, making up, prolonged culture, fencing, draining, 
 making roads, farm buildings, etc., constituting nearly all its value, 
 the community has no claim." 8 But despite this reservation the 
 justice of the general principle is clearly recognised by him. 
 
 Other communities besides England have put forward a similar 
 demand. Not to mention the claims made by socialists like 
 Proudhon and the Belgian Baron Colins, and Christian Socialists 
 like Francois Huet, we find that a similar method of procedure is 
 advocated by philosophers like Renouvier, Fouillee, and Secretan. 
 Some of them even go the length of claiming compensation for the 
 loss which this usurpation has involved to the present generation. 
 
 Thus, a conception that was already ancient even when the 
 
 * Agrarian Justice opposed to Agrarian Law and Agrarian Monopoly. 
 
 1 The Theory of Human Progression and Natural Probability of a Reign of 
 Justice. For further information concerning Spence, Ogilvie, Dove, Paine, etc., 
 see Escarra's Nationalisation du Sol et Socialisms (Paris, 1904). We have drawn 
 upon bis book for the views here put forward, the works of these writers not 
 being easily accessible, 
 
 Justice, p. 92.
 
 UNEARNED INCREMENT 561 
 
 law of rent was first formulated proclaimed the inalienable right 
 of man to the soil and demanded the re-establishment of that right. 
 We shall hear an echo of that ancient belief in all the advocates of 
 land nationalisation, in Stuart Mill, Wallace, Henry George, and 
 Walras : 1 and this is one of the many links that bind them to those 
 earlier writers. Gossen is a solitary exception. 
 
 But a simple pronouncement on the illegality of property does 
 not take us very far. Appropriation of public property for private 
 purposes is undoubtedly a great injustice, but the transaction is 
 so old that retribution would serve little useful purpose, and the 
 authors, were they still alive, would be safely ensconced behind 
 their prescriptive rights. Moreover, most of the present proprietors, 
 possibly all of them, cannot be accused of violent theft. They have 
 acquired their land in a perfectly regular fashion, giving of their toil 
 or their savings in exchange for it. To them it is merely an instru- 
 ment of production, and their possession of it as legally justifiable 
 as the ownership of a machine or any other form of capital. To 
 take it away from them without some indemnity would not be to 
 repair the old injustice, but to create a new one. Hence i' is that 
 the doctrine of the right of the community to the land had little 
 more than philosophic interest until such time as it begot a new 
 theory the theory of rent. 
 
 What the Ricardian theory really proves is the accumulative 
 nature of the benefits accruing from the possession of land. This 
 spontaneous, automatic character of rent makes it unique : to no 
 other form of revenue does it belong. The extension of cultivation, 
 the increase of population, the growing demand for commodities, 
 means an indefinite progression in the value of land. The interest, 
 initiative, and intelligence of the proprietor are of no account. 
 Everything depends upon the development of the social environ- 
 ment. This value which is created by the community should also 
 belong to it. Just as the landed proprietors in times past filched 
 
 1 " The land ifl the original heritage of the whole human race," Bays Mill 
 in hie Dissertations and Discussions. In the Principles, Book II, chap. 2, 6, 
 he expresses his views thns : "The essential principle of property being to 
 assure to all persons what they have produced by their labour and accumulated 
 by their abstinence, this principle cannot apply to what is not the produce of 
 labour, the raw material of the earth." Walras, in his Theorie de la Proprieti, 
 in the Studes d'Sconomie sociale, p. 218, says that the land by a kind of natural 
 right is the property of the State. Henry George, in Progress and, Poverty, 
 Book VII, chap. 1, maintains that " the equal right of all men to the use of the 
 land is as clear as their equal right to breathe the air it is a right proclaimed by 
 the fact of their existence."
 
 562 THE THEORY OF RENT 
 
 the land, so they to-day absorb this income. But why allow this 
 injustice to continue ? 
 
 *' Suppose," says Stuart Mill, " that there is a kind of income 
 which constantly tends to increase without any exertion or sacrifice 
 on the part of the owners, these owners constituting a class in the 
 community whom the natural course of things progressively enriches 
 consistently with complete passiveness on their own part. In such 
 a case it would be no violation of the principles on which private 
 property is founded if the State should appropriate this increase of 
 wealth, or part of it, as it arises. This would not properly be taking 
 anything from anybody ; it would merely be applying an accession 
 of wealth created by circumstances to the benefit of society, instead 
 of allowing it to become an unearned appendage to the riches of a 
 particular class. Now this is actually the case with rent." 1 The 
 argument seems quite decisive. At any rate, Ricardo's book was 
 hardly out of the press before the demand for confiscation was 
 renewed. 
 
 His friend James Mill, writing in 1821, claimed that the State 
 could legitimately appropriate to itself not only the present rent of 
 land, but also all future increments of the same, with a view to 
 compensating for public expenditure. 2 The Saint-Simonians, a 
 little later, expressed a similar view. 8 But it was James Mill's 
 son, John Stuart Mill, who showed the warmest attachment to 
 this idea. The Principles contains a general outline of his reform 
 plan, which took a still more definite shape in the programme of 
 the Land Tenure Reform Association, founded in 1870, and in 
 the discussions and explanations which accompanied it.* 
 
 The following are the essential points : (1) The State will only 
 appropriate for its own use the future rents of land ; that is, the 
 rents paid after the proposed reform has been accomplished. (2) A 
 practical beginning will be made by valuing the whole of the land, 
 and a periodical revaluation will be made with a view to determining 
 the increase in its value, and whether such increase is or is not the 
 result of communal activity. A general tax would transfer this 
 
 1 Principles, Book V, chap. 2, 5. 
 
 1 " This continual increase arising from the circumstances of the community 
 and from nothing in which the landholders themselves have any peculiar share, 
 does seem a fund no less peculiarly fitted for appropriation to the purposes of 
 the State than the whole of the rent in a country where land has never been 
 appropriated." (Elements of Political Economy, chap. 4, 5.) 
 
 1 Cf. supra, chapter on Saint-Simon. 
 
 Principles, Book V, chap. 2, 5. Cf. also chap. 3, 2 and 6. For the 
 programme of the League see Dissertations and Discussions, vol. iv.
 
 UNEARNED INCREMENT 563 
 
 benefit to the State. 1 (8) Should any proprietor consider himself 
 unfairly treated the State would give him the option of paying the 
 new tax or of buying back the property at the price obtainable for 
 it had he determined to sell just when the reform was being 
 brought in. 
 
 Mill was opposed to immediate nationalisation. Not that he 
 thought it unjust'; on the contrary, he was fully convinced of its 
 equity. But our experience of State administration and of the work 
 of municipal bodies did not seem to him to warrant any great faith 
 in the utility of any such measure. He was afraid that " many 
 years would elapse before the revenue realised for the State would 
 be sufficient to pay the indemnity which would be justly claimed by 
 the dispossessed proprietors." * 
 
 Nor did he attempt to disguise the fact that the financial results 
 would in his opinion be somewhat insignificant and the scope of the 
 reform naturally somewhat limited. A few years only were to 
 elapse before another writer proposed a much more radical measure 
 which was to effect a veritable social revolution. It was a project 
 to abolish poverty and to secure distributive justice that Henry 
 George now launched on the strength of his belief in the doctrine of 
 rent. 
 
 Henry George (1839-1897) was not a professional economist. 
 He was a self-made, self-taught man who followed a variety of 
 occupations before he finally blossomed forth as a publicist. At 
 the age of sixteen he went to sea, and led a roving life until 1861, 
 when he settled down at San Francisco as a compositor, finally 
 becoming editor of a daily paper in that city. He witnessed the 
 rapid expansion of San Francisco and the development of the 
 surrounding districts as the result of the great influx of gold-diggers. 
 He also saw something of the agricultural exploitation of the western 
 States. The enormous increase in the value of land and the fever 
 of speculation which resulted from this naturally left a lasting 
 impression upon him. Progress and Poverty (1879), the book which 
 established his fame, is wholly inspired by these ideas. * 
 
 1 Mill thought it impossible to distinguish in individual cases between the 
 surplus value which is due to general circumstances and the surplus that results 
 from the expenditure undertaken by the proprietor. Hence his conclusion that 
 a general tax was the most equitable method of procedure with a view to effecting 
 confiscation. 
 
 1 Dissertations and Discussions, rol. iv, p. 266. 
 
 Progress and Poverty was not his first effort, however. In 1871 Our Land 
 and Land Policy had appeared, and in 1874 The Land Question. Later still he 
 published Protection or Free Trade (1886), in which he puts forward a strong
 
 564 THE THEORY OF RENT 
 
 The book aroused the greatest enthusiasm. It has all the liveli- 
 ness of journalism and the eloquence of oratory, but has neither the 
 precision nor the finality of a work of science. Its economic heresies, 
 though obvious enough, detracted nothing from its powerful appeal, 
 and the wonderful setting in which the whole problem of poverty 
 was placed has not been without its effect even upon economists j 1 
 nor is the powerful agitation to which the book gave rise by any 
 means extinct. 
 
 It seemed to Henry George that landed proprietors, in virtue 
 of the monopoly which they possess, absorb not merely a part but 
 almost the whole of the benefits which accrue from the increase of 
 population and the perfection of machinery. The progress of 
 civilisation seems helpless to narrow the breach separating the rich 
 from the poor. While rents go up interest goes down and wages 
 fall to a minimum. Every country presents the same phenomena 
 extreme poverty at one end of the scale accompanied by extravagant 
 luxury at the other. 
 
 Is this unhappy result a kind of hybrid begotten of the Mal- 
 thusian law and the law of diminishing returns ? Must we, after all, 
 agree with Malthus, Ricardo, and Mill when they say that the cause 
 is to be sought in the increase of population outrunning the means 
 of subsistence ? Henry George thinks not, for experience everywhere 
 seems to show that the rich are growing in numbers much more 
 rapidly than the growth of population warrants, and that organisa- 
 tion is really performing wonderful feats under very difficult con- 
 ditions. 2 
 
 Is it caused by the exploitation of labour by capital, as the 
 socialists seem to think ? George apparently thinks not, for the 
 two factors, capital and labour, seem to him so intimately con- 
 nected that both of them are easily exploited by the landowners. 
 Every man, he thinks, could devote his energies either to the pro- 
 duction of capital or to supplying labour capital and labour being 
 merely different manifestations of the same force, human effort. 
 The benefits resulting from the formation of capital on the one 
 
 case for Free Trade, and in 1891 An Open Letter to Pope Leo XIII on the con- 
 dition of the workers. 
 
 1 Clark in his Distribution of Wealth states that the method by which he 
 tries to determine the exact productivity of each factor of production is one 
 that he borrowed from Henry George. 
 
 * " Twenty men working together will, where nature is niggardly, produce 
 more than twenty times the wealth that one man can produce where nature 
 is most bountiful." Of. also the whole of Book II, which is a disproof of the 
 Maithusian theory.
 
 UNEARNED INCREMENT 565 
 
 hand and from the exercise of labour on the other tend to be equal, 
 and any inequality is immediately counteracted by a larger produc- 
 tion of one or other of these two factors, with the result that equili- 
 brium is soon re-established. The rate of interest and the rate of 
 wages can never vary inversely. 1 
 
 But if we can neither accuse over-population nor lay the blame 
 at the door of exploitation, how are we to account for the fact that 
 the labourer is still so miserably paid ? It is entirely, he thinks, the 
 result of rent. Hitherto exceedingly severe in his handling of 
 some Ricardian theories, George has no hesitation in pushing the 
 doctrine of rent to its extreme limits. 
 
 He points out that owing to the existence of competition between 
 capital and labour the rates of interest and wages are determined 
 by the yield of that capital and labour when applied to land on 
 the margin of cultivation that is, to land that yields no surplus 
 or rent. And in virtue of the natural monopoly which landowners 
 possess they can exact for the use of other lands any amount they 
 like beyond this minimum. The result is that rent goes on gradually 
 increasing as the limits of cultivation extend. As population 
 grows and needs become more extensive and varied, as technical 
 processes become more perfect and labour becomes less and less 
 necessary, new lands are brought under cultivation, such lands 
 being generally of an inferior character. The result is that the 
 lands which were previously cultivated will always yield a rent 
 to the proprietor. Thus the progress of civilisation, whatever 
 form it take, always tends to the same result a higher rent for the 
 benefit of the landed proprietor.* 
 
 1 " Labour and capital are but different forms of the same thing human 
 exertion. Capital is produced by labour ; it is, in fact, but labour impressed 
 upon matter. . . . The use of capital in production is, therefore, but a mode 
 of labour. . . . Hence the principle that, under circumstances which permit free 
 competition, operates to bring wages to a common standard and profits to a 
 substantial equality the principle that men will seek to gratify their desires 
 with the least exertion operates to establish and maintain this equilibrium 
 between wages and -interest. . . . And this relation fixed, it is evident that 
 interest and wages must rise and fall together, and that interest cannot be 
 increased without increasing wages, nor wages be lowered without depressing 
 interest." (Progress and Poverty, Book III, chap. 5.) It is hardly necessary 
 to point out how very much simplified this doctrine concerning the relation 
 between wages and interest really is. 
 
 1 A rtsumi of this theory of distribution, whose very simplicity most make 
 it suspect, may be found in Book V, chap. 2 : " In every direction, the direct 
 tendency of advancing civilisation is to increase the power of human labour 
 to satisfy human desires to extirpate poverty and to banish want and the 
 fear of want. . . . But labour cannot reap the benefits which advancing
 
 566 THE THEORY OF RENT 
 
 " Here is a little village ; in ten years it will be a great city 
 in ten years the railroad will have taken the place of the stage- 
 coach, the electric light of the candle ; it will abound with all the 
 machinery and improvements that so enormously multiply the effec- 
 tive power of labour. Will, in ten years, interest be any higher ? " 
 He will tell you " No ! " " Will the wages of common labour be 
 any higher ? " He will tell you " No 1 " " What, then, will be 
 higher ? " " Rent : the value of land. Go, get yourself a piece of 
 ground, and hold possession. . . . You may sit down and smoke 
 your pipe ; you may lie around like the lazzaroni of Naples or the 
 lepers of Mexico ; you may go up in a balloon or down a hole in 
 the ground ; and without doing one stroke of work, without adding 
 one iota to the wealth of the community, in ten years you will 
 be rich 1 In the new city you may have a luxurious mansion ; 
 but among its public buildings will be an almshouse." 1 
 
 Accordingly Henry George regards rent not so much as a species 
 of revenue which, as Stuart Mill saw, is particularly easy to absorb 
 by means of taxation, but as the very source of all evil. Once 
 get rid of rent, poverty will be banished, inequality of wealth will 
 be removed, and economic crises which George thought were 
 the result of speculation in land will no longer disturb the serenity 
 of commercial life. But it is hardly enough to aim at the future 
 
 civilisation thus brings, because they are intercepted. Land being necessary to 
 labour, and being reduced to private ownership, every increase in the productive 
 power of labour but increases rent the price that labour must pay for the 
 opportunity to utilise its power ; and thus all the advantages gained by the 
 march of progress go to the owners of land, and wages do not increase." 
 George, however, does not claim that real wages have fallen because technical 
 improvements enable production to be carried on where it was formerly impos- 
 sible. At most this will only enable capital and labour to preserve their old 
 scale of remuneration ; it will not give them any share in the progress that 
 has been made, so that, relatively speaking, it is true to say that wages and 
 interest have both fallen in comparison with rent. " When I say that wages 
 fall as rent rises, I do not mean that the quantity of wealth obtained by labourers 
 as wages is necessarily less, but that the proportion which it bears to the whole 
 produce is necessarily less. The proportion may diminish while the quantity 
 remains the same, or even increases." (Book VI, chap. 6. Cf. also Book IV, 
 chap. 3.) George, like Ricardoand a good many socialists, confuses two different 
 problems, namely, the price of productive services and the proportional dis- 
 tribution of the product between the different agents of production (Book V). 
 He adds, however, that scientific discovery, by pushing the margin of culti- 
 vation back to that point where the law of diminishing returns is more than 
 counterbalanced by increased productive efficiency, may even sometimes reduce 
 the worker's real wages, and so impair hia position not only relatively, but also 
 absolutely. (Book IV, chap. 4.) 
 Ibid., Book V, chap. 2.
 
 UNEARNED INCREMENT 567 
 
 increments of rent, for the damning consequences of privilege would 
 still remain if landowners were allowed to retain even their present 
 rents. The whole abomination must be taxed out of existence. 1 
 Such a tax would yield sufficient to defray all State expenditure, 
 and other forms of taxation could then be dispensed with. In the 
 single tax advocated by Henry George we have a curious revival of 
 the Physiocrats' impot unique. 
 
 George's system is open to serious criticism both from the 
 economic and from the ethical standpoint. From the economic 
 point of view it is obvious that the right of private property does 
 confer upon the proprietor the right to such benefit as may accrue 
 from a possible surplus value, but it is not at all clear nor has 
 George succeeded in proving it that such a right absorbs the whole 
 benefit which accrues from social progress. Besides, it seems rather 
 childish to think that rent is the sole cause of poverty and that its 
 confiscation would result in the removal of the evils of poverty. 
 
 From the point of view of equity it seems clear that George in 
 removing one injustice is at the same time creating another. To rob 
 the present proprietors of the rents which they draw is simply to 
 deprive them of advantages which many of them have acquired 
 either by means of labour or economy. Land is no longer acquired 
 merely by occupation : the usual way of getting hold of it to-day 
 is to buy it. And if we consider that such a transaction is just, 
 we are bound to recognise the legitimacy of rent just as much as 
 the interest of capital. Confiscation might be justified in the case 
 of those who first unlawfully occupied the land. But how many 
 of them are left now ? 
 
 Further, if we are going to relieve the landowner of the rent 
 which results from the progress of civilisation, we ought to indemnify 
 him for any " decrement " which may have resulted through no 
 error of his. Stuart Mill anticipated this objection 2 and gave the 
 dissatisfied proprietor the option of selling his land at a price equal 
 to its market value at the time when the reform was inaugurated. 3 
 
 1 That portion of their revenue which represented the capital sunk in the 
 land would still be the property of the landowners. 
 
 * Mill points out that the answer to this objection is that the right of selling 
 the land at a price which depends upon two contrary conditions (gain or loss) 
 establishes a kind of equilibrium. The State would not lose anything by this, 
 for a fall in value in one place, unless it be accompanied by a general want of 
 prosperity, implies a corresponding increase somewhere else, of which the State 
 will get the benefit. (Dissertations and Discussions, vol. iv.) 
 
 1 M. Einaudi, however, in his excellent Studi iugli effetti ddle imposte, p. 125 
 (Turin, 1902), remarks that this principle of indemnifying losses leads directly 
 to a S'tate guarantee of values the expediency of which is at least problematic.
 
 568 THE THEORY OF RENT 
 
 Henry George apparently never faced this aspect of the question, 
 He thought that " decrement " would be very exceptional indeed, 
 and that the persistence of increment values is as thoroughly estab- 
 lished as any law in the physical world ever was. 
 
 Mill's system, though much more moderate than George's, is 
 by no means beyond reproach. The common element in both 
 systems i.e. the emphasis laid upon unearned increments has 
 been criticised both by socialists and economists. 
 
 The socialists point out that if the object is to get rid of unearned 
 incomes the interest of capital as well as the rent of land ought to 
 be confiscated. While agreeing with the object, they claim that 
 they are more logical in demanding the extinction of both kinds. 
 But this criticism is not quite a complete answer to Mill and his 
 supporters, for the latter regarded interest as the legitimate remu- 
 neration, if not of the labour, at least of the abstinence of the capi- 
 talist. Interest is the remuneration of sacrifice. 1 But the socialists 
 are not convinced. They cannot see how the negative effort of the 
 capitalist is to be compared with the positive effort of the labourer, 
 and they have not been sparing in their denunciation of Mill and 
 his followers. 
 
 The economists adopt a different line of criticism. The argument 
 is that the rent of land is illegal because the progress of society has 
 contributed more to it than the work of the proprietor. But is 
 there any kind of revenue which is altogether free from such criti- 
 cism ? Every kind of revenue contains some elements that are 
 essentially social in character ; that is, elements that depend entirely 
 upon the demands of society. The growth of social demand often 
 brings to capital as well as to land, to labour as well as to capital, 
 quite unexpected and occasionally extravagant incomes. Has not 
 political economy in the course of its development been forced 
 to recognise the existence of a whole series of rents differing from 
 the rent of land merely in respect of their shorter duration ? Was 
 
 He makes the further observation that the compensation would often be paid 
 to a person other than the one who paid the tax when it was levied the property 
 in the meantime having changed hands. 
 
 1 For the distinction between the legality of movable and immovable property 
 see Mill, Principles., Book II, chap. 2, 1, and Henry George, Progress and Poverty, 
 Book VII, chap. 1. " The institution of private property," says Mill in the 
 above passage, " when limited to its essential elements, consists in the recognition, 
 in each person, of a right to the exclusive disposal of what he or she have pro- 
 duced by their own efforts, or received either by gift or by fair agreement without 
 force or fraud from those who produced it." Such a definition at least implies 
 that lauded property is illegal. A house is distinguished from the land upon 
 which it is built ; whereas the former is legally held the latter is not.
 
 UNEARNED INCREMENT 569 
 
 the fortune of the celebrated hunchback of Quincampoix Street, 
 who li ved in the glorious days of Law's system, in any way different 
 from the fortune of the Duke of Westminster, who owns large areas 
 of the city of London ? Or is the surplus value conferred upon old 
 capital by a mere fall in the rate of interest in any respect different 
 from the surplus value acquired by land under the pressure of 
 growing population ? The most striking thing, apparently, about 
 unearned increment is its ubiquity. Society, presumably, does 
 not distribute its revenues in the way a schoolmaster rewards the 
 most painstaking or the most meritorious pupil. It puts a premium 
 upon the services that are rarest, but never inquires whether they 
 involved any greater amount of sacrifice. Such premiums simply 
 denote the intensity of its own demands. What right have we 
 to isolate one of these and demand that it and it alone shall be 
 confiscated ? 
 
 Stuart Mill has given the only reply that is possible by showing 
 that none of the other rents has either the persistence or the gene- 
 rality of the rent of land. 1 That reply seems clear enough to justify 
 at least a partial application of the systems of Henry George and 
 Stuart Mill. 
 
 About the year 1880 several leagues were founded in England, 
 America, and Australia with a view to propagating what George's 
 followers call his " sublime truths." During the last few years 
 they have not been nearly so active, although several attempts have 
 since been made, especially by municipalities, to tax surplus values.' 
 Even as far back as 1807 a law was passed in France requiring 
 riparian owners to pay compensation in cases where their estates 
 bordered upon public works which in any way contributed to the 
 greater value of the property. But the law is very seldom enforced. 3 
 
 1 Mill, Dissertations and Discussions, vol. iv, p. 298. 
 
 * Especially in England, where various schemes have been propounded and 
 investigated by Royal Commissions in the course of the last ten years. Such 
 schemes are discussed in a very thorough fashion in Einaudi's book already 
 mentioned, and in an article entitled Recent Schemes for Rating Urban Land 
 Values contributed by Edgeworth to the Economic Journal in 1906. 
 
 Article 30 of the Act of September 16, 1807, runs as follows : " If as the 
 result of the improvements already mentioned in this Act through the making 
 of new roads or the laying out of new squares, through the construction of quays 
 or other public works any private property acquires a notable increase in 
 value, such property shall be made to pay an indemnity which may be equal to 
 half the value of the advantage which has thus accrued to it." The principle was 
 rarely applied, however. M. Berth&emy (Traiti ilementaire de Droit adminis- 
 tratif, 1908, p. 624) states that he can only find twenty occasions on whwh the 
 law was brought into operation in the whole course of the nineteenth century. 
 E.D. T
 
 570 THE THEORY OF RENT 
 
 In London the principle was recognised as far back as the seven- 
 teenth century, but has long since fallen into desuetude. 1 The 
 idea is again gaining ground very rapidly, in England and Germany 
 especially. Numerous projects have been launched with a view to 
 taxing the surplus value of urban lands not used for building pur- 
 poses, and some of the schemes have been fairly successful. The 
 adoption of this principle was one of the more prominent features 
 of the famous English Budget of 1909, which roused so much oppo- 
 sition and brought the long constitutional struggle between the 
 Liberal Government and the House of Lords to a head. The econo- 
 mists are still divided on the question. The imposition of a Werth- 
 zuwachssteuer by certain German municipalities led to a fresh dis- 
 cussion of the topic in a number of reviews and polemical works, 
 but the principle stands enshrined in the German Imperial Act of 
 1911. 
 
 These ideas have never obtained the same hold in France, where 
 property is subdivided to a much greater extent than it is in England, 
 and where rent is accordingly distributed among a greater number 
 of cultivators and naturally raises less opposition. In addition to 
 this, the slow growth of the population in France makes the problem 
 less acute than it is in Germany, where the workers find that an 
 increasing proportion of wages is absorbed in the payment of rent. 
 But the question will demand attention sooner or later, and France, 
 like other countries, will have to look for an answer. 
 
 Ill : SYSTEMS OF LAND NATIONALISATION 
 
 THE " land -nationalises," whose schemes now come under con- 
 sideration, not content with the taxation of a part of the revenue 
 of the land, demand that the whole of it should again become the 
 property of the State. 
 
 Apparently a much more thoroughgoing suggestion than any 
 of the preceding ones, especially Mill's, in reality it is a much simpler 
 system that is proposed. The advocates of land nationalisation 
 think, with Mill, that the surplus value of the land should be reserved 
 for the State, and, like him, they have great faith in the persistence 
 
 1 Professor Seligman (Essays in Taxation, 6th ed., p. 341) quotes an English 
 law of 1672 relating to the widening of certain streets in Westminster in which 
 the principle is neatly stated. But when it was proposed to apply it to certain 
 public works undertaken in London in 1890 it was energetically opposed. It 
 was admitted afresh in the Tower Bridge Act of 1895. A similar system is 
 frequently adopted in America under the name of " special assessment " 01 
 " betterTnent."
 
 SYSTEMS OF LAND NATIONALISATION 571 
 
 and continuity of this surplus value. They also agree with him 
 when he puts forward the claim of society to the possession of the 
 soil, but they never suggest that it should be taken from its present 
 owners. They reject the distinction between earned and unearned 
 income and consider that they are both equally legitimate. But, 
 unlike Mill, they never feel that they can say to the landed pro- 
 prietor, " Thus far and no farther." Appropriation is advocated 
 simply on the ground of its public utility, and care is taken to hedge 
 it round with all kinds of guarantees. Proprietors are to be 
 indemnified not merely for the loss of income it would immediately 
 involve, but also for the loss of any future revenue upon which they 
 had reckoned. Could anything be simpler or more reasonable ? 
 
 The practical interest of a ^ystem of this kind obviously cannot 
 be very great. Such a fundamental change in the institution of 
 private property, especially in old countries, could only be accom- 
 plished by means of a revolution. Revolutions are to be undertaken 
 in no light-hearted fashion, and never without tke sanction of absolute 
 necessity. Curiously enough, all the changes made in France, for 
 example, since the Revolution, in Russia since the emancipation of 
 the serfs, and in Ireland during the last hundred years have 
 been in the opposite direction. They have extended rather than 
 contracted the area of private property. Russia at the present 
 moment is engaged in this very task. The prospects of nationalisa- 
 tion are certainly not very rosy. New countries may perhaps prove 
 more favourable grounds for experiment : there the State may 
 possibly show itself more jealous of its rights. But as a matter of 
 fact it is just in those countries that the State is most reckless, 
 the reason undoubtedly being that the abuses of private property 
 have not yet had time to make their influence felt. 
 
 The extremely hypothetical character of the schemes now under 
 consideration relieves us of the necessity of examining their organisa- 
 tion in any detail, although this question of the minutise is apparently 
 one that strongly appeals to the creative instinct of these Utopians. 
 
 Of greater interest are the grounds on which they base their 
 demand and the economic processes by means of which they hope 
 to accomplish their aims. From this point of view the most interest- 
 ing systems are those of Gossen and Walras. Gossen's scheme is 
 expounded in a curious volume entitled Entwickelung der Gesetze 
 des menschlichen Verkehra, and Walras's is developed in a memo- 
 randum addressed by the author to the Vaudoise Society of Natural 
 Sciences in 1880. Both works contain ideas from which the 
 economist may learn a good deal, and both writers claim that the
 
 572 THE THEORY OF RENT 
 
 successful adoption of their schemes would enable the State to make 
 an offer of free land to all citizens. 
 
 (a) Gossen's book appeared in 1853. 1 It is a curious coincidence 
 that the French Bastiat, the American Carey, and the German 
 Gossen should all be engaged in developing an optimistic thesis 
 just about the same time. Of the three, Gossen's was the most opti- 
 mistic and by far the most scientific. He concurred in the judgment 
 of the Physiocrats, who believed that the world was providentially 
 subjected to the action of beneficent laws which men must know 
 and obey if they are ever to become happy. Such, he thought, are 
 the laws of enjoyment, or of utility or ophelimity, as we call them 
 to-day. A person who merely follows his own interests finds that 
 unconsciously, perhaps, he has been contributing to the happiness of 
 the whole of society. Gossen gives a remarkably clear proof of the 
 theory of maximum ophelimity, based upon a very ingenious analysis 
 of wants. According to this theory, every individual who pursues 
 the satisfaction of his own desires under a regime of free competition 
 helps in the realisation of the maximum satisfaction by everybody 
 concerned. 
 
 If it be true that each individual in pursuit of personal enjoy- 
 ment unwittingly contributes to the well-being of the whole com- 
 munity, it is clear that everyone ought to be given the utmost 
 possible freedom in the pursuit of his interests. But there are 
 two great obstacles in the way of this. The first of these is want of 
 capital, which Gossen thought could be obviated by creating a huge 
 Government bank which would lend capital whenever required. 
 The mechanism of the bank is described in considerable detail. 
 The second obstacle is the existence of private property in land. 
 If man is to develop all his faculties and to use them to their 
 utmost extent in the production of wealth, he must be allowed to 
 choose his work freely and to carry it on under the most advan- 
 tageous circumstances possible. But private property hinders 
 free choice. " Thanks to this one fact," says Gossen, " the obstinacy 
 of a single proprietor often hinders the best development of the 
 land which belongs to him and prevents its utilisation in the fashion 
 
 1 No notice whatever was taken of it then, and even in the second edition 
 of the great Handworterbuch der Staatsunssenschaften, published in 1900, no men- 
 tion is made of Gossen's name, although the third edition of that work has made 
 ample reparation. The book was reprinted in 1889. On the relation between 
 the ideas of Gossen and those of Jevons and Walras see Walras's interesting 
 article, Un Economiste inconnu, Hermann Henri Gossen, published in the Journal 
 dee Economistes in 1885 and reproduced in his Etudes d'Sconomie aociale, pp. 351 
 tt seq.
 
 SYSTEMS OF LAND NATIONALISATION 578 
 
 that would best meet the needs of production. The necessity for the 
 compulsory purchase of land for industrial purposes, for the making of 
 roads, railways, or for developing mines, affords an indication of the 
 unsatisfactory condition of landholding as it exists at present." 1 
 
 It is obviously necessary that the community's right to the soil 
 should again be restored to it, so that everyone might be free to 
 demand and to obtain the use of as much of it as he required. Every 
 industry could then choose that locality which seemed best fitted 
 for it. The right of using the land might be disposed of by public 
 auction and given to the bidder who offered the highest rent. There 
 would thus be a kind of guarantee that the organisation of produc- 
 tion at any one moment was being carried on in the most favourable 
 fashion relatively, that is to say, to the knowledge possessed by 
 the community at that period. 2 
 
 (6) Walras's position is not quite so frankly utilitarian as Gossen's. 
 It was the analysis of the respective rdles of the individual and the 
 State, of which he gave an exposition in his lectures on La Th&orie 
 $nirale de la SodiU (1867), that inspired his reform. Following Henry 
 George, he sought a reconciliation of individualism and socialism 3 
 a reconciliation which he variously speaks of under the terms 
 " liberal socialism, "" synthetic socialism, " or simply " syntheticism. " 4 
 
 It was his opinion that no real opposition existed between the 
 State and the individual, that the one is just the complement of 
 the other. Taken separately, it has been well said that they are 
 nothing better than abstractions ; the only real man is the social 
 man man living in society. This man, as we know, has two kinds 
 of interests the one personal or individual, and as such opposed 
 to the interests of other beings ; the other social or collective, 
 
 1 Entwickdung der Qesetze, p. 250. 
 
 * Gossen sees other advantages that would follow such reform. He enume- 
 rates them thus : (1) The confiscation of rent would reduce the possibility of 
 living without working, and this would increase the industrial activity of the class 
 under consideration. (2) The legal transference of property would be greatly 
 simplified. (3) Producers would be exempted from buying land and from keeping 
 capital for this purpose. (4) Rent would take the place of taxation to a very 
 considerable extent, and would free theoollection of it from every trace of vexation 
 or injustice. (Ibid., p. 273.) 
 
 1 Cf. the fragment entitled Methode de Conciliation ou de Synthese, in 
 the Studes d'Hconomie sociale. Henry George in his preface to Progress and 
 Poverty writes thus : " What I have done in this book ... is to unite the 
 truth perceived by the school of Smith and Ricardo to the truth perceived by 
 the school of Proudhon and Lassalle ; to show that laissez-faire (in ita full, true 
 meaning) opens the way to a realisation of the noble dream of socialism." 
 
 4 Etudes d'flconomie aociale, p. 239.
 
 574 THE THEORY or RENT 
 
 common both to himself and his fellows and unless these are secured 
 the existence of the race is immediately jeopardised. The two groups 
 of interests are equally important, for they are both equally necessary 
 for the life of the social being. The State and the individual are 
 mere phases in the life of the same being, according as we think 
 of him pursuing the collective interests which he has in common with 
 his fellow-men or his more personal and individual interests. Each 
 has its own sphere of activity definitely marked off from the other by 
 the diverse nature of the respective tasks which they have to perform. 
 
 The duty of the State is to secure those general conditions of 
 existence which are necessary for everybody alike. Upon the indi- 
 vidual devolves the duty of determining his own personal position 
 in society through perseverance in the exercise of his own capacity 
 in any line of activity which he may himself choose. But if both 
 of them, individual and State alike, are to perform their respective 
 tasks efficiently, they must be supplied with all necessary resources. 
 To the individual should accrue the wealth which results from 
 labour and saving, to the State the revenue which results from 
 general social progress i.e. the rent of land. Provided for in the 
 manner indicated, there would be no necessity for taking away from 
 the individual a portion of the fruit of his labour by means of taxa- 
 tion. Collective ownership of land and rent, private ownership of 
 capital and labour, together with their incomes such is the social 
 organisation which Walras thought would solve the problem of 
 distribution : equal conditions, coupled with unequal situations. 1 
 
 The reforms of Gossen and Walras, starting from a different angle 
 as they do, depend for their realisation upon conditions that are 
 exactly identical. Both of them evince the most scrupulous respect 
 for the prescriptive rights of the present owners ; and both agree 
 that the State has no more right to appropriate future rents a upon 
 
 1 See the charming sixth lesson of the Th&orie ginerale de la Societe in 
 the Stvdes d'lSconomie sociale. 
 
 * In order to justify a measure involving a slight diminution in the rent of 
 landed proprietors, it is hardly necessary to invoke the fact that rents have a 
 faculty of growing continuously without the co-operation of the proprietor. We 
 need scarcely point out that this increase in rent over a certain period cannot 
 enter into the price of land simply because it cannot be calculated. Conse- 
 quently, when a buyer buys under the system of guarantee afforded by the 
 State he has at the same time undoubtedly bought a claim to all the variations 
 of rent which may ensue. . . . Even if the landed proprietor is indemnified by 
 being paid a perpetual rent equal to the rent of his land at the time of confisca- 
 tion, as is done to-day in the case of compulsory purchase, the injustice will 
 not be as great as it otherwise would be, but it will not be removed altogether.'* 
 (Gossen, Entwickelung der Gesetze, pp. 257-258.)
 
 SYSTEMS OF LAND NATIONALISATION 575 
 
 which these owners rely, in the manner suggested by John Stuart 
 Mill, than it has to confiscate present rents, as Henry George 
 proposed. The only way in which reform can be fairly carried out is 
 to buy back the land, including in the purchase price any surplus 
 values upon which the present proprietors have set their hopes. The 
 most expedient way, perhaps, would be to issue bonds and to offer 
 these to the proprietors in exchange for the land. The rents, which 
 would still be received by the State for there is no prospect of 
 cessation of growth would be employed partly in paying interest 
 on the debt and partly in redeeming it ; so that at the end of a 
 certain period, say fifty years, the State would have paid back all 
 the capital and it alone would henceforth draw the rents. 1 
 
 It would have been unnecessary to add anything to the exposition 
 as given by Walras but for the objection which he himself raised 
 to it, and which led him to give a very interesting account of his 
 belief in the permanence of rent. 
 
 "If," says Walras, "the State pays to the proprietors the 
 exact value of their lands, reckoning in that price a sum equal to 
 the estimated value of the future rent, what is it going to gain by 
 the bargain ? " If the value of the soil is carefully computed in the 
 manner indicated above, then the interest on the capital borrowed 
 to effect the purchase and the rents received must exactly balance 
 one another, for one is just the price of the other, and the State will 
 find that the rent of land is insufficient to repay the outlay 
 involved. The results will cancel one another. Some inconveni- 
 ences will doubtless be avoided, but there will be no outstanding 
 advantage. How are we to get rid of this objection ? 
 
 The difficulty is soon removed, for once the system outlined 
 above is adopted there will be an end to all speculation in land. 
 When individual buyers find that they must pay the owners a price 
 that covers all surplus values which the land may possibly yield in 
 the future, which would mean that they would not get any of that 
 surplus value themselves, they will not be quite so keen. This is 
 not the case, however, at the present time. Speculation of this 
 kind is rife everywhere, for the good reason that a surplus value 
 is always a possible contingency. The more perspicacious or better 
 informed a buyer is, the more firmly does he believe in this advance 
 and the more careful is he to safeguard his future interests. The 
 
 1 Gossen gives reasons for thinking that the State, owing to its superior 
 position as compared with individuals, might offer better terms to the proprietors 
 than ordinary buyers could among others, that the State can borrow cheaply and 
 could consequently offer a better price.
 
 576 THE THEORY OF RENT 
 
 State, so soon as it has bought back the land, will be in the position 
 of the speculator in question. Walras is of the opinion that the 
 surplus value is certain to grow in future even more rapidly than 
 the actual possessors of the land imagine. Thanks to economic 
 evolution, what the private proprietor can only speculate on the 
 State can rely upon with absolute certainty. 1 
 
 " I believe, along with several competent economists, that when 
 humanity left the purely agricultural system under which it had 
 lived for thousands of years and entered upon a regime of industry 
 and commerce, under which agriculture is still necessary to feed a 
 growing population, but only possible with the expenditure of a vast 
 amount of capital, it achieved a notable triumph, and the step it 
 then took marks a veritable advance in economic evolution. I also 
 believe that as the result of this evolution rent will continue to 
 grow, but without involving any scarcity or increase in the value 
 of agricultural produce a fact that has escaped everyone except 
 the wideawake and the well-informed, and by which proprietors 
 alone have profited. I further believe that if the State had bought 
 the land before this evolution had taken place and had then given 
 of its resources to further such development, even the normal 
 growth of this surplus value would have been ample to clear the 
 debt." 2 
 
 Walras agrees with Ricardo, and a kind of rehabilitation of the 
 Ricardian thesis drives him to the conclusion that the future must 
 witness a further growth of this surplus value of land merely 
 because of the limited quantity of land in existence. There is this 
 difference, however. Whereas Ricardo bases his whole contention 
 upon the validity of the law of diminishing returns, Walras will 
 not even entertain the thought of a possible diminution in the 
 amount of agricultural produce. The inevitable progress of society 
 which leads it on from a purely agricultural stage right up to the 
 industrial-commercial stage, from extensive to intensive cultivation, 
 
 1 A similar idea underlies Gide's proposal in an article contributed to the 
 Journal des Sconomiste* for July 1883. "The State would offer to buy the 
 land and pay for it on the basis of ninety-nine years' purchase. There is reason 
 to think that hardly a buyer would be found who would refuse such an offer 
 coupled with a slight compensation, for ninety-nine years ie the equivalent of 
 perpetuity as far as the individual is concerned. There would be nothing mean 
 about such a price ; really it would be more of a gift to the proprietor." 
 
 * Walras, Studes d'Sconomie sociale, p. 368. A mathematical discussion of 
 the theory is contained in the Thiorie mathematiqiie du Prix des Terres. The 
 same argument expressed in ordinary language may be found in the article 
 entitled Un fi canonist e. inconnu (Studes d'Sconomie sociale, pp. 365 et seq,), and 
 it is still more simply summed up in the ProW&me fiscal, pp. 446-449.
 
 SYSTEMS OF LAND NATIONALISATION 577 
 
 must result in increasing the value of land. The State would ease 
 this transitional process by a measure of appropriation, and could 
 make a solid contribution to the success of this gigantic undertaking, 
 which is to apply not merely to land, but also to railways and 
 mines, etc. 1 
 
 (c) Numerous and various are the reasons invoked by the advocates 
 of land nationalisation. Gossen's ideal is the maximum product, 
 while Walras's first care is to supply the State with all necessary 
 resources. A final class of writers regards it as an excellent oppor- 
 tunity of giving everybody access to the soil. It was this ideal 
 of free land that inspired the late Alfred Russel Wallace to 
 write his book Land Nationalisation : its Necessity and it* Ainu, 
 and to inaugurate his campaign in favour of nationalisation in 1882. 
 
 Wallace imagined that the mere right of free land would put &D 
 end for ever to the worker's dependence upon the goodwill of the 
 capitalist. Nobody would be found willing to work for starvation 
 wages were everyone certain that on a free piece of land he would 
 always obtain his daily bread. None would suffer hunger any 
 longer, for the soil, at any rate, would always be there awaiting 
 cultivation. Free access to the land would by itself solve the 
 problem of poverty and want, and this would be by no means one 
 of the least of the benefits of land nationalisation. 8 
 
 The essential thing, in his opinion, is to give to every worker the 
 right to possess and to cultivate a portion of the soil. 3 His proposal 
 is that once nationalisation is an accomplished fact every individual 
 at least once in his lifetime should be given the opportunity of 
 choosing a plot of land of from one to five acres in extent wherever 
 he like> on condition that he personally occupies and cultivates it. 4 
 
 The extremely simple character of the proposal makes it all 
 the more notorious. Unlike the other schemes, it is not based 
 
 1 " The same considerations would apply in the case of mines, railways, mono- 
 polies of every kind, natural and otherwise, where the principle of free com- 
 petition is in operation or where any surplus value exists." (Etudes <T Economic 
 sociale, p. 347, note. Cf. also pp. 237 et seq.) 
 
 1 Cf. Escarra, toe. cit., p. 224. See also Laveleye, Le Socialism* contem- 
 porain, 8th ed., Appendix I. 
 
 Metin, Le Socialism* en Angleterre, p. 179 (1897). 
 
 " The possession of a piece of land frees the workman from dependence 
 upon the masters, which is one cause of poverty. The worker who possesses 
 land is free. He has always something he can turn his hand to when out of 
 work." Elsewhere: " If a certain quantity of land is given to the workers their 
 wages will surely rise, for no one will work for another unless he can get more 
 than he gets when working for himself." (Quoted by Esoarra, p. 224, note.) 
 The same idea occurd in Henry George, but not as a part of the general argument.
 
 578 THE THEORY OF RENT 
 
 upon any subtle, complex economic analysis. But it supplies a most 
 convincing platform theme. Closer scrutiny, however, reveals its 
 almost childish nature. 
 
 The cultivation even of the smallest piece of land requires some 
 capital, which the advocates of free land appear to forget altogether. 
 The amount of capital so required may not infrequently be in excess 
 of the modest sum possessed by the working man. They also seem 
 oblivious of the fact that the land does not produce all the year 
 round : there must of necessity be a period of quiescence when the 
 seeds are germinating. And if we are to suppose that the worker has 
 sufficient reserve to wait for the harvest, why not admit at once 
 that he has also enough to tide over a period of unemployment ? 
 A few pounds in the bank to which he can have access whenever 
 he likes would certainly be much more serviceable in mid-winter, 
 say, than a plot of land situated some distance away. Cultivation 
 also requires capacity as well as capital. You cannot improvise the 
 peasant, and a first-class artisan may be a very indifferent cultivator. 
 The experience of distress committees seems to prove this point. 
 The advocates of free land have a mistaken belief in the efficacy 
 of the proposed remedy, and experience would quickly show them 
 how difficult it would be to apply it. 1 
 
 * If we had not decided against the inclusion of the Italian economists, 
 this would have been the place to devote a few words to the writings of Achilla 
 Loria. No one excels him as a writer on political economy. An elaborate 
 superstructure of great economic, political, social, and even religious significance 
 has been built upon the foundation of free land, which at least denotes a powerful 
 imagination. A resume of this thesis is contained in La Terra ed il Sistema 
 eociale, translated for the Revue Economic politique in 1892. We cannot 
 examine Loria's system here. Suffice it to say that in his Costituzione economica 
 odierna (1900) he demands that the law should recognise each man's right to 
 the land : either to a unit of land (i.e. a quantity of land such as would enable 
 a man to live and set up as an independent producer) or, failing that, to a fraction 
 of such a unit. 
 
 Such is the theoretical solution, but the practical suggestion is somewhat 
 milder, a kind of territorial wage being suggested. Every master would be 
 obliged to give to bis workmen, in addition to a minimum wage, a certain amount 
 of land at the end of a given number of years. If during that period the work- 
 man has been employed by several masters, each master should contribute in 
 proportion to the length of time he has been in his service. 
 
 At the end of a certain period every worker would thus become a proprietor. 
 These would thus be in the same position as their primitive ancestors were 
 as far as natural economy is concerned, and would be able to join with the 
 older proprietors in a kind of association of capital and labour on a footing of 
 absolute equality, which Signor Loria thought would be a most fruitful type of 
 organisation. During the intervening years a certain amount of pressure would 
 have to be put upon the proprietors.
 
 SOCIALIST EXTENSIONS OF RENT 579 
 
 IV : SOCIALIST EXTENSIONS OF THE 
 DOCTRINE OF RENT 
 
 THE writers who have hitherto engaged our attention were all of 
 them individualists. They had no quarrel with the institution of 
 private property as such, nor were they hostile to the existence of 
 capital or to the personal advantage which may accrue from the 
 possession of exceptional talent or ability. The orthodox socialist, 
 on the other hand, is distinguished by an aversion to both interest 
 and rent, and some of them even go the length of denying the 
 individual's claim to any special benefit accruing from personal 
 ability if it has the effect of increasing his income beyond the mere 
 remuneration of labour. 
 
 Between the two conceptions is a veritable abyss, and the ques- 
 tion arises as to whether it can ever be bridged. Some writers 
 confidently reply in the affirmative. " It is the easiest thing in 
 the world. Just treat your interest on capital and the revenue 
 derived from exceptional capacity as rent, and the theory of rent 
 will supply a justification not only for the appropriation of land, 
 but also for universal collectivism." It was in England that this 
 idea was first mooted. 
 
 England, the true home of socialism, the England of Godwin 
 and Hall, of Thompson and Owen, after the first outburst of socialist 
 activity over seventy years before, had not given birth to a single 
 socialist scheme. With the exception of John Stuart Mill, who was 
 impressed by the French socialists, English writers had remained 
 quite indifferent to the ideas that were agitating Europe. Karl 
 Marx toiled at the production of his masterpiece, Das Kapital, 
 in the very heart of London without arousing the curiosity of a 
 single English economist. The formation of socialist parties in 
 Germany and France after 1870 had to intervene before the ideas 
 of the great collectivist aroused any real enthusiasm in Great 
 Britain, and it was not until 1880 that a small Marxian party was 
 formed in England. 1 Just about the same time another group of 
 writers known as the Fabian Socialists began to preach an original 
 and characteristically English kind of socialism. 1 
 
 The Fabian Society at first consisted of a small group of young 
 men, for the most part belonging to the middle classes, and holding 
 
 1 The Social Democratic Federation was founded by Hyndman in 1881. See 
 M6tin, Le Socialisme en Angleterre, chap. 6 (1897). 
 
 1 Bernard Shaw, The Fabian Society, what it hat dont and how it hat dont it 
 (1892 ; Fabian Tract, No. 41).
 
 580 THE THEORY OF RENT 
 
 themselves aloof from the older political parties. The object was 
 " the prompt reconstruction of society in accordance with the 
 highest moral possibilities." Success appearing somewhat remote, 
 and being anxious for more immediate results, they allowed them- 
 selves to be led astray by ideas borrowed from the Marxian and 
 anarchist doctrines of the Continent. But they very soon renounced 
 the revolutionary spirit, which has so little in common with the 
 English temperament ; and in order to emphasise the difference 
 between themselves and the advocates of brute force and the believers 
 in a sensational historical crisis 1 they adopted the name Fabian, 
 which is derived from Fabius Cunctator, the famous adversary of 
 Hannibal. The school has always been very critical both of itself 
 and of others, somewhat afraid of public ridicule, but possessing 
 none of the enthusiasm of apostles. Always ready to banter one 
 another, 2 to destroy their ancient idols, and to dispense with every 
 social or definitely political creed, the Fabians rapidly became trans- 
 formed into a society of students and propagandists whose interests 
 are exclusively intellectual, and who believe that " in the natural 
 philosophy of socialism light is a more important factor than heat." * 
 Such an attitude is hardly conducive to success in a socialist 
 crusade, but the Fabians have left a deep impression not so much 
 upon working men, perhaps, as upon members of the bourgeois or 
 middle class. Several of their members are persons of great literary 
 distinction, such as Mr. Bernard Shaw, the dramatist and critic, Mr. 
 and Mrs. Webb, the historians of Industrial Democracy, and Mr. 
 H. G. Wells, the novelist. By throwing themselves into the study 
 of social conditions of different kinds, by collaborating in the publica- 
 tion of reviews and newspapers without distinction of party, by 
 publishing pamphlets and calling conferences, they have managed to 
 stimulate interest in their ideas. A riswm& of these ideas is given in 
 a curious collection of articles entitled the Fabian Essays, published 
 in 1889. These essays represent the opinions of the more prominent 
 Fabians rather than of the Fabian Society, for the society as such has 
 only a practical policy, but no theoretical doctrine which it holds in 
 common. It calls itself socialist, 4 and would welcome the trans- 
 
 1 Report on Fabian Policy (Fabian Tract, No. 70). 
 
 1 " For it was at this period that we contracted the invaluable habit of 
 freely laughing at ourselves which has always distinguished us, and which has 
 saved us from becoming hampered by the gushing enthusiasts who mistake 
 their own emotions for public movements." (Bernard Shaw, loc. cit.) 
 
 8 Report on Fabian Policy. 
 
 4 Socialism, as understood by the Fabian Society, means the organisation 
 and conduct of the necessary industries of the country, and the appropriation
 
 SOCIALIST EXTENSIONS OF RENT 581 
 
 formation of individual into collective property. On the other hand, 
 it declares that it has " no distinctive opinions on the marriage ques- 
 tion, religion, art, abstract economics, historic evolution, currency, 
 or any other subject than its own special business of practical 
 democracy and socialism." l The economic theories which imme- 
 diately interest us here are peculiar to certain members of the society. 
 The society as a whole was doubtless inspired by these ideas, but 
 they have not all received official recognition at its hands, and they 
 are not even accepted by some adherents of the school. 2 
 
 It is Sidney Webb more especially who has essayed the task of 
 finding a new theoretical basis for Fabian collectivism. Having 
 rejected the Marxian theory of labour-value, and conscious of the 
 charm possessed by the modern theories of Jevons, of Marshall, 
 and the Austrians, he felt the need of some new justification for the 
 collective ownership of the means of production. Unable to free 
 himself from the fascination which Ricardo has always exercised 
 over his fellow-countrymen, he turns to the theory of rent of that 
 great economist, and that theory, in his opinion, is '* the very corner- 
 stone of collectivist economy." 3 
 
 It is perfectly obvious that this theory of rent affords ample 
 justification for the appropriation of the revenue of land by proving 
 that this revenue is purely supplementary, produced as it is only 
 on the best lands and not on the worst, where the worker only 
 
 of all forms of economic rent of land and capital by the nation as a whole, through 
 the most suitable public authorities, municipal, provincial, or central. The 
 socialism advocated by the Fabian Society is State socialism exclusively (the 
 term is used to distinguish it from anarchist socialism). On the other hand, it 
 " steadfastly discountenances all schemes for securing to any person, or any 
 group of persons, the entire product of their labour. It recognises that wealth 
 is social in its origin and must be social in its distribution, since the evolution 
 of industry has made it impossible to distinguish the particular contribution 
 that each person makes to the common product, or to ascertain its value." 
 (Report on Fabian Policy.) 
 
 1 Ibid. 
 
 9 In addition to the Fabian Essays, the principal publications containing an 
 exposition of Fabian ideas are the Fabian Tracts, a collection containing a great 
 number of pamphlets on various subjects ; The History of Trade Unionism, 
 by Mr. and Mrs. Webb ; Industrial Democracy, particularly chaps. 1 and 2 of 
 the third part, by the same authors ; and, finally, Problems of Modern Industry 
 (1898), a collection of lectures and articles, also by Mr. and Mrs. Webb. 
 
 * Mr. and Mrs. Webb in their History of Trade Unionism reject " that con- 
 fident sciolism and prejudice which has led generations of socialists to borrow 
 from Adam Smith and the ' classic ' economists the erroneous theory that 
 labour is by itself the creator of value without going on to master that impreg- 
 nable and more difficult law of economic rent which is the very corner-stone of 
 collectivist economy."
 
 582 THE THEORY OF RENT 
 
 produces the exact equivalent of his wages. There is nothing very 
 new in this, however. 
 
 Equally valid is its justification of confiscated interest. Different 
 kinds of capital, different machines, implements, and buildings, all 
 of which are employed for purposes of production, show the same 
 variety of quality, and consequently produce different quantities 
 of material goods, just as different lands do. The employee who 
 works with " marginal capital," if we may so put it, or, in other 
 words, has to make shift with the minimum of tools and machinery, 
 without which no work at all would be possible, barely produces 
 the equivalent of his wages. Everything that exceeds this minimum 
 may be claimed by the capitalist as payment for the superior yield 
 of the capital which he has supplied. Interest, accordingly, is a 
 differential revenue a rent which ought to be expressed as a definite 
 quantity of produce, for such it really is, and not as so much per 
 cent. 1 
 
 Finally, any who possess superior ability as compared with those 
 who work not merely with a minimum of capital and labour, but 
 with a minimum of intelligence and ability, produce a surplus, which 
 they generally retain for themselves. This surplus is of the nature 
 of a differential rent the rent of ability. Generally it is the result 
 of the better education received by the children of proprietors 
 and capitalists, and it is thus the indirect outcome of private 
 property.* 
 
 This ingenious argument is not very convincing. Even though 
 we admit that interest and possibly the greater portion of wages 
 may only be differential revenues, their confiscation would require 
 special justification. The attributes of capital, unlike those of land 
 as defined in the Ricardian theory, are not natural, but have been 
 
 1 " The interest with which we are concerned must clearly be a definable 
 quantity of produce." (The National Dividend and its Distribution, in Problems 
 of Modern Industry, p. 227. We are indebted to this article for the exposition 
 which we have given of the Pabian doctrine.) 
 
 * An exposition of the same theory is given in Tract No. 15, English Progreea 
 towards Social Democracy : " The individuals or classes who possess social power 
 have at all times, consciously or unconsciously, made use of that power in such 
 a way as to leave to the great majority of their fellows practically nothing 
 beyond the means of subsistence according to the current local standard. The 
 additional product, determined by the relative differences in productive efficiency 
 of the different sites, soils, capitals, and forms of skill above the margin of 
 cultivation, has gone to those exercising control over these valuable but scarce 
 productive factors. This struggle to secure the surplus or ' economic rent ' is 
 the key to the confused history of European progress, and an underlying, 
 unconscious motive of all revolutions." Cf. also The Difficulties of Individualism, 
 in Problems of Modern Industry, pp. 237-239.
 
 SOCIALIST EXTENSIONS OF RENT 588 
 
 conferred upon it by the efforts of human beings. And as to the 
 rent of ability, it still remains to be seen whether society would 
 benefit by the confiscation of this rent. As a scientific explanation 
 of distribution it does not seem to us a particularly attractive one. 
 The distribution of incomes is effected by means of exchange and 
 depends upon prices, but Webb makes an abstraction of prices in 
 order to concentrate upon the material product. We do not deny 
 the existence of rent derived from fixed capital, such rent being 
 approximately measured by comparison with the current rate of 
 interest. But after the labours of Bohm-Bawerk and Fisher it 
 would seem impossible to explain this rate itself by reference to the 
 material productivity of capital, which seems to be the essence of 
 Webb's theory. 
 
 The latest attempt to deduce revolutionary conclusions from the 
 older economics and to found a theory of collectivism upon the 
 Ricardian doctrine of rent has proved a failure. Even Webb's friends 
 have not shown the enthusiasm for it that they might * and this 
 despite the constant allusion to the " three monopolies " which one 
 meets with in their writings. 
 
 The interest of the experiment lies not so much in itself as in 
 the indication which it affords of the more recent trend of thought 
 in this matter. We have already drawn attention to the fact that 
 the more immediate disciples of Marx both in France and Germany 
 have refuted his theory of value, showing a disposition to rally to 
 the counter-theory of final utility. We have here a group of English 
 socialists undergoing a somewhat similar process of evolution. On 
 every hand it seems that socialism has given up all pretension to 
 creatiru a working men's political economy alongside of the bourgeois, 
 and it is now generally recognised that there can only be one political 
 economy, independent altogether of all parties and social ideals, 
 whose sole function is to give a scientific explanation of economic 
 phenomena. 
 
 The Fabians even outdo the syndicalists in their reaction against 
 the Marxian theories. Not only is the theory of value thrown 
 overboard, but Marx's whole social doctrine is rejected as well. 
 There are two points on which the opposition is particularly marked, 
 and although these may be outside the scope of the present chapter 
 it is necessary to mention them in order to complete our exposition 
 of Fabian ideas. 
 
 1 Bernard Shaw in his Economic Basis of Socialism, published in the Fabian 
 Essays, makes a very neat distinction between interest properly so called and 
 economic rent.
 
 584 THE THEORY OF RENT 
 
 Marx's social doctrine was built upon the theory of class war. 
 Socialism was simply the creed of the proletarian. Its triumph 
 would mean the victory of the proletariat over the bourgeoisie. Its 
 principles are the direct antithesis of those which govern society at 
 the present time, just as the two classes are directly opposed to one 
 another. The Fabians entertain no such views. They think of 
 socialism as a mere extension of the ideals of bourgeois democracy, 
 and they would be quite content with a logical development and 
 application of the principles which at present govern society. " The 
 economic side of the democratic ideal is, in fact, socialism itself," 
 writes Sidney Webb. 1 Our object should not be to replace the 
 bourgeois supremacy by the proletarian ascendancy, nor even to 
 emancipate the worker from the tyranny of the wage system 
 (for under the socialist regime, as the Fabians point out, every- 
 body will be a wage-earner), but merely to organise industry in 
 the interest of the community as a whole. ** We do not desire 
 to see the mines and the profits from the mines transferred to the 
 miners, but to the community as a whole." a Socialism is not a 
 class doctrine, but a philosophy of general interest. " Socialism is 
 a plan for securing equal rights and opportunities for all." 8 Webb 
 questions the existence of an English class struggle in the Marxian 
 sense of the word. 4 On the contrary : "In view of the fact that the 
 socialist movement has been hitherto inspired, instructed, and led 
 by members of the middle class or bourgeoisie, the Fabian Society 
 . . . protests against the absurdity of socialists denouncing the very 
 class from which socialism has sprung as specially hostile to it." 
 One cannot see much similarity between this point of view and 
 that of the French syndicalists. 6 
 
 The Fabian philosophy of history is equally distinct. For Marx 
 the capital fact in nineteenth- century history is the concentration of 
 property in the hands of a privileged few, and the consequent pauper- 
 isation of the masses. The necessary consequence of this twofold 
 development will be the revolutionary dispossession of the former 
 by the latter. 
 
 Optimistic as they are, the Fabians are not prepared to deny 
 
 1 Fabian Essays, p. 35. 
 
 J Socialism True and False (Tract No. 51). 
 
 What Socialism is (Tract No. 13). 
 
 * In his preface to Kurella's German book, Sozialismus in England (1898), 
 he mentions the fact that the English working class is divided into a number of 
 corporations who are either jealous of or misunderstand one another, but hare 
 not what we may properly call a class consciousness (p. 10). 
 
 Report on Fabian Policy, p. 7.
 
 SOCIALIST EXTENSIONS OF RENT 585 
 
 the concentration of capital. According to their view, the prime 
 fact in nineteenth-century history is not the servility of the masses, 
 but the waning authority of the capitalists, the growing import- 
 ance of collective government in national economy, and the gradual 
 dispossession of the idlers for the sake of the workers, a process that 
 is already well on the way towards consummation. Webb is of the 
 opinion that socialism is being realised without any conflict, and 
 even with the tacit approval of its victims. " Slice after slice has 
 gradually been cut from the profits of capital, and therefore from its 
 selling value, by socially beneficial restrictions on its user's liberty 
 to do as he liked with it. Slice after slice has been cut off the incomes 
 from rent and interest by the gradual shifting of taxation from 
 consumers to persons enjoying incomes above the average of the 
 kingdom. . . . To-day almost every conceivable trade is, some- 
 where or other, carried on by parish, municipality, or the national 
 Government itself without the intervention of any middleman or 
 capitalist. . . . The community furnishes and maintains its own 
 museums, parks, art galleries, libraries, concert halls, roads, streets, 
 bridges, markets, slaughter-houses, fire-engines, lighthouses, pilots, 
 ferries, surf-boats, steam-tugs, lifeboats, cemeteries, public baths, 
 washhouses, pounds, harbours, piers, wharves, hospitals, dispen- 
 saries, gasworks, waterworks, tramways, telegraph cables, allot- 
 ments, cow meadows, artisans' dwellings, schools, churches, and 
 reading-rooms." And even where private industry is allowed to 
 survive it is rigorously supervised and inspected. " The State 
 in most of the larger industrial operations prescribes the age of the 
 worker, the hours of work, the amount of air, light, cubic space, 
 heat, lavatory accommodation, holidays, and meal-times ; where, 
 when, and how wages shall be paid ; how machinery, staircases, 
 lift-holes, mines, and quarries are to be fenced and guarded ; how 
 and when the plant shall be cleaned, repaired, and worked. . . . 
 On every side the individual capitalist is being registered, in- 
 spected, controlled, and eventually superseded by the com- 
 munity." * 
 
 We are already in the full current of socialism, declares Mr. Webb. 
 Our legislators are socialists without knowing it. " The economic 
 history of the century is an almost continuous record of the progress 
 of socialism." * The Fabians, adopting a saying of the Saint- 
 Simonians, point out to the socialists that they ought to be content 
 with a clear exposition of the evolution of which everyone knows 
 
 1 Fabian Essays, pp. 47-49. 
 Hid., p. 31.
 
 586 THE THEORY OF RENT 
 
 something, although perhaps in a hazy fashion. " Instead of 
 unconscious factors we become deliberate agents either to aid or 
 resist the developments coming to our notice." x 
 
 We are some distance away from Marx here, and farther still 
 from his syndicalist disciples. We have really been led back to the 
 philosophy of history as it was interpreted by the German State 
 Socialists. Must we, then, conclude that the Fabians are State 
 Socialists who feign ignorance of the fact ? 
 
 Fabian socialism, strictly speaking, is not a new scientific doctrine. 
 It is rather a plea for economic centralisation, an idea begotten of 
 the modern conditions of existence in Europe, as against orthodox 
 Liberalism, which is somewhat threadbare but still holds an honour- 
 able place in the opinion of many English writers. It is highly 
 probable that the legislative activity of the last thirty years, which 
 friends and foes alike regard as somewhat socialistic, will appear 
 to our descendants as a moderate movement in the direction of 
 greater centralisation. 
 
 English politics even long before this had begun to shake off its 
 individualism and to rid itself of the philosophic and political doc- 
 trines of the utilitarian Radicals, which Bentham and his friends had 
 formulated early in the nineteenth century, and which still exercise 
 a considerable influence over some people. The Fabians regard 
 themselves as the special protagonists of the new standpoint. They 
 would be proud to consider themselves the intellectual successors 
 of the utilitarian Radicals, who simply claim to express the new desires 
 of a great industrial democracy. Labour legislation and its many 
 ramifications, municipal socialism spontaneously developing in all 
 the bis towns, the great co-operative " wholesales " in Glasgow and 
 Manchester, furnish persuasive illustration of the practical socialism 
 which they advocate. " It is not," writes Mrs. Sidney Webb, 
 " the socialism of foreign manufacture which cries for a Utopia 
 of anarchy to be brought about by a murderous revolution, but the 
 distinctively English socialism, the socialism which discovers itself 
 in works and not in words, the socialism that has silently embodied 
 itself in the Factory Acts, the Truck Acts, Employers' Liability Acts, 
 Public Health Acts, Artisans' Dwellings Acts, Education Acts in 
 
 1 Sidney Webb, The Difficulties of Individualism, in Problems of Modern 
 Industry, p. 231. Also in the Fabian Essays, p. 35, he declares : " Socialist* 
 as well as individualists realise that important organic changes can only be 
 (1) democratic . . . ; (2) gradual . . . ; (3) not regarded as immoral by the 
 mass of the people ; and (4) in this country, at any rate, constitutional and 
 peaceful."
 
 THE SOLIDARISTS 587 
 
 all that mass of beneficent legislation forcing the individual into the 
 service and under the protection of the State." l 
 
 The Fabian doctrine is the latest avatar of the Ricardian theory. 
 It would really seem impossible to draw any further conclusions 
 from it. Everything that could possibly be attempted in that 
 direction has already been done, although other weapons of war 
 forged against the institution of private property may yet come 
 out of that old armoury. But that is hardly probable, especially when 
 we remember that economic science no longer regards rent as a kind 
 of anomaly amid the other economic phenomena. There is no doubt 
 as to its reality, but it has been deprived of much of the social 
 importance that was attributed to it by Ricardo and his followers, 
 and it has consequently lost much of its revolutionary fecundity. 
 
 CHAPTER III : THE SOLIDARISTS 
 
 I : THE CAUSES OF THE DEVELOPMENT OF SOLIDARISM 
 
 THE word " solidarity," formerly a term of exclusively legal import,* 
 has during the last twenty years been employed to designate a 
 doctrine which has aroused the greatest enthusiasm at least in 
 France. Every official speech pays homage to the ideal, every 
 social conference ends with an expression of approval. Those who 
 wish to narrow the scope of industrial warfare as well as those who 
 wish to extend the bounds of commercial freedom base their demands 
 upon " a sense of social solidarity," and it is becoming quite a 
 common experience to find writers on ethics and education who 
 have fallen under its spell. The result is that no history of French 
 economic doctrines can pass it by. 3 
 
 1 B. Potter (Mrs. Sidney Webb), The Co-operative Movement, p. 16. 
 
 * Etymologically " solidarity " is a corruption of eolidum, which was employed 
 by the Roman jurists to signify the obligation incurred by debtors who were 
 each held responsible for the whole amount of a debt. One would naturally 
 expect the French derivative to be solidite, which was the term used by the 
 jurists under the old regime, especially by Fothier. Solidarity was substituted 
 for it by the editors of the Civil Code. 
 
 We should never come to an end if we began to quote passages in which 
 the merits of solidarity are set forth. We must content ourselves with the 
 following, chosen at random : 
 
 M. Millerand, at the time Minister of Commerce, in a speech delivered at 
 the opening of the Exposition Univereelle in 1900, said : "Science teaches men 
 the true secret of material greatness and of social morality ; and all its teaching, 
 in a word, points to solidarity." 
 
 M. Doherme, the founder of the People's University movement, sy : " Th
 
 588 THE SOLIDARISTS 
 
 The fundamental idea underlying the doctrine of solidarity, 
 namely, that the human race, taken collectively, forms one single 
 body, of which individuals are the members, is not by any means new. 
 St. Paul and Marcus Aurelius among the writers of antiquity, not 
 to mention Menenius Agrippa's well-known apologue, gave expression 
 to this very idea in terms almost identical with those now commonly 
 used. 1 
 
 Nor was the importance of heredity wholly lost upon the ancients. 
 The hereditary transmission of moral qualities was a doctrine 
 taught with the express sanction of a revealed religion. This doctrine 
 of original sin is perhaps the most terrible example of solidarism 
 that history has to reveal. Turning to profane history, we are 
 reminded of the line of Horace : 
 
 Ddicta majorum immeritus lues! 
 
 We must also remember that it was always something more than 
 a mere theory or dogma. It was a practical rule of conduct, and 
 as such was enjoined by law, exhorted by religion, and enforced 
 by custom, with the result that what was preached was also prac- 
 tised with a thoroughness that is quite unknown at the present day. 
 We have an illustration of this in the collective responsibility of all 
 the members of a family or tribe whenever one of their number was 
 found guilty of some criminal offence. A survival of this pristine 
 custom is the Corsican vendetta of to-day. 
 
 Finally, there is that other aspect of solidarity which is based 
 upon division of labour and the consequent necessity of relying upon 
 the co-operation of others for the satisfaction of our wants. The 
 Greek writers had caught a glimpse of this interdependence many 
 centuries before the brilliant exposition of Adam Smith was given 
 to the world. 
 
 All the manifold aspects of the doctrine, whether biological, 
 sociological, moral, religious, legal, or economic, were obviously 
 matters of common knowledge to the writers of antiquity. But each 
 phase of the subject seemed isolated from the rest, and it was not 
 
 folly of solidarity should be the source of our inspiration, just as the martyrs 
 of old were inspired by the folly of the Cross. The thing that wants doing is 
 to organise democracy." (La Co-operation des Idees, June 16, 1900.) 
 
 1 " For as we have many members in one body, and all members have not 
 the same office ; so we, being many, are one body in Christ, and every one 
 members one of another." (Romans xii, 4 and 5.) 
 
 " As in physical organisms the unity is made up of separate limbs, so among 
 reasoning things the reason is distributed among individuals constituted for ticity 
 of co-operation." (Marcus Aurelius, vii, 13; Kendall's translation.)
 
 DEVELOPMENT OF SOLIDARISM 589 
 
 until the middle of the nineteenth century that it dawned upon 
 thinkers that there was possibly something like unity underlying this 
 apparent diversity. It has already been impressed upon us that 
 Pierre Leroux and a few of the disciples of Fourier, as well as Bastiat, 
 had realised something of the value of the doctrine of solidarity and 
 of the appropriateness of the term. But it was reserved for Auguste 
 Comte to appreciate its full possibilities. ** The new philosophy, 
 viewed as a whole, emphasises the intimacy that exists between 
 the individual and the group in their different relations, so that 
 the conception of social solidarity extending throughout time and 
 embracing the whole of humanity has become a fairly familiar 
 idea." * 
 
 It is necessary, however, to inquire somewhat more closely into 
 the success of the new doctrine in holding the attention both of 
 the public and of economists. It is possible that the seed would 
 have borne little fruit but for the presence of extraneous circum- 
 stances which helped to impress the public with a sense of the 
 importance of these new theories. 
 
 Nothing has left a deeper impression upon the public or afforded 
 a better illustration of the infinite possibilities of the new doctrine 
 than the study of bacteriology. The prevalence of certain contagious 
 maladies or epidemics had been too terribly prominent in the history 
 of the human race to rfquire any confirmation ; but it was some- 
 thing to learn that the most serious diseases and maladies of all 
 kinds were communicated from man to man by means of invisible 
 bacilli. It was now realised that men who were supposed to be 
 dying a natural death were in reality being slowly murdered. It 
 was with something like horror that men learned that the consump- 
 tive, v the hero of a hundred sentimental tales, every day expectorated 
 sufficient germs to depopulate a whole town. Such " pathological " 
 solidarity is being more closely interwoven every day by the ever- 
 increasing multiplicity and rapidity of the means of communication. 
 The slow caravan journey across the desert was much more likely 
 to destroy the vitality of the bacilh' picked up at Mecca than the 
 much more rapid railway journey of the future, which will speed 
 the pilgrim across the sandy wastes in a few hours. The traveller 
 of former days, who went either afoot or on horseback, ran less 
 risk of infection than his descendant of to-day, who perhaps only 
 spends a few hours in the metropolis. 
 
 1 Discourt aur VEaprit positif. In the Court de Philosophic he frankly pays 
 it this well-deserved compliment : " It is a truly capital idea, and thoroughly 
 modern too."
 
 590 THE SOLIDARISTS 
 
 Sociology has also brought its contingent of facts and theories. 1 
 The sociologist stakes his reputation upon being able to prove that 
 the fable of the body and its members is no fable at all, but a literal 
 transcription of actual facts, and that the union existing between 
 various members of the social body is as intimate as that which 
 exists between the different parts of the same organism. Such is 
 the fullness and minuteness with which the analogy has been pushed 
 even into obscure points of anatomical detail that it is difficult not 
 to smile at the ndiveU of its authors. It is pointed out that so close 
 is the resemblance between the respective functions in the two 
 cases that the term " circulation " does duty in both spheres, and a 
 comparison is instituted between nutrition and production, reproduc- 
 tion and colonisation, and accumulation of fat and capitalism. In 
 Florence during the Middle Ages the bourgeois were spoken of as 
 the fat people, the workers as the small people. The organs also 
 are very similar. Arteries and veins have their counterpart in 
 the railway system, with its network of " up " and " down " 
 lines. The nervous system of the one becomes the telegraphic 
 system of the other, with its rapid communication of news and 
 sensations. The brain becomes the seat of government, the 
 heart is the bank ; and between the two, both in nature and in 
 society, there is a most intimate connection. Even the white 
 corpuscles have a prototype in the police fof ce, whose duty is to rush 
 to the seat of disorder and to attempt to crush it immediately. 
 
 The sociological analogy, ingenious rather than scientific, did 
 not have a very long vogue. 2 But it has at least supplied a few 
 conclusions which are thoroughly well established, and which serve 
 as the basis of the solidarist doctrine. Among these we may 
 mention the following : 
 
 (a) That solidarity in the sense of the mutual dependence of 
 members of the same body is a characteristic of all life. Inorganic 
 bodies are incomplete simply because they are mere aggregates. 
 Death is nothing but the dissolution of the mysterious links which 
 
 1 Social biology dates from the publication of Professor Schaffle's great 
 work Bail und Leben des sozialen Kdrpers (1875-78) ; possibly from the publication 
 of Rodbertus's work at any rate, Rodbertus accuses Schaffle of plagiarism. See 
 also Spencer's Principles of Sociology. Aristotle had already ventured to say 
 that " an animal is just like a well-ordered city," a proposition that might well 
 be inverted. 
 
 * There are still a few adherents left. See M. Worms 'B book, Organisms et 
 SocitU, and Lilienfeld's Pathologie sociale. 
 
 Herbert Spencer, who was the pioneer of the analogy, had abandoned it ; 
 and Auguste Comte, the godfather of sociology, took good care to put sociologists 
 on their guard against the method, which he considered irrational.
 
 DEVELOPMENT OF SOLIDARISM 591 
 
 bind together the various parts of the living organism, with the 
 result that it relapses into the state of a corpse, in which the various 
 elements become indifferent to the presence of one another and are 
 dissipated through space, to enter into new combinations at the 
 further call of nature. 
 
 (&) That solidarity becomes more perfect and intimate with every 
 rise in the biological scale. Completely homogeneous organisms 
 scarcely differ from simple aggregates. They may be cut into 
 sections or have a member removed without suffering much damage. 
 The section cut off will become the centre of independent existence 
 and the amputated limb will grow again. In the case of some 
 organisms of this kind reproduction takes the form of voluntary or 
 spontaneous segmentation. But in the case of the higher animals the 
 removal of a single organ sometimes involves the death of the whole 
 organism, and almost always imperils the existence of some others. 
 
 (c) That a growing differentiation of the parts makes for the 
 greater solidarity of the whole. Where every organ is exactly alike 
 each is generally complete in itself. But where they are different 
 each is just the complement of the other, and none can move or 
 exist independently of the rest. 
 
 One has only to think of the treatment meted out to the 
 innovator by primitive tribes to realise the tremendous solidarity 
 of savage society. The " boycotting " familiar in civilised countries 
 provides a similar example. 
 
 Political economy, in addition to an unrivalled exposition of 
 division of labour (which, as we have seen, was not unknown in 
 classical times), has adduced several other incidental proofs of 
 solidarity, such as bank failures in London or Paris and short tune 
 in the diamond or automobile industry as the result of a crisis in 
 New York or an indifferent rice harvest in India. To take a 
 simpler case, consider how easy it would be for the secretary of an 
 electrical engineers' union to plunge whole cities into darkness. 
 The general strike, the latest bugbear of the bourgeoisie, owes its 
 very existence to the growing sense of solidarity among working men. 
 A sufficient number of workmen have only to make up their minds to 
 remain idle and society has either to give way to their demands or 
 perish. 
 
 Add to this the remarkable development which has taken place 
 in the spreading of news and the perfecting of telegraphic com- 
 munication, by which daily and even hourly men of all nations are 
 swayed with feelings of sorrow or joy at the mere recital of some 
 startling incident which formerly would have influenced but a very
 
 592 THE SOLIDARISTS 
 
 small number of people. 1 Such agencies are not unworthy of com- 
 parison with those subtle human sympathies which are known by 
 the name of spiritualism or telepathy. Thus from every side, from 
 the limbo of occultism as well as from the full daylight of everyday life, 
 the presence of numberless facts goes to show that each for all and 
 all for each is not a mere maxim or counsel of perfection, but a 
 stern, practical fact. The good or bad fortune of others involves our 
 own well-being or misfortune. The ego, as someone has said, is a 
 social product. These are some of the founts from which the stream 
 of solidarism take its rise. 
 
 But that is not all. The doctrine of solidarity had the good 
 fortune to appear just when people were becoming suspicious of 
 individualist Liberalism, though unwilling to commit themselves 
 either to collectivism or State Socialism. 
 
 In France especially a new political party in process of formation 
 was on the look-out for a cry. The new creed which it desired must 
 needs be of the nature of a via media between economic Liberalism on 
 the one hand and socialism on the other. It must repudiate laissez- 
 faire equally with the socialisation of individual property ; it must 
 hold fast to the doctrine of the rights of man and the claims of the 
 individual while recognising the wisdom of imposing restrictions 
 upon the exercise of those rights in the interests of the whole com- 
 munity. This was the party which called itself Radical then, but 
 now prefers to be known as the Radical-Socialist party. German 
 State Socialism as expounded about the same time was closely akin 
 to it. But the German conception of the State as something entirely 
 above party was an idea that was not so easily grasped in France as 
 in Prussia. History in the two countries had not emphasised the 
 same truths. Solidarism, so to speak, is State Socialism in a French 
 garb, but possessed of somewhat better grace in that it does not 
 necessarily imply the coercive intervention of the State, but shows 
 considerable respect for individual liberties. 2 
 
 1 " The enormous development of steam communication and the spread of 
 the telegraph over the whole globe have caused modern industry to develop 
 from a gigantic starfish, any of whose members might be destroyed without 
 affecting the rest, into a /*ey a &ov which is convulsed in agony by a slight 
 injury in one part." (Nicholson, Effects of Machinery on Wages, p. 117.) 
 
 * It was in 1889, if we mistake not, that the term " solidarity " was proposed 
 as the title of a new economic school in a lecture entitled UScole nouvelle. This 
 lecture was published, along with others, in a small volume entitled Quatre Ecolea 
 d'Sconomie sociole (1890, Geneva) (UScole liberate, by Frederic Passy ; L'Ecoh 
 catholiquc, by Claudio Jannet ; L'lScole socialiste, by M. Stiegler ; and L'Scoh 
 nouvelle, by M. Gide). The characteristics of the various schools are summed 
 up as follows : The one is the school of liberty, the other of authority,
 
 THE SOLIDARIST THESIS 598 
 
 The new word performed one final service by usurping the 
 functions of the term "charity," which no one was anxious to retain 
 because of its religious connection. The other term, "fraternity," 
 which had done duty since the Revolution of 1848, was somewhat 
 antiquated by this time, and charged with a false kind of sentimen- 
 talism. The word "solidarity," on the contrary, has an imposing, 
 scientific appearance without a trace of ideology. Henceforth every 
 sacrifice which is demanded in the interests of others, whether grants 
 to friendly societies or workmen's associations, cheap dwellings, 
 workmen's pensions, or even parish allowances, is claimed, not in the 
 interests of charity, but of solidarity. And whenever such demand 
 is made the approved formula is always used it is not a work of 
 charity, but of solidarity, for charity degradeth whereas solidarity 
 lifteth up. 
 
 II : THE SOLIDARIST THESIS 
 
 THE current is seldom very clear when the tributaries are numerous, 
 and the stream must deposit its sediment before it becomes limpid. 
 So here much greater precision was needed if the doctrine was ever 
 to become general in its scope or even popular in its appeal. 
 
 M. Leon Bourgeois, one of the leaders of the Radical-Socialist 
 party, to his eternal credit attempted some such clarification by 
 employing the term " solidarity," hitherto so vaguely metaphysical, 
 in a strictly legal fashion to designate a kind of quasi-contract. 
 Quite a sensation was caused by M. Bourgeois's work a result due 
 alike to the prominent position of the author and the opportune 
 moment at which the book appeared. The greatest enthusiasm 
 was shown for the new doctrine, especially in the universities and 
 among the teachers in 100,000 elementary schools. An equally 
 warm welcome was extended to it in democratic circles, where the 
 desire for some kind of lay morality had by this time become very 
 
 while the third is the school of equality. Gide then proceeds : " Were I asked 
 to define what I understand by the New School in a single word, I should call 
 it the Solidarity School. Unlike liberty, equality, and fraternity, solidarity 
 is not a very high-sounding word, nor is it a mere ideal. It is just a fact, one 
 of the best-established facts of history and experience, and the most important 
 discovery of our time, and this fact of solidarity is becoming better established 
 every day." 
 
 It would have been better, perhaps, to have spoken of a new movement 
 rather than of a new school, seeing the variety of schools, some of them actually 
 opposed to one another, such as the school of Biological Naturalism and the 
 Christian school, the Anarchist school and the State Socialist school, that have 
 adopted solidarity as a part of their creed.
 
 594 THE SOLIDARISTS 
 
 strong. It becomes necessary, accordingly, to give a more detailed 
 analysis of the theory than was possible within the compass of the 
 small volume in which it was first expounded. 1 
 
 In the first place it must be noted that the doctrine connotes 
 something more than the mere application or extension of the idea 
 of natural solidarity to the social or moral order. On the contrary, 
 it is an attempt to remove some of the anomalies of natural solidarity. 
 A firm belief in the injustice of natural solidarity, or at least a 
 conviction that things are so adjusted that some individuals obtain 
 advantages which they by no means deserve while others are 
 burdened with disadvantages which are none of their seeking, lies 
 at the root of the doctrine. There is a demand for intervention in 
 order that those who have benefited by the accidents of natural 
 solidarity should divide the spoils with those who have been less 
 fortunate in drawing prizes in the lottery of life. It is for Justice to 
 restore the balance and correct the abnormalities which a fickle sister 
 has created. Just as it has been seen that man may utilise the forces 
 of nature, against which he formerly was wont to struggle, to further 
 his own ends, so solidarity puts forth a claim for the co-operation of 
 Justice to correct the anomalies begotten of brute strength, believing 
 that only in this way is real advance possible or any kind of improve- 
 ment even remotely attainable. 
 
 Natural solidarity 2 tells us that as a result of the division of labour, 
 
 1 M. Leon Bourgeois's La Solidarity appeared originally as a series of articles 
 (iontributed to the Nouvette Revue in 1896. These were published in book form 
 in the following year. The different aspects of the question have been dealt 
 with in a series of lectures delivered by various authors at the ficole des Hautes 
 fitudes sociales under the presidency of M. Bourgeois himself, and published in 
 a volume entitled Essaid'une Philosophic de la Solidariti (1902). An association 
 for the propagation of the new ideas was founded in 1895 under the name of La 
 Socie'te' d'fiducation sociale. An International Congress was called together on the 
 occasion of the 1900 Exposition, but since then the signs of activity have been few. 
 
 French books and articles dealing with the subject are plentiful enough. 
 We can only mention La Solidariti sociale et set Nouvdles Formules, by M. 
 d'Eichthal (1903) ; the annual report of L'Acade'mie des Sciences morales et 
 politiques for 1903 ; M. Bougie's book. Le Solidarisme (1907) ; and Fleurant'a 
 La Solidariti (1907). There is hardly a manual for teachers published which 
 does not contain a chapter devoted to this question. 
 
 * " The fact that such a thing as natural solidarity exists should not be 
 taken to imply that it must necessarily be just. Justice can never be realised 
 unless the laws of solidarity are first observed ; but once these have been 
 established, their effects must be modified to make them conform to the require- 
 ments of justice. The actual and the ideal should never be confused ; they are 
 the direct contraries of one another. But it is absolutely necessary that the 
 first should be established before we can realise the moral necessity for the 
 other." (Bourgeois, Philosophic de la Solidariti, pp. 13, 17.)
 
 THE SOLIDARIST THESIS 595 
 
 of the influence of heredity, and of a thousand other causes which have 
 just been described, every man owes either to his forbears or his con- 
 temporaries the best part of what he has, and even of what he himself 
 is. As Auguste Comte has put it, " We are born burdened with all 
 manner of social obligations." Nor is it an uncommon thing to 
 meet with the word " debt " or " obligation " in the articles of the 
 French Constitution. In the Constitution of 1793, for example, the 
 duty of public assistance is spoken of as a sacred debt. But the 
 term was loosely employed in the sense of noblesse oblige or richesse 
 oblige, every individual being left free to carry out the obligation as 
 best he could in accordance with the dictates of his own conscience. 
 It is necessary, however, to transform the duty into a real debt, to 
 give it a legal status, and when not voluntarily performed a legal 
 sanction as well. If we are anxious to know exactly how this is to 
 be done we have only to turn to Articles 1371-81 of the Civil Code, 
 where in the chapter dealing with quasi-contracts we shall come 
 across a section headed " Of Non-conventional Contracts." 
 
 The title would seem to imply the validity of debts not explicitly 
 contracted that is to say, the existence of obligations which have 
 not involved any volitional undertaking on the part of either party 
 concerned. The first case, that of injury inflicted upon others, 
 whether wilfully or not, is referred to as quasi-misdemeanour, and 
 other instances mentioned in the section are spoken of as quasi- 
 contracts. Illustrations, which are plentiful enough, include pay- 
 ments made when not really due, attention to the business of 
 another without any definite mandate authorising such inter- 
 ference, the obligation of the inheritor of property to pay off debts 
 incurred by the previous owner, the recognition of the common 
 interest which people living in the same neighbourhood possess, 
 and which also exists between those who own property and 
 those who lease it, between those who use it and those who 
 inherit it. 
 
 Wherever anything of the nature of a quasi- contract exists we 
 may be tolerably certain that it is the product of de facto or natural 
 solidarity. Such solidarity may take its rise in the mere fact of 
 propinquity or the mere feeling of neighbourliness ; but more often 
 than not it involves a measure of control over the lives of others, 
 which is one of the outstanding features of a regime of division of 
 labour. Then follow the familiar phenomena of fortunes amassed 
 to the detriment of others through the acquisition of unearned 
 increment and the operation of the laws of inheritance the source 
 of so many inequalities. Nor must we forget the prejudicial effect
 
 596 THE SOLIDARISTS 
 
 of quasi-misdemeanour upon the fortunes of others. The result is 
 that the whole of society seems built, if not upon an original explicit 
 contract, as Rousseau imagined, at least upon a quasi-contract ; and 
 seeing that this quasi-contract receives the tacit submission of the 
 parties concerned, there is no reason why it should not be legally 
 binding as well. 
 
 Now the existence of a debt implies that someone must pay it, 
 and the next question is to determine who that someone ought to be. 
 
 Obviously it can only be those who have benefited by the exist- 
 ence of natural solidarity all those who have amassed a fortune, but 
 whose fortune would be still to make but for the co-operation of a 
 thousand collaborators, both past and present. Such individuals 
 have already drawn more than their share and have a balance to 
 make up on the debit account. This debt should certainly be paid. 
 It is all the better if it is done voluntarily, as an act of liberality 
 arising out of goodness of heart guia bonus, as the Gospel narrative 
 puts it, of the rich good man. But this is hardly probable. Most 
 people will pay just when they are obliged to ; but such people have 
 no right to consider themselves free, and no claim to the free disposal 
 of their goods until they have acquitted themselves honourably. 1 
 Individual property will be respected and free when every social 
 debt which it involves has been adequately discharged, and not 
 before then. 2 Until this is done it is useless to speak of the existence 
 of competition. 
 
 The next question is to determine who is to receive payment. 
 Payment ought to be made to those who, instead of bene- 
 fiting by the existence of natural solidarity, have suffered loss 
 through its operation the disinherited, as they are rightly called. 8 
 All those who have not received a fair share of the total wealth 
 produced by the co-operation of all naturally find themselves in 
 
 1 " There are some debts which are hardly noticed at all, but which ought to 
 be paid all the same." (Bourgeois, Philosophic de la Solidarite, p. 60.) " There is a 
 real claim where we thought there was only a moral obligation, and a debt where 
 we thought there was only a sacrifice." As the Gospel says : " Unto whomso- 
 ever much is given, of him shall be much required." (Luke xii, 48.) "So 
 that ye come behind in no gift." (1 Corinthians i, 7.) 
 
 1 " No man is free as long as he is in debt. He becomes free the moment 
 he pays off that debt. The doctrine of solidarity is just the corrective of the 
 theories of private property and individual liberty." (Bourgeois, op. cit., p. 45.) 
 
 ' M. Bourgeois also points out that just as our ancestors were indebted to 
 us, so are we indebted to those that shall come after us. But that is a different 
 thing, and the theory does not seem very sound on this point. It is strange 
 to think that creditors long since dead should transfer the debt which was owing 
 to them to the credit of generations yet unborn!
 
 THE SOLIDARIST THESIS 597 
 
 the position of creditors. It is not easy to name them, perhaps, but 
 the State can reach them a helping hand in a thousand different 
 ways. State action of this kind was formerly spoken of as public 
 assistance ; nowadays it is termed solidarity or mutual insurance. 
 
 The payment may take the form either of a voluntary contribu- 
 tion to help some solidarist effort or other, or an obligatory contribu- 
 tion levied by the State. Some advocate progressive taxation, for 
 if it be true that profits tend to grow progressively in proportion as 
 an increase in the variety and strength of the means of production 
 takes place, why not a progressive tax as well ? l Besides, the tax 
 would be of a semi-sacred character, because it would mean the 
 discharging of an important social debt. Nor is there anything 
 very extravagant in the demand that the State should see that 
 everyone makes a contribution in proportion to his ability, seeing that 
 the natural function of the State is to be the guardian of contracts. 2 
 
 It is still more difficult to assess the rate of payment. The 
 conditions under which payment would be made, says M. Bourgeois, 
 would be such as the associates themselves would have adopted 
 had they been free to discuss the terms of their engagement. In 
 other words, everything must be regulated as if society were the 
 result of an express convention, or rather of a retroactive contract 
 mutually agreed upon. The difficulty is to determine the conditions 
 which individual associates would demand as the price of their 
 adhesion to the terms of the contract. We shall have to imagine 
 what they would demand were they able to make fresh terms. 
 
 But we are not much farther ahead after all, for the individual 
 himself knows nothing at all about it. Renouncing the attempt to 
 solve the insoluble, one has to fix some kind of minimum claim which 
 the disinherited may reasonably expect to see fulfilled. Such a 
 minimum claim would be a guarantee against the ordinary risks of life. 
 Society would become a kind of association for mutual insurance, 
 with the good and bad fortune spread out equally over everybody. 3 
 
 1 Bourgeois, op. dt., p. 94. 
 
 * Even the texts of the Civil Code seem to point to some such theory. 
 Article 1370, in addition to the cases of quasi -con tract and quasi -misdemeanour 
 of which it speaks, also mentions " law " as a general cause of obligation. 
 
 * "Wherever it is impossible to fix definitely the value of the personal effort 
 put forth by a single individual, as in the case of a quasi-contract that is, 
 whenever it is impossible to determine the value of the debt on the one hand or 
 the credit on the other the best plan is to pool those risks and advantages. This 
 would mean that none would know who is really bearing the risk or who is 
 reaping the advantages, the risks being shared by everybody and the advantages 
 being thrown open to everyone." (Ibid., p. 81.) 
 
 The end of the quotation apparently contradicts the statement we have
 
 598 THE SOLIDARISTS 
 
 But a quasi-contract is something very different from this. 
 Contracts and quasi-contracts are based upon the giving and receiving 
 of equivalent values, do ut des, whereas mutual insurance is a kind 
 of substitute for direct liability. A contract is essentially indivi- 
 dualistic mutualism is primarily socialistic. 
 
 This idea of a quasi-contract contributed not a little to the 
 success of M. Bourgeois's theory, but it makes no vital contribu- 
 tion to the doctrine itself, and he might very easily have omitted 
 it altogether. 1 It is nothing better than an artifice, almost a logo- 
 machy, invented for the express purpose of affording some kind of 
 justification for demanding a legal contribution by treating it as 
 an implicit or retroactive contract. It is more of a concession to 
 individual liberty than anything else. A taxpayer grumbles at a 
 tax which goes to provide pensions for the old, but it is pointed 
 out to him that the contribution is owing from him in virtue 
 not of an explicit agreement perhaps, but at least of a quasi- 
 agreement. 
 
 But what useful purpose can be served by such ironical subter- 
 fuge ? If it can be shown that owing to inferior moral education 
 the law must have the making of a conscience for those who have 
 none, and must enforce a certain minimum of social duties which 
 appear necessary for the preservation of life and the perpetuation of 
 social amenities, what is that but a form of State Socialism ? If it 
 is pointed out, on the other hand, that moral progress consists in 
 transforming debts into duties 2 rather than vice versa, one readily 
 realises that it is best to multiply the number of free institutions of 
 a solidarist complexion, such as mutual aid and co-operative societies, 
 trade unions, etc. 
 
 Another objective which the quasi-contract theory had in view 
 was to supply the debtor with a kind of guarantee that nothing 
 
 italicised, in which he speaks of pooling risks and advantages. With regard to 
 the latter, it is enough, apparently, to secure equal opportunity. It is not very 
 obvious why the principle should be so rigidly enforced in the one case and so 
 reluctantly in the other. If the principle of solidarity holds me responsible for 
 the degradation of the drunkard in the one case, is there any reason why I 
 should not be allowed to share in the good fortune of the lucky speculator in 
 another ? Is it because the logical application of this principle would directly 
 lead to communism ? 
 
 1 One should add that the word " quasi-contract " is not so frequently used 
 by M. Bourgeois as it is by his disciples. As in many another instance, the 
 disciples have outdone the master. In his Philosophic de la Solidariti he scarcely 
 uses the term at all, but seems to prefer to speak of mutualisation. 
 
 1 Such seems to be the ideal of Guyau, the philosopher, in his charming 
 volume, Etquifse d'une Morale sans Obligation ni Sanction,
 
 THE SOLIDARIST THESIS 599 
 
 would be required of him beyond the exact equivalent of his debt. 1 
 But, as we have already noted, it would be a somewhat illusory 
 guarantee, because it is almost impossible to determine the amount 
 of the debt in the first place. Since the amount of this debt is in 
 some way to be fixed by law it may be well to begin with it. 
 
 Should the legislator find himself driven to accept M. Bourgeois's 
 valuation, the demands made upon the taxpayer will not be so 
 exorbitant after all. The whole mass of obligations is summed up 
 under three heads : 
 
 1. Free education for all classes of the community. Intellectual 
 capital more than any other kind of capital is a collective good, and 
 should never be other than common property, upon which every 
 one may draw whenever he wishes. A necessary corollary would 
 be a shorter working day. 
 
 2. A minimum of the means of existence for everybody. It is 
 difficult to imagine a retroactive contract which refuses to grant 
 men the right to live. Regarded in this light, the " guarantism " of 
 Sismondi and Fourier, the " right to work " of Louis Blanc and 
 Considerant, gain new significance and throb with fresh vitality. 
 
 3. Insurance against the risks of life, which, being fortuitous, are 
 escaped by none. We know the promptness with which the feeling 
 of kinship is aroused whenever one of these accidents happens on a 
 scale somewhat larger than usual and assumes the proportions of a 
 catastrophe. Why should it be otherwise when a single individual 
 falls a victim to the fickleness of fate ? 
 
 If M. Bourgeois has given his theory a distinctly politico-legal 
 bias, M. Durkheim has taken good care to approach the question 
 from the standpoint of moralist and sociologist. 
 
 M. Durkheim draws a distinction between two kinds of 
 solidarities. 
 
 The first of these, which he regards as a quite inferior type, 
 depends upon external resemblances, and is of a purely mechanical 
 character, like the cohesion of atoms in a physical body. The other, 
 which consists of a union of dissimilars, is the result of division of 
 labour, and of such is the union between the various members of 
 the human body. Durkheim regards this kind of unity as of 
 immense significance, not so much because of its economic conse- 
 quence as of its important moral results, ** which might even supply 
 
 1 " The only thing that justice demands ia the payment of debt ; beyond 
 that we have no right to impose any obligation whatsoever." (Bourgeois, j>. 
 cit., pp. 45 and 56.)
 
 600 THE SOLIDAEISTS 
 
 the basis of a new moral order." Seeing that individuals really 
 follow divergent paths, the struggle for existence cannot be quite 
 so keen as it is generally supposed to be, 1 and this differentiation 
 between the individual and the mass enables the former to dissociate 
 himself from the collective conscience. Durkheim's desire was to 
 see the new ethic developed by the professional associations ; hence 
 the important rdle which trade unionism holds in his philosophy. 
 
 Without disputing the validity of the distinction thus made, we 
 may be allowed to question the advisability of treating one kind 
 of solidarity with such contempt and of showing such enthusiasm 
 for the other. Our hope is that the future lies with the former kind. 
 For what is the object of evolution if it is not to make what seems 
 similar really alike? The world is not merely marching in the 
 direction of greater differentiation; it is also moving towards a 
 deeper unity. This seems a well-established fact, at least so far as 
 the physical world is concerned. Mountains are brought low and 
 the hollow places filled. Heat is dissipated throughout space, 
 causing minute gradations of temperature, and the establishment of 
 a kind of final equilibrium. 2 The same law applies to human 
 beings. Differences of caste, of rank, of manners and customs, of 
 language and measurements, are everywhere being obliterated. And 
 it seems by this time a tolerably well-established fact that the 
 wars of the past were wars between strangers strangers in race 
 or religion, in culture or education and consequently it was 
 between people who were dissimilar that they appeared most 
 violent. Therefore the march towards unity also represents a 
 movement in the direction of peace. 3 
 
 1 " Thanks to this fact, rivals need not seek to eliminate one another, but 
 may well be content to exist side by side. Specialisation is undertaken, our 
 author thinks, not with the idea of producing more, as the economists seem to 
 teach, but merely with a view to enabling us to exist under the new conditions 
 of life which await us." (Division du Travail.) 
 
 * " Every brook that flows, every lamp that burns, every word spoken, 
 every gesture made, betokens a movement in the direction of the greater 
 uniformity of the universe." (Lalande, La Dissolution.) 
 
 This is the sense in which solidarity has been understood by the Lausanne 
 philosopher Charles Seoretan, in his book La Civilisation et la Croyance, and 
 the same point of view has been adopted by M. Alfred Fonillee. " Solidarity," 
 writes Fouillee, " has all the practical value of an ideal force. The recognition 
 of the profound identity which pervades humanity and the adoption of an ideal 
 of perfect unity as the supreme object of rational desire must assume the form 
 of a duty in the eyes of every human being. We should anticipate the unity 
 of the human race, which is as yet far from being realised, and which will never 
 be perfect perhaps, by acting as if we were already one." (Revue de Deux 
 Mondea, July 15, 1901.)
 
 APPLICATION OF SOLIDARIST DOCTRINES 601 
 
 Such a conception of solidarity seems more akin to the idea? 
 which we have formed respecting it, and has by far the greatest 
 moral value; for if I am to be responsible for the evil that has 
 befallen another, or to be considered an accomplice in the evil 
 which he has done, that can only be just in proportion to the 
 extent to which that other is also myself. 1 The practical result 
 will be a preference for such modes of association as will group men 
 together according to some general characteristic a co-operative 
 association rather than a trade union ; for while the interest of the 
 latter is in opposition both to that of the producer and that of the 
 public, the method of association in the former case is the most 
 general imaginable, for everyone at some time or other must be 
 regarded as a consumer. 
 
 Ill : THE PRACTICAL APPLICATION OF 
 SOLIDARIST DOCTRINES 
 
 THERE is no such thing as a Solidarist school in the sense in which 
 we speak of a Historical, a Liberal, or a Marxian school. Solidarity 
 is a banner borne aloft by more than one school, and a philosophy that 
 serves to justify aims that are occasionally divergent. As we have 
 already had occasion to point out, the solidarists are more of a political 
 party than a doctrinal school, and their best work has been done in 
 association with the Radical-Socialist party. Behind them is the State 
 Socialist or " interventionist " school. It has been suggested that the 
 social legislation of the last twenty years, such as the regulations 
 governing the conditions of labour, factory and general hygiene, in- 
 surance against accidents and old age, State aid for the aged and the 
 disabled, 8 the establishment of societies for mutual credit, rural banks 
 
 1 Auguste Comte, in his vernal authoritative manner, declared that solidarity 
 rests upon the fact that men can represent one another, and consequently may 
 be held responsible for one another. 
 
 * See a collection of addresses by various authors, published under the title 
 of Let Applications societies de, la Solidaritt (1904). 
 
 * These laws of public assistance are among the most remarkable practical 
 manifestations of the solidarist movement. They are quite a new feature in 
 French public life, and until their appearance relief, whether given by the State, 
 the department, or the commune, was purely optional (except in a few isolated 
 cases, such as in that of waifs and strays). To mention only the principal ones in 
 France, the law of July 15, 1893, made relief in the form of medical attendance for 
 all destitute invalids obligatory upon the communes. The law of July 14, 1905, 
 extended a similar benefit to all invalids and to all persons over seventy year* 
 of age in the form of pensions varying in amount from 60 to 240 franca per 
 annum (360 in Paris). Finally, the law of April 5, 1910, secures a pension to all 
 workmen at the age of sixty, the charge being divided between the State, the 
 
 B.D.
 
 602 THE SOLIDARISTS 
 
 and cheap cottages, and school clinics, all of which are the direct 
 outcome of preaching solidarity, as well as the grants in aid of these 
 objects which are paid out of the progressive taxation levied upon 
 inherited wealth or extraordinary incomes of such as have plucked 
 the fruit from the tree of civilisation to the deprivation of those 
 who caused that fruit to grow, should be known as " the laws of 
 social solidarity." 
 
 Nor are workmen the only class who are likely to benefit by the 
 adoption of this principle. The Protectionist or Nationalist party 
 claims to be the party of solidarity, as well as the mutualists, who 
 employ the term oftener than anyone else. When the taxpayer 
 complains about the taxes which he has to pay in order to grant a 
 bounty to certain proprietors or manufacturers, and the consumer 
 grumbles because the levying of import duties results in increasing 
 his cost of living, the reply is that the spirit of solidarity demands 
 that preference should be given to their own kith and kin. 1 ' 
 
 Fiscal reform, with its twofold attribute of a progressive tax at 
 one end of the scale and total exemption at the other, also claims to 
 be solidarist. Progressive taxation is justified on the ground that 
 bhose who have made their fortunes are the debtors of society, 
 while exemption at the other end is only fair, seeing that the dis- 
 inherited have nothing to give, but have already a strong claim 
 upon society. 
 
 However closely akin to State Socialism practical solidarism may 
 appear, the fact that the latter may achieve its results merety by 
 means of associationism is sufficient to distinguish it from the 
 former. The result is that it has given quite a fresh impetus to the 
 associative movement. Syndicalists, mutualists, and co-operators 
 vie with one another in their anxiety to swear allegiance to the 
 
 employers, and the workmen themselves. It is a kind of payment made b}' the 
 members of the present generation to the survivors of a past one. This relief is 
 clearly of the nature of a social debt, and justifies us in treating it as the out- 
 come of a quasi -contract/f or on the one hand it constitutes an obligation fixed 
 by law on the part of the commune, the department, or the State, as the case 
 may be an obligation which they cannot escape and on the other hand a right 
 on the part of the beneficiary, as in the case of a creditor in an action for the 
 recovery of debt. 
 
 1 A very curious application of this national solidarity has come to light 
 quite recently. Formerly the French Government would only sanction foreign 
 loans if the borrowing country promised to apply some part of its funds to French 
 industry. That meant linking the rentier and the French manufacturers by a 
 forced kind of solidarity, the first being unwilling to lend money unless that 
 money in some way returned to the second person for goods purchased. This 
 is just where the claim of the workers, who justly demand a minimum wage, 
 comes in.
 
 APPLICATION OF SOLTDARIST DOCTRINES 603 
 
 principle of free solidarism as distinct from the forced solidarism of 
 the State Socialists. 1 It is not that they fail to recognise the neces- 
 sity for the latter and its superiority over free competition, but on 
 moral grounds they think that such forced solidarism is even inferior 
 to competition. It is imperative, however, that we should make 
 some distinction between such heterogeneous elements as enter into 
 the composition of the solidarist party. 
 
 The syndicalists, who come first, will hear of nothing except 
 trade unionism, which is to become the basis of a new economic 
 organisation and a new kind of ethics. The sense of solidarity is in 
 this case very strong, because the syndicat poses as the sworn 
 foe of the bourgeoisie. Nothing develops this sense like a struggle, 
 and the struggle becomes a means of discipline. The attempts made 
 by the trade unionists to enforce this solidarity, not only upon their 
 own members, but also upon workmen who are unwilling to enrol 
 themselves as members of the union, the antagonism shown for 
 the jaunes, and the advent of the solidarist or sympathetic strike, 
 constitute one of the most interesting aspects of the syndicalist 
 movement. 
 
 Next came the mutualists, who are loudest and most persistent 
 in their appeal to solidarity.* It is not difficult to understand this 
 when we realise the battle which they wage against the ills of 
 life invalidity, old age, poverty, and death. It is just here that 
 men most feel the need of sticking together. But if we are to judge 
 by the sacrifices which they make, the sense of solidarity among 
 the mutualists themselves is not very great. They are loud in 
 their demands that the State or the commune, or even voluntary 
 subscribers, should complete what they have begun, 8 and that the 
 
 1 The doctrine of quasi-contract might lead to the one conclusion as well 
 as to the other. M. Bourgeois himself seems to incline rather in the direction 
 of associationism. " The Radical party has a social doctrine, a doctrine that 
 might be summed up in one word association." (Preface to M. Buisson's 
 La Politique radicale.) 
 
 1 " The Apotheosis of Solidarity," printed in large type, recently appeared 
 as a headline in one of the French morning papers. The reference was to a 
 banquet of 30,000 mutualists. 
 
 * Mutualists are so taken up with the idea of solidarity that they indignantly 
 protest if any of their number happens to make use of the term " beneficence " or 
 "charity." "Everyone has a right to demand his own," they say: that ia 
 clearly Bourgeois's thesis. On the other hand, their journal, L'Avenir de la 
 Mutuality for February 1909 claims that societies for mutual help have a right to 
 organise tombolas and lotteries, and they base their case upon the law of May 21, 
 1836, which reserves the right of lottery to "efforts of an entinly charitable 
 character." In order to defend its claim, L'Avenir de la Mifrml tt does not 
 hesitate to affirm that the societies for mutual help "recognise the cxiatenco of
 
 604 THE SOLIDARISTS 
 
 State should delegate to them the task of establishing workmen's 
 pensions and of dispensing State aid. Containing as they do some 
 members of the middle classes as well as employees, they show no 
 pronounced revolutionary leanings, nor have they even a plan of 
 social reorganisation. 
 
 Co-operation, on account of its scope and the variety of its 
 aims, has some claim to be regarded as in a measure a realisation 
 of the ideals of solidarism. But co-operation presents a twofold 
 aspect with different programmes and aims that are not always 
 easily reconcilable. The oldest movements in which the fraternal 
 tradition of 1848 may still be viewed in all its pristine vigour are the 
 producers' associations, of which we have already spoken. Their 
 ideal is to emancipate the worker by setting up a kind of 
 industrial republic, and they make a practical beginning with 
 " guarantism," which Sismondi expected the masters to give and 
 which Fourier thought would naturally follow the establishment 
 of the Phalanst^re. 1 But however rosy the prospects may be they 
 can never affect more than a very small proportion of the working 
 classes. 
 
 Distributive societies have met with a greater measure of success. 
 Their membership is reckoned by the million, and in some towns in 
 England, Germany, and Switzerland the members actually comprise 
 the majority of the population. Such is the colossal magnitude of the 
 " wholesale " that it might even alter the whole character of com- 
 mercial organisation that is, if we are to judge not merely by the 
 record of its transactions, but also by the feeling of awe which it 
 inspires in the minds of merchants in all countries, who are already 
 claiming the protection of their respective Governments. Although 
 the number of such societies is rapidly increasing in France, they 
 have never had quite the same practical influence there, simply 
 because they have been lacking in the true spirit of solidarity. 
 Curiously enough, these French co-operators have formulated a 
 
 an element of benevolence which is not exactly mutual and which is rightly 
 connected with the superior modern principle of social solidarity, but which 
 none the less justifies the application of the law of 1836." 
 
 1 " Solidarity is just an empty word if it is not supported by special organisms 
 which can render it effective. This is why workmen's associations have deemed 
 it necessary to establish what they call ' guarantism.' . . . 
 
 " The most unmistakable manifestation of solidarity consists in the employ- 
 ment of a part of the wealth produced by labour in order to repair the poverty 
 caused by the deficient organisation of labour, which leaves the worker and his 
 family liable to the acutest suffering whenever illness, old age, or misfortune 
 crosses their paths." (Programme on the cover of a journal known as 
 tion ouvritrc, the organ of the producers' associations./
 
 APPLICATION OF SOLIBARIST DOCTRINES 605 
 
 most ambitious programme of social reform, which is wholly inspired 
 by the experience of the Rochdale Pioneers. 1 
 
 1 This co-operatiat programme is generally known in France aa that of 
 the ficole de Nimea. Really it is a development of the suggestions thrown 
 out by the Rochdale Pioneers in 1844. M. Bourgeois, who gives it a place 
 in his Syatemct aociolistes, considers that it is a little indefinite. It seems to 
 us, on the other hand, to be about aa precise as any of the other socialist 
 systems that attempt to envisage the future ; and it has this advantage, that ita 
 prophecies are already in process of realisation in a fashion that is most unmis- 
 takable. See a brief risumt of the programme in a lecture by Gide on the 
 occasion of the centenary of the French Revolution, published in the volume 
 entitled Go-operation (Dei Transformation! qtte la Go-operation at appttec a 
 rtaliter dans I'Ordre iconomique), 
 
 The task of reorganising society belongs, not to the producers, but to the 
 consumers, for while the former are inspired by the co-operative spirit, the latter 
 are imbued with enthusiasm for the general well-being. Consumers have only 
 to unite and all their wants are satisfied just in the way they desire, for they can 
 either buy directly from the producers all that they need, or they can, when 
 they have become sufficiently rich and powerful, produce for themselves in 
 their own factories and on their own lands. This would mean the abolition of 
 all profits, those of middlemen and manufacturers alike. The societies would 
 retain only as much as would be necessary for the further extension of the move- 
 ment, returning all the rest to the consumers in proportion to the amount of 
 their purchases. We have already had occasion to note how this idea of the 
 abolition of profits had haunted John Stuart Mill, and how it seemed linked 
 with an entirely new phase of social evolution, to which he gave the name of 
 the " stationary State." We have also witnessed the Hedonists' arrival at 
 exactly the same conclusion, though along a directly opposite path, namely, 
 that of absolutely free competition. 
 
 We must not lose sight of the fact that this revolution is accomplished 
 without affecting the foundations of the social order property, inheritance, 
 interest, etc. and without having recourse to any measure of expropriation save 
 such as naturally results from the free play of present economic laws. Co- 
 operators have no desire to interfere with accumulated capital, their aim being 
 merely to form new capital which shall render the old useless. If existing 
 capital is merely accumulated profits made out of labour, why should not labour 
 itself make a profit, and this time keep it for its own use ? 
 
 Complaints have been made that a system of this kind, even if it were realised, 
 would not result in the abolition of the wage-earner, seeing that the workers 
 would still be employed, the only difference being that their employer would 
 be a society instead of an individual. The reply is that a person who works 
 for a society of which he himself is a member is very near to being his own 
 master. 
 
 Moreover, has anyone a right to raise this objection T The upholder of the 
 present economic order certainly has not when we remember that he considers 
 the wage contract to be the definite type of pure contract. Neither are the oolleo- 
 tivista entitled to make it, for under their system everybody would be a civil 
 servant. Hence the only persons who are really justified in making this criti- 
 cism are those who believe that the future will see an increase in the number 
 of independent proprietors. The reply that we would make to them is this i 
 The only hope of seeing this realised which is also the ideal ofsome oo-operaton
 
 606 THE SOLIDARISTS 
 
 The gospel of solidarity has even penetrated into the rural 
 districts, and although the temperament of the peasant is strongly 
 individualistic it is already beginning to bear fruit in the shape of 
 numerous associations of various kinds. The most interesting of 
 these is the mutual credit society, which implies collective respon- 
 sibility for social debts. 1 
 
 This by no means exhausts the practical consequences of the 
 solidarist ideal. One notable result which has already shown itself 
 is a serious modification of the whole conception of the rights and 
 attributes of private property. The old formula in which property 
 was spoken of as a social trust rather than as a strictly individualistic 
 right at the dominiurn ex jure Quiritium, but which until quite 
 recently was nothing more than a mere metaphor, becomes a reality 
 under the inspiration of this new doctrine of solidarity. Once it is 
 realised that property is simply the result of the unconscious co- 
 operation of a large number of causes, most of which are impersonal, 
 the tendency will be to eliminate it altogether or to adapt it more 
 and more to collective ends. M. Alfred Fouillee, 2 a French philo- 
 sopher, aptly put this aspect of the question when he spoke of social 
 co-proprietorship being grafted on to individual property. 
 
 The modifications introduced into the study of jurisprudence 
 by emphasising its solidarist aspect are occasionally spoken of as 
 " juridical socialism," a term that is not very clear, to say the least. 
 The jurists who have undertaken the task of applying this new 
 principle to the study of jurisprudence have not merely adopted the 
 quasi-contract theory as the basis of their work of reconstruction, 
 but have also refused to recognise any absolute rights of property ; 
 in other words, they claim that the proprietor has other responsi- 
 bilities besides the mere exercise of those rights (gui suo jure utitur 
 neminem Icedere videtur). 
 
 Instead of emphasising the new principle known as the " abuse of 
 rights," they prefer to claim the complete subjection of all private 
 rights to the public weal. They point to a thousand instances in 
 
 is to set up producers' associations under the control and protection of consumers' 
 societies. In fact, a regime of federated co-operative societies is not incom- 
 patible with the maintenance of a certain amount of autonomous production, 
 thanks to various considerations which need not be detailed here. 
 
 1 In France this rule of solidarity has as yet only been adopted by a Catholic 
 group of credit societies known as the Union Durand. It may be practised by 
 a few other societies there, but it is quite obviously the exception, whereas in 
 some German societies and in Italian and Swiss associations the rule is alwaj's 
 followed another proof that although the idea is French in origin we must look 
 elsewhere for practical applications. 
 
 8 La Propriele sociale et la Democratic.
 
 CRITICISM 607 
 
 which a proprietor ought to be held responsible, though through no 
 fault of his own, for the results following from the discharge of his 
 economic duties. 1 The existence of such a thing as an acquired 
 right is also denied, chiefly on the ground that fictitious rights of 
 this kind bar the way to progress by setting up a claim for indemnity. 1 
 
 IV: CRITICISM 
 
 NOTWITHSTANDING the popularity of the term " solidarity " and the 
 numerous attempts made to give effect to the doctrine of which we 
 have just given a summary account, it would be a mistake to 
 imagine that the theory has met with sympathy everywhere. On 
 the contrary, it has been subjected to the liveliest criticism, especially 
 by the Liberal economists. 
 
 It is not that the Liberals deny the existence of solidarity or 
 disapprove of the results which follow from its operation. The 
 discovery of the law of solidarity under the familiar aspect of 
 division of labour and exchange constitutes a part of their own 
 title to fame, and extravagant were the eulogiums which they 
 bestowed upon its working. 
 
 They do, however, hold firmly to the belief that economic 
 solidarity is quite sufficient, and that it is also the best imaginable, 
 despite the fact that it may be our duty to organise it afresh. Is it 
 possible to improve upon a system of division of functions which 
 gives everyone, every day of his life, the equivalent of the service 
 
 1 The result is that masters are nowadays held responsible whenever a 
 workman meets with an accident, or falls ill even. They are also liable to damages 
 whenever they pay off their men. Owners of urban property are no longer 
 allowed to build according to their fancy, and any property set up in contra- 
 vention of the sanitary regulations is immediately demolished. Further progress 
 along these lines would lead to juridical socialism. See Lea Transformation* 
 du Droit civil, by M. Charmont, and Lt Droit social et U Droit individuel, by 
 M. Duguit. 
 
 * Anton Menger, of Vienna, is the protagonist of this view. See his book, 
 Das biirgerliche JKecht und die besitzlosen Volksklassen (1890). Another of his 
 works, Das Recht auf den vollen Arbeitsertrag, which has been translated into 
 English and contains a valuable preface by Professor Foxwell Menger, maintains 
 that at the basis of the economic order are three fundamental rights which may 
 be compared with the political demands put forward in the Peclaration of the 
 Rights of Man. These rights are : (1) the right to the whole produce of labour, 
 (2) the right to work, (3) the right to exist all of which claims were put forward 
 by Considerant, Louis Blanc, and Proudhon, the French socialists of 1848. 
 
 See also Lassalle's book, Das System der erworbenen Rechte. Mention should 
 also be made of M. Emmanuel Levy de Lyon, who has published several article* 
 of this kind, especially the pamphlet entitled Capital et Travail.
 
 608 THE SOLIDARISTS 
 
 which he has rendered to society ? Bastiat in his fable The Blind 
 and ike Paralytic compares this distribution of social effort to an 
 understanding between two such persons, whereby the blind does 
 the walking and the maimed indicates the direction. 
 
 Members of this school are strongly of the opinion that it is 
 quite enough to let this principle of each for all work itself out 
 under the pressure of competition. And as a matter of fact is it 
 not to the interest of the producer to consult the wants and tastes 
 and even the fancies of the public ? Altruism pursued in this spirit, 
 as it well might be, manifests itself as an incessant desire to satisfy 
 the wants of others, and even to live for others. It loses none of 
 its force by becoming, instead of a mere ideal, a professional necessity 
 which no producer can afford to neglect without running the risk 
 of failure. 1 And it is not only between producers and consumers, 
 but also between capital and labour, that such solidarity exists. 
 Neither can produce without the other, and the interest of both 
 is to have as large a produce as possible. A similar kind of solidarity 
 exists among nations. The richer our neighbours are the better 
 chance of our finding an outlet for our products. 
 
 Moreover, none of these solidarites but is essentially just, since 
 everyone receives the exact equivalent of what he gives. What 
 can the new doctrine of solidarity add to this, unless it be, perhaps, 
 an element of pure parasitism ? 2 
 
 For what is the essence of the new doctrine if it is not that those 
 members of society who are possessed of a certain superiority 
 of position, either material or intellectual (which is very often the 
 result of the greater contribution which they have made to the 
 material or intellectual capital of society), by a bold inversion of 
 their material positions should find themselves treated as the 
 
 1 " The producer is concerned about the well-being of his clients at every 
 moment. His sympathies are wide enough to include the whole of humanity. 
 The merchant and the transport agent are always on the look-out for what 
 will prove most advantageous to those for whom they are working, as well as 
 for new clients that is, for more persons to whom they can be of service." These 
 words, which might have been written by Bastiat, are taken from a small yet 
 curious volume published by M. Yves Guyot, and entitled La Morale de la 
 Concurrence. 
 
 " Solidarity serves aa a pretext for those people who want to enjoy the 
 fruits of the labour of others without taking a part in such labours themselves, 
 and for politicians who want to win adherents to their cause ; it is just a new 
 name for an unhealthy kind of egoism." (Vilfredo Pareto, Le Peril socialise, 
 in the Journal des Sconomistes, May 15, 1900.) 
 
 " The solidarist theories would simply greatly increase the number and 
 incapacity of the unemployable." (Demolins, La Superiorite des Anglo-Saxons.}
 
 CRITICISM 609 
 
 debtors of such as have not succeeded ? The natural result is that 
 there are springing up everywhere in society whole classes who are 
 living upon the claims of solidarity, just as their predecessors lived 
 upon the claims of Christian charity. More daring than their for- 
 bears, they have none of the humility of the ordinary beggar, but 
 boldly demand their due ; not for the love of God, as was wont 
 with the true mendicant, but in the name of some quasi-contract, 
 with a policeman within hailing distance lest the debtor should not 
 acquit himself in a sufficiently graceful fashion. Hence the swarm 
 of pensioners and semi-invalids, of unemployed who patronise the 
 relief works, and of victims of accidents more or less real, of 
 parents who have their children reared for nothing, of manufacturers 
 and proprietors who make a profit directly or indirectly out of the 
 existence of public rights, and of public servants who in the name 
 of professional solidarity trample national solidarity underfoot and 
 sacrifice the interests both of taxpayer and consumer. 
 
 The economists have never held the doctrine that commutative 
 justice by itself mere do ut des is enough. Adjacent to the realm 
 of justice lies the domain of charity. But to annex this zone to the 
 dominion of justice and to claim solidarity as a justification seems 
 utter futility. 
 
 There is no avoiding this dilemma. Either they get the equi- 
 valent of what they give, which is the case under a system of free 
 exchange, or they do not in which case they must be either getting 
 more or less. In other words, they are either parasites or destitutes 
 a case of exploitation or of charity. 
 
 It is further pointed out that the whole trend of evolution appears 
 to give no countenance to this doctrine of solidarity, and that 
 consequently it is of the nature of a retrograde movement. Even 
 in the biological realm we come across what looks like a persistent 
 effort to attain independence or autonomy, a struggle on the part 
 of the individual to free himself from the trammels of his descent. 1 
 Such must be the explanation of the recent heroic efforts to leave 
 the earth and rise towards the skies, and the consequent exultation 
 which the aviator feels when he finds that he has overcome the 
 
 1 " The distinctive feature of evolution seems to be the growing tendency 
 among organisms to attain to a position of independence by acquiring a certain 
 degree of specialised skill." (De Launay, L'Histoire de la Terre.) The crystal's 
 action, says de Launay, in grouping itself in the form of a polyhedron is an 
 expression of independence as well as a means of defence. The crystal is 
 simply the earliest individual to break away from ite environment. The 
 animal form in the ocean depths that carries in Its own body the essentials 
 of a new environment marks a second step. 
 
 B.D. ^
 
 610 THE SOLIDARISTS 
 
 force of gravity and broken the last link which bound man to his 
 mother earth. Turning to criminal law, we are met with similar 
 considerations there. The collective responsibility of the whole 
 family or tribe seemed quite just to the primitive mind, and the sons 
 of the Atridse and the descendants of Adam suffered with hardly a 
 murmur for the sins committed by their parents. 1 But to us the 
 doctrine is simply revolting. Whenever such penalties are demanded 
 by nature we can only submit with the best grace that we can 
 command. We are reluctantly bound to admit that the innocent 
 does suffer for the faults of others that the child perishes because 
 the parent was a drunkard. But we, at any rate, regard such things 
 as evil, and valiantly struggle against them. We are not much 
 given to raising altars to Eumenides. When solidarity breeds 
 contamination we seek to counteract it by a strict individualism 
 that immunes. The innumerable fetters that had been riveted 
 together by the old co-operative regime were ruthlessly torn off by 
 the French Revolution. Why attempt to forge new chains by 
 giving to each individual a hypothetical claim upon his fellows ? 
 
 The moralists in their turn have also raised objections. They 
 want to know what new principle of morality solidarity professes to 
 teach. When it has been shown that my neighbour's illness may easily 
 compass my own death, what new feeling will the mere proving of 
 this beget in me ? Will it be love ? Is it not much more likely to 
 reveal itself as a desire to keep him as far from me as possible to 
 get rid of him altogether like a plague-stricken rat, or at least to 
 see that he is locked up in some sanatorium or other ? I may 
 perhaps be found more willing to contribute towards the upkeep 
 of the sanatorium, but the dominant motive will be fear, or self- 
 interest, if that word seems preferable. 2 
 
 Thus solidarity, while it does not seem to contain any new 
 doctrine of love, tends to weaken and to suppress the sense of 
 responsibility by treating society as a whole, or at least the 
 social environment, as the source of our errors, our vices and 
 
 1 "The primitive era was an age of solidarity. Crime was no individual 
 thing then, and that the innocent should suffer for the sake of the guilty seemed 
 a part of the order of things. It is only in an age of reflection that such dogmas 
 appear absurd." (Renan, Avenir de la Science, p. 307.) 
 
 1 Anti-kissing leagues, inspired not by any puritan motives, but arising 
 solely out of fear of bacilli, have been formed in the United States. One 
 mm-t not be surprised if a league against hand-shaking is established next ; 
 although this would be rather a curious result of a doctrine of solidarity that 
 is always represented by the device of two hands clasped in one another ! 
 
 In Paul Bureau's book La Crist morale des Temps nouveaux there is a lengthy, 
 lively criticism of solidarism from the moral standpoint.
 
 CRITICISM 611 
 
 crimes. Individual responsibility, however, is the very basis of 
 morality. 
 
 Such are the criticisms preferred by individualist economists. It 
 would be a mistake to imagine, however, that the socialists, the 
 anarchists, or the syndicalists have treated the doctrine with any 
 greater degree of indulgence. The proposal to reconcile masters and 
 workmen, rich and poor, in a kind of silly, sentimental embrace is a 
 menace to socialism and a denial of the principle of class war. 1 
 
 All such criticism, however, utterly fails to convince us. It may 
 be well, perhaps, to get rid of the coercive element in the discharge 
 of social debt, but that does not do away with the valuable contribu- 
 tion made by solidarity both to social economics and to ethics. 
 
 Solidarity by itself does not furnish a principle of moral conduct, 
 since it is just a natural fact, and as such it is non-moral. Whenever 
 we imagine that solidarity is something evil, that judgment in 
 itself is a proof that we have had recourse to some criterion 
 outside solidarity itself by which to judge of its good or evil features. 
 It is quite possible also that the idea may be exploited for the profit 
 of the egoist. If solidarity is nothing but a mere cord binding us 
 together it may quite possibly happen that it will be used to exalt 
 some people and to pull others down, and the number brought low 
 may even exceed the number raised up. We need not be surprised 
 if occasionally we find that instead of increasing the power of 
 good we have extended the opportunity for evil. But we must 
 speed the coming of these new powers in the hope that in the end 
 good will triumph over evil. Solidarity by itself cannot furnish a 
 rule of moral conduct to such as have none already ; but, granting 
 the existence of a moral principle, it matters not whether it be 
 egoism or altruism, solidarity supplies us with a leverage of incom- 
 parable strength. 
 
 In short, it teaches us three important lessons : 
 
 1. It shows us that all the good which has happened to others 
 has added to our own well-being, and that all the evil that has 
 befallen them has done us harm, and that consequently we ought 
 to encourage the one and discourage the other, so that a policy of 
 indifferent abstention is no longer possible for any of us. 
 
 The mode of action prescribed may be frankly utilitarian, but 
 there is an element of triumph in getting the egoist to forget himself 
 
 1 This is how we find it appraised in Lt Mouvemeni sdcialisle : " The develop 
 ment of solidarism is one of the most disquieting features of the present tiuu>. 
 It affords a proof as well as being a cause of a considerable slackening of energy. " 
 (Issue for July 1907 ; Paul Olivier in a review of Bougie's book on solidftrism.)
 
 612 THE SOLIDARISTS 
 
 and to remember others, even though it be but for a time. A heart 
 that beats for others, though the reason perhaps be selfish, is a 
 somewhat nobler heart. It is doubtful whether we can ever get 
 pure altruism without some admixture of self-interest. The Gospel 
 only asks that we should love our neighbour as ourselves. Solidarity 
 makes a similar demand, neither more nor less, but undertakes to 
 prove that the neighbour is really myself. 
 
 2. It shows us how the results of our actions return upon 
 ourselves with their harvest of suffering or joy a thousand times 
 increased. This gives it its character for solemnity and majesty 
 which has made it such an exceedingly favourable instrument for 
 moral education. To our care is entrusted the welfare of souls, 
 and just as we are led to see that we never really had a right to say 
 that this or that matter was no concern of ours, so we also find 
 ourselves relieved of that other equally heinous maxim, namely, 
 that certain matters concern ourselves alone. Far from weakening 
 the sense of responsibility, as some writers maintain, it is obvious 
 that it increases it indefinitely. 
 
 8. It is true that in a contrary fashion it renders us more indulgent 
 of the faults of others, by showing how often we have been uncon- 
 scious accomplices in their crime. Morally this is a gain, for it helps us 
 to be more indulgent towards others, but more severe upon ourselves. 
 
 From the standpoint of sociological evolution we are confronted 
 with the dissolution of many of the older forms of solidarity and 
 with the emergence of new ones. What really takes place is an 
 extension of the circle of solidarity through the family, the city, and 
 the nation until it reaches humanity such expansion being accom- 
 panied by a doubly fortunate result. On the one hand corporate 
 egoism becomes so ennobled and extended that it includes the 
 whole of humanity, with the result that the strife between antago- 
 nistic interests becomes less acute. The old argument from 
 independence had already grown blunt in the struggle with division 
 of labour. Degree of independence is not the sole measure of 
 personality. The savage beneath his ancestral tree is independent, 
 and so perhaps is Ibsen's hero in revolt against society. The king 
 on his throne, on the other hand, who never speaks except in the 
 plural number, is always conscious of his dependence. But the 
 savage because of his independence is powerless, whereas the king 
 because of his dependence is very powerful. Solidarity, whether it 
 be like the rope that binds the Alpine climber to his guide which 
 may lead them .both to the abyss, or like the patriotism that 
 rivets the soldier's gaze upon his country's flag, cannot detract
 
 CRITICISM 613 
 
 from individuality. If it be true, as was said just now, that the 
 crystal is the earliest effort of the individual to render itself inde- 
 pendent of its environment, we must never forget that it is also the 
 earliest realisation of true solidarity in the form of association. 
 
 As to the argument of the economists that mere exchange is the 
 only form of solidarity that is at all compatible with the demands 
 of justice, all the schools whose fortunes we have followed in the 
 course of this volume have declared against this view, not excepting 
 even the Mathematical school, the latest offspring of the Classical 
 tradition. Esau's bargain with Jacob, the contracts between the 
 Congo Company and the blacks, or bet ween the entrepreneur and the 
 home-worker, are irreproachable from a Hedonistic standpoint (see 
 p. 540). But no one would consider sunh primitive exchanges, which, 
 as Proudhon eloquently remarks, savour of retaliation an eye for an 
 eye and a tooth for a tooth as evidence of the existence of solidarity 
 
 Even if we conceived of exchange as a balance the two sides of 
 which are in equilibrium, it is impossible to escape the conclusion 
 that the contracting parties fare rather differently when they do 
 not start on a footing of complete equality. There is always a 
 Brennus ready to throw his sword into the scales. 
 
 It is only natural that we should ask ourselves what is to be 
 done under such circumstances. Must we be content simply to resign 
 ourselves to our fate ? This seems inevitable if it be true, as the 
 economists seem to suggest, that human relations depend entirely 
 upon exchange and its derivatives selling, lending, wage-earning, 
 etc. But it is quite otherwise when these human relations are 
 regarded as the outcome of association, whether professional, 
 mutualist, or co-operative. 1 
 
 In this spirit the worker subscribes to his union with a view to 
 increasing its strength. Undoubtedly he reckons upon getting a 
 higher wage, but there is no necessary relation between his member- 
 ship of the union and the eventual rise in wages which he expects. 
 The mutualist supports his society in the hope that he may add to 
 the general feeling of security. Undoubtedly in his case again he 
 reckons upon the society paying his doctor should he fall ill, but 
 
 1 Association, even when the object in view is purely mercenary, has a moral 
 value superior to exchange : 
 
 (1) Inasmuch as it always implies, in addition to money payment, a certain 
 sacrifice of time and trouble, perhaps even of independence. It involves some- 
 thing more than the obligation to attend meetings and to conform to rules. 
 
 (2) It implies something more than a mere act of exchange which is com- 
 pleted in an instant and at one stroke. It implies the indefinite collaboration 
 of the parties concerned.
 
 614 THE ANARCHISTS 
 
 scores of members pass through life without making any demand 
 upon their society at all, contributing much more than they with- 
 draw. In this way the good lives pay for the bad ones. The 
 member of the co-operative society, in a similar fashion, is more 
 concerned about a fuller satisfaction of his need than he is about 
 the amount of profit that he can get out of it. In short, whereas 
 under a competitive system each one tries to get rid of his neighbour, 
 under a regime of association everyone would try to make some use 
 of him. The object of solidarity is to substitute " each for all " as 
 a principle of action instead of " each for himself." x Every step 
 taken in this direction, whether we wish it or no, implies a movement 
 away from the regime of exchange in the direction of solidarity. 
 
 CHAPTER IV: THE ANARCHISTS 
 
 THE social creed of the anarchist is a curious fusion of Liberal 
 and socialist doctrines. Its economic criticism of the State, its 
 enthusiasm for individual initiative, as well as its conception of a 
 spontaneous economic order, are features which it owes to Liberalism ; 
 while its hatred of private property and its theory of exploitation 
 represent its borrowings from socialism. 
 
 Doctrinal fusions of this kind which seek to combine two extreme 
 standpoints not infrequently outdo them both. Dunoyer, for 
 example, was the extremest of Liberals, but he took great care to 
 remind his readers of at least one function which none but the State 
 could perform : no other authority, he thought, could ever under- 
 take to provide security. True bourgeois of 1830 that he was, 
 Dunoyer always considered that " order " was a prime social 
 necessity. 2 But, armed with the criticism of the socialists, the 
 anarchists soon get rid of this last vestige of the State's prerogative. 
 In their opinion the security of which Dunoyer spoke merely meant 
 
 1 The solidarist regime must be distinguished from the exchange regime on 
 the one hand and from charity on the other. Exchange implies giving some- 
 thing with a view to obtaining the exact equivalent. Charity, on the other 
 hand, implies giving without expecting any return ; hence it involves a sacrifice. 
 Solidarity also implies a sacrifice : every appeal on behalf of solidarity is based 
 upon the consciousness of a certain amount of sacrifice, but a sacrifice that is 
 not entirely disinterested it is the sacrifice of a part of the individual self in 
 order to gain an equal share in the collective being. 
 
 2 Sec his article on Government in the Didionnaire of Coquelin and 
 Guillaumin.
 
 THE ANARCHISTS 615 
 
 the security of proprietors; "order" is only necessary for the 
 defence of the possessors against the attack of the non-possessors. 
 The socialists themselves (with the exception of Fourier, perhaps, 
 whom the anarchists claim as one of themselves), however opposed 
 to private property, were exceedingly anxious to retain considerable 
 powers in the hands of the State, such as the superintendence of 
 social production, for example. Armed this time with the criticism 
 of the Liberal school, the anarchists experience no difficulty in 
 demonstrating the economic and administrative incapacity o the 
 State. " Liberty without socialism means privilege, and socialism 
 without liberty means slavery and brutality " so writes Bakunin. 1 
 It is only fitting that a few pages at the end of this book -should 
 be devoted to a doctrine that attempts to fuse the two great social 
 currents that strove so valiantly for the upper hand in nineteenth- 
 century history. 
 
 It is not our first acquaintance with anarchy, however. It has 
 already been given a " local habitation and a name " by Proudhon, 
 who is the real father of modern anarchism. This does not imply 
 that similar doctrines may not be discovered in writings of a still 
 earlier date, as in Godwin's, for example. But such writers remained 
 solitary exceptions, 2 while the links connecting the anarchical teaching 
 of Proudhon with the political and social anarchy of the last thirty 
 years are easily traced. Not only is the similarity of ideas very striking, 
 but their transmission from Proudhon to Bakunin, and thence to 
 Kropotkin, Reclus, and Jean Grave, is by no means difficult to 
 follow. 
 
 Alongside of the political and social anarchism which form the 
 principal subject of this chapter there is also the philosophical 
 and literary anarchism, whose predominant characteristic is an 
 almost insane exaltation of the individual. The best known repre- 
 sentative of this school, which hails from Germany, is Max Stirner, 
 whose book entitled Der Einzige und sein Eigenthum appeared in 
 1844. 3 The work was forgotten for a long time, although it enjoyed 
 
 1 (Euvrea, vol. i, p. 59 (F&ifralisme, Socialisms, et Antithiologisme). 
 
 1 Adler in his article A narchismus in the Handwdrttrbuch der Staatswisstn 
 tchaften, and in his Oeschichte dea Sozidlismua und Kommunismua (1899), shows 
 the indebtedness of the anarchist ideal to Greek philosophy. 
 
 1 The work was republished in 1882 and again in 1893, and translated into 
 French in 1902. There are also a few translations from the writ rgs of Smith 
 and Say from his pen. A very interesting account of his life, to which we most 
 acknowledge our indebtedness for some of the information given hero, is to be 
 found in J. H. Mackay's Max Stirner, etn Lebenund &in Work (Berlin, 1898). 
 Stirner's real name was Kaspar Schmidt. Born m 1806 at Uayreuth, in 
 Bavaria, he died at Berlin in extreme poverty and wretchedness in 1866. Foi
 
 616 THE ANARCHISTS 
 
 a striking success when it first appeared. Some twenty years ago, 
 just when Nietzsche was beginning to win that literary renown 
 which is so unmistakably his to-day, it was seen that in Stirner he 
 had a precursor, although Stirner's works probably remained quite 
 unknown to Nietzsche himself, with the result that Stirner has 
 since enjoyed posthumous fame as the earliest immoraliste. A few 
 words only are necessary to show the difference between his doctrines 
 and those of Proudhon, Bakunin, and Kropotkin. 1 
 
 I : STIRNER'S PHILOSOPHICAL ANARCHISM AND THE 
 CULT OF THE INDIVIDUAL 
 
 STIRNER'S book was written as the result of a wager. The nature 
 of the circumstances and the character of the epoch that gave birth 
 to it were briefly these. Stirner was a member of a group of young 
 German Radicals and democrats whom Bruno Bauer had gathered 
 round him in 1840. They drew their inspiration from Feuerbach, 
 and accepted the more extreme views of the Hegelian philosophy. 
 Their ideal was the absolute freedom of the human spirit, and in 
 the sacred name of liberty they criticised everything that seemed in 
 any way opposed to this ideal, whether nascent communism, 
 dogmatic Christianity, or absolute government. The intellectual 
 leaders of the German Revolution of 1848 were drawn from this 
 group, but they were soon swept aside in the reaction of 1850. A 
 few of them who were in the habit of meeting regularly in one of 
 the Berlin restaurants assumed the name die Freien. Marx and 
 Engels occasionally joined them, but soon left in disgust. Their 
 joint pamphlet, which bears the ironical title of The Holy Family, 
 is supposed to refer to Bauer and his friends. A few of the German 
 Liberal economists, including Julius Faucher among others, paid 
 occasional visits to the Hippel Restaurant. Max Stirner, who was 
 one of the most faithful members and a most attentive listener, 
 
 an account of the " left Hegelian school " and of Stirner himself see the very 
 interesting articles of Saint-Rene Taillandier published in the Revue det Deux 
 Mondes, 1842-60. 
 
 1 Some may perhaps wonder why Nietzsche is not included, especially 
 as he was a successor of Stirner's. But Nietzsche's interests were always 
 exclusively philosophical and ethical. Stirner's work, on the other hand, is 
 mainly social and political. We have already pointed out that even StirnerV 
 book has only a rather remote connection with economics, and a detailed study 
 of it would be more in' keeping with a history of political ideas. Nietzsche's 
 work would lead us still farther afield, and would force us to examine every 
 individualistic doctrine as it cropped up.
 
 STIRNER'S PHILOSOPHICAL ANARCHISM 617 
 
 although it does not seem that he contributed much to the discussion, 
 conceived the idea of preparing a surprise for his friends hi the form 
 of a book in which he attempted to prove that the criticism of the 
 supercritics was itself in need of criticism. 
 
 The extreme Radicals who formed the majority of the group 
 were still very strongly attached to a number of abstract ideas 
 which to Stirner seemed little better than phantoms. Humanity, 
 Society, the Pure, and the Good seemed so many extravagant 
 abstractions ; so many fetishes made with hands before whom 
 men bow the knee and show as much reverence as ever the 
 faithful have shown towards their God. Such abstractions, it 
 seemed to him, possess about as much reality as the gods of 
 Olympus or the ghosts that people the imagination of childhood. 
 The only reality we know is the individual ; there is no other. Every 
 individual constitutes an independent original force, its only law its 
 own personal interest, and the only limit to his development consists 
 in whatever threatens that interest or weakens its force. Every 
 man has a right to say, " I want to become all that it is within my 
 power to become, and to have everything I am entitled to." * 
 Bastiat had already expressed it as his opinion that there could 
 be no conflict of legitimate rights, and Stirner declares that " every 
 interest is legitimate provided only it is possible." " The crouching 
 tiger is within his rights when he springs at me ; but so am I when 
 I resist his attacks." " Might is right, and there is no right without 
 might." 
 
 Granting that the individual is the only reality, all those collective 
 unities that go by the name of the family, the State, society, or the 
 nation, and all of which tend to limit his individuality by making 
 the individual subservient to themselves, at once become meaning- 
 less. They are devoid of substance and reali ty. 8 Whatever authority 
 they possess has been ascribed to them by the individual. Mere 
 creatures of the imagination, they lose every right as soon as I 
 cease to recognise them, and it is only then that I become a really 
 free man. " I have a right to overthrow every authority, whether of 
 
 1 Der Einzige und aein Eigenthum (ed. Reklam), p. 164. * Ibid., p. 225. 
 
 * " This man has a body, and so has this man, and that man, right through 
 society, so that you have a collection of bodies and not one collective body. Society 
 has several bodies at its disposal, but has no body of its own. Just like the 
 parallel notion of a nation, this corporate body is a mere phantom an idea 
 with no corporeal existence." (Ibid., p. 135.) To make the possession of a body 
 the test of reality is surely gross materialism. At this rate, law, custom, and 
 language would have to be considered unreal. A historical fact such as a battle 
 or a revolution has no body, but it* real consequence* are often palpable enough.
 
 618 THE ANARCHISTS 
 
 Jesus, Jehovah, or God, if I can. I have a right to commit a murder 
 if I wish it that is to say, unless I shun a crime as I would a disease. 
 I decide the limits of my rights, for outside the ego there is nothing. 
 ... It may be that that nothing belongs to no one else ; but 
 that is somebody else's affair, not mine. Self-defence is their 
 own look-out." 1 The workers who complain of exploitation, the 
 poor who are deprived of all property, have just one thing which they 
 must do. They must recognise the right to property as inherent in 
 themselves and take as much of it as they want. "The egoist's 
 method of solving the problem of poverty is not to say to the poor, 
 * Just wait patiently until a board of guardians shall give you 
 something in the name of the community,' but 'Lay your hands 
 upon anything you want and take that.' The earth belongs to him 
 who knows how to get hold of it, and having got hold of it knows 
 how to keep it. If he seizes it, not only has he the land, but he has 
 the right to it as well." a 
 
 But what kind of a society would we have under such condi- 
 tions ? It would simply be a " Union of Egos," each seeking his own 
 and joining the association merely with a view to greater personal 
 satisfaction. Present-day society dominates over the individual, 
 making him its tool. The " Union of Egos " for we cannot call it a 
 society would be simply a tool in the hand of the individual. No 
 scruples would be felt by anyone leaving the union if he thought some- 
 thing was to be gained by such withdrawal. Every individual would 
 just say to his neighbour, " I am not anxious to recognise you or 
 to show you any respect. I simply want you to be of some service to 
 me." 8 It would be a case of bellum omnium contra omnes, with occa- 
 sional precarious alliances. But it would at least mean liberty for all. 
 
 Such strange, paradoxical doctrines are irrefutable if we accept 
 Stirner's postulates. But we must reject his whole point of view 
 and dispute the stress laid upon the individual as the only reality, 
 as well as his denial of the reality of society. Granting that the 
 individual is the only reality, then society and the nation are mere 
 abstractions created by man and removable at his pleasure. But 
 that is just the mistake. The individual has no existence apart 
 from society, nor has he any greater degree of reality. He is simply 
 an element, not a separate entity. His existence or non-existence 
 does not depend upon himself. Nor is society merely an idea. It 
 is a natural fact. The individual may be quite as appropriately 
 described as an abstraction or a mere phantom, 
 
 1 Der Einzige und sein Eigenthum, p. 222. 
 
 * Ibid., p. 223. Ibid., p. 164.
 
 SOCIAL AND POLITICAL ANARCHISM 619 
 
 The fundamental difference between Stirner and the other 
 
 anarchists who will engage our attention is just this recognition of 
 
 the reality of the social fact which Stirner denies in toto. It also 
 
 marks the cleavage between literary and political anarchism. 1 
 
 i 
 
 II : SOCIAL AND POLITICAL ANARCHISM AND THE 
 CRITICISM OF AUTHORITY 
 
 STIRNER spent his life between his study and the Hippel Restaurant, 
 the rendezvous of his friends. Bakunin and Kropotkin are men of a 
 different stamp who have risked their freedom, and even their lives, 
 for the sake of the cause which they have at heart. It is true that 
 the seed sown in the mind of the ignorant as the result of their 
 teaching has often had most deplorable results, but no one can 
 deny the quality of courage to either Kropotkin or Reclus, or with- 
 hold from them the title of greatness both of mind and character. 
 
 Bakunin was reared in much the same intellectual atmosphere 
 as Stirner.* By birth he belonged to the Russian nobility, and 
 spent the earliest years of his life in the Russian army. In 1 884, at 
 the age of twenty, he resigned his commission in order to devote 
 himself to the study of philosophy, and, like Proudhon, Stirner, and 
 Marx, he came under the universal spell of Hegel. In 1840 he pro- 
 ceeded to Berlin, where he became acquainted with the school of 
 young Radicals of whom we have already spoken. From 1844 to 
 
 1 In a pamphlet called Lea Nouvcaux Aspects du Socialisms (Paris, 1908), 
 written by a syndicalist of the name of Berth, syndicalism and anarchism are 
 contrasted, Proudhon's emphasis upon the reality of society being adopted as 
 the crucial test. Unfortunately, however, Berth confines his examination to 
 Stirner's system. Had he applied the test to Bakunin or Kropotkin he would 
 have discovered that the emphasis laid by them upon the reality of society 
 constitutes the most original feature in their theory. We are thus driven to 
 the exactly opposite conclusion, and feel bound to admit M. Berth notwith- 
 standing that anarchism and syndicalism in many respects closely resemble 
 one another. Jean Grave, however, as we shall see later, seems more favourably 
 inclined towards the naive individualism of Stirner. 
 
 1 See Bakunin's Life, written by his friend James Guillaume, included in the 
 two-volume edition of his works ; or the notice of him prefaced by Dragomanov 
 to his volume Michail Bakunin'a sozial-politischer Briefwechsel mit Herzen und 
 Ogareff (Stuttgart, 1895). A fairly full biography not yet published has been 
 written by Nettlau, and a copy of the MS. may be seen in the Bibliotheque 
 Nationale at Paris. See also M. Lagardelle's article on Bakunin in the Revue, 
 politique et parlementaire (1909). Bakunin 's works have been published in French 
 in four volumes, the first of which was issued in 1895, and the other three in 
 1907, 1908, and 1909 respectively (Paris, Stork). Some of his writings, however, 
 are not included among these, e.g. the Statutes of the International Alliance for 
 Social Democracy.
 
 620 THE ANARCHISTS 
 
 1847 we find him in Paris, where he used to spend whole nights in 
 discussion with Proudhon. Proudhon's influence upon him is very 
 marked, and one constantly meets with passages in the writings of 
 the Russian anarchist which are nothing but paraphrases of ideas 
 already put forward by Proudhon in the Idie ginirale de la Revolution 
 au XIX' Si&clc. The year 1848 revealed to the dilettante nobleman 
 his true vocation, which he conceived to be that of a revolutionary. 
 He successively took part in the risings at Prague and in the Saxon 
 Revolution at Dresden. He was arrested and twice condemned to 
 death, in Saxony and again in Austria, but was finally handed over 
 to the Russian authorities, who imprisoned him in the fortress of St. 
 Peter and St. Paul, where an attack of scurvy caused him to lose all 
 his teeth. He was exiled to Siberia in 1857, but managed to escape 
 in 1861. Making his way to London, he undertook the direction 
 of a vigorous revolutionary campaign, which was carried on in 
 Switzerland, Italy, and France. During the years 1870 and 1871 he 
 successfully planned a popular rising at Lyons. Bernard Lazare 
 has graphically described him as " a hirsute giant with an enormous 
 head which seems larger than it really is because of the mass of 
 bushy hair and untrimmed beard which surrounds it. He always 
 sleeps rough, has no roof above him, and no homeland which he 
 can call his own, and like an apostle is always prepared to set out 
 on his sacred mission at any hour of the night or day." 
 
 The most striking fact in his history was his rupture with Karl 
 Marx at the last International Congress, held at The Hague in 1872. 
 Bakunin joined the International in 1869. Disgusted with the 
 pontifical tendencies of the General Council, which was entirely 
 under the heel of Marx, he proposed a scheme of federal organisation 
 under which each section would be left with considerable autonomy. 
 The Jura Federation supported his proposals, and so did several of 
 the French, Belgian, and Spanish delegates, as well as all the Italian. 
 But he was expelled from the International by Marx's own friends. 
 The official rupture between Marxian socialism and anarchy, grown 
 to considerable proportions since, dates from that very moment. 
 That Hague congress marks also the end of the International. Marx 
 soon afterwards transferred the centre of the administration to the 
 United States, and no conference has been held since. Bakunin also 
 retired from the struggle about the same time, but not before he 
 had set up a new association at Geneva, composed of a few faithful 
 friends. In 1876 Bakunin died at Berne. 
 
 It was in the region of the Jura, in the neighbourhood of Neuchatel, 
 where Bakunin had still a few followers among the extremely
 
 SOCIAL AND POLITICAL ANARCHISM 621 
 
 individualistic but somewhat mystical population of those parts, 
 that Kropotkin in the course of a short stay in the district in 
 1872 imbibed those anarchist ideas to the propagation of which 
 he has so strenuously devoted his life. 1 Although personally un- 
 acquainted with Bakunin, Kropotkin must be regarded as his direct 
 descendant. 
 
 Prince Kropotkin is also a Russian aristocrat, and he, like his 
 master, joined the army after a short period of study. He attracted 
 public notice first of all as the author of several remarkable works 
 dealing with natural history and geography, which showed him 
 to be a confirmed disciple of Darwin. But science was by no means 
 his only interest. By 1871 Hegelian influence was on the wane in 
 Russia, and the more thoughtful of the younger generation turned 
 their attention to democracy. The new watchword was, ** Go, seek 
 the people, live among them, educate them and win their confidence 
 if you want to get rid of the yoke of autocracy." Kropotkin caught 
 the inspiration. He himself has told us how one evening after 
 dinner at the Winter Palace he drove off in a cab, took off his fine 
 clothes, and, putting on a cotton shirt instead of his silk one, 
 and boots such as the peasants wore, hurried away to another 
 quarter of the city and joined a number of working men whom he 
 was trying to educate. But his propaganda proved short-lived, for 
 one evening when he was leaving the headquarters of the Geographical 
 Society, where he had just been reading a paper and had been offered 
 the presidency of one of the sections, he was arrested on a charge of 
 political conspiracy and imprisoned in the fortress of St. Peter and 
 St. Paul. He managed to escape in 1876, and found refuge in 
 England. Afterwards he was wrongfully condemned to three years' 
 imprisonment at Clairvaux on account of his supposed complicity in 
 an anarchist outbreak which took place at Lyons in 1884. But 
 there was something extraordinary about a prisoner who could get 
 the libraries of Ernest Renan and the Paris Academy of Sciences 
 
 * " I returned from that journey with very definite sociological theories in 
 my mind which I have ever since cherished, and I have done everything I can 
 to give them a more clear and a more concrete expression." Kropotkin 's 
 principal works are : Paroles dun Revolte (1884) ; In Russian and French Prisons 
 (1887); L* Conqufte du Pain (1888; Engl. trans. 1906); The State, its Part in 
 History (1898); Fields, Factories, andWorkshops( 1899); Memoirs of a Revolutionist 
 (1900); M utual Aid (\W2). He has also published a large number of pamphlets, 
 among them U Anarchic: sa Philosophic, ton Ideal (1896). Our quotations are 
 taken from EltzbacherVDer Anarchismut, a work that consists almost entirely of 
 quotatioaa from the various anarchist authors, grouped under a few headings. 
 [The ref 3re*ioes are to the French translation; 1902. Tr] These writers, and 
 Kropotkin among them, have readily recognised the impartiality of the work.
 
 622 THE ANARCHISTS 
 
 placed at his disposal during his term of imprisonment in order to 
 enable him to pursue his scientific investigations. During his 
 previous imprisonment in Russia the Geographical Society of St. 
 Petersburg had extended him a similar privilege. Kropotkin has 
 since lived in England. 
 
 The best known French anarchists, Elisee Reclus, the geographer, 
 and Jean Grave, simply reproduce Kropotkin's ideas, with an 
 occasional admixture of Bakunin's or Proudhon's. 1 
 
 Our concern is with the expression of anarchist ideas as we find 
 them in the best known writers of the school. Consequently we 
 must pass over the very striking but immature formulae which are 
 not infrequently to be met with in the works of more obscure 
 writers. 2 
 
 Here again the distinguishing features are the emphasis laid upon 
 individual rights and a passion for the free and full development of 
 personality, which, as we have seen, was the keynote of Stirner's 
 system. " Obedience means abdication," declares Elisee Reclus. 3 
 " Mankind's subjection will continue just so long as it is tolerated. 
 I am ashamed of my fellow-men," writes Proudhon in 1850 from his 
 prison at Doullens. 4 " My liberty," says Bakunin, " or what comes to 
 the same thing, my honour as a man, consists in obeying no other 
 individual and in performing only just those acts that carry convic- 
 tion to me." * Jean Grave declares that society can impose '* no 
 limitations upon the individual save such as are derived from the 
 natural conditions under which he lives." ' 
 
 But this cult of the individual which is present everywhere in 
 anarchist literature rests upon a conception which is the direct 
 antithesis of Stirner's. To Stirner every man was a unique being 
 whose will was his only law. The anarchists who follow Proudhon, 
 on the other hand, regard man as a specimen of humanity, i.e. of 
 
 1 Cf. L' Evolution, la Revolution, et Vldeal anarchique, by filisee Reclus 
 (Paris, 1898), and La Societi future, by Jean Grave (1895). 
 
 * On the present position of anarchist ideas in France see R. de Marmande, 
 Les Forces revolutionnaires en France, in the Grande Revue, August 10, 1911. 
 
 ' L'Svolution, la Revolution, et I'ldeal anarchique, p. 88 ; and he adds : " Our 
 ideal implies the fullest and most absolute liberty of expression of opinion on 
 all matters whatsoever. It further involves complete freedom to follow one's 
 own inclinations or to do as one likes " (p. 143), with this single proviso : " that 
 the individual is thereby developing a healthy moral life " (p. 141 ). 
 
 * Extract from Garnets, published in the Figaro, January 16, 1909. 
 
 6 (Euvres, vol. i, p. 281. 
 
 6 Jean Grave, La Societe future, p. 157. Cf. also p. 199 : " No individual 
 must accept any restriction that- will check his development, nor must he submit 
 to the yoke of authority under any pretence whatsoever."
 
 SOCIAL AND POLITICAL ANARCHISM 623 
 
 something superior to the individual. " What I respect in my 
 neighbour is his manhood," J wrote Proudhon. It is this humanity 
 or manhood that the anarchist would have us respect by respecting 
 his liberty, for, as Bakunin declares, ' liberty is the supreme aim of all 
 human development." 1 It is not the triumph of the egoist but the 
 triumph of humanity in the individual that the anarchists would 
 seek, and so they claim liberty not merely for themselves but for 
 all men. Far from wishing to be served by their fellow-men, as 
 Stirner desired, they want equal respect shown for human dignity 
 wherever found. " Treat others as you would that others should 
 treat you under similar circumstances," 8 writes Kropotkin, employ- 
 ing Kantian and even Christian phraseology. Bakunin, a faithful 
 disciple of Proudhon's, considered that " all morality is founded on 
 human respect, that is to say, upon the recognition of the humanity, of 
 the human rights and worth in all men, of whatever race or colour, 
 degree of intellectual or moral development " ; * and he adds that " the 
 individual can only become free when every other individual is free. 
 Liberty is not an isolated fact. It is the outcome of mutual good- 
 will ; a principle not of exclusion, but of inclusion, the liberty of each 
 individual being simply the reflection of his humanity or of his 
 rights as a human being in the conscience of every free man, his 
 brother and equal." * This idea of humanity, which the latest 
 anarchists owe to Proudhon, is not simply foreign to Stirner, but is 
 just one of those phantoms which Stirner was particularly anxious 
 to waylay.* 
 
 Along with this extravagant worship of individual liberty goes 
 a hatred of all authority. Here the political anarchists join hands 
 with Stirner. For the exercise of authority of one man over another 
 means the exploitation of one man by another and a denial of his 
 humanity. The State is the summation of all authority, and the 
 full force of anarchist hatred is focused upon the State. No human 
 relation is too sacred for State intervention, no citizen but is liable 
 
 1 Justice dans la Rtvolitfion, vol. i, p. 185. 
 
 8 Bakunin, (Euvrea, vol. i, p. 105. 
 
 1 Quoted by Eltzbacher, foe. cit., p. 199. 
 
 * Bakunin, CSuvres, vol. i, p. 281. " I can be really free when those around 
 me, both men and women, are also free. The liberty of others, far from limiting' 
 or negating my own, is, on the contrary, ite necessary condition and guarantee." 
 
 8 Ibid., vol. i, p. 277. 
 
 The idea of respecting man's humanity is vigorously criticised by Stirner. 
 Proudhon is expressly mentioned as the chief representative of that view. The 
 principle was also regarded with some favour by Feuerbach, who wanted to 
 substitute emphasis upon the human in man for the stress generally laid upon 
 the divine in his nature.
 
 624 THE ANARCHISTS 
 
 to have his conduct minutely prescribed by law. There are officers 
 to apply the law, armies to enforce it, lecturers to interpret it, priests 
 to inculcate respect for it, and jurists to expound it and to justify 
 everybody. Thus has the State become the agent par excellence of 
 all exploitation and oppression. 1 It is the one adversary, in the 
 opinion of every anarchist " the sum total of all that negates the 
 liberty of its members." ** It is the grave where every trace of 
 individuality is sacrificed and buried." Elsewhere, " it is a flagrant 
 negation of humanity." * Bakunin, who in this matter as well as 
 in many others is a follower of Bastiat, speaks of it as " the visible 
 incarnation of infuriated force." That is enough to label it for ever 
 with the evil things of life, for the aim of humanity is liberty, but 
 force is " a permanent negation of liberty." 3 
 
 A necessary agent of oppression, government always and in- 
 evitably becomes the agent of corruption. It contaminates every- 
 thing that comes into contact with it, and the first to show signs 
 of such contamination are its own representatives. " The best man, 
 whoever that may be, whatever degree of intelligence, magnanimity, 
 and purity of heart he may have, is unavoidably corrupted by his 
 trade. The person who enjoys any privilege, whether political or 
 economic, is intellectually and morally a depraved character." So 
 Bakunin thought, 4 and Elisee Reclus writes in a similar strain. 
 " Every tree in nature bears its own peculiar fruit, and government, 
 whatever be the form it take, always results in caprice or tyranny, 
 in misery, villainy, murder, and evil." 5 The governing classes are 
 inevitably demoralised, but so are the governed, and for just the 
 same reasons. Government is a worker of evil even when it would 
 do good, for " the good whenever it is enjoined becomes evil. 
 Liberty, morality, real human dignity consists in this, that man 
 should do what is good not because he is told to do it, but simply 
 
 1 Proudhon is the model here. " To be governed," says he (Idle generale de 
 la Revolution) " is to have every deed of ours, every action and movement, 
 noted, registered, reviewed, docketed, measured, filed, assessed, guaranteed, 
 licensed, authorised, recommended, prohibited, checked, reformed, redressed, 
 corrected ; under pretence of public policy, to be taxed, dragooned, imprisoned, 
 exploited, cajoled, forced, cheated, robbed ; at the least sign of resistance or 
 complaint to be repressed, convicted, vilified, vexed, hunted, mauled, murdered, 
 stripped, garrotted, imprisoned, shot, slaughtered, judged, condemned, deported, 
 sacrificed, sold, betrayed, and finally mocked, flouted, outraged and dishonoured 
 That is government, such its justification and morality." 
 
 2 Bakunin, (Euvres, vol. i, pp. 143, 227, 151. 
 
 * Ibid,, vol. i, p. 228. 
 
 Ibid., vol. i, p. 176 ; vol. iii, p. 53. 
 
 1 IS Evolution, la Revolution, et I' I deal anarchiste, p. 164.
 
 SOCIAL AND POLITICAL ANARCHISM 625 
 
 because he thinks that it really is the best that he can ever wish 
 or desire." 1 
 
 It matters little what form government takes. Absolute or 
 constitutional monarchy, democratic or aristocratic republicanism, 
 government on the basis of a universal or a restricted suffrage, are 
 all much the same, for they all presuppose a State of some sort. 
 Authority, whether of a despot or of the majority of the community, 
 is none the less authority, and implies the exercise of a will other 
 than the individual's own. The great error committed by all the 
 revolutions of the past has been this : one government has been 
 turned out, but only to have its place usurped by another. The only 
 true revolution will be that which will get rid of government itself 
 the fount and origin of all authority. 
 
 Still closer scrutiny reveals the interesting fact that the State, 
 which is naturally oppressive, gradually becomes employed as the 
 instrument for the subjugation of the weak by the strong, the poor 
 by the rich. It was Adam Smith who ventured to declare that 
 " civil government ... is in reality instituted for the defence of 
 the rich against the poor, or of those who have some property against 
 those who have none at all." a Pages of anarchist literature simply 
 consist of elaborate paraphrases of this remark of Smith's. 
 
 Kropotkin thinks that every law must belong to one or other of 
 three categories. To the first category belong all laws concerned 
 with the security of the individual ; to the second all laws con- 
 cerned with the protection of government ; and to the third all 
 those enactments where the chief object in view is the inviolability 
 of private property. 3 In the opinion of the anarchist, all laws might 
 more correctly be placed under the last category only, for when- 
 ever the safety of the individual is in any way threatened it is 
 generally the result of some inequality of fortune. 4 Indirectly, 
 
 1 Bakunin, CSuvres, vol. i, p. 280. 
 
 * Wealth of Nations, vol. ii, p. 207. Cf. supra, p. 79, footnote. Adam Smith, it 
 is true, did write that " civil government, so far as it is instituted for the security of 
 property," etc. ; but that does not imply that the great economist regarded this as 
 the only object of government, although it certainly is one of its chief aims. 
 
 * " The million and one laws that govern humanity naturally fall into one 
 or other of three categories : laws for the protection of property, of government, 
 or of individuals. If we take these three divisions and analyse them we are 
 inevitably forced to realise how futile and even injurious all legislation is." 
 (Memoirs of a Revolutionist, p. 236.) 
 
 1 " Society itself is every day creating beings imbued with an ti -social feelinga 
 and incapable of leading honest, industrious lives." (Kropotkin, quoted by 
 Eltzbacher, loc. cil., p. 221.) " Seeing that the organisation of society is alwayi 
 and everywhere the one cause of all the crimes committed by men, ita conduct
 
 626 THE ANARCHISTS 
 
 that is to say, the attack is directed against property. The real 
 function of government is to defend property, and every law which 
 is instrumental in protecting property is also effective in shielding 
 the institution of government from attack. 
 
 Property itself is an organisation which enables a small minority 
 of proprietors to exploit and to hold in perpetual slavery the masses 
 of the people. In this instance the anarchists have not made any 
 weighty contribution of their own, but have merely adopted the 
 criticisms of the socialists. 1 Proceeding in the usual fashion, they 
 point to the miserable wages which are usually paid to the workers, 
 and show how the masters always manage to reserve all the leisure, 
 all the joys of existence, all the culture and other benefits of civilisa- 
 tion for themselves. Private property is of the essence of privilege 
 the parent of every other kind of privilege. And the State becomes 
 simply the bulwark of privilege. " Exploitation and government," 
 says Bakunin, " are correlative terms indispensable to political life 
 of every kind. Exploitation supplies the means as well as the 
 foundation upon which government is raised, and the aim which it 
 follows, which is merely to legalise and defend further exploitation." * 
 
 in punishing criminals is clearly absurd or obviously insincere. Every punish- 
 ment implies guilt, but the criminals in this case are never guilty. We deny 
 the so-called right of society to bestow punishment in this arbitrary fashion. 
 A human being is simply the unwilling product of the natural or social environ- 
 ment in which he was born and reared and under whose influence he still remains. 
 The three great causes of human immorality are inequality, whether political, 
 economic, or social ; ignorance, which is its natural result ; and slavery, its 
 inevitable consequence." (Bakunin, Programme de VAlliance Internationale de la 
 Dhnocratie socialists, in Sozial-politischer Briefwechsel, pp. 332-333.) 
 
 " Property and want are the great incentives to crime. But if defective 
 society organisation is the cause of crime, an improvement in organisation should 
 cause a disappearance of crime." (Jean Grave, La Societe future, pp. 137-138.) 
 
 1 " la it necessary," asks Bakunin, " to repeat the arguments of socialism, 
 which are still unanswerable and which no bourgeois economist has ever attempted 
 to disprove ? What are we to make of property and capital as they exist at 
 the present moment ? In both cases it practically means a right or a powei 
 guaranteed and protected by society to live without working ; and since property 
 and capital produce absolutely nothing unless fertilised by labour, it means 
 power and the right to live upon the labour of others and to exploit the labour 
 of those who have neither property nor capital and are compelled to sell their 
 productive force to the fortunate owner of the one or other of these." Of. 
 Kropotkin's Conquest of .Bread, p. 56 : " Multiply examples, choose them where 
 you will, consider the origin of all fortunes, large or small, whether arising out 
 of commerce, finance, manufactures, or the land. Everywhere you will find 
 that the wealth of the wealthy springs from the poverty of the poor." In this 
 sentence he sums up a long demonstration which he gives in proof of thi* 
 contention. 
 
 * Bakunin, (Euvrei. vol. i, p. 324,
 
 SOCIAL AND POLITICAL ANARCHISM 627 
 
 "Experience teaches us," says Proudhon, 1 "that government 
 everywhere, however popular at first, has always been on the side 
 of the rich and the educated as against the poor and ignorant 
 masses." 2 
 
 Whether the extinction of private property, which would free the 
 worker from the danger of being exploited by the rich, would also 
 render the State unnecessary is a question upon which the anarchists 
 are not agreed. Proudhon, we remember, had hoped by means of 
 the Exchange Bank to reduce the right of property to mere 
 possession. Bakunin, on the contrary, is under the spell of the 
 Marxians, and, like a true collectivist, he thinks that all the instru- 
 ments of production, including land, should be possessed by the 
 community. Such instruments should always be at the disposal 
 of groups of working men expert in the details of agriculture or 
 industrial production, and such workers should be paid according 
 to their labour. 3 Kropotkin, on the other hand, regards communism 
 as the ideal and looks upon the distinction drawn by the collectivist 
 between instruments of production and objects of consumption as 
 utterly futile. Food, clothing, and fuel are quite as necessary 
 for production as machinery or tools, and nothing is gained by 
 emphasising the distinction between them. Social resources of every 
 kind should be freely placed at the disposal of the workers.* 
 
 But the State and the institution of private property by no 
 means exhausts the list of tyrannies. Individual liberty is as little 
 compatible with irrevocable vows that is, with a present promise 
 which binds for ever the will of man as it is with submission to 
 external authority. The present marriage law, for example, violates 
 both these conditions. Marriage ought to be a free union. A contract 
 freely entered upon and deliberately fulfilled is the only form of 
 marriage that is compatible with the true dignity and equality of 
 both man and woman. 6 A free and not a legal contract is the only 
 form of engagement which the anarchists recognise. Free contract 
 
 1 I die ginlrale de la Revolution, p. 119. 
 
 * " Law is simply an instrument invented for the maintenance of exploita- 
 tion and the domination of the idle rich over the toiling masses. Ite sole mission 
 is the perpetuation of exploitation." (Kropotkin, Memoirs of a Revolutionist, 
 
 p. 235.) 
 
 Bakunin, Programme deVAUiance, in Sozial-politiacher Briefwechsel, p. 339. 
 
 1 Kropotkin, Conquest of Bread, pp. 61-62. 
 
 " The anarchist* want to see free unions established, resting upon mutual 
 affection and based upon respect for one's self and for the dignity of others. 
 And in that sense, in their desire to show respect and affection for all the 
 members of the association, they are inimical to the family." (filisee Reclus, 
 loc. cit., pp. 146-146.)
 
 628 THE ANARCHISTS 
 
 between man and wife, between an individual and an association, 
 between different associations pursuing the same task, between one 
 commune and another, or between a commune and a whole country. 
 But such engagements must always be revocable, otherwise they 
 would merely constitute another link in the chain that has shackled 
 humanity. Every contract that is not voluntarily and frequently 
 renewed becomes tyrannical and oppressive and constitutes a stand- 
 ing menace to human liberty. " Because I was a fool yesterday, 
 must I remain one all my life ? " 1 asks Stirner ; and on this point 
 Bakunin, Kropotkin, Reclus, Jean Grave, and even Proudhon are 
 agreed. 
 
 To regard their social philosophy as nothing but pure caprice 
 because of the wonderful faith which they had in their fellow-men 
 would, however, be a great mistake. 
 
 Notwithstanding the merciless criticism of authority of every 
 kind, there was still left one autocrat, of a purely abstract character 
 perhaps, but none the less imperious in its demands. This was 
 the authority of reason or of science. The sovereignty of reason was 
 one of the essential features of Proudhon's anarchist society.* What 
 Proudhon calls reason Bakunin refers to as science, but his obeisance 
 is not a whit less devotional. " We recognise," says he, *' the 
 absolute authority of science and the futility of contending with 
 natural law. No liberty is possible for man unless he recognise 
 this and seek to turn this law to his own advantage. No one except 
 a fool or a theologian, or perhaps a metaphysician, a jurist, or a 
 bourgeois economist, would revolt against the mathematical law 
 which declares that 2-4-2 = 4." The utmost that a man can 
 claim in this matter is that " he obeys the laws of nature because he 
 himself has come to regard them as necessary, and not because they 
 have been imposed upon him by some external authority." * 
 
 Not only does Bakunin bow the knee to science, but he also 
 swears allegiance to technical or scientific skill. " In the matter of 
 boots I am willing to accept the authority of the shoemaker ; of 
 clothes, the opinion of the tailor ; if it is a house, a canal, or a railway, 
 
 1 Der Einzige, p. 229. 
 
 * Of. Idee generate de la Revolution, p. 281 , and p. 342 : " Revolution follows 
 revelation. Reason aided by experience reveals to us the nature of the laws 
 which govern society as well as nature, and which in both cases are simply the 
 laws of necessity. They are neither made by man nor imposed by his authority. 
 They have only been discovered step by step, which is a proof of their independent 
 existence. By obeying them a man becomes just and noble. Violation of them 
 constitutes injustice and sin. I can suggest no other motive for human actions." 
 
 1 Bakunin, CSuvres, vol. iii, p. 51.
 
 MUTUAL AID 
 
 I consult the architect and the engineer. What I respect is not 
 their office but their science, not the man but his knowledge. I 
 cannot, however, allow any one of them to impose upon me, be he 
 shoemaker, tailor, architect, or savant. I listen to them willingly 
 and with all the respect which their intelligence, character, or 
 knowledge deserves, but always reserving my undisputed right of 
 criticism and control." l Bakunin has no doubt that most men 
 willingly and spontaneously acknowledge the natural authority of 
 science. He agrees with Descartes and employs almost identical 
 terms * when he declares that " common sense is one of the com- 
 monest things in the world." But common sense simply means 
 " the totality of the generally recognised laws of nature." He shares 
 with the Physiocrats a belief in their obviousness, and invokes their 
 authority whenever he makes a vow. He is also anxious to make 
 them known and acceptable of all men through the instrumentality 
 of a general system of popular education. The moment they are 
 accepted by " the universal conscience of mankind the question of 
 liberty will be completely solved." * Let us again note how redolent 
 all this is of the rationalistic optimism of the eighteenth century, 
 and how closely Liberals and anarchists resemble one another in 
 their absolute faith in the " sweet reasonableness " of mankind. 
 Bakunin only differs from the Physiocrats in his hatred of the despot 
 whom they had enthroned. 
 
 A society of free men, perfectly autonomous, each obeying only 
 himself, but subservient to the authority of reason and science 
 such is the ideal which the anarchists propose, a preliminary con- 
 sideration of its realisation being the overthrow of every established 
 authority. " No God and no master," says Jean Grave ; " everyone 
 obeying his own will." * 
 
 III : MUTUAL AID AND THE 
 
 ANARCHIST CONCEPTION OF SOCIETY 
 
 AT first sight it might seem that a conception of social existence 
 
 which would raise every individual on a pedestal and proclaim the 
 
 complete autonomy of each would speedily reduce society to a 
 
 number of independent personalities. Every social tie removed, 
 
 1 Bakunin, QSuvret, vol. iii, p. 66. 
 
 2 " In general we may say that man's general life is almost entirely governed 
 by what we call good sense." (Ibid., vol iii, p. 60.) 
 
 fbid., vol. iii, p. 61. 
 
 future, p. 303.
 
 630 THE ANARCHISTS 
 
 there would remain just a few individuals in juxtaposition, and 
 society as a " collective being " would disappear. 
 
 But it would be a grievous mistake to conceive of the anarchist 
 ideal in this light. There is no social doctrine where the words 
 " solidarity " and " fraternity " more frequently recur. Individual 
 happiness and social well-being are to them inseparable. Hobbes' 
 society, or Stirner's, where the hand of everyone is against his 
 brother, fill the anarchists with horror. To their mind that is a 
 faithful picture of society as it exists to-day. In reality, how- 
 ever, man is a social being. The individual and society are 
 correlative : it is impossible to imagine the one without thinking of 
 the other. 
 
 No one has given more forcible expression to this truth than 
 Bakunin ; and this is possibly because no one ever had a keener 
 sense of social solidarity. ** Let us do justice once for all," he remarks, 
 ** to the isolated or absolute individual of the idealists. But that 
 individual is as much a fiction as that other Absolute God. . . . 
 Society, however, is prior to the individual, and will doubtless survive 
 him, just as Nature will. Society, like Nature, is eternal ; born of 
 the womb of Nature, it will last as long as Nature herself. . . . 
 Man becomes human and develops a conscience only when he realises 
 his humanity in society ; and even then he can only express himself 
 through the collective action of society. Man can only be freed 
 from the yoke of external nature through the collective or social 
 effort of his fellow-men, who during their sojourn here have trans- 
 formed the surface of the earth and made the further development 
 of mankind possible. But freedom from the yoke of his own nature, 
 from the tyranny of his own instincts, is only possible when the 
 bodily senses are controlled by a well-trained, well-educated mind. 
 Education and training are essentially social functions. Outside the 
 bounds of society, man would for ever remain a savage beast." l 
 
 Whether we read Proudhon or Kropotkin, we always meet with 
 the same emphasis on the reality of the social being, on the pre- 
 existence of the State, or at least of its necessary coexistence, if the 
 individual is ever to reach full development. It is true that there 
 are a few anarchists, such as Jean Grave, who still seem to uphold 
 the old futile distinction between the individual and society, and 
 who conceive of society as made up of individuals just as a house is 
 built of bricks. 
 
 But is there no element of contradiction between this idea 
 and the previous declaration of individual autonomy ? How is it 
 1 Bakunin, (Euvre*. vol. i, pp. 286, 298, 277,
 
 MUTUAL AID 631 
 
 possible to exalt social life and at the same time demand the abolition 
 of all traditional social links ? J 
 
 The apparent antinomy is resolved by emphasising a distinction 
 which Liberalism had drawn between government and society. 
 Society is the natural, spontaneous expression of social life. Govern- 
 ment is an artificial organ, or, to change the metaphor, a parasite 
 preying upon society.* Liberals from the days of Smith onward 
 had applied the distinction to economic institutions ; the anarchists 
 
 1 Bakunin on his death-bed confessed to his friend Reichel that " all his 
 philosophy had been built upon a false foundation. All was vitiated because 
 he had begun by taking man as an individual, whereas he is really a member 
 of a collective whole " (quoted by Guillaume, CEuvres, preface to vol. ii, p. 60). 
 In his Philosophic du Progres ((Euvrca, vol. xx, pp. 36-38) Proudhon writes as 
 follows : " All that reason knows and maintains is that the individual, like an 
 idea, is really a group. All existence is in groups, and whatever forms a group 
 also forms a unit, and consequently becomes perceptible and is then said to 
 exist. In accordance with this general conception of being, I think it possible 
 to prove the existence of positive reality and up to a certain point to demonstrate 
 the laws of the social being or of the humanitarian group, and to establish a 
 proof of the existence of an individuality superior to collective man and still 
 quite other and different from his individual self." The same idea frequently 
 comes up in different connections, e.g., in the Petit Catechi#me politique at 
 the end of vol. i of La Justice dana la RivobUion, and in Idee generate de la 
 Rivolution. 
 
 Kropotkin thinks that man has always lived in society of one kind or another. 
 " As far back as we can go in the palaeo-ethnology of mankind, we find men 
 living in societies, in tribes similar to those of the highest mammals." (Mutual 
 Aid, p. 80). " Man did not create society ; society is older than man." (The 
 State, its Historic R6le, p. 6; London, 1898.) Jean Grave, on the other hand, 
 thinks that " the individual was prior to society. Destroy the individual, and 
 there will be nothing left of society. Let the association be dissolved and the 
 individuals scattered, they will fare badly and will possibly return to savagery, 
 their faculties will decay and not progress, but still they will continue to exist." 
 (La Societe future, pp. 160-162.) Grave's view is essentially his own and does not 
 square with those of either Kropotkin, Bakunin, or Proudhon, the real founders of 
 anarchy. It is, moreover, quite obvious that their theories are really much 
 nearer the truth, for it is as impossible to conceive of society without the indi- 
 vidual as it is to conceive of the individual without society. The individual, as 
 Bakunin emphatically declares, is a fiction, or an abstraction, as Walras would 
 say. Many people find it difficult to accept this doctrine. But it seems the only 
 one that tallies with the facts, whether of nature or of history. We can no more 
 imagine the individual without society than we can a fish without water. 
 Deprived of water, it is not only less of a fish, but it is no longer a fish at all 
 except a dead one. 
 
 1 Bastiat speaks of this error of confusing government and society as being 
 the worst that has ever befallen the science. The State problem he defines 
 as follows : " How to inscribe within the great circle which we call society that 
 other circle called government." Dunoyer in so many words expresses the eame 
 idea.
 
 632 THE ANARCHISTS 
 
 were to apply it to every social institution. Not only the economic 
 but every form of social life is the outcome of the social instinct 
 which lies deep in the nature of humanity. This instinct of solidarity 
 urges men to seek the help of their fellow-men and to act in concert 
 with them. It is what Kropotkin calls mutual aid, and seems as 
 natural to man and as necessary for the preservation of the species 
 as the struggle for existence itself. What really binds society 
 together, what makes for real cohesion, is not constraint (which, 
 contrary to the time-honoured belief of the privileged classes, is really 
 only necessary to uphold their privileges), but this profound instinct 
 of mutual help and reciprocal friendship, whose strength and force 
 have never yet been adequately realised. " There is in human 
 nature," says Kropotkin, ** a nucleus of social habits inherited from 
 the past, which have not been as fully appreciated as they might. They 
 are not the result of any restraint and transcend all compulsion." * 
 Law, instead of creating the social instinct, simply presupposes 
 it. Laws can only be applied so long as the instinct exists, and 
 fall into desuetude as soon as the instinct refuses to sanction them. 
 Government, far from developing this instinct, opposes it with rigid, 
 stereotyped institutions which thwart its full and complete develop- 
 ment. To free the individual from external restraint is also to 
 liberate society by giving it greater plasticity and permitting it to 
 assume new forms which are obviously better adapted to the happi- 
 ness and prosperity of the race. 1 Kropotkin in his delightful book 
 Mutual Aid gives numerous examples of this spontaneous social 
 instinct. He shows how it assumes different forms in the economic, 
 scientific, educational, sporting, hygienic, and charitable associa- 
 tions of modern Europe ; in the municipalities and corporations of 
 
 1 Memoirs of a Revolutionist, p. 414. Cf. also Paroles (Tune, RevoUe, p. 221. 
 
 * This idea finds frequent expression both with Reclus and Kropotkin. 
 " The fact that we have instituted, regulated, codified, and encompassed with 
 constraints and penalties, with gendarmes and jailers, the larger part of our more 
 or less incoherent collection of political, religious, moral and social conceptions 
 of to-day in order to enforce them upon the citizens of to-morrow is in itself 
 sufficiently absurd, and it is bound to have contradictory results. Life, which is 
 always improving and renewing itself, can never submit to regulations which have 
 been drawn up in some period now past." (Reclus, loc. tit., pp. 108-9.) "Anarchist 
 society," writes Kropotkin, " is one to which any pre-eetablished, crystallised 
 form of law will always be repugnant. It is also one which looks for harmony, 
 which can only be temporary and fugitive perhaps, in the equilibrium between 
 the mass of different forces and influences of every kind which pursue their 
 course without the slightest deflection, and which because they are quite 
 untrammelled beget reaction and arouse those activities which are favourable 
 to them when they move in the direction of progress." (L'Anarchit, pp. 17, 18.)
 
 MUTUAL AID 688 
 
 the Middle Ages ; and how even among animals this same instinct; 
 which forms the real basis of all human societies, has enabled them 
 to overcome the natural dangers that threaten their existence. 
 
 Anarchist society must not be conceived as a bellum omnium 
 contra omnes, but as a federation of free associations which everyone 
 would be at liberty to enter and to leave just as he liked. This 
 society, Kropotkin tells us, would be composed of a multitude of 
 associations bound together for all purposes that demand united 
 action. A federation of producers would have control of agricultural 
 and industrial, and even of intellectual and artistic, production ; an 
 association of consumers would see to questions of housing, lighting, 
 health, food, and sanitation. In some cases the federation of pro- 
 ducers would join hands with the consumers' league. Still wider 
 groups would embrace a whole country, or possibly several countries, 
 and would include people employed in the same kind of work, 
 whether industrial, intellectual, or artistic, for none of these pursuits 
 would be confined to some one territory. Mutual understanding 
 would result in combined efforts, and complete liberty would give 
 plenty of scope for invention and new methods of organisation. 
 Individual initiative would be encouraged ; every tendency to 
 uniformity and centralisation would be effectively checked. 1 
 
 In such a society as this complete concord between the general 
 and the individual interests, hitherto so vainly sought after by the 
 bourgeoisie, would be realised once for all in the absolute freedom 
 now the possession of both the individual and the group, and 
 in the total disappearance of all traces of antagonism between 
 possessors and non-possessing, between governors and governed. 
 Again we note a revival of the belief in the spontaneous harmony of 
 interests which was so prominent a feature of eighteenth-century 
 philosophy.* 
 
 1 Memoir* of a Revolutionist. 
 
 * Proudhon had already set the problem ae follows : " Can we find a method 
 of transacting business that will unite divergent interests and identify individuals 
 with the general well-being, replace the inequality of nature by equality of 
 education, and remove all political and economic contradictions ; when eaoh 
 individual will be at once both producer and consumer, citizen and sovereign, 
 ruler and ruled ; when liberty will always expand without involving any 
 counter-loss ; when the well-being of eaoh will grow indefinitely without 
 involving any damage to the property, the labour, or the revenue of any of his 
 fellow-citizens, or of the State itself, without weakening the interest* he has in 
 common with his fellow-men, without alienating their good opinion or destroying 
 their affection for him?" (Idit gtnerdU, p. 145.) Says Jean Grave: "Wre 
 society established on natural bases, individual and general interest* would 
 never conflict." (Socitif future, p. 156.) 
 
 K.D. *
 
 634 THE ANARCHISTS 
 
 Such an attractive picture of society was bound to invite criticism. 
 The anarchists foresaw this, and have tried to meet most of the 
 arguments. 
 
 In the first place, would such extravagant freedom not beget 
 abuse, unjustifiable repudiation of contracts, crimes and misde- 
 meanours ? Would it not give rise to chronic instability ? and would 
 the conscientious never find themselves the victims of the fickle and 
 the fraudulent ? 
 
 The anarchists agree that there may be a few pranks played, or, 
 as Grave euphemistically calls them, " certain acts apparently 
 altogether devoid of logic." 1 But can we not reckon upon criticism 
 and disapproval checking such anti-social instincts ? Public opinion, 
 if it were once freed from the warping influence of present-day 
 institutions, would possess far greater coercive force. 2 Our present 
 system of building prisons, " those criminal universities," as 
 Kropotkin calls them, will never check these anti-social instincts. 
 ** Liberty is still the best remedy for the temporary excesses of 
 liberty." 3 Moreover, such a system would enjoy a superior sanction 
 in the possible refusal of other people to work with those who could 
 not keep their word. 4 " You are a man and you have a right to 
 live. But as you wish to live under special conditions and leave the 
 ranks, it is more than probable that you will suffer for it in your daily 
 relations with other citizens." 5 
 
 But there is still a more serious objection. Were there no com- 
 pulsion, would anyone be found willing to work ? The host of 
 idlers is at the present time vast, and without the sting of necessity 
 
 1 La Societe future, p. 16. " We cannot disguise the fact," says Kropotkin, 
 " that if complete liberty of thought and action were once given to the individual 
 we should see some exaggerations, possibly extravagant exaggerations, of our 
 principles." (Memoirs of a Revolutionist, p. 413.) 
 
 * "The only great and all-powerful authority at once rational and natural 
 that we can respect is the public spirit of a collective society founded upon 
 equality and solidarity, upon liberty and respect for the human qualities of 
 all its members. It will be a thousand times more powerful than all your 
 authorities, whether divine, theological, metaphysical, political, or juridical, 
 whether instituted by Church or by State ; more powerful than all your criminal 
 codes, all your jailers and hangmen." (Bakunin, (Euvres, vol. iii, p. 79.) 
 
 ' Memoirs of a Revolutionist, p. 414. This is also one of the favourite 
 doctrines of the Liberals. 
 
 * Kropotkin, Conquest of Bread, p. 206. 
 
 * Grave, op. cit., p. 297. Proudhon is even more severe. " By making a 
 contract you become a member of the fraternity of free men. In case of 
 infringement, either on their side or on yours, you are responsible to one another, 
 and the responsibility might even involve excommunication and death." (Idit 
 gkntnU, p. 843.)
 
 MUTUAL AID 685 
 
 it would become still greater. Kropotkin remarks that **it is 
 only about the sugar plantations of the West Indies and the 
 sugar refineries of Europe that robbery, laziness, and very often 
 drunkenness become quite usual with the bees.** * Is it not possible 
 that men are just imitating the bee ? 
 
 The anarchists point out that many a so-called idler to-day is 
 simply a madcap who will soon discover his true vocation in the free 
 society of the future, and will thus be gradually transformed into 
 a useful member of society. 8 Moreover, does not the fact that so 
 many people shun work altogether prove that the present method 
 of organising society must be at once cruel and repugnant ? The 
 certainty of being confined in an unhealthy workshop for ten or 
 twelve hours every day, with mind and body ** to some unmeaning 
 task-work given," in return for a wage that is seldom sufficient to 
 keep a family in decent comfort, is hardly a prospect that is likely 
 to attract the worker. One of the principal aims of the anarchist 
 regime and in this respect it resembles the Phalanstre of Fourier 
 will be to make labour both attractive and productive.* Science 
 will render the factory healthy well lighted and thoroughly venti- 
 lated. Machinery will even come to the rescue of the housewife and 
 will relieve her of many a disagreeable task. Inventors, who are 
 generally ignorant of the unpleasant nature of many of these tasks, 
 have been inclined to ignore them altogether. " If a Huxley spent 
 only five hours in the sewers of London, rest assured that he would 
 have found the means of making them as sanitary as his physio- 
 logical laboratory." * Finally, and most important of all, the 
 working day could then be reduced to a matter of four or five 
 hours, for there would no longer be any idlers, and the systematic 
 application of science would increase production tenfold. 
 
 The wonderful expansion of production under the influence of 
 applied science is a favourite theme of the anarchists. Kropotkin 
 has treated us to some delightful illustrations of this in his Conquest 
 
 1 Kropotkin, Mutual Aid, p. 17. 
 
 1 " In our opinion, and speaking strictly, there fa no such thing as a really 
 idle person. There are a few individuals, perhaps, who have not developed as 
 they might have done and whose activity has never found'a proper outlet under 
 existing conditions. In a society where everyone would be allowed to chooae 
 his own sphere of work the idlest people would be found doing something." 
 (J. Grave, La Societe future, pp. 277-278.) Kropotkin writes in the same strain 
 (Conquest of Bread, chapter on Objection*). 
 
 1 Kropotkin, Memoirs of a Revolutionist, p. 414 ; Conquest of Bread, p, 168. 
 The anarchists show no desire to expand the Phalanstere, but prefer the family 
 life. 
 
 Conquest of Bread, p. 204.
 
 636 THE ANARCHISTS 
 
 of Bread. He begins by pointing out the wonders already accom- 
 plished by market gardeners living in the neighbourhood of Paris. 
 One of these, employing only three men working twelve to fifteen 
 hours a day, was able, thanks to intensive cultivation, to raise 110 
 tons of vegetables on one acre of ground. Taking this as his basis, 
 he calculates that the 3,600,000 inhabitants in the departments of the 
 Seine and the Seine-et-Oise could produce all the corn, milk, vegetables, 
 and fruit which they could possibly need in the year with fifty-eight 
 half-days labour per man. By parity of reasoning he arrives at the 
 conclusion that twenty-eight to thirty-six days' work per annum 
 would secure for each family a healthy, comfortable home such as is 
 occupied by English working men at the present time. The same 
 thing applies to clothing. American factories produce on an average 
 forty yards of cotton in ten hours. " Admitting that a family needs 
 two hundred yards a year at most, this would be equivalent to fifty 
 hours' labour, or ten half-days of five hours each, 1 and that all 
 adults save women bind themselves to work five hours a day 
 from the age of twenty or twenty-two to forty-five or fifty. . . . 
 Such a society could in return guarantee well-being to all its 
 members." 2 Elisee Reclus shares these hopes. It seems to him 
 that " in the great human family hunger is simply the result of a 
 collective crime, and it becomes an absurdity when we remember 
 that the products are more than double enough for all the needs of 
 consumers." 3 
 
 Amid such superabundant wealth, in a world thus transformed 
 into a land of milk and honey, distribution would not be a very 
 difficult problem. Nothing really could be easier. " No stint or 
 limit to what the community possesses in abundance, but equal 
 sharing and dividing of those commodities which are scarce or apt 
 to run short." * Such was to be the guiding principle. In practice 
 the women and children, the aged and the infirm, were to come first 
 and the robust men last, for such even is the etiquette of the soup 
 kitchen, which has become a feature of some recent strikes. As to the 
 laws of value which are supposed to determine the present distribution 
 of wealth, and which the economists fondly believe to be necessary and 
 immutable, the anarchists regard them as being no concern of theirs. 
 The futility of such doctrines is a source of some amusement to them. 6 
 
 1 Conquest of Bread, p. 130. Ibid., p. 133. 
 
 1 filisee Reclus, V Evolution, etc., pp. 136-137. * Conquest of Bread, p. 83. 
 
 6 Cf. Grave, La Societe future, ch. 14, La Valeur. The anarchists frequently 
 complain that their ideas are generally mutilated by the economists. To read 
 this chapter is to realise the amount of intelligence which they display when 
 interpreting their adversaries' doctrines !
 
 REVOLUTION 637 
 
 IV: REVOLUTION 
 
 BUT how is the beautiful dream to be realised ? The way thither, 
 from the miserable wilderness wherein we now dwell to the Promised 
 Land of which they have given us a glimpse, lies through Revolu- 
 tion so the anarchist tells us. 
 
 A theory of revolution forms a necessary part of the anarchist 
 doctrine. In the mind of the public it is too often thought to be 
 the only message which the anarchists have to give. We must content 
 ourselves with a very brief reference to it, for the non-economic ideas 
 of anarchism have already detained us sufficiently long. 
 
 Proudhon is soon out of the running. We have already had 
 occasion to refer to his disapproval of violence and revolution. It 
 seemed to him that the anarchic ideal was for ever impossible apart 
 from a change of heart and a reawakening of conscience. But his 
 successors were somewhat less patient. To their minds revolution 
 seemed an unavoidable necessity from which escape was impossible. 
 Even if we could imagine all the privileged individuals of to-day 
 agreeing among themselves on the night of some fourth of August 
 to yield up every privilege which they possess and to enter the ranks 
 of the proletariat of their own free will, such a deed would hardly be 
 desirable. The people, says Reclus, with their usual generosity, 
 would simply let them do as they liked, but would say to their 
 former masters, " Keep your privileges." " It is not because 
 justice should not be done, but things ought to find a natural 
 equilibrium. The oppressed should rise in their own strength, the 
 despoiled seize their own again, and the slaves regain their own 
 liberty. Such things can only really be attained as the result of a 
 bitter struggle." l 
 
 It is not that Bakunin, Kropotkin, or their disciples revel in 
 bloodshed or welcome outbreaks of violence. Bloodshed, although 
 inevitably and inseparably connected with revolution, is none the 
 less regrettable, and should always be confined within the narrowest 
 limits. " Bloody revolutions are occasionally necessary because of 
 the crass stupidity of mankind ; but they are always an evil, an 
 immense evil, and a great misfortune ; not only because of their 
 victims, but also because of the pure and perfect character of the 
 
 1 L'Svolution, p. 154. Kropotkin says : " Those who wish the triumph of 
 justice, who really want to put the new ideas into practice, understand the 
 necessity for a terrible revolution which would sweep away this canker and 
 revive the degenerate hearts with its invigorating rush, bringing back habits of 
 devotion, of self-negation, and of heroism, without which society become* vile, 
 degraded, and rotten." (Parole* d'un Rtvolti, p. 280.)
 
 638 THE ANABCHISTS 
 
 aims in view of which they are carried out." l " The question," 
 says Kropotkin,* " is not how to avoid revolutions, but how to secure 
 the best results by checking civil war as far as possible, by reducing 
 the number of victims, and by restraining the more dangerous 
 passions." To do this we must rely upon people's instincts, who, 
 far from being sanguinary, '* are really too kind at heart not to be 
 very soon disgusted with cruelty." 8 The attack must be directed 
 not against men but against their position, and the aim must be not 
 individuals but their status. Hence Bakunin lays great stress upon 
 setting fire to the national archives, and to papers of all kinds 
 relating to title in property, upon the immediate suppression of 
 all law courts and police, upon the disbanding of the army, and 
 the instant confiscation of all instruments of production factories, 
 mines, etc. Kropotkin in the Conquest of Bread gives us a picture 
 of an insurgent commune laying hold of houses and occupying them, 
 seizing drapers' establishments and taking whatever they need, 
 confiscating the land, cultivating it, and distributing its products. 
 If revolutionists only proceeded in this fashion, never respecting the 
 rights of property at all (which was the great mistake made by the 
 Commune in its dealing with the Bank of France during the rising 
 of 1871), the revolution would soon be over and society would 
 speedily reorganise itself on a new and indestructible basis and with 
 a minimum of bloodshed. 
 
 But the tone is not always equally pacific. Bakunin during at 
 least one period of his life preached a savage and merciless revolu- 
 tion against privilege of every kind. At that time, indeed, he might 
 justly have passed as the inventor of the active propaganda which, 
 strenuously pursued for many years by a few exasperated fanatics, 
 had the effect of rousing public opinion everywhere against anarchism. 
 "We understand revolution," someone has remarked, "in the sense 
 of an upheaval of what we call the worst passions, and we can 
 imagine its resulting in the destruction of what we to-day term 
 public order." "Brigandage," it is remarked elsewhere, "is an 
 honourable method of political propaganda in Russia, where the 
 brigand is a hero, a defender and saviour of the people." 4 In a 
 
 1 Bakunin, in Sozial-politischer, p. 297. 
 
 z Memoirs of a Revolutionist, p. 297. 
 
 1 Kropotkin, quoted by Eltzbacher, p. 236. " Revolution, once it becomes 
 socialistic, will cease to be sanguinary and cruel. The people are not cruel. It is 
 the privileged classes that are cruel. People are ordinarily kind and humane, and 
 will suffer long rather than cause others any suffering." (Bakunin, CEuvres, vol. 
 ill, pp. 184-185.) The same idea runs through Sorel s Reflexions tur la Violence, 
 
 * Bakuuinu Sorial-poliiincher, pp. 335 and 353.
 
 REVOLUTION 639 
 
 kind of proclamation entitled The Principles of Revolution, which, 
 as some writers point out, ought not to be attributed to Bakunin, 
 but which at any rate appears to give a fair representation of his 
 ideas at this period of his life, we meet with the following words ; 
 " The present generation should blindly and indiscriminately destroy 
 all that at present exists, with this single thought in mind to destroy 
 as much and as quickly as possible." x The means advocated are 
 of a most varied description : ** Poison, the dagger, and the sword 
 . . . revolution makes them all equally sacred. The whole field is 
 free for action." a Bakunin had always shown a good deal of sym- 
 pathy for the role of the conspirator. In the Statutes of the Inter- 
 national Brotherhood, which prescribed the rules of conduct for a 
 kind of revolutionary association created by Bakunin in 1864, are 
 some passages advocating violence which are as bloodcurdling as 
 anything contained in NetchaiefP s famous Revolutionary Catechism. 
 It is difficult to find lines more full of violent revolutionary exaspera- 
 tion than that passage of the Statutes of the International Socialist 
 Alliance which forms the real programme of the anarchists. Since 
 it also seems to us to give a fairly faithful expression of Bakunin's 
 thoughts on the matter, it will afford a fitting close to our exposition. 
 " We want a universal revolution that will shake the social and 
 political, the economic and philosophical basis of society, so that of 
 the present order, which is founded upon property, exploitation, 
 dominion, and authority, and supported either by religion or 
 philosophy, by bourgeois economics or by revolutionary Jacobinism, 
 there may not be left, either in Europe or anywhere else, a single 
 stone standing. The workers' prayer for peace we would answer 
 by demanding the freedom of all the oppressed and the death of 
 everyone who lords it over them, exploiters and guardians of every 
 kind. Every State and every Church would be destroyed, together 
 with all their various institutions, their religious, political, judicial, 
 and financial regulations ; the police system, all university regula- 
 tions, all social and economic rules whatsoever, so that the millions 
 
 1 Snzial-p litischer, p. 361. The proclamation was addressed to Young Russia 
 just after the Tsar Alexander II had accepted tile challenge of Liberalism by 
 emancipating the serfs. But he immediately proceeded to revive the cruel 
 system of espionage and repression carried out by his father Nicholas I, and so 
 roused the indignation of the more advanced leaders, who thought that they had 
 in him a hero who would open the golden gates of liberty. Bakunin at the time 
 was under the influence of an unscrupulous fanatic of the name of Netchaieff, 
 whose savage and revolting passion for the execution of criminal deeds in the 
 name of revolution had completely captivated him. Later on he vigorously 
 reproved such acts, and declared that they ought to be suppressed. 
 
 Ibid.
 
 640 THE ANARCHISTS 
 
 of poor human beings who are now being cheated and gagged, 
 tormented and exploited, delivered from the cruellest of official 
 directors and officious curates, from all collective and individual 
 tyranny, would for once be able to breathe freely." * 
 
 A discussion of anarchist doctrine lies beyond our province. 
 Moreover, such sweeping generalisations disarm all criticism. Their 
 theories are too often the outbursts of passionate feeling and scarcely 
 need refuting. Let us, then, try to discover the kind of influence 
 they have had. 
 
 We are not going to speak of the criminal outrages which 
 unfortunately have resulted from their teaching. Untutored minds 
 already exasperated by want found themselves incapable of resisting 
 the temptations to violence in face of such doctrines. Such deeds, 
 or active propaganda as they call it, can have no manner of justifica- 
 tion, but find an explanation in the extreme fanaticism of the 
 authors. It is not very easy to attribute such violence to a social 
 doctrine which, according to the circumstances, may on the one 
 hand be considered as the philosophy of outrage and violence, and 
 on the other as an ideal expression of human fraternity and 
 individual progress. 
 
 The influence of which we would speak is the influence which 
 anarchy has had upon the working classes in general. Undoubtedly 
 it has led to a revival of individualism and has begotten a reaction 
 against the centralising socialism of Marx. Its success has been 
 especially great among the Latin nations and in Austria, where it 
 seemed for a time as if it would supplant socialism altogether. Very 
 marked progress has also been made in France, Italy, and Spain. 
 Is it because individuality is stronger in those countries than 
 elsewhere ? We think not. The fact is that wherever liberty 
 has only recently been achieved, order and discipline, even 
 when freely accepted, seem little better than intolerable signs of 
 slavery. 
 
 An anarchist party came into being between 1880 and 1895. But 
 since 1895 it seems to have declined. This does not mean that the 
 influence of anarchism has been on the wane, but simply that it 
 has changed its character. In France especially many of the older 
 anarchists have joined the Trade Union movement, and have occa- 
 sionally managed to get the control of affairs into their own hands, 
 and under their influence the trade unions have tried to get rid of 
 the soclialist yoke. The Confederation generate du Travail has for 
 its motto two words that are always coupled together in anarchist 
 1 Bakimin, Sozial-politischer, p, 332.
 
 REVOLUTION 641 
 
 literature, namely, " Welfare and liberty." It has also advocated 
 " direct action " that is, action which is of a definitely revolutionary 
 character and in defiance of public order. Finally, it betrays the 
 same impatience with merely political action, and would have the 
 workers concentrate upon the economic struggle. 
 
 The prophets of revolutionary syndicalism deny any alliance 
 with anarchy. But, despite their protests, it would be a compara- 
 tively easy matter to point to numerous analogies in the writings of 
 Bakunin and Kropotkin. Moreover, they admit that Proudhon, as 
 well as Marx, has contributed something to the syndicalist doctrine ; 
 and we have already noted the intimate connection which exists 
 between Proudhon and the anarchists. 
 
 The first resemblance consists in their advocacy of violence as a 
 method of regenerating and purifying social life. " It is to violence," 
 writes M. Sorel, " that socialism owes those great moral victories 
 that have brought salvation to the modern world." * The anarchists 
 in a similar fashion liken revolution to the storm that clears the 
 threatening sky of summer, making the air once more pure and calm. 
 Kropotkin longs for a revolution because it would not merely 
 renew the economic order, but would also "stir up society both 
 morally and intellectually, shake it out of its lethargy, and revive 
 its morals. The vile and narrow passion of the moment would be 
 swept aside by the strong breath of a nobler passion, a greater 
 enthusiasm, and a more generous devotion." * 
 
 In the second place, moral considerations, which find no place 
 in the social philosophy of Marx, are duly recognised by Sorel and 
 by the anarchist authors. Bakunin, Kropotkin, and Proudhon 
 especially demand a due respect for human worth as the condition 
 of every man's liberty. They also proclaim the sovereignty of reason 
 as the only power that can make men really free. M. Sorel, after 
 showing how the new school may be easily distinguished from official 
 socialism by the greater stress which it lays upon the perfection of 
 morals, proceeds to add that on this point he is entirely at one with 
 the anarchists. 8 
 
 Finally, their social and political ideals are the same. In both 
 cases the demand is for the abolition of personal property and the 
 extinction of the State. " The syndicalist hates the State just as 
 much as the anarchist. He sees in the State nothing but an unpro- 
 ductive parasite borne upon the shoulder of the producer and living 
 
 1 Reflexions sur la Violence, p. 263. 
 1 Paroles d"un Rcvolte, pp. 17-18. 
 
 Reflexions sur la Violence, p. 218. 
 v.p.
 
 642 THE ANARCHISTS 
 
 upon his substance." 1 And Sorel regards socialism as a tool in the 
 hands of the workers which will some day enable them to get rid of 
 the State and abolish the rights of private property. 2 " Free 
 producers working in a factory where there willbe no masters " * 
 such is the ideal of syndicalism, according to Sorel. There is also the 
 same hostility shown towards democracy as at present constituted 
 and its alliance with the State. 
 
 But despite many resemblances the two conceptions are really 
 quite distinct. The hope of anarchy is that spontaneous action and 
 universal liberty will somehow regenerate society. Syndicalism 
 builds its faith upon a particular institution, the trade union, which 
 it regards as the most effective instrument of class war. On this 
 basis there would be set up an ideal society of producers founded 
 upon labour, from which intellectualism would be banished. Anarchy, 
 on the other hand, contents itself with a vision of a kind of natural 
 society, which the syndicalist thinks both illusory and dangerous. 
 
 It has not been altogether useless, perhaps, to note the striking 
 analogy that exists between these two currents of thought which have 
 had such a profound influence upon the working-class movement 
 during the last fifteen years, and which have resulted in a remarkable 
 revival of individualism. 
 
 1 Berth, Let Nouveaux Aspects du Socialisme, p. 3. 
 
 2 Reflexions sur la Violence, introduction. 
 a Ibid., p. 237,
 
 CONCLUSION 648 
 
 CONCLUSION 
 
 CAN a history of economic doctrines really be said to have a con- 
 clusion ? 
 
 It is obviously impossible to regard the history of any science 
 as complete so long as that science itself is not definitely constituted. 
 This applies to all sciences alike, even to the more advanced 
 physics, chemistry, and mathematics, for example, all of which 
 are continuously undergoing some modification, abandoning in the 
 course of their progress certain conceptions that were formerly 
 regarded as useful, but which now appear antiquated, and adopting 
 others which, if not entirely new, are at least more comprehensive 
 and more fruitful. And not only is this true of individual sciences, 
 but it is equally true of the very conception of science itself. Pro- 
 gress in the sciences involves a modification of our ideas concerning 
 science. The savant, to-day as of yore, is engaged in the pursuit 
 of truth, but the conception of scientific truth at the beginning of 
 the twentieth century is not what it was at the beginning of the 
 nineteenth, and everything points to still further modifications of 
 that conception in the future. It is scarcely to be expected that 
 political economy, a young science hardly out of its swaddling- 
 clothes, will prove itself less mutable than the sciences already 
 mentioned. All that the historian is permitted to do is to point 
 to the distance already traversed, without pretending to be able 
 to guess the character of the road that still remains to be covered. 
 His object must be to appreciate the nature of the tasks that now 
 await the economist, and for this his study of the efforts put forth 
 in the past, to which the preceding chapters bear record, should 
 prove of some assistance. 
 
 A simple analogy will perhaps help us to gauge the kind of 
 impression left upon us by a study of a century and a half of economic 
 ideas. Imagine ourselves looking at a fan spread out in front of 
 us. At the handle the separate radii are so closely packed 
 together that they appear to form a single block. But as the eye 
 travels towards the circumference the branches gradually separate 
 from one another until they finally assume quite divergent posi- 
 tions. But their separation is not complete, and the more they 
 are spread out the easier it is to detect the presence of the tissue 
 that forms a common bond between the various sections of the fan 
 and constitutes the basis of a new unity which is quite as powerful, 
 if not perhaps more so, than the unity which results from their 
 superposition at the base.
 
 644 CONCLUSION 
 
 So it was with the Physiocrats, and still more with Adam Smith, 
 whose theory of political economy was a doctrine of such beautiful 
 simplicity that the human mind could grasp it at a single glance. 
 But as time went on and the science progressed it was realised 
 that the unity which characterised it at first was more apparent 
 than real. The contradictory theories which Smith had seemed able 
 to reconcile gave rise to new currents of thought, which tended to 
 drift farther and farther apart as they assumed a greater degree 
 of independence. Conflicting theories of distribution and of value 
 began to take the field, and quarrels arose over the relative merits 
 of the abstract and the historical method, or the claims of society 
 and the rights of the individual. With a view to self-defence, each 
 of these schools took its own path, which it followed with varied 
 fortune, including not a few setbacks. Each of them also sur- 
 rounded itself with a network of observations and inductions, thus 
 bringing into the common fund a wealth of new truths and useful 
 conclusions. All this has resulted in the gradual formation, around 
 each great current of economic thought, of a thick enveloping layer 
 of great resistance and of increasing extent, which constitutes a kind 
 of common scientific matrix uniting them together, and underneath 
 which may still be detected the salient features of the great systems. 
 What strikes us now is not the multiplicity of branches which go 
 to make up the fan, but the presence of the common tissue in 
 which, especially towards the circumference, the different radii 
 seem to lose themselves and to disappear altogether. In other 
 words, the sum total of acquired truths is the only legacy left us 
 by the various systems of the past, and this is the only thing that 
 interests us to-day. 
 
 Hence one result of so much discussion and polemical warfare 
 has been the discovery of some common ground upon which all 
 economists, whatever their social and political aspirations, can 
 meet. This common ground is the domain of economic science 
 a science that is concerned, not with the presentation of what ought 
 to be, but with the explanation and the thorough understanding 
 of what actually exists. The superiority of a theory is measured 
 solely by its explanatory power. It matters little whether its 
 author be Interventionist or Liberal, Protectionist or Free Trader, 
 Socialist or Individualist everyone must necessarily bow before 
 an exact observation or a scientific explanation. 
 
 But while these divergent schools tend to be lost in the unity 
 of a more fully comprehended science, we see the emergence of 
 other divisions, less scientific perhaps, but much more fertile so
 
 CONCLUSION 645 
 
 far as the progress of the science itself is concerned. It seems as 
 if a new kind of fan arrangement were making its appearance under- 
 neath the old. 
 
 This is obviously the case with regard to method, for example, 
 where the separation between pur and descriptive economics, or 
 between the theoretical systematisation and the mere observation 
 of concrete phenomena, is becoming very pronounced. Both kinds 
 of research are equally necessary, and demand different mental 
 qualities which are very seldom found combined in the same person. 
 Economic science, however, cannot afford to dispense either with 
 theory or observation. The desire to seize hold of the chain of 
 economic phenomena and to unravel its secret connections is as 
 strong as ever it was. On the other hand, in view of the trans- 
 formation and the daily modifications which industry everywhere 
 seems to be undergoing, it is useless to imagine that we can dispense 
 with the task of observing and describing these. The two methods 
 are developing and progressing together, and the violent quarrels 
 as to their respective merits appear to be definitely laid at rest. 
 
 Accordingly what we find is a segmentation of economic science 
 into a number of distinct sciences, each of which tends to become 
 more or less autonomous. Such separation does not necessarily 
 imply a conflict of opinion, but is simply the outcome of division 
 of labour. At the outset of its career the whole of political economy 
 was included within the compass of one or two volumes, and all 
 those facts and theories of which an economist was supposed to 
 have special knowledge were, according to Say and his disciples, 
 easily grouped under the three heads of Production, Consumption, 
 and Distribution. But since then the science has been broken 
 up into a number of distinct branches. The term " physics," 
 which was formerly employed as a name for one of the exact 
 sciences, is just now little better than a collective name used to 
 designate a number of special sciences, such as electricity, optics, 
 etc., each of which might claim the lifelong devotion of the 
 student. Similarly "political economy " has just become a vague 
 but useful term to denote a number of studies which often differ 
 widely from one another. The theory of prices and the theory of 
 distribution have undergone such modifications as entitle them 
 to be regarded as separate studies. Social economics has carved 
 out a domain of its own and is now leading a separate existence, 
 the theory of population has assumed the dimensions of a special 
 science known as demography, and the theory of taxation is now 
 known as the science of finance. Statistics, occupying the border-
 
 646 CONCLUSION 
 
 land of these various sciences, has its own peculiar method of pro* 
 cedure. Descriptions of the commercial and industrial mechanism 
 of banks and exchanges, the classification of the forms of industry 
 and the study of its transformations are related to political economy 
 much as zoology, descriptive botany, and morphology are related 
 to the science of natural history. And although a different name 
 must not always be taken as evidence of a different science, there 
 is little doubt about the existence of the separate sciences already 
 enumerated. The difficulty rather is to grasp the connection 
 between them and to realise the nature of that fundamental unity 
 which binds them all together. 
 
 But there still remains a wide region over the whole of which 
 divergences exist and conflicts continue, and where, moreover, 
 they will probably never cease. This is the realm of social and 
 political economics. 
 
 Despite the gradual rise of a consensus of scientific opinion among 
 economists, the divergences concerning the object that should be 
 pursued and the means employed to achieve that end are as pro- 
 nounced as ever. Each of the chief doctrines of which we have given 
 an exposition in the course of this work has its body of representa- 
 tives. Liberals, Communists, Interventionists, State and Christian 
 Socialists continue to preach their differing ideals and to advocate 
 different methods of procedure. On the question of the science 
 itself, however, they are all united. The arguments upon which 
 they base then* contentions are largely borrowed from sources 
 other than scientific. Moral and religious beliefs, political or 
 social convictions, individual preference or sentiment, personal 
 experience or interest these are among the considerations deter- 
 mining the orientation of each. The earlier half of the nineteenth 
 century witnessed the science of political economy making com- 
 mon cause with one particular doctrine, namely, Liberalism. The 
 alliance proved most unfortunate. The time when economic 
 doctrines were expected to lend support to some given policy is 
 for ever gone by. But the lesson has not been lost, and everybody 
 realises that nothing could be more dangerous for the development 
 of the science than to link its teaching to the tenets of some 
 particular school At the same time the science might conceivably 
 furnish valuable information to the politician by enabling him to 
 foresee the results of such and such a measure ; and it is to be hoped 
 that such predictions, all too uncertain as yet, may, accordingly, 
 become more precise in the future. 
 
 We cannot, then, suppose that the various currents of opinion
 
 CONCLUSION 647 
 
 to-day known as Liberalism, Socialism, Solidarism, Syndicalism, 
 and Anarchism are likely to disappear in the immediate future. 
 They may be given other names, perhaps, but they will always 
 continue to exist in some form or other, simply because they 
 correspond to some profound tendency in human nature or to 
 certain permanent collective interests which alternately sway man- 
 kind. 
 
 We cannot pretend to regret this. Uniformity of belief is an 
 illusory ideal, and from a purely practical point of view we should 
 be sorry to see the day when there will be no conflict of opinion 
 even about those causes or those methods which we hold most dear. 
 
 We may sum up our conclusions as follows : From a scientific 
 standpoint unity is likely to become more pronounced and collabora- 
 tion much more general than in the past, thanks to the adoption 
 of more scientific methods. 
 
 In the domain of practice the variety of economic ideals and 
 the conflict between them is likely to continue. 
 
 Such, it seems to us, will be the spectacle presented by the political 
 economy of the future. 
 
 Thus the impression obtained from a perusal of this history of 
 economic doctrines is, if not somewhat melancholy, at least sufficient 
 to justify a certain degree of humility. So many doctrines that we 
 thought definitely established have disappeared altogether, and so 
 many that we thought completely overthrown have been rehabili- 
 tated. Those that die do not seem altogether dead, somehow, and 
 those that are revived are not quite the same. 
 
 What the science and its teachers need most of all is full and 
 complete liberty liberty to follow whatever method suits them 
 best and to accept whatever theory attracts them most ; liberty to 
 choose their own ideals and to formulate their own systems for 
 systems and ideals, by bringing sentiment into play, may occasionally 
 prove very stimulating even to scientific research. Nothing could 
 be more harmful than the dogmatism which the science has only 
 recently escaped. In this matter, unfortunately, no school and no 
 country is entirely above criticism. 
 
 Sismondi used to complain that Liberalism, after it had achieved 
 its triumph, had attempted to convert political economy into a 
 system of orthodoxy. But Liberalism is not the only doctrine 
 against which a similar charge might be brought. It is only a 
 few years since Schmoller, the chief of the German Historical 
 school, in an address delivered as Rector of Berlin University, 
 declared that neither Marxians nor the disciples of Smith could in
 
 648 CONCLUSION 
 
 future be regarded as accredited teachers of the science. Does the 
 German Historical school really wish to revive that ostracism from 
 which it was itself one of the first to suffer? Neither can we, as 
 Frenchmen, pride ourselves upon having been less exclusive. The in- 
 difference or even the actual hostility with which the Historical 
 school was for a long time treated does very little credit to us. 
 Moreover, that same intolerance of which " bourgeois economics " 
 was so justly accused, is it not to be met with in an equally extra- 
 vagant fashion in the socialism of to-day ? The ultra-dogmatism 
 of the Liberal school can be easily paralleled from the history of 
 Marxism and the frantic efforts made by some socialists to prevent 
 other Marxians making a breach in the doctrine. If there is one 
 lesson more than another that emerges from a study of the 
 history of economic doctrines it is the necessity for a more critical 
 spirit and a more watchful attitude, always ready to test any new 
 truths that present themselves, to extend a hearty welcome to 
 every fresh observation or new experience, thus enabling the science 
 to enlarge its scope and gain a deeper significance without sacrificing 
 any of its essential tenets.
 
 INDEX 
 
 In the longer paragraphs a number standing alone, and separated by a 
 
 semicolon from the preceding sentence, indicates a reference of smaller 
 
 importance. Such numbers are, of course, not connected with the sentence 
 
 preceding them. 
 
 "ABBOTS' PARTY," 608 
 
 Ability, rent of, 549-552, 682, 583 
 
 " Abstinence," 350 
 
 " Abuse of rights," 606 
 
 Act of Union of 1707, Adam Smith on, 
 266 
 
 Act of Union of 1800, 104 
 
 Adamson, Professor, 529 . 
 
 Adler, G., 615 n. 
 
 Aftalion, A., 184 n. 
 
 Agneta Park, 255 
 
 Agoult, Mme. d', 292 n. 
 
 Agriculture, the sole source of the " net 
 product," 12, 14 ; the Physiocratio in- 
 fluence upon the conception of, 17 ; 
 the inherent distinction between in- 
 dustry and, 17-18 ; workers in, 
 ignored by the Physiocrats, 22 n. ; 
 Condillac on, 49 n. ; viewed by 
 Quesnay as the source of all wealth, 56 ; 
 Smith and the superior productivity 
 of, 64, 90, 112; Smith's admiration 
 for, 67-68; Buchanan on, 143; the 
 future of, 155-157 ; Last and Protection 
 and, 276 and n. ; Carey and Protection 
 and, 283 
 
 Agriculturist, the, predominant import- 
 ance of, in the Physiocratic hierarchy 
 of classes, (Jl 
 
 Aix-la-Chapolle, 281 n. 
 
 Alexander II, Tsar, 639 . 
 
 Algeria, 339 n. 
 
 Allgemeiner deutscher Arbeiterverein, 
 432 
 
 Allix, M., 117 n., 207 n. 
 
 AUon Locke, 504 
 
 America see United States 
 
 Anarchism, vii, XT ; the development of, 
 516; a fusion of Liberal and socialist 
 doctrines, 614; and the State, 615, 
 623-624, 625, 626, 627 ; Proudhon the 
 father of, 615 ; indebtedness of, to 
 Greek philosophy, 615 n. ; philosophical 
 and literary anarchism, 615, 619 ; 
 Stirner and the cult of the individual, 
 615-619; and syndicalism, 619 n. ; 
 Bakunin, 619-620; Kropotkin, 621- 
 622 ; Llio principles of social and political 
 anarchism, 622-629 ; and the in- 
 dividual, o-^-O-ii; and humanity, 623 ; 
 
 and government, 624-627 ; and pro- 
 perty, 626-627; and marriage, 627; 
 and free contract, 627-628 ; and 
 reason and science, 628-629, 641 ; the 
 anarchist conception of society, 629- 
 636 ; criticism of the social ideal, 634- 
 636 ; and revolution, 637-640, 641 ; 
 ita influence, 640-642; and in- 
 dividualism and socialism, 640 ; and 
 syndicalism, 641 ; the moral element 
 in the doctrine, 641 
 
 Anarchists, and the cult of the " noble 
 savage," 7 
 
 Anarchy, Proudhon and, 311 n. 
 
 Anderson, J, 148 n.-149 n. 
 
 Andler, C., 321 n., 416 n., 435 n. 
 
 Antoine, Father, 499 n. 
 
 Antonelli, ., 251 n., 537 n. 
 
 Argenson, Marquis d', 11 n. 
 
 Aristotle, 401 ; on value, 461 n. ; 590 . 
 
 Arkwright, R., 65 
 
 Ashley, W. J., T, vi, xi, 386 n., 387, 
 391 n., 406 
 
 Association, 231, 233 ; Robert Owen and, 
 237 ; Blano and, 256, 257, 260, 263 ; 
 Buchez and, 258 ; Leroux and, 263 ; 
 Cabet and, 263-264; Proudhon and, 
 297 and nn., 315 n. ; 300 ; the French 
 Liberal school and, 325 ; Stuart Mill 
 and, 370 ; Le Play and, 491 n. ; the 
 Christian Socialists and, 504-506, 607 n.; 
 Kingsley on, 505 n. ; solidarity and, 
 602, 613-614 ; and exchange, 613 n. 
 
 Associative socialists, 227, 231-235; 
 and the Physiocrats, 232-233; and 
 competition, 233-234; Blano and, 263 
 
 Au bur tin, F., 487 n. 
 
 Auouy, M., 316 n. 
 
 Aulard, F., 200 . 
 
 Aupetit, J. J., 529 n., 530 H., 537 ., 
 539 n., 643 n. 
 
 AuspitK, Herr, 529 n. 
 
 Austria, and the Zollverein, 268 ; Social 
 Catholicism in, 490 n. ; anarchism in, 
 640 
 
 Austrian school, XT, 48, 397n., 521, 522 o, 
 541, 644 and n., 581 
 
 Avarice* foncieres, 22, 23 ., 25 
 
 Avancts touvcraines, 38 n. 
 
 Aveuel, M. d', 546 
 
 0441
 
 650 
 
 INDEX 
 
 BABETTF, F., 200 and nn., 256, 436 n. 
 
 " Back to the land," in Fourier's sys- 
 tem, 251-252 ; Tolstoy and, 513 
 
 Baden, 268 n. 
 
 Baden, the Margrave of (AbbeRoubaud), 
 and the Physiocrats, 4 n., 5 ; the 
 Physiocratic experiment of, 44 
 
 Bakunin, M., 449 n., 459 n., 615, 616, 
 619-620, 621. 622, 623, 624, 626 and 
 nn., 627, 628, 630, 631 n., 634 ., 
 637-640, 641 
 
 14 Balance of trade " theory, Mercier de 
 la Riviere on, 31 ; David Hume and, 
 53 ; Adam Smith and, 98 ; Rioardo 
 and, 163-165 ; 285 ; List and, 285 n. 
 
 Bank Act, English, of 1822, 166; of 
 1844, 166 
 
 Bank of Amsterdam, 85 
 
 Bank, Bonnard's, 316 .-317 n. 
 
 Bank of England, 166 
 
 Bank of Exchange see Exchange Bank 
 
 Bank of France, 305, 311, 312, 314, 
 638 
 
 Bank-notes, Adam Smith and, 85, 96 ; 
 Ricardo and, 165-167 : and Proud- 
 hon's exchange notes, 311-312 
 
 Banks, Adam Smith and, 85, 96 ; 
 Ricardo and, 138, 139 n., 163, 167; 
 in the Saint-Simonians' system, 218- 
 219 and n., 226 ; Fourier's co-operative, 
 251 n. ; influence on crises in the 
 money market, 285 n. ; Count Mollien 
 and, 314 ; the Raiffeisen agricultural 
 credit banks, 503 n. 
 
 Barone, Signer M., 529 n. 
 
 Barres. A. M., 254 n. 
 
 Bastiat, F., xv, 92, 93, 115, 117, 118 n., 
 146 n., 156, 160, 163 n., 223 n., 277 n. ; 
 and the Classical school, 322 ; and 
 Protection, 323, 328 n., 329; 324; 
 and liberty, 324 n. ; and State inter- 
 vention, 325 n., 408-409; and the 
 Liberal school, 327 ; Carey and, 327- 
 328 ; his career, 328 n. ; and socialism, 
 328 n., 329 ; criticism of, 329 ; esti- 
 mate of his work, 329 and n. ; and 
 individualism, 330 ; his theory of 
 universal harmony, 330-346 ; and the 
 Providential order, 331 ; his theory of 
 service- value, 332-335 ; and Proud- 
 hon, 333 n.-334 n. ; his law of free 
 utility, 335-337 ; and the proprietor, 
 336; and rent, 337-340, 425, 545, 
 546 ; and the relation of profits to 
 wages, 340-342, 427 ; on the sub- 
 ordination of producer to consumer, 
 342-343; and solidarity, 344-345; 
 363 n. ; and international exchange, 
 365 ; and Optimism, 377 ; and the 
 State, 438 n., 439; 459 n., 616, 572, 
 589; his fable, The Blind and the 
 Paralytic, 608 ; 617, 624 ; and govern- 
 ment and society, 631 n. 
 
 Baudeau, the Abbe, on the Physiocrats, 
 
 3 n. ; a member of the Physiocratic 
 school, 4 n. ; on the " natural order," 
 10 ; on the productivity of agricul- 
 ture, 13 n. ; on industry and com- 
 merce, 13 ; on the Tableau economiqw, 
 18 n., 20 n. ; on the dependence of the 
 productive classes on the landed pro- 
 prietors, 22 n. ; OB the landed pro- 
 prietors as nobility, 22 n. ; and the 
 origin and justification of private 
 property, 22 ; on the avances foncieres, 
 23 n., 25 n. ; on the duties of landed 
 proprietors, 25 ; on the regard to 
 be paid to the peasants, 26 ; on use- 
 less laws, 33 n. on the Greek states, 
 34 n. ; on the sovereignty of the 
 people, 36 n. ; on the supreme will, 
 36 n. ; on education, 37 ; on inter- 
 national antagonism, 37 n on the 
 three errors of States, 37 n.-38 n. ; on 
 avances gouveraines, 38 n. ; on the 
 revenue from land, 40 n. ; on the 
 sovereign, 41 n. ; on the gross and net 
 revenue, 43 n. ; 118 n. 
 
 Bauer, Bruno, 616 
 
 Bauer, Professor S., 19 nn. 
 
 Bavaria, Tariff Union between Wurtem. 
 berg and, 268 
 
 Bazard, St. A., 201 n., 211, 212, 213 
 
 Bebel, F. A., 437 
 
 Bentham, J., 96 n., 686 
 
 Beranger, J. P. de, 331 
 
 Berens, E., 547 n. 
 
 Bergson, H., 403 n. 
 
 Bernstein, E., 473, 474 n., 475 and n., 
 479, 480 n. 
 
 Berth, E\, 479 n., 619 n., 642 n. 
 
 Berthelemy, H., 569 n. 
 
 Biological method, 544 n. 
 
 Biological Naturalism, the school of, 
 593 n. 
 
 Bismarck, Prince, and Lassalle, 414 ; 
 436 ; and State Socialism. 445 
 
 Blanc, Louis, 169, 198, 227, 235 ; quality 
 of his work, 255-256 ; and competi- 
 tion, 256-257, 260 ; and association, 
 257-261, 263 ; and interest, 259-260 ; 
 a pioneer of State Socialism, 261, 262, 
 414 ; and State intervention, 262, 
 414 ; 290 ; Proudhon and, 296 n. ; 
 300 ; and the Revolution of 1848, 300- 
 306 ; Lassalle and, 434 ; 599, 607 n. 
 
 Blanqui, A., 197, 295 
 
 Blind and the Paralytic, The, Bastiat'a 
 fable, 608 
 
 Block, M., 375 
 
 Bohm-Bawerk, E. von, on capital, 71 n. ; 
 on Adam Smith's conception of the 
 determinant of value, 78 n.-lQ n.; 150; 
 and Bastiat, 329 ; 474 n., 616 ; on the 
 Classical school, 518 n. ; on wages, 520; 
 522 n. ; on final utility, 523 n. ; hia 
 theory of interest, 530, 540; 541 ., 
 583
 
 INDEX 
 
 651 
 
 Boisguillebert, P., 29 n., 33 n., 54 
 
 Bon prix, the, 15-16, 29, 45 
 
 Bonar, J., 52 n., 121 
 
 Bonnard's Bank, 316 n.-317 n. 
 
 Booth, C., 388 
 
 Bortkevitch, V., 529 n. 
 
 Bougie, C., 594 n. 
 
 Bourgeois, L., 593-599, 603 nn., 605 n. 
 
 Bourgin, H., 201 n., 246 n., 265 n. 
 
 Bourguin, M., 231 n., 320 n., 449 n. 
 
 BourDville, 255, 513 a. 
 
 Bouvier, M., 538 n. 
 
 Boyve, M. de, 508 n. 
 
 Brandes, G., 432 n, 
 
 Brants, V., ri 
 
 Braun, K., 368 
 
 Bray, J. F., 315, 316 
 
 "Brazen law of wages," the, 361, 426, 
 
 433, 453 n., 541 
 Brentano, L., 386, 389 n. 
 Briand, M., 251 n. 
 Bright, John, 366 
 
 Brissot de Warville, J. P., 200 ., 292 . 
 Brodnitz, Heir, 445 n. 
 Brook Farm, 255 n. 
 Brunetiere, F., 485 n. 
 Brunhes, Mmo., 510 n. 
 Brunswick, 268 n. 
 Buccleuoh, Duke of, and Adam Smith. 
 
 51 n. 
 
 Buchanan, J., 52 n., 143 
 Biicher, K., 252 n., 271 ., 386, 397 
 Bucher, L., 414 
 Buchez, P., 258, 259, 306, 496 and n., 
 
 505 
 
 Buffon, the Comte de, 121, 523 n. 
 Buisson, M., 249 n., 603 n. 
 Buonarotti, F., 256 and n. 
 Bureau, P., 493 n., 495 . 
 Buret, A. E., 197 
 Burgin, M., 95 n. 
 
 CABET, , 233, 235, 246, 263-264, 290, 
 296 ., 297 
 
 Cairnes, J. E., 329, 374-375, 387 
 
 Calvin, John, 503 n. 
 
 Cameralists, 110, 383 
 
 Campanella, T., 200 n., 246 
 
 Cannan, Dr. E., v, 52 n., 56 n., 71 n., 
 79 n., 145 and n., 427 n., 549 n. 
 
 Canonists, the, 110 
 
 Cantillon, R., 46 
 
 Capital, Adam Smith and, 56, 71-73, 89- 
 91 ; Ricardo and the identification of, 
 with labour, 149-150 ; the law of the 
 concentration of, 187; Saint-Simon 
 and 206, 214; the Saint-Simonians 
 and, 214 ; Proudhon and, 293, 308-309, 
 310, 313-314 ; Bastiat and, 340-342 ; 
 Colson and, 342 n. ; Dunoyer on, 347 n.; 
 Senior and, 350 ; Marx and, 455-465 ; 
 Marx's law of the concentration of, 
 459^65, 475-476 ; the socialist's con- 
 ception of, 459-460; the Marxian 
 
 school and, 467 n. ; the productivity 
 theory of, 502 ; final utility and, 
 528 ; the rent of, 548-549 n., 558 n. ; 
 the rent of fixed, 556, 583; Henry 
 George on the relation of labour to, 
 564-565 ; co-operators and, 605 n. 
 
 Capitalism, Marx and, 461-462 
 
 Carey, H. C., and trade, 28 ; and rent, 
 115, 338-340,425, 545, 546; 156, 278; 
 and Protection, 282-284; and Free 
 Trade, 282-283 ; and Lost, 284 ; 289 
 n. ; and the Optimistic school, 327 ; 
 and Bastiat, 327-328, 340; and the 
 Ricardian theory of value, 332; 333 
 n. ; and Bastiat's profits theory, 342 
 n. ; and solidarity, 345 ; his popula- 
 tion theory, 346 ; 549, 572 
 
 Carey, M., 278 
 
 Carlyle, T., 196, 511, 512 n, 
 
 Camot, H., 212, 213 a. 
 
 Carnot, S., 367 n. 
 
 Carrel, A., 212 
 
 Cartwright, E., 65 
 
 Carver, J. N., 522 n. 
 
 Catherine, Empress of Russia, and the 
 Physiocrats, 5 ; and Mercier de la 
 Rividre, 34 
 
 Catholic Church, Roman, 485 
 
 Cataolic Socialism, 495 
 
 Catholicism, and the economic order, 
 483 n., 484 n. ; Social Catholicism, 
 495-503 
 
 Cauwes, P., 285 n. 
 
 Cazamian, L., 510 n. 
 
 Chain bre consultative des Associations da 
 Production, 257 n. 
 
 Channing, W. E., 255 n., 504 n. 
 
 Chapelier, Le, decree of, 233 n. 
 
 Chaptal, J. A., 112, 277 n., 278 n., 281 n. 
 
 Charity, solidarism distinguished from, 
 614 n. 
 
 Charlety, S., 226 n. 
 
 Charmont, M., 607 n. 
 
 Charter of 1814, 205 
 
 Chartist movement, the, 235 
 
 Chatelain, M., 60 n., 369 n., 415 n., 427 n. 
 
 Cherbuliez, A. &, 376, 541 n. 
 
 Chevalier, M., 212, 213, 226, 289 n., 366, 
 375, 411-412, 444 
 
 Child, Sir J., 54 
 
 Chrematistic school, 178-179 
 
 Christian Social Union, 506 n. 
 
 Christian Socialism (Social Protestantism), 
 xv, 378, 495, 503-509 ; origin of the 
 movement, 503-504 ; and association, 
 504-506 ; and moral reform, 505, 509 ; 
 and private property, 506 ; the move- 
 ment in America, 506 ; in Germany and 
 in Switzerland, 507 ; in France, 508 ; 
 and solidarity, 508 ; and individualism, 
 509 
 
 Christian Socialists, 111, 196, 370, 483 ; 
 and socialism, 483-485 ; and Classical 
 Liberalism, 484 ; and the " naturaj
 
 652 
 
 INDEX 
 
 Christian Socialists Conti 
 
 order," 484 ; and Marx's collectivism, 
 485 ; and State Socialism, 485 ; their 
 doctrines, and their influence, 486 ; and 
 economic theory, 515 
 
 Christianity, economic doctrines inspired 
 by, 483-514 
 
 Christliche Gewerkvereine, 501 
 
 Civitas Solis, 246 
 
 Clark, J. B., 522 n., 527, 542 n., 552, 564 . 
 
 55 Class war," 465 n., 471, 478, 479, 481- 
 482 
 
 Classical school, doctrine of, XT; the 
 Physiocratic doctrine and, 10 ; Last 
 
 and, 169 ; and the critical school, 170 ; 
 Sismondi and, 174, 177, 179, 195-196 ; 
 and machinery, 180, 182 ; and over- 
 production, 181 ; resemblance oi doc- 
 trines of, to those of Marx, 181 ; and 
 competition, 182 ; and the be ne licence of 
 the spontaneous economic forces, 230 ; 
 and Free Trade, 264 ; List and, 289, 290; 
 severance of, into English and French 
 schools, 322 ; apogee and decline of, 
 348-376 ; Senior and, 349-350 ; spread 
 of the doctrines of, 351-352 ; Stuart 
 Mill and, 352, 353, 354, 368, 374 ; and 
 natural laws, 354-366; called the 
 Individualist school, 355 ; and in- 
 dividualism, 355-356 ; and liberty, 
 356 ; definition of, 356 n., 357 n. ; 
 and laissez-faire, 357 ; and inter- 
 national exchange, 363 ; doctrines of, 
 in the middle of the nineteenth 
 century, 366-367 ; and peasant pro- 
 prietorship, 371 n. ; decline of the 
 Classical doctrine, 378 ; Koscher and 
 flildebrand and, 383-385 ; Knies and, 
 384 ; the Historical school's criti- 
 cism of, 385, 389-398, 517 ; and self- 
 interest, 393-394 ; and the deductive 
 method, 395-396; 407; Hermann 
 and, 410-411 ; and distribution, 422 ; 
 State Socialism and, 438 ; and 
 Marxism, 467, 472 ; Carlyle and, 511 ; 
 the Hedonists and, 518-521, 539, 541 n., 
 544 ; and rent, 520, 547 ; and price, 
 520; and value, 530 ., 558 
 
 Clavieres, , 107 
 
 Cobden, R., 280, 323, 328 ., 360, 366, 
 375 
 
 Colbert, J. B., 11 n., 280 
 
 Colbertian system, Physiocracy antago- 
 nistic to, 29 ; and agriculture and 
 industry, 30 n. ; 97, 178 
 
 Colins, Baron, 155, 560 
 
 Collectivism, xv ; the Saint-Simonians 
 and, 201, 202, 211, 218-221, 231 ; of 
 Marx, 250, 459 n., 485 ; development 
 of, 378 ; origin of the term, 459 n. , 
 and property, 464 and n. ; and 
 Christian Socialism, 509 ; the working- 
 class ideal, 516, 579 ; the Fabian, 581 ^ 
 Kropotkin and, 627 
 
 Collinsists, 465 n. 
 
 Colson, L. C., 342 n., 427 n., 537 . 
 
 Combination Laws, 361 
 
 Commerce, regarded as unproductive by 
 the Physiocrats, 13 
 
 Communism, Sismondi and, 194 ; Marx 
 and, 221, 459 n., 464; Cabet and, 264 ; 
 Proudhon and, 298, 300 ; Bastiat and, 
 337 ; Stuart Mill and, 353, 367 ; 
 Buskin and, 513 ; Tolstoy and, 613 ; 
 Kropotkin and, 627 
 
 Communists, the, Proudhon and, 296 
 and n. 
 
 Competition, Sismondi and, 182-184, 186, 
 193 n., 198 ; Adam Smith and, 182 ; 
 the Associationists and, 233-234 ; 
 Robert Owen and, 240 ; Blanc and, 
 256-257, 260; Ollivier on, 325; Stuart 
 Mill on, 353, 358 ; free, the Classical 
 school and, 358, 544; Cairnes and, 
 375; the State Socialists and, 440; 
 F. D. Maurice and, 504 n. ; free, 
 the Hedonists and, 518, 541-542, 
 605 n. ; free, Walras and, 541-542; 
 543 
 
 Composite rent, 652 
 
 Comptabilisme sociaie, 242 
 
 Comte, A., 36 n., 201 n., 203 and n., 211 ; 
 and Saint-Simon, 222 ; and the 
 spontaneity of the " natural order," 
 331 ; 335, 352, 367, 374 n.; and the 
 Historical method, 404-405; and the 
 equality of men, 486 n. and solidarity, 
 589, 601 n. ; and the sociological 
 analogy, 590 n. ; 595 
 
 Comte, C., 207 
 
 Condc-sur-Vesgres, Fourier colony at, 
 255 n 
 
 Condillao, B. de, xiii, 46, 47, 48-60, 74, 
 75, 109 and n., 117, 118 n., 523 n. 
 
 Condorcet, M. C., 122, 224 
 
 Confederation general du Travail, 480, 
 502,640 
 
 Congress of Catholic Circles, 498 n. 
 
 Considerant, V., 234 n., 255, 264, 296 n., 
 301, 303, 304, 599, 607 n. 
 
 Consumer, Bastiat and the subordination 
 of producer to, 342-343 
 
 Consumer's rent, 527 n. 
 
 Consumers and social reorganisation, 
 605 n. 
 
 Consumption, the Psychological school 
 and, 526-52 7; the Mathematical school 
 and, 630 
 
 Continental Blockade, the, 266, 279 
 
 Cooper, W., 244 
 
 Co-operation, Fourier and Owen and, 
 234, 257 ; in Fourier's Phalanstere, 
 246-252, 257; Blanc and, 257-263, 
 306; Buchez and, 258 ; Proudhon and, 
 315 ; Stuart Mill and, 353, 370 ; the 
 Social Catholics and, 496-500 ; F. D. 
 Maurice and, 504 n. ; the Chris, 
 tian Jbocialisto and, 505, 506 ; Tomy
 
 INDEX 
 
 653 
 
 Fallot and, 508 n. ; solidarity and, 
 588, 604 ; the iScole de Nimes and, 
 605 n. ; co-operators and capital, 605 n. 
 
 Co-operative societies, beginnings of, 
 243; Robert Owen and, 243-244, 
 504 ; character of, 250 n., 504-505 
 
 Co-partnership, 251 n. 
 
 Corn, high price of, in England, in the 
 earljr nineteenth century, 145-146 
 
 Corn Laws, English, Sismondi and, 175 ; 
 269, 277, 280, 354, 361, 366 
 
 Corporative associations, the Social 
 Catholics and, 496-500, 501 and n. 
 
 Cossa, L., ri, 367, 376 
 
 Cost of production theory, Adam 
 Smith's, 78-79, 80 
 
 Courcelle-Seneuil, J. G., 118 n., 316 n., 
 317 n., 375, 641 n. 
 
 Cournot, A., r, 265 n., 349, 360 n., 412- 
 413,420 n./444, 519, 520, 529 n., 531 nn. 
 
 Coux, de, 483 n. 
 
 Credit, Enfantin on, 213 n., 226 n. ; the 
 Saint-Simonians and, 226; Proudhon 
 and, 313 n., 314 
 
 Cremieux, H. J., 303 
 
 Crises, J. B. Say and, 115-117; in- 
 dustrial, in England, 172 ; Sismondi 
 and, 173, 190-192, 426 ; Robert Owen 
 and, 239 ; Rodbertus and, 426 ; 
 Mane and, 462-463, 478-479 ; Henry 
 George and, 566 
 
 Croce, B., 474 n. 
 
 Crompton, S., 65 
 
 Cunningham, W., Y, vi, 387 
 
 Curmond, M., 13 n. 
 
 DARTMON, A., 316 n. 
 
 Darwin, Charles, his debt to Malthas, 
 121 ; the French Liberal school and 
 his doctrine of the survival of the 
 fittest, 326 ; Kidd and the Darwinian 
 theory, 485 n. ; Kropotkin and, 621 
 
 Dechesne, M., 498 n. 
 
 Declaration of the Rights of Man, 233 
 
 Deductive method, the, 387, 395-398 
 
 Deherme, G., 587 n. 
 
 Demand and supply, Adam Smith and, 
 73-74, 80-85, 89 ; the law of, of the 
 Classical school, 359-360 ; the Hedon- 
 ists and, 519-520 
 
 Demand, price and, 519-520 
 
 Demography, 121, 645 
 
 Demolins, E., 494 and n., 495, 608 n. 
 
 Denis, Professor H., ri ; on Physio- 
 cracy, 2 n., 8 n. ; on the Tableau 
 tconomiquf, 19 and n. ; 140 n., 141 n., 
 164 n., 184 n., 404 
 
 Denis, M., 242 n. 
 
 Descartes, 629 
 
 Deschamps, M., x n., xi n. 
 
 Despotism, the Physiocrats and, 36-37 
 
 Destutt d& Tracy. 118 n. 
 
 Dictionnaire d 1 Economic polilique, 354, 
 353 
 
 Diehl, K., 317 n. 
 
 Differential rents, 546-558 
 
 Discount, in Proudhon's Exchange Rank 
 scheme, 310 n., 313 ; normal, 312 
 
 Distribution, the Physiocrats and, 18, 
 21, 113, 114; Adam Smith and, 55, 
 80, 93, 113, 114, 228; J. B. Say and, 
 93, 113-114, 228; Ricardo and, 114, 
 139-140, 162-163, 228 ; Sismondi and, 
 177-178, 185, 186, 198; the Saint- 
 Simonians and, 229 ; Fourier and, 245 ; 
 Vidal and, 259 ; Stuart Mill and, 368, 
 369; Rodbertus and, 421-429, 430- 
 431 ; State Socialism and, 443-444 ; 
 the Hedonists and, 527, 529-530, 541 ; 
 Henry George and, 565 n.-566 n. 
 Mr. and Mrs. Webb and, 683; the 
 anarchists and, 636 ; development of 
 the theory, 645 
 
 Distributive societies, 604 
 
 Dolleans, E"., 236 n., 239 n., 244 n, 
 
 Dollfus, J. H., 490 
 
 Doubleday, T., 137 n. 
 
 Dove, P. E., 560 and n. 
 
 Dragomanov, M. P., 619 . 
 
 Dr6me, M. de la, 303 
 
 Droz, N., 197 and n. 
 
 Drysdale, Dr., 134 n. 
 
 Dubois, J. B., ri 
 
 Duguit, L., 607 n. 
 
 Duhring, E., 117, 208 n., 289 n., 420 . 
 
 Dumas, G., 202 n. 
 
 Dumont, M., 137 
 
 Dumoulin, C., 503 n. 
 
 Dumping, 275 
 
 Dunoyer, C., 207, 325 n., 326 n., 327,346- 
 348 and n., 363,439, 614-616, 631 n. 
 
 Dupin, C., 277 
 
 Dupont de Nemours, P. 8., on Q.uesnay's 
 "rural economy," 2; as a member of 
 the Physiocratic school. 3 n.-4 n. ; 
 originator of the term " Physiocracy," 
 4 n. ; his definition of Physiocracy, 5 ; 
 on natural society, 6 n. ; on the 
 " natural order," 7 n., 8 n., 9 n. ; 
 on the " net product," 12 n. ; on the 
 productive and non-productive classes, 
 14 n. ; on the need for the security of 
 property, 24 n. ; on representation in 
 the State, and on the parliamentary 
 regime, 34 n. ; on despotism, 35 n. ; 
 on the duty of the sovereign, 37 ; on 
 taxation, 38 n., 40 n. ; on the land- 
 owner, 39 and n. ; on the relation of 
 expenditure to production, 41n.~42n. ; 
 on regulating national expenditure, 
 44 n. ; on the amount of the tax, 44 
 n. ; and " proportionality," 45 n. ; on 
 natural law, 354 n. 
 
 Dupont- White, C. , 221, 304 ; on the 
 State, 408 n., 409, 440, 441 ; on the 
 State and the individual, 440 ; and 
 individualism, 443 n. ; and distribu- 
 tion, 443-444
 
 654 
 
 INDEX 
 
 Dupuit, A. J., 521 n., 531 n. 
 
 Durand Union, 606 n. 
 
 Durkheim, E., 61, 388 n. ; and solidarity, 
 
 599-600 
 Duverger, 213 
 
 EAST INDIA COMPANY, 96 
 
 ficole de Nimes, 605 n. 
 
 " Economic chivalry," 335 
 
 Economic equilibrium, theory of, 474, 
 521 n., 555 n., 558 n. 
 
 Economic forces, Proudhon and, 296- 
 297, 315 
 
 " Economic law," 69, 70 
 
 Economic liberty, Adam Smith and, 
 93-98 ; the consummation of, 326-327 
 
 " Economic rent," 582 n., 583 n. 
 
 Economics, Senior and, 349-350 ; Stuart 
 Mill's influence upon, 367 ; theory of 
 the universality of the laws of, 390 ; 
 relativity of the laws of, 390-395 ; the 
 deductive method in, 395-398 ; the 
 Historical school and, 398-407 ; the 
 varied scope of, 399 ; environment a 
 principal factor in, 400 ; the place of 
 history in, 400-407 ; and statistics, 
 407 n. ; as a science, 543 n., 644 ; the 
 separation between pure and descrip- 
 tive, 645 
 
 Economics, pure, 392-393, 515, 517, 541 
 and n., 645 
 
 Economie soeiale, 178 
 
 " Economistes," 4 n. 
 
 Eden, Lord, 105 n. 
 
 Eden, Treaty of, 105, 269 
 
 Edgeworth, Maria, 119 n. 
 
 Edgeworth, Professor, 529 n., 536 n. 
 
 Education, Adam Smith on compulsory, 
 60, 96 ; Robert Owen and, 238 n. ; 
 Fourier and, 253 
 
 Effertz, 0., 420 n. 
 
 Eheberg, K. T, 266 n. 
 
 Eichthal, G. d', 374, 594 n. 
 
 Einaudi, L., 546 n,, 567 
 
 Eisenach, Congress of, 354, 417, 436, 
 437 438 
 
 Eltzbacher, P., 621 n., 625 n., 638 n. 
 
 Ely, R. T., 351 n., 507 n. 
 
 Enclosure Acts, in England, 145 
 
 Enfantin, B. P., 201 n., 203 n,, 211, 
 212 and n., 213, 216 n., 226 and n., 
 229, 230 n., 231 
 
 Engels, F., 208 n., 209, 228, 449 n., 
 450 n., 464 n., 616 
 
 Ensor, R. C., 449 n. 
 
 Entrepreneur, the, J. B. Say and, 65 n., 
 113-114 ; Sismondi and, 183 ; theSaint- 
 Simonians and, 215, 216; French and 
 English economists' conception of the 
 income of, 373 n., 550 ; and production, 
 426 ; in Walras's system, 533-534 ; 
 and Walker's conception of profit, 550 ; 
 
 distinguished from the capitalist, 550 
 and n.; a " captain of industry," 550 
 
 Environment, Robert Owen and, 238, 
 239 ; Fourier and, 247 ; the Associa- 
 tionists and, 259 ; Le Play and, 494 
 
 Equalitarians, 200 
 
 Equilibrium, the Mathematical school 
 and, 533-536, 539 
 
 Erfurt, Congress of, 507 
 
 " Ergonomy," 375 
 
 Escarra, IS , 560 n., 577 nn. 
 
 Esmein, A., 34 n., 35 n. 
 
 Espinas, A., xi 
 
 Etiology, Robert Owen regarded as the 
 father of, 238 
 
 Evolution, and solidarity, 609 
 
 Exchange, the Physiocratio view of, 27, 
 46, 49, 114 ; Condillac on, 50 ; Proud- 
 hon and, 299-300, 309-314 ; Dunoyer 
 and, 348 ; Marx and, 450 ; the final 
 utility theory and, 523-524, 525, 526 ; 
 the Mathematical school and, 528-530 ; 
 and solidarity, 607, 613-614; and 
 association, 613 n. 
 
 Exchange Bank, Proudhon's, 242, 243, 
 291, 293 n., 308-320, 334 n., 627 
 
 Exchange banks, 316 
 
 Exchange notes, Proudhon's, 309-314, 
 316, 317 n. 
 
 Exchange value, profit dependent on, 90 
 
 " Exploitation," the Saint-Simonians and, 
 214,215, 216; Sismondi and, 215,216 ; 
 Marx and, 215, 216 ; Bakunin and, 
 626 ; Kropotkin and, 627 n. 
 
 FABIAN socialists, 221, 465 n., 475, 579- 
 
 587 
 
 Fabian Society, vii, 579-581 
 Fable of the Bees, The, 54, 70 n. 
 Factory legislation, beginnings of, in 
 
 England, 171 ; Act of 1819, 171, 237 
 Faguet, M., 251 n. 
 
 Fallot, Pastor Tomy, 508 and n., 509 
 Familistere, 255 
 Faucher, J., 616 
 February Revolution see Revolution of 
 
 1848 
 
 Ferrara, F., 333 n. 
 Ferrier, F., 278 n. 
 Festy, 0., 258 n. 
 Fetter, Professor F. A., 522 n. 
 Feuerbach, L. A., 616, 623 n. 
 Fichte, J. G., 435-436 n. 
 Final utility theory, 474, 521-528, 539, 
 
 583 
 
 Finance, the science of, 645 
 Fiscal reform, and solidarity, 602 
 Fisher, Irving, 71 n., 522 n.. 529 n., 541 n., 
 
 583 
 
 Fix, T., 197 
 Fleurant, M., 594 n. 
 Fontenay, R. de, 146 n., 156, 338 *. 
 Fouillee, A., 560, 600 n., 606
 
 INDEX 
 
 655 
 
 Fourier, C., 137 n., 169, 194 ; and the 
 Saint- Simonians, 201 n. ; 231 ; on asso- 
 ciation, 232 n. ; 233 ; and Robert 
 Owen, 234-235, 245; his work and 
 ideas, 245-246 ; his Phalanstere, 246- 
 251, 257 ; " Back to the land," 251- 
 252 ; and the attractiveness of labour, 
 252-253; and education, 253; and 
 the sex question, 253-254 ; and anti- 
 militarism, 254 ; his influence and 
 following, 254-255; Stuart Mill on 
 Fourierism, 255 ; and interest, 259 ; 
 261, 264; and Free Trade, 265 n. ; 
 290 ; Proudhon and, 296, 297 n. ; 300 ; 
 and " the right to work," 301 ; 323, 
 378, 465, 470, 486, 544, 589; and 
 guarantism, 599, 604 ; claimed as an 
 anarchist, 615 
 
 Fourniere, E., 465 n., 469 n. 
 
 Foville, M. de, 156 nn. 
 
 Foxwell, Professor, 231 n., 244 n., 316 n., 
 607 n. 
 
 France, population in, 125, 136 n., 137 ; 
 economic unity of, achieved, 266 ; and 
 tariffs, 269, 280 ; List on Protection 
 and, 276 n. ; the classic land of 
 socialism, 323 ; Protection in, 323 ; 
 the Classical doctrines in, 352 ; Stuart 
 Mill on the growth of population in, 
 399 ; Christian Socialism in, 508 ; 
 anarchism and, 640 
 
 Frankfort, 268 n. 
 
 Franklin, B., 329 ; Bastiat and, 329 n. 
 
 Free contract, the anarchists and, 627- 
 628 
 
 " Free credit," 307, 319, 320 
 
 Free Trade, the Physiocrats and, 17, 29- 
 31, 98, 153 ; the Physiocrats the 
 founders of, 29 ; Adam Smith and, 98- 
 102, 153 ; J. B. Say and, 115 ; Ricardo 
 and, 153, 154, 163 ; the theory in the 
 middle of the nineteenth century, 264- 
 265 ; Fourier and, 266 n. Cournot 
 and, 265 n. and agriculture, List on, 
 276 ; Carey and, 282-283 ; List and, 
 287-288; 298; follows the interest 
 of the consumer, 343 ; Dunoyer and, 
 347 ; Stuart Mill and, 365,411 n. .and 
 the Corn Laws, 366 ; Prince Smith and, 
 376 
 
 Tree utility theory, Bastiat'a, 335-340 
 
 Frezouls, P., 547 n., 554 n. 
 
 Froebel, F., a disciple of Fourier, 253 
 
 GALIAKI, the Abb4, h! criticism of the 
 Physiocratio doctrine, 32 ; 46, 47 
 
 Garantismr., Fourier's, 254. See Guarant- 
 ism 
 
 Qaroon, M., 44 n. 
 
 Garden cities, 251, 613 
 
 Gamier, G. t 103, 108, 108, 115,295, 379 n. 
 
 Gamier, J., 379 
 
 Gendre, 7. Le, 11 . 
 
 George, Henry, and the Physiocrats, 
 45 n.; and rent, 141, 565-568, 575; 
 and land nationalisation, 141, 155, 
 577 n. ; 376, 465 n., 506 ; and man's 
 right to the land, 561 ; his career and 
 his works, 563-564; 569, 573; and 
 laissez-faire, 573 n. 
 
 Germany, political and economic condi- 
 tion of, in the nineteenth century, 265, 
 266 ; tariffs in, 266, 280, 281 ; the 
 movement for economic unity in, 267- 
 268 ; List and the claim of, to Holland 
 and Denmark, 272 ; the English Corn 
 Laws and, 276-277 ; and Protection, 
 281 n., 289 ; the Classical doctrines in, 
 352; State Socialism in, 445-446; 
 Christian Socialism in, 607 
 
 Gervinus, G. G., 383 n. 
 
 Gibbon, E., 105 
 
 Gide, C., 245 n., 246 n., 334 n., 342 n., 
 522 n., 576 n., 592 n., 605 n. 
 
 Godin, A., 255 
 
 Godwin, Wm., 122, 131, 136 n., 200 and 
 n., 679, 615 
 
 Goehre, Pastor, 507 
 
 Goethe, 400 
 
 " Good price " tee Bon prix 
 
 Gossen, H. H., 155, 349, 474 n., 522 n., 
 529 n. ; and land nationalisation, 571- 
 577 ; and the confiscation of rent, 574- 
 575 
 
 Gounelle, E., 506 n., 508 nn.. 509 
 
 Gournay, V. de, 4 n. ; and the origin of 
 the term laissez-faire, 11 n. 
 
 Gouth, Pastor, 608 
 
 Government, in Saint-Simon's system, 
 207-209 ; Adam Smith on, 217, 625 ; 
 Proudhon and, 310-311, 624 n. ; 
 Chevalier and, 412 ; the State Social- 
 ists and, 439-440, 441 ; the anarchists 
 and, 624-627 ; and society, 631 ; and 
 the social instinct, 632 
 
 Grand, G., 482 n. 
 
 Grave, J., 615, 619 n., 622, 626 n., 628, 
 629, 630, 631 n., 633 n., 634, 635 n., 
 636 n. 
 
 Great Britain, growth of wealth and 
 population in, 131 
 
 Grim, K., 298 n,, 323 . 
 
 Guarantism, 599, 604. See Oarantisme 
 
 Gneade, J., 453 n., 465 n. 
 
 GniL'anme, J., 459 n., 619 n., 631 n. 
 
 Guillanmin, U. G., 295 
 
 Gustavus 111, of Sweden, and the Physio- 
 crats, 5 
 
 Guyau, J. M., 598 n. 
 
 Guyot, Y., 343 n., 358 n., 608 n. 
 
 HALftvT, ., 104 n., 119 n,, HI n., 207 n* 
 
 230 n. 
 
 Hall, 0., 579 
 Hamilton, A., 277 
 Hanover, 268 n. 
 Hardie, J. Keir, 606
 
 656 
 
 INDEX 
 
 Hargreaves, J., 65 
 
 Harmel, L., 499 n. 
 
 Harmony, Bastiat's doctrine of, 330- 
 346 
 
 Harmony, Fourier's ideal city, 249 and n., 
 254 
 
 Hasbach, W., 69 n. 
 
 Hawthorne, N., 255 n. 
 
 Hedonism, xv, 10 ; Adam Smith's 
 Optimism distinct from that of, 93 ; 
 355 ; Ruskin and Tolstoy and, 510 ; 
 definition of, 518 
 
 Hedonistic school, and free competition, 
 91, 240, 373 n., 518, 543, 605 n. ; 335, 
 395, 407 ; its doctrines, 518-544 ; and 
 the Classical school, 518-521, 539, 
 541 n., 544 ; and wages, 520-521, 541 ; 
 and interest and rent, 520-521 ; France 
 and, 529, 537 ; criticism of its doc- 
 trines, 537-544 ; and distribution, 541 
 
 Heeren, A. H. L., 383 n. 
 
 Hegel. 435 and n.. 619 
 
 " Hegelian school, left," 616 n. 
 
 Hegelian terminology, Proudhon and, 
 298 n. 
 
 Held, A., 386 
 
 Heredity, and solidarity, 588 
 
 Hermann, F., 410-411, 548 n., 551, 556 
 
 Herron, G. D., 507 n. 
 
 Hesse-Darmstadt, Tariff Union between 
 Prussia and, 268 
 
 Higgs, H., 5 n. 
 
 Hildebrand, Bruno, 196, 271 n., 380 n., 
 381 n., 383-384, 385, 389 and n., 390, 
 394. 400 and n., 404, 405 
 
 Hirst, Miss M. E., 275 n., 277 n., 
 278 nn. 
 
 Historical school, vi-vii, xv, 111 ; and 
 political economy, 175, 222 ; Sismondi 
 and, 196; List and, 287; 368, 374, 
 377 ; origin and development of, 379, 
 380-388 ; the newer school, 385-386 ; 
 influence of, in England, and in 
 France, 387-388 ; critical ideas of, 
 388-398 ; the positive ideas of, 398- 
 407 ; A. Comte and, 404-405 ; and Le 
 Play's school, 493-494 ; and economic 
 theory, 515 ; and the Classical school, 
 517; 648 
 
 History, the consideration of economic 
 reforms based upon, 221, 222 ; the 
 philosophy of, in economics, 221, 224 ; 
 the place of, in economics- 400-403 
 
 Hitze, the Abbe, 496 
 
 Hobbes, T., 630 
 
 Holyoake, G. J., 244 n. 
 
 Homo ceconomicus, Adam Smith and, 86 ; 
 399 ; Carlyle and, 511 ; the Hedonists 
 and, 618, 543 
 
 Howarth, C., 244 
 
 Huet, F., 495. 560 
 
 Hughes, T., 504 
 
 Humanity, in the anarchist doctrine, 
 623 
 
 Hume, David, Adam Smith and, 50 ., 
 53, 64 n., 105, 106, 273 n. ; and money, 
 85; 120 n., 149 n.. 165 
 
 Huskisson, W., 265, 267 
 
 Hutcheson, F., 50 n., 53 
 
 Hyndman, H. M., 579 n. 
 
 IBSEN, H., 511 
 
 Icaria, Cabet's ideal State. 246, 263, 
 264 n. 
 
 Identity of interests, Adam Smith and, 
 185, 410 ; Sismondi and, 185-186, 410, 
 413 ; Malthus and Bicardo and, 410 ; 
 Hermann and, 410-411 ; Stuart Mill 
 and, 411 ; Cournot and, 413 
 
 Immortale Dei, Encyclical, 501 
 
 ImpSt unique, 45, 61, 567 
 
 Indirect and direct taxation, the Physio- 
 crats and, 44-45 
 
 Individual, the State and, 442-443 ; 
 Walras on the State and, 573-574; 
 in philosophical anarchism, 615 ; 
 Stirner and the cult of the, 617-619, 
 622-623 ; Proudhon and the anarchists 
 and, 622-623, 630 ; and society, the 
 anarchists and, 629-631 ; Bakunin 
 on, 630, 631 n. ; Jean Grave and, 
 631 n. 
 
 Individualism, xi, 263; List and,* 270; 
 the Classical school and, 322, 355, 
 356; Bastiat and, 330; Stuart Mill 
 and, 355, 356 and n. ; Ricardo and 
 Malthus and, 355 ; Herbert Spencer 
 and, 356 ; and solidarity, 356 n. and 
 liberty, 356 ; the Liberal school and, 
 357 n. ; Dupont- White and, 443 n. ; 
 Wagner and, 443 n. ; Christian Social- 
 ism and, 509 ; modern development of, 
 516 ; anarchism and, 640, 642 ; syndi- 
 calism and, 642 
 
 Individualist school, 355 ; known also as 
 the Liberal school, 356 ; definition of, 
 356 n. ; and inheritance, 372 n. 
 
 Individuality, solidarity and, 612-613 
 
 Induction, 395, 397-398 
 
 Industrial and Provident Societies Acts 
 of 1852-62, 505 
 
 Industrial Revolution, 65, 104, 111 
 
 Industrialism, of Saint-Simon, 202-211, 
 224 ; Fourier and, 251 
 
 Industry, regarded as sterile by the 
 Physiocrats, 13 ; the inherent distinc- 
 tion between agriculture and, 17-18 ; 
 the Physiocrats' erroneous view of, 46 ; 
 Sismondi and, 194 ; Saint-Simon and, 
 204, 205 and n.. 206 ; List and, 274, 
 286, 287 
 
 Ingersoll, C., 278 
 
 Ingram, J. K., v, xi, 385 n., 404 
 
 Inheritance, the Saint-Simonians and 
 217-218, 223, 224; the State to be 
 sole inheritor of property, 223 ; the 
 French Revolution and, 223 : the
 
 INDEX 
 
 657 
 
 Phalanstere and, 246 ; Dunoyer and, 
 347 n. ; Senior and. 351 and n., 372 ; 
 Stuart Mill and, 372 
 
 Institutional Church, 506 
 
 Interest, the Physiocrats and, 32-33 ; 
 Condillac and, 50 ; Adam Smith and, 
 65 n., 02, 96 ; Bentham and, 96 n. ; 
 Sismondi and, 176 n., 192-193 n. ; Marx 
 and, 181-185; (he Saint-Simoniaos 
 and, 213 n., 214 ; downward trend of 
 the rate of, 223 ; Robert Owen and, 
 240 n. ; Blano and, 259-260 ; Fourier 
 and, 259 ; Proud ho n's Exchange Bank 
 and, 298 n., 308-310, 312, 313, 314, 
 319; Solway's scheme and, 319; the 
 People's Bank and, 319 ; Bastiat and 
 Proudhon's controversy aa to the legi- 
 timacy of, 333 n.-334 n. ; Bastiat and, 
 340-342 ; Senior and, 350 ; the term as 
 used by the French economists, 373 n. ; 
 final utility and, 528; Bohm-Bawerk 
 and, 530, 540 ; and wages, Henry 
 George on, 565 ; the proposed con- 
 fiscation of, 568 ; " the remuneration 
 of sacrifice," 568 ; the Fabian school 
 and the confiscation of, 582 
 
 Interests, the spontaneous harmony of, 
 633. See Identity of Interests 
 
 International trade, Adam Smith and, 
 98-100; Stuart Mill and, 98-100; 
 Ricardo and, 98, 138, 163, 363 and n.~ 
 364 and n. ; List and, 290 ; Bastiat and, 
 330 ; Dunoyer and, 363 
 
 International Working Men's Association 
 (the "International"), 321 449 n., 
 620 
 
 Internationalism, Marx's, 465 n. 
 
 Interventionism, 407 
 
 Interventionists, Sismondi the first of the, 
 192, 196 ; 601 
 
 Ireland, 104 
 
 !' Iron law," the, 42, 342 n. 
 
 Italy, zii ; anarchism and, 640 
 
 JANBT, P., 254 
 
 Jannet, C., 490 n., 592 . 
 
 Jaures, J., 469 n. 
 
 " Jeunes Abbes, Les," 502 
 
 Jevons, Stanley, 46 n., 48, 75, 78, 117 ; 
 on the Ricardian school, 118 n. ; and 
 the law of indifference, 148, 525 n. ; his 
 economic method, 380 ; 406, 474 n. ; 
 on the purpose of economics, 518 n. ; 
 and the final utility theory, 521 n., 
 522 n. ; and Cournot, 529 n. ; a 
 member of tho Mathematical school, 
 629 n. ; and value, 530 n. ; 537 n., 541, 
 572 n., 581 
 
 Joint- stock companies, Marxism and, 
 463, 476 
 
 Joint-stock principle, 248 
 
 Joseph II, Emperor of Austria, and the 
 Physiocrats, 5 
 
 " Juridical socialism," 606, 607 n. 
 Jurisprudence, solidarity and, 606-607 
 Justice, Proudhon on, 298-299 
 
 Kapital, Marx's, 354, 386, 449 n. ; 
 Labriola on, 467 
 
 Kautsky, K., 480 n. 
 
 Kotteler, Monseigneur von, 496 
 
 Kidd, B., 485 n. 
 
 King, G., 54 
 
 ivingsley, C., 504 and n., 505 n. 
 
 Knies, K., 89, 196 and n., 380 n., 381 n., 
 382 n., 384-385, 389, 390-391, 392, 
 393, 400 n., 402, 403 n., 404, 405 
 
 Kohler, C., 277 n. 
 
 Kraus, Professor, 106 n. 
 
 Kropotkin, Prince, 459 n., 616, 616, 619 
 and n., 621-622, 623, 625, 627 and n., 
 628, 630, 631 n., 632, 633, 634 and n., 
 635, 636, 637-638, 641 
 
 Kurella, Heir, 584 n. 
 
 Kutter, Pastor, 507 
 
 LABOUR, regarded by Adam Smith as the 
 true source of wealth, 56-57 ; regarded 
 as the measure of value, 77, 149 ; re- 
 garded by Marx as the cause of value, 
 77, 151 n., 184-185; regarded by 
 Ricardo as the cause and measure of 
 value, 140, 144 n., 149, 201 n., 332 ; 
 Ricardo and the territorial division of, 
 164 ; Sismondi and, 176 n. ; Saint- 
 Simon on, 206 n. ; Fourier and the 
 attractiveness of, 252-253 ; Proudhon 
 on the organisation of, 291 n. Proud- 
 hon and the productiveness of, 293 
 and nn. ; regarded by Bastiat as the 
 determinant of value, 332 ; Carey on, 
 aa the measure of value, 332 ; and 
 value, Ferrara and, 333 n. ; Dunoyer 
 on, 347-348 and n. ; Rodbertus and, 
 423 ; Marx's theory of surplus labour, 
 450-459; rent of, 558 n. ; Henry 
 George and the relation of capital 
 to, 564-565 
 
 Labour, division of, Adam Smith and, 
 56-62, 91 ; the outcome of personal 
 interest, 70-71 ; dependent upon 
 capital, 90 ; Ricardo and the terri- 
 torial division of labour, 164 ; Tolstoy 
 and, 514 ; solidarity and, 607 
 
 Labour notes, Robert Owen's, 315, 316 
 
 Labour-value theory, Marx's, 474-475, 
 581 
 
 Labriola, A., 36 n., 449 n., 462n., 464 n., 
 465 and n., 467, 469 n., 470 n., 473 n., 
 474 n. 
 
 Lacordairo, J., 262 
 
 Lafargue, P., 465 n. 
 
 Lafayette, G., 267 
 
 Lagardelle, H , 482 n., 619 n. 
 
 Lataaez-faire, in the Physiocratio doctrine, 
 11 ; the origin of the formula, 11 n. ; 
 170, 173, 197; Lost and, 277; tht
 
 658 
 
 INDEX 
 
 Lerissez-faire continued 
 
 Classical school and, 322, 357, 390 ; the 
 right interpretation of, 324 ; Stuart 
 Mill and, 357 ; Cairnes and, 374 ; the 
 Christian schools and, 377 ; the His- 
 torical school and, 389 ; Adam Smith 
 and, 408, 410 ; Carlyle and, 511 ; the 
 Hedonists and, 541 ; Henry George and 
 573 n. 
 
 Lalande, A., 600 n. 
 
 Lamartine, A., 302 n., 303 
 
 Lammenais, the Abbe de, 496 
 
 Land, the Physiocratic conception of, 
 as an agent in production, 12 ; and 
 rent, in Ricardo's view, 143-149 ; 
 nationalisation of, 155, 570-578 ; the 
 Saint-Simonians and, 214 ; Carey's 
 theory of the order of cultivation of 
 rich and poor land, 338-339 ; growth 
 in value of, 546 ; a gift of nature, 559 ; 
 confiscation of, 559-562 ; and the 
 theory of rent, 561 
 
 Land Tenure Reform Association, 562 
 
 Landez, A., 540 n. 
 
 Landowners, the Physiocrats' esteem for, 
 39-40 
 
 Landrecht, the Prussian, 445 
 
 Landry, A., 420 n., 470 n., 537 ., 544 n. 
 
 Langlois, C. V., 405 n. 
 
 Laskine, M., 208 n. 
 
 Lassalle, F., 73 n., 159, 261, 294, 329, 376 ; 
 and the 1' brazen law," 321, 426 ; and 
 State Socialism, 414 ; and Rodbertus, 
 414-415, 416, 417; and Bismarck, 
 414 ; his career, 432 ; his political and 
 economic programme, 433-435 ; and 
 Marx, 433 n., 434 n. ; and State inter- 
 vention, 434-435 ; 436, 437, 449 ., 
 453 n., 496 n., 607 n. 
 
 Lauderdale, Earl of, 109 n. 
 
 Launay, M. de, 609 n. 
 
 Launhardt, Herr, 529 n. 
 
 Laveleye, IS. de, 222, 376, 577 . 
 
 Lavergne, L. G. de, 371 n. 
 
 Lavoisier, A. L., 15, 125 
 
 Law, Kropotkin on, 627 n., 632 n. ; 
 Reclus on, 632 n. 
 
 Law of capillarity, 137 
 
 Law of concentration of capital, Marx's, 
 450, 475-476 
 
 Law of demand and supply, 359-360 
 
 Law of diminishing returns, 118, 126, 
 146-147, 148, 153, 157, 340, 341, 373, 
 558 and n. 
 
 Law of free competition, 356-358 
 
 Law of indifference, 148, 525, 527 n. 
 
 Law of international exchange, 362-366 
 
 Law of population, Malthus's, 120, 121- 
 137 ; of the Classical school, 358-359, 
 373 
 
 Law of rent, 362 
 
 Law of sale, Cournot's, 531 n. 
 
 Law of self-interest, 355-356 
 
 Law of substitution, 525, 526, 528, 537 n. 
 
 Law of variation of intensity of need 
 543 n. 
 
 Law of wages, 360-362 
 
 Lazare, B., 620 
 
 Ledru-Rollin, A. A., 303, 
 
 Legrand, D., 486 
 
 Leo XII, Pope, 500 n. 
 
 Leo XIII, Pope, 501 
 
 Leopold, Grand Duke, of Tuscany, and 
 the Physiocrats, 5 
 
 Leroux, P., 235 and n., 263, 344 n,, 589 
 
 Leroy-Beaulieu, P., 137, 254 n., 342 n., 
 375 n, ; and the Mathematical method. 
 537 n.; 546 
 
 Leslie, Cliff e, 196, 387 
 
 Lesseps, F. de, 212 
 
 Letchworth, 613 n. 
 
 Levasseur, E, 326 n., 388 n. 
 
 Levy de Lyon, E.. 607 n. 
 
 Levy-Briihl, L, 435 n. 
 
 Lexis, Professor, 448 n. 
 
 Liberal individualists, and co-operation, 
 343 
 
 Liberal Optimists, 322-348 
 
 Liberal school, xv ; the Physiocratio doc- 
 trine and, 46 ; Adam Smith a member 
 of, 53 ; beginnings of, 54 ; and Adam 
 Smith's theory of value, 75 ; 205 ; 
 Saint-Simon and, 210 n. ; the Associa- 
 tionists and, 231 ; 233 ; severance of, 
 into French and English sections, 322 ; 
 and Protection and socialism, 323, 326, 
 354; and Optimism, 324-326; and 
 liberty, 324, 325-326; origin of the 
 name, 324 ; and association, 325 ; and 
 Darwin's doctrine of the survival of 
 the fittest, 326 ; and the Physiocrats, 
 327 ; Bastiat and, 327 ; and Bastiat's 
 theory of profits, 342 n. ; synonymous 
 with the Individualist school, 356 ; 
 definition of, 356 n., 357 n. ; and the 
 repeal of the Corn Laws, 366 ; Le Play 
 and, 486-487 ; and solidarity, 607-608 ; 
 629 ; and government and society, 
 631 ; 648 
 
 Liberal Socialism, 573 
 
 Liberalism, economic, vii, xv, 170 ; 
 Sismondi and, 173, 185; 209; 311 
 n. ; the Classical school and, 322; 
 and Optimism, 377 ; the reaction 
 against, 377-378 ; effect of Bismarck's 
 policy upon, 436 ; and measures of 
 social reform in Germany, 436 n. ; 
 growth of, in Germany, 439 ; State 
 Socialism and, 447 ; the Christian 
 schools and, 484 ; 493 ; modern revival 
 of, 516; 586; political economy and, 
 646, 647 
 
 Liberalism of Adam Smith, 207 ; of the 
 Liberal school, 326 
 
 Liberalism, political, the Saint-Simoniana 
 and, 211 
 
 Liberty, the French Revolution and, 104 ; 
 Blanc on, 262 ; Sismondi on, 262 n.;
 
 INDEX 
 
 659 
 
 Proudhon and, 293, 297, 315; the 
 French Liberal school and, 324, 325- 
 327 ; Dunoyer and, 327 ; Stuart Mill 
 and, 353, 358, 413 ; and the natural 
 laws, 355 ; the Classical school and, 
 356 ; and State intervention, 413 ; 
 Cournot and, 413 ; the State Socialists 
 and, 440 ; the anarchists and, 622- 
 623, 624, 629 ; Kropotkin on liberty 
 as the corrective for the excesses of 
 liberty, 634 
 
 Liberty, individual, the Physiocratic 
 doctrine and, 10 n., 11 ; Proudhon and, 
 315 ; Ricardo and Malthua and, 410 ; 
 Stuart Mill and, 411 n. ; Eodbertus 
 and, 429 
 
 Lichtenberger, A., 200 n. 
 
 Lie ben, R., 529 n. 
 
 Liebknecht, W., 437 
 
 Lilienfeld, von, 690 n. 
 
 List, Tf., Ill, and the Classical school, 
 169, 289, 290; his National System, 
 and Protection, 265, 268 ; and the 
 German tariffs, 266, 267-268 ; and 
 nationality, 270-272 ; and productive 
 power, 270 ; and Germany's claim to 
 Holland and Denmark, 272 ; and Adam 
 Smith and his school, 273 ; and manu- 
 factures, 273-274 ; and agriculture, 
 274, 276-277 ; his Protectionism, 275- 
 276, 281-282; origin of his Protec- 
 tionist ideas, 277-280 ; his influence, 
 280-287 ; and history, 282, 381, and 
 Carey, 282-284 ; and Stuart Mill, 284- 
 285; his originality, 287-289; and 
 the Historical school, 287, 360 n. ; and 
 free exchange, 287-288 ; and the indi- 
 vidual and the nation, 288, 411 ; and 
 the duty of Governments, 288; and 
 economic reforms in Germany, 288- 
 289; his aim and achievement, 290 ; 
 323, 378 ; his economic method, 380 ; 
 the Historical school and, 380 n. ; 439 
 
 Littre, M., 222 n. 
 
 Lloyd, S., 266 . 
 
 Locke, J., 559 
 
 Loesewitz, J., 502 
 
 Longe, P. D., 361 
 
 Loria, A., 469 n. ; and land nationalisa- 
 tion, 578 n. 
 
 Lorin, H., 499 n. 
 
 Louis Bonaparte, 320 
 
 Louis Philippe, 301 
 
 Ludlow, J. M. F., 504, 505 
 
 Luxembourg Commission, the, 302, 304- 
 306, 319 n. 
 
 MABLY, the Abbe de, 200 and n. 
 McCullooh, J. R., 62 n., 109 n., 139 n., 
 
 140 n., 141 n., 150, 168, 175, 177, 349 n., 
 
 379 
 
 Mackay, J. H., 615 n. 
 MoVickar, J., 349 
 Machinery, Adam Smith and, 112 ; J. B. 
 
 Say on, 112 ; SLsmondi and, 180-182 ; 
 the Classical school and, 180-182 ; 
 Ricardo and, 180 n., 181 
 
 Maitland, P. W., vi 
 
 Malon, Benott, 465 n. 
 
 Malthua, T. R., xiv, 108, 109 n., 110, 
 116 and n., 117 ; one of the Pessimists, 
 vi, 119-120, 192 ; regarded as an 
 Optimist, 119 n. ; his career, 120 n. ; 
 his law of population, 120, 121-137, 
 157, 345 ; and moral restraint, 127- 
 129 ; and the Neo-Malthusians, 134 ; 
 on charity, 135 n.-136 n. ; corre- 
 spondence with Ricardo, 139 n., 141 n. ; 
 and rent, 142, 152, 164 ; and the law 
 of diminishing returns, 146-147 and 
 n. ; 149 n., 150 n., 155, 156 n. ; and 
 wages and population, 158-159, 189 ; 
 163 n. ; and Protection, 164 ; Sismondi 
 and, 175 ; Sismondi and the theory 
 of population of, 189 n. ; the Saint- 
 Simonians and, 227 ; 264, 322, 324, 
 326, 348, 353; and individualism, 
 355 ; 358, 359, 371 ; and the identity 
 of public and private interests, 410 ; 
 416, 564 
 
 Malthusian League, the, 134 n. 
 
 Manchester school, xi, 436, 437, 438, 539 
 
 " Mancheeterism," 357, 447 
 
 " Manchesterthum," 357, 438 
 
 Mandeville, B. de, 64, 70 n. 
 
 Mangoldt, H. von, 548 n., 551, 556 
 
 Manifesto, Communist, 449 n., 450 n. 
 
 Mantoux, P., 66 n., 97 n., 103, 104 
 
 Mann, the laws of, Malthus and, 132 n. 
 
 Manufactures, List on, 273-274, 276 and n. 
 
 Marat, J. P., 199 H. 
 
 Maroet, Mrs., 119 n., 349 
 
 Marcus Aurelius, 588 
 
 " Marginal utility," 521 n., 539 
 
 Marie, A. T., 301, 302 n. 
 
 Markets, Say's theory of, 116 
 
 Marmande, R. de, 622 n. 
 
 Maroussem, P. du, 495 n. 
 
 Marrast, A., 303 
 
 Marriage, effect of, upon population, 
 136 n. ; the anarchists and, 627 
 
 Marshall, Professor A., 329 n.. 335, 386, 
 390 ., 391, 392, 394, 396, 397 n., 401, 
 402 n. ; compared with Marx, 474 n. ; 
 513 n., 516, 527 n., 529 ., 531, 544 tin., 
 546 n., 551 n., 552 ; and rent, 557 
 and n. ; 581 
 
 Martineau, Miss, 119 n., 349 
 
 Marx, Karl, x ; on Adam Smith, 66 n. ; 
 his labour- value theory, 77, 151 n., 184- 
 186, 201 n., 216, 293 n., 474-475, 581 ; 
 intellectually a scion of the Ricardian 
 family, 120 ; his theory of surplus 
 value and Ricardo's theory, 140 ; re- 
 semblance of doctrines of, to those of 
 the Classical school, 181 ; similarities 
 between Sismondi and, 184 ; his theory 
 of surplus value, 184, 198, 228, 294 ;
 
 660 
 
 INDEX 
 
 Marx, Karl continued 
 and profit and interest, 185, 216 ; 
 debt to Sismondi, 198 ; 209 n. ; and 
 " exploitation," 215, 216 ; hia system 
 and communism, 221 ; his system 
 compared with the Saint-Simoniana', 
 225 ; 227 ; and List, 278 n. ; and his 
 "Utopian" predecessors, 301; and 
 Bray's scheme, 315 n. ; and Proudhon, 
 320-321 ; and distribution, 368 n. ; 386 ; 
 his socialism, 416, 433, 449-450, 470 ; 
 the object of his system, 423 ; and the 
 "brazen law," 426 ; 429; and Eodbertus, 
 429 n. ; Lassallo and, 433 n., 434 n. ; 437, 
 448 n. ; his career, his works and in- 
 fluence, 449 n.-450 n. ; his theory of 
 surplus labour and surplus value, 450- 
 459, 474-475 ; and capital, 455-458 ; 
 his law of concentration of capital, 
 459-465, 475-476 ; the Marxian school, 
 465-473 ; his following, 465 n. ; and 
 Ricardo, 466 ; his obscurity of style, 
 
 466 ; and value, 466 and n., 474 ; on 
 production, 468 n.-469 n. ; the French 
 socialists and, 469 ; quality of his 
 economic theories, 473 ; compared 
 with Marshall, 474 n. ; and syndicalism, 
 480-481, 641; 483; the Christian schools 
 and his collectivism, 485 ; Herron on, 
 507 n. ; 579 ; the Fabians and his 
 theories, 583-584, 586 ; and the anar- 
 chists, 616; influenced by Hegel, 619; 
 and Bakunin, 620; anarchy and his 
 socialism, 640 
 
 Marxian school, characteristics of, 465- 
 472 ; and production, 468 ; 515 ; be- 
 ginnings of, 579 ; and Marx's theory 
 of value, 583 ; 647, 648 
 
 Marxism, vii, xv, 447, 449-483 ; and the 
 Classical school, 467, 472; Sorel on, 
 
 467 n. ; and capitalism, 467 ; a work- 
 ing-class socialism, 470-471, 480 ; the 
 evolution of, 473 n. ; and syndicalism, 
 479-483 ; its contempt for intellec- 
 tualism, 480 ; traced in the doctrines 
 of Le Play's school, 495 ; the Fabians 
 and, 583-584, 586 ; the rupture with 
 anarchism, 620 
 
 Mathematical school, the, x ; Quesnay a 
 pioneer of, 19 n. ; and the abstract 
 method, 138 ; 335 ; and the Mathe- 
 matical method, 392 n., 537jn., 538-539; 
 and the Psychological school, 521 ; prin- 
 cipal adherents of, 528 n. ; doctrines of, 
 528-537 ; and exchange, 528-530 ; and 
 distribution, 529-530 ; and consump- 
 tion, 530 ; and value, 530 n. ; and 
 production, 536 ; and free competition, 
 643 ; influence of, 544 ; and solidarity, 
 613 
 
 Maurice, F. D., 504 and n., 505, 508 n. 
 
 Mazel, F., 316, 317 
 
 Mecklenburg, 268 n. 
 
 Mehring, F., 434 n. 
 
 Meline, M., 17 . 
 
 Melouga family, 489, 493 
 
 Meneniua Agrippa, 588 
 
 Monger, A., 209, 212, 231 n., 316n.;nd 
 the origin of Rodbertus's ideas, 415 n. ; 
 and Marx, 416 n., 450 n. ; and Fichte, 
 436 n. ; and private and public rights, 
 607 n. 
 
 Menger, K., 75, 380 ; and the historical 
 method 382, 383 n., 402 n. ; and the 
 Historical school, 389, 390, 395, 517 ; 
 and the deductive method, 396 nn. ; 
 and the final utility theory, 622 n. ; and 
 the theory of rent, 557 
 
 Mercanti di tenute, 190 
 
 Mercantilism, the " net product " theory 
 and, 17 ; influence of Physioc ratio ideas 
 upon, 27 ; Physiocracy antagonistic to, 
 29 ; and agriculture and industry, 
 30 n. ; Adam Smith and, 83, 97, 98, 
 100, 101, 169 ; List and, 279 
 
 Mercantilist school, 1 ; and the increase 
 of wealth, 17 ; their view of the State, 
 27 ; Adam Smith's Wealth of Nation 
 and, 83 ; and money, 83, 314 ; List 
 and, 280, 285 n. 
 
 Meredith, George, 432 n. 
 
 Meslier, the Cur, 200 n. 
 
 Method, the relative importance of, 397, 
 645 
 
 Metin, A., 677 n., 679 n. 
 
 Meyer, Ed., 402 n., 405 n. 
 
 Meyer, R., 416 and n., 417 nn., 423 n., 
 428 n. 
 
 Mieux value, 184 
 
 Milcent, M., 502 n. 
 
 Mill, James, and rent, 155, 168, 562 ; and 
 land nationalisation, 155, 168 ; a dis- 
 ciple of Ricardo, 168, 349 n. ; 352 n. 
 
 Mill, John Stuart, xv ; and productive 
 and unproductive works, 62 ; " in- 
 dustry is limited by capital," 72 n. ; 
 and Adam Smith's conception of 
 utility, 75 n. ; and international trade, 
 98, 100, 330 n. ; and " products," 
 109 n. ; 138 ; and Ricardo's theory of 
 rent, 141 ; and the stationary state, 
 162, 373-374, 606 n. ; 222 n. ; on 
 Saint-Simonism and Fourierism, 255 ; 
 280; and Protection, 283, 284-285, 
 365 ; and List, 285 n. ; and the Classi- 
 cal school, 322, 352-353, 368 ; 349 ; 
 his career and works, 352 n., 353 ; and 
 socialism, 352 n., 353, 358, 367, 368 ; 
 and communism, 353, 367 ; and com- 
 petition, 353, 358 ; and co-operation, 
 353 ; and individualism, 355, 356 
 and n. ; and laissez-faire, 357 ; and 
 the law of population, 358-359 ; and 
 the law of demand and supply, 359- 
 360, 519; and value, 360; and the 
 law of wages, 360-362 ; and trade 
 unionism, 360, 362 n. ; and Malthas, 362 
 n. ; and rent, 362,370-372, 548, 551,553,
 
 INDEX 
 
 661 
 
 564-555 ; and international exchange, 
 364-365 ; and Free Trade, 365, 411 n. ; 
 influence upon economics, 367 ; French 
 influence upon. 367, 579 ; and natural 
 law, 368 ; his programme of social reform, 
 36D-374; and wages, 309-370; and asso- 
 ciation, 370, 505 ; and inheritance, 372 ; 
 his successors, 374-376; 377, 379; and 
 relativity, 392; and self-interest, 
 394, 411; 404; and the identity 
 of general and personal interests, 
 411 ; and State intervention, 411, 
 413; and individual liberty, 411 
 n., 413 ; Chevalier and, 411; and 
 the State and the individual, 442, 443, 
 444 ; on Le Play's theory of the salva- 
 tion of the working-classes by the 
 upper, 491 ; on the rent of ability, 
 549 ; and man's right to the land, 561 ; 
 and the confiscation of rent, 562-563, 
 666, 667, 568, 569, 670-571, 575 ; 564 ; 
 and private property, 568 n. ; and 
 the abolition of profit, 605 n. 
 
 Millerand, A., 587 n. 
 
 Mines and the " net product," 14 
 
 Mirabeau, Marquis de, one of the Physio- 
 crats, 3 n. ; and Rousseau and Physio- 
 crapy, 6 n. ; and the origin of the term 
 laissez-faire, 1 1 n. ; on the Tableau 
 economiquc, 18 n. ; and interest, 32- 
 33 ; Cantillon's influence upon, 46 n. ; 
 on population, 121 
 
 Molinari, M. de, 248, 329 n., 358 n. 
 
 Mollien, the Comte, 314 
 
 Money, Adam Smith and, 71, 82-85, 89, 
 106, 115; the Physiocrats and, 115; 
 Ricardo and the quantity theory of, 
 164-165; Ricardo and paper money, 
 165-167 ; Robert Owen and, 240-241, 
 243 ; Proudhon and, 308-310, 313, 316 ; 
 Solvay's scheme, 318-319 ; the Classi- 
 cal school and, 360 ; Ruskin and 
 Tolstoy and, 510 
 
 Monod, W., 508 n., 509 n. 
 
 Monopoly, z ; Adam Smith and, 95, 96 ; 
 Stuart Mill and, 554 n. ; and the rent 
 of land, 554 n. 
 
 Monopoly price, Adam Smith on, 81 n. 
 
 Montague, La, 200 n. 
 
 Montalembert, the Comte de, 487 . 
 
 Montchretien, A. de, 1 
 
 Montesquieu, C. de S., 121 
 
 More, Sir Thomas, 200 and n., 246 
 
 Morellet, the Abbd, 46 
 
 Morelly, 200 and n. 
 
 Morris, Wm., 251 
 
 Moufang, Canon, 496 
 
 Mulhouse, the Industrial Society of, 172 
 
 Miiller, Adam, 278 n. 
 
 Mun, the Comte de, 484 n., 497, 502 
 
 Mutual aid, the anarchists and, 629-636 
 
 Mutual credit, 314, 316 ; solidarity and, 
 606 
 
 Mutnalists, and solidarity, 602, 603-604 
 
 Mutuality, Prondhon and, 297 n., 299, 
 300 
 
 NAPOLEON I, 107 
 
 Napoleon III, 280, 323, 366, 375, 490 n. 
 
 Nassau, 268 n. 
 
 National Equitable Labour Exchange. 
 236 n., 241-242, 244 . 
 
 National workshops of the 1848 Revolu- 
 tion, 301-303 
 
 Nationalisation of the land, 570-578 
 
 Nationality, Last and, 270-272 
 
 Natural laws, 354-366, 368, 385 n. ; 
 the anarchists and, 628, 629 
 
 " Natural order," the, xiv, 5-12 ; mean- 
 ing of the term, 6-8 ; the Physiocrats' 
 conception of, 8, 9-10, 109 ; Turgot 
 on the universality and immutability 
 of, 10 ; and the old regime, 10 ; the 
 aim of, 10-11 ; and the right of private 
 property and individual liberty, 10 n., 
 11 ; comprehensiveness of, 12 ; the ban 
 prix and, 15 ; property the " founda- 
 tion-stone " of, 21 ; and trade, 29 ; 
 the conception of, constitutes the 
 foundation of political economy, 46 ; 
 Adam Smith and, 109 ; Ricardo's 
 theory of rent and, 152 ; the French 
 Classical school and, 322, 323; the 
 Christian schools and, 484 
 
 " Naturalism," Adam Smith's, 68-88 
 
 Naumann, Pastor, 507 
 
 Navigation Laws, 101 n. 
 
 Neale, Vansittart, 504 
 
 Necessity, the laws of, Kropotkin on, 
 628 n. 
 
 Necker, J., and free trade in corn, 32 ; 157 
 
 " Negative rent," 558 
 
 Neill. C. P., 277 n. 
 
 Neo-Classical school, 10, 397 
 
 Neo-Malthusians, 130, 134 
 
 Neo-Marxism, 473-483 ; and the labour- 
 value theory, 474 ; and surplus labour 
 and surplus value, 475 ; and syndi- 
 calism, 479-483 
 
 " Net product," the, 12-18 ; agriculture 
 the sole source of, 12, 14 ; mines doubt- 
 ful yielders of, 14 and n. ; disappears 
 when prices are low, 15 ; the 
 illusion of, 16 ; rent and, 16 ; value 
 of the theory of, 17 ; and Mercantilism, 
 17; non-existent. 24; interest a sym- 
 bol of, 32 ; taxation should be drawn 
 from, 38-40, 41 ; adaptation of* to the 
 impSt unique, 43 ; 453 n. 
 
 Netchaieff, 639 and n. 
 
 Nettlau, M., 619 n. 
 
 New Harmony, Owen's colony, 236 n., 
 241 n., 246, 257 
 
 New Moral World. 236 n. 
 
 Nicholas I, Tsar, 639 . 
 
 Nicholson, Professor J. S., 52 n., 266 n., 
 592 n.
 
 662 INDEX 
 
 Nietzsche, 511, 616 and a. 
 
 Nitti, F. S., 503 n. 
 
 " Noble savage," the cult of the, 7 
 
 44 Normal," the term, 271 
 
 North, Dudley, 54 
 
 North, Lord, 105 
 
 OBEBLIN, Pastor, 486 
 
 Office du Travail, 257 n. 
 
 Ogilvie, W., 560 and n. 
 
 Oldenburg, 268 n. 
 
 Olivier, P., 611 n. 
 
 Ollivier, E., 324 
 
 Oncken, H., 11 ., 17, 19 n., 30, 383 n., 
 414 n., 432 n. 
 
 Ophelimity, 75, 91, 99, 522 n., 541 ., 572 
 
 Optimism, xv ; Adam Smith's, 68-69, 
 88-93; the French Liberal school 
 and, 324-327; Bastiat and, 327, 377 ; 
 Carey and, 327, 493 
 
 Optimist school, definition of, 356 n., 
 357 n. 
 
 Optimists, the, 118, 322-348, 354, 356, 
 368, 438 
 
 Orbiston, Robert Owen's colony at, 236 n. 
 
 Organic sociologists, the Physiocrats the 
 forerunners of, 7 
 
 " Organisation of labour," 300, 303-305, 
 319 
 
 Orthodox school, 169, 176, 326 
 
 Ott, A., 317 ., 420 n. 
 
 Over-production, J. B. Say and, 115- 
 117 ; 171 ; Sismondi and, 176, 178- 
 182 ; the Classical school and, 181 ; 
 Marx and, 461 
 
 Owen, Robert, 169, 171 ; Sismondi and, 
 173 n., 184, 194 ; 201 n. and associa- 
 tion, 232 n., 233 ; and Fourier, 234- 
 235, 245 ; and the Chartist movement, 
 235 ; and socialism, 235 ; his career, 
 235 n. ; his industrial reforms, 236- 
 237 ; and association, 237 ; and the 
 social milieu. 237-239; and profit, 
 239-244 ; and money, 240-241 ; and 
 the National Equitable Labour Ex- 
 change, 241-242 ; and co-operative 
 societies, 243-244, 504 ; founded no 
 school, 244 ; 246, 255, 261, 264, 290, 
 293, 315, 316, 323, 370, 378, 470, 579 
 
 P ASP'S, 0. DB, 459 n, 
 
 Paillottet, P., 343 n. 
 
 Paine, Tom, 560 and n. 
 
 Pantaleoni, M., 36 n., 530, 538 n., 542, 
 551 nn. 
 
 Parable, Saint-Simon's, 204-205 
 
 Pareto, V., 71 n. ; on prices, 76 n.-77 n. ; 
 99, 231 n. ; and Free Trade, 288 n. ; on 
 method, 397 ; and maximum utility 
 and maximum ophelimity, 412 ; 421, 
 448, 516, 521 n., 522 n., 529 n., 533 n., 
 534 n., 536 and n., 537 n., 540 n., 
 541 n. ; and the Hedonists, 542 ; 544 n., 
 555 . ; and the relative duration of 
 
 rents, 557 ; and negative rent, 558 
 on solidarity, 608 n. 
 
 Passy, F., 509 n., 592 n. 
 
 Passy, H., 371 n. 
 
 Patten, Professor, 285 n., 522 n., 542 n. 
 
 Pearson, K., 407 n. 
 
 Peasant proprietorship, 371-372 
 
 Pecqueur, C., 304-305, 449 n. 
 
 Peel, Sir Robert, 280, 366 
 
 Pellarin, C., 245 n. 
 
 People's Bank, 308 n., 317 n., 319-320 
 
 Pereire, E. and I., 212, 226 
 
 Perin, C., 502 n. 
 
 Personal interest see Self-interest 
 
 Pervinquiere, M., 14 
 
 Pessimism, the French Liberal school and, 
 324 
 
 Pessimista, the, 118-120; and rent, 118; 
 and the law of diminishing returns, 
 118; Mill and, 372 
 
 Petty, W., 54 
 
 Pfluger, Pastor, 507 
 
 Phalange, 248-250 
 
 Phalanstere, 245 n., 246-252, 255, 257, 
 297 n., 604, 635 
 
 Physiocracy, 4 n. ; a popular craze, 5 ; 
 Adam Smith and, 63 ; J. B. Say and. 
 108-109 
 
 Physiocrats, the, xi n., 1-50 ; and the 
 conception of political economy, 2 ; 
 the first school of economists, 3 ; the 
 Abbe Baudeau on, 3 n. ; bibliography 
 of the system, 4 n.-5 n. ; and the 
 " natural order," 5-12 ; Rousseau and, 
 6 . ; and the civilised state as op- 
 posed to a state of nature. 7 ; fore- 
 runners of the organic sociologists, 7 ; 
 their conception of the " natural 
 order," and man's duty with regard 
 to it, 8, 9-10, 87-88 ; and the rights of 
 private property and individual liberty, 
 10 n., 11; and the " net product," 
 12-18, 141 ; and land as an agent in 
 production, 12 ; on industry and 
 commerce, 12-13 ; and the " sterile 
 classes," 14, 21 ; and mines and the 
 " net product," 14 and n. ; and agri- 
 cultural and industrial production, 15 ; 
 their influence upon practical politics, 
 17 ; and the circulation of wealth, 18- 
 26 ; their regard for private pro- 
 perty, 21-26, 199 n.-200 n., 217 ; and 
 the duties incumbent upon landed 
 proprietors, 25-26 ; and the abolition 
 of corporations, 26 n.-27 n. ; and trade, 
 27-33 ; and Mercantilism, 27, 29, 169, 
 314 ; the founders of Free Trade, 
 29 ; and reciprocity, 31 ; Galiani'a 
 criticism of, 32 ; and the question of 
 interest, 32-33 ; and the functions of 
 the State, 33-37 ; and legislation, 
 33-34; and political liberty, 34 n.; 
 and the sovereign authority, 35-37, 
 41 ; and education, 37 ; and inter.
 
 INDEX 
 
 663 
 
 nationalism, 37 ; and taxation, 38-45 ; 
 and the fiscal system of the French 
 Revolution, 44, 104 ; rrtume of their 
 doctrine, 45-50; Adam Smith and, 
 51 n., 56, 56, 62, 63, 64, 65, 69, 80, 
 88, 93, 98, 100 ; 89, 97 ; J. B. Say and, 
 108-109 ; Germain Gamier and, 108 ; 
 and money, 115 ; and population, 122 ; 
 and rent, 142 ; and Free Trade, 98, 153, 
 163 ; and the natural identity of 
 individual and general interests, 185 ; 
 201 n. ; the Associationists and, 232- 
 233 ; 322, 323 ; and their successors, 
 327 ; 331, 338 n., 347, 348, 354, 371, 
 572, 629, 644 
 
 Pitt, William, 104, 105 
 
 Place, F., 159 n. 
 
 Plato, 200 and n. 
 
 Play, 7. Le, 137, 196, 238, 304 ; his 
 school, 486-495; his career, 486 n.- 
 487 n. ; his family system, 488-493 ; 
 and the State, 488 ; his method, 492 ; 
 and the Historical school, 493-494; 
 the division in hi* school, 494-495 ; 
 497, 602 
 
 " Plutology," 376 
 
 Podmore, P., 236 n. 
 
 Political economy, origin of the term, 1 
 Quesnay and his school the virtual 
 founders of the science, 2 ; Adam 
 Smith as founder of, 50-51, 103 ; the 
 scope of, in Adam Smith's system, 55- 
 56 ; Quesnay's conception of, 88 ; 
 Adam Smith's conception of, 88, 89, 
 110 ; J. B. Say's influence upon, 
 107, 111 ; influence of Mai thus 
 and Ricardo upon, 108 ; the Physio- 
 crats and, 109 ; J. B. Say's conception 
 of, 110-111 ; Say's treatment of, 117, 
 175 ; a fashionable craze, 119 n., 349 ; 
 Ricardo and, 138, 139 n., 175 ; the new, 
 the attack upon, 169 ; Sismondi and, 
 173-178, 184, 196, 198, 380; the 
 Historical school and, 175, 222, 380, 
 381 ; the Classical school and, 177 ; 
 A. Comte and, 201 n. ; Saint-Simon on, 
 209 n. ; List and, 270, 380-381 ; and 
 politics, 288 ; significance of the ad- 
 vent of, 327 ; McVickar on, 349 ; 
 Senior and, 350 ; Stuart Mill and, 353 ; 
 not a " dismal science," 354 ; the re- 
 action against Liberalism, 377 ; de- 
 velopment of the abstract method in, 
 379-380 ; the socialists and, 381 ; 
 Roscher and, 383-384; Hildebrand 
 and, 383-384 ; Knies and, 384-385 ; 
 the newer Historical school and, 386 ; 
 Toynbee and, 386 n. ; development of, 
 in France, 388 ; influence of the His- 
 torical method upon, 388 ; Menger 
 and, 389 ; Ashley and, 391 n. ; and 
 sociology, 404 ; Ruskin and, 510 n. ; 
 Carlyle on, 511 and n. ; modern claims 
 for, 517 ; Pare to and, 636 n. ; recog- 
 
 nised as independent of parties and 
 ideals, 583 ; development and future 
 of, 643-648; simplicity of Adam 
 Smith's system, 644 ; divergency of 
 objects and methods among econo- 
 mists, 646-647 ; Liberalism and, 646, 
 647 
 
 Political Economy Club, 139 n. 
 
 Pollock, Sir F., 559 
 
 Poor Law, English, Malthus and, 130 n., 
 136 n. ; Sismondi and, 195 
 
 Population, Adam Smith's supply and 
 demand theory applied to, 82, 89, 188 ; 
 dependent upon capital, 90 ; Mai thus 'a 
 law of, 120, 121-137, 142, 167, 345 ; 
 the " repressive checks," 126-127 ; the 
 " preventive checks," 127-129, 137 ; 
 the reproductive capacity and intel- 
 lectual activity, 137 n.-138 n. ; Sis- 
 mondi on the regulation of, by revenue, 
 188; wages and, 189; Sismondi and 
 Malthus's theory, 189 n. ; Carey's 
 theory of, 346; development of the 
 theory of, 645 
 
 Port Sunlight, 255, 513 n. 
 
 Positivism, Saint- Simon the father of, 
 203; 213 
 
 Pothier, R. J., 587 n. 
 
 Potter, B. (Mrs. Sidney Webb), 687 n. 
 
 Price, demand and supply and, 519-520 ; 
 cost of production and, 520 ; and rent, 
 520 
 
 Prices, Adam Smith's theory of, 74-81 ; 
 Walras and, 114 ; the recent theory of, 
 515 ; development of the theory of, 
 645 
 
 Principles of Revolution, The, 639 
 
 Producer, subordination of, to consumer, 
 342-343 
 
 Producer's rent, 627 n. 
 
 Producers, and social reorganisation, 
 605 n. 
 
 Producers' associations, 604 
 
 Production, the accretion of value is, 16 ; 
 labour as the cause of, 24 ; the Physio- 
 cratic conception of, 46, 49 ; the three 
 factors of, 56 n. ; Adam Smith and, 80, 
 419 ; adaptation of supply to demand 
 the basis of our theory of, 82 ; J. B. 
 Say and, 109 ; Sismondi and, 177, 178- 
 182, 193, 419 ; the Classical school 
 and, 177 ; net and gross. Sismondi and, 
 189-190 ; the Christian Socialists and, 
 196 ; the Saint- Simonians and, 199, 
 226-227 ; Dunoyer and, 347-348 ; 
 Senior on agricultural and industrial 
 production, 362 n. ; Stuart Mill and, 
 368-369; Rodbertus and, 419-421, 
 430 ; State Socialism and, 444 ; Marx 
 on, 468 n.-469 n. ; cost of. and value, 
 520, 526 ; cost of, and price, 520, 534 n. ; 
 the Hedonists and. 533 ; the expansion 
 of. under the influence of applied 
 science, 635-636
 
 664 
 
 INDEX 
 
 Productive power, List and. 270, 272-742 
 
 Productivity theory of capital^ 502, 683 ; 
 of wages, 527-528 
 
 Profit, Adam Smith on the relation of, 
 to rent, 64 n. ; Adam Smith's conception 
 of, 65 n., 80, 114 ; Smith on high 
 profits, 67, 74 n. ; dependent on ex- 
 change value, 90; Ricardo and, 114, 
 160-163, 373 ; the Pessimists and, 118 ; 
 Marx and, 185, 457-458 and n. ; Robert 
 Owen and the abolition of, 239-243 ; 
 Bastiat and the relation of, to wages, 
 340-342, 550-551; Stuart Mill and, 
 373 n. ; the term as understood by 
 English and French economists, 373 n. ; 
 the Classical school and, 520 ; Walras 
 and, 534 n.-535 n. ; rent and, 545 ; 
 Walker and, 550-551 ; Pantaleoni on, 
 651 n. ; Stuart Mill and the abolition 
 of, 605 n. 
 
 Profit-sharing, the Saint-Simonians and, 
 227 
 
 Property, private, the Physiocratio doc- 
 trine and, 10 n., 11, 21, 24-25 ; respect 
 for, during the French Revolution, 25 ; 
 Turgot's views upon, 25 ; Rioardo's 
 theory of rent and, 154, 558-559 ; Sis- 
 mondi and, 198 ; the Saint-Simonians 
 and, 199-201, 213-225, 294 n. ; con- 
 sidered from the point of view of 
 ethics, 200 ; Saint-Simon and, 210 ; ex- 
 ploitation and, 215 ; Fourier's Phalan- 
 stere and, 248-249; the Radical 
 Socialists and, 251 ; Proudhon and, 
 290-300, 315; Brissot and, 292 n. ; 
 Bastiat and, 337 ; Marx and, 463-464 ; 
 the Christian Socialists and, 506 ; 
 Tolstoy and, 513 ; the Hedonists and, 
 540 n. ; considered to be unjust, 559 ; 
 Stuart Mill and, 568 n. ; Gossen and, 
 572-573 ; solidarity and, 606-607 ; the 
 anarchists and, 626-627, 641 ; syndica- 
 lism and, 641 ; socialism and, 642 
 
 Proprietor, the, in Ricardo's, Proudhon's, 
 and Bastiat's view, 336 
 
 Protection, the probable attitude of the 
 Physiocrats to, 17 ; influence of, on 
 agriculture and on industry, 30 n. 
 Adam Smith's criticism of, 98-99 ; 
 Ricardo and, 163 n. ; Mai thus and, 
 164 ; Sismondi and, 264 n.-265 n. ; 
 Saint-Simon and, 265 n. ; the Saint- 
 Simonians and, 265 n. ; List and, 265, 
 268-290 ; and agriculture, List on, 
 276 and n. ; in the United States, 279 ; 
 in Germany, 279, 280, 281 ; in France, 
 280, 281, 323, 354; Carey and, 282- 
 284 ; Duhring and, 289 n. ; in England, 
 323, 354; Bastiat and, 329-330 ; follows 
 the interest of the producer, 343 ; the 
 Liberal school and, 354 ; Stuart Mill 
 and, 365 ; the Social Catholics and, 
 501 n. ; and solidarity, 602 
 
 Proudhon, J. J., 169 ; and government, 
 
 209, 310, 311. 624 n., 627; his Er 
 change Bank, 242, 291, 293 ., 308-319 ; 
 and private property, 290-300 ; bis 
 works, 291 n.-292 n. ; his career and 
 his character, 291-292; and interest, 
 293 n. : and labour, 293 ; and socialism, 
 296-300; and Fourier, 296, 297 n, ; 
 and the communists and communism, 
 
 296, 297, 298, 299, 300; and the 
 economio fo; ;s, 296-297 ; on liberty, 
 
 297, 315 ; and association, 297 and n. ; 
 on justice, 208-299 ; and exchange, 
 299-300 ; and the Revolution of 1848, 
 300-308 ; and " the right to work," 
 301 ; and money, 308-310, 313-314 ; 
 and co-operation. 315 ; and solidarity, 
 317 ; and the People's Bank 319-320 ; 
 influence after 1848, 320-321 ; Marx 
 and, 320-321, 449 n. 462 ; new interest 
 in his ideas, 321 ; 323, 329 ; and 
 Bastiat, 333 n.-334 n., 343 ; and the 
 proprietor, 336 ; 378, 415 n., 429 n., 
 450, 486 ; on land, 559 ; and the con- 
 fiscation of land, 560 ; 607 n., 613 ; 
 the and anarchists, 615, 641 ; 616, 
 619 and n. ; and Bakunin, 620 ; 622 ; 
 and the individual, 622-623 ; and the 
 idea of humanity, 623 ; and reason, 
 628 ; and society, 630, 631 n. ; on the 
 harmony of individual and general 
 interests, 633 n. ; 634 ; and revolution, 
 637 ; and syndicalism, 641 
 
 Providential order, Bastiat and, 331 
 
 Prudhommeaux, M., 264 n. 
 
 Prussia, the tariff of 1821 of, and Adam 
 
 Smith's doctrines, 106 n. ; tariffs in, 
 
 in the early nineteenth century, 266 ; 
 
 and the Zollverein, 268 ; industry in, 
 
 281 n. 
 
 Psychological school, the, 397 n., 521-528 
 Puech, M., 321 n., 323 n. 
 ?! Pure " school, the, 353, 392 
 
 QUANTITY theory of money, 360 
 Quaai-contract theory, 595-599, 603 n., 
 
 606 
 
 Quesnay, F., 2-5 ; virtually the founder 
 of political economy, 2 ; his works, 
 3 n. ; on natural right, 7 nn. ; and the 
 analogy between social and animal 
 economy, 7 ; and the " natural order," 
 9, 10 and n., ; and the " net product," 
 15 ; his theory of the circulation of 
 wealth, and the Tableau tconomiqut, 
 18-20 ; on the productive and sterile 
 classes, 21 n. ; on the landed pro- 
 prietors, 21 n. ; on the security residing 
 in property, 24 n. ; on the safety of 
 property as the basis of economic order, 
 25 ; on the poor, 26 n. ; on foreign 
 trade, 28 ; on Free Trade, 29 nn. ; 
 on the " good price," 29 ; on American 
 competition, 30 n. ; on Protection, 
 31 n. ; and interest, 33 ; on laws, 34 ;
 
 INDEX 
 
 665 
 
 on the sovereign authority, 35 ; on 
 despotism, 36 n. ; on education, 37 ; 
 on Government expenditure, 38 n. ; 
 and the " iron law," 42-43 ; and wages, 
 43 n. ; and value, 47 n. ; 54 ; and 
 Adam Smith, 55 ; and agriculture as 
 the source of all wealth, 56 ; his con- 
 ception of political economy, 88 ; 
 Adam Smith's criticism of his theory, 
 88 ; 201 n., 232, 298 
 
 Quetelet, L., 407 n. 
 
 Quod Apostolici, Encyclical, 500 n. 
 
 RADICAL party, English, 372 
 
 Radical-Socialist party, 592, 601 
 
 Rae, J., 52 n., 64 n., 66 n., 96 n., 103 n., 
 106 n. 
 
 Ragaz, Professor, 507 
 
 Raiffeisen, F. W., 496, 503 n. 
 
 Rambaud, J., xi, 277 n., 503 n. 
 
 Rau, K. H., 352, 379 
 
 Rauschenbusch, W., 507 n. 
 
 Raymond, D., 277 n. 
 
 Reason, the anarchists and, 628, 641 
 
 Reciprocity, Mercier de la Riviere on, 31 ; 
 Proudhon on, 310 n. 
 
 Reclus, ., 615, 619, 622, 624, 627 n., 
 628, 632 n., 636, 637 
 
 Reichel, 631 n. 
 
 Reid, T., 560 
 
 Religion, Robert Owen and, 238-239 
 
 Renard, G., 465 n., 469 n. 
 
 Renouvier, C. B., 403 n., 560 
 
 Rent, the theory of, xv ; Ricardo's con- 
 ception of the nature of, 16, 114 ; and 
 the " net product," 17 ; Adam Smith 
 and, 64, 80, 92 ; relation of wages and 
 profit to, 64 n. ; J. B. Say and, 114- 
 115, 556; the Pessimists and, 118; 
 Ricardo's theory of, 138, 140-157, 164, 
 335, 338, 339, 370, 545-546, 547, 548 
 andn., 552-553, 544 n., 555 n., 558- 
 559, 561, 581-583, 587; differential 
 rent, 142, 546-558 ; Malthus and, 142, 
 ] 52, 164 ; James Mill and, 155, 562 ; 
 the Saint-Simonians and, 213 n., 214, 
 562; Carey and, 327, 338-340, 425, 
 545, 546; Bastiat and, 335-338, 340, 
 425, 545, 546 ; Fontenay and, 338 n. ; 
 Senior and, 350-351, 302; the Classi- 
 cal school and, 362, 520, 547 ; Stuart 
 Mill and, H62, 370-372, 548, 554, 555, 
 602-563, 566, 567-568, 569 ; Eodber- 
 tus and, 424, 425; modern econo- 
 mists and, 516 ; and price, 520 ; an 
 " unearned increment," 545 ; growth 
 in, 546; of land, 546-548, 554-555, 
 556-557 ; of capital, 548-549 n. ; 558 n., 
 583 ; of ability, 549, 551, 582, 683 ; 
 Walker's theory, 549-552 ; and profit, 
 550-552 ; and the Classical theory of dis- 
 tribution, 553 ; a consequence of the 
 laws of value, 5o5 ; of land, a species 
 of the income of fixed capital, 556 ; a 
 
 H.D. 
 
 scarcity price, 656; dchaffle and, 
 556-557 ; K. Menger and, 557 ; rela- 
 tive permanence of renti, 557 ; negative 
 rent, 558; J. B. Clark and, 558 n.; 
 and private property, 558-559 ; man's 
 right to the land and the theory of 
 rent, 561 ; of land, spontaneous cha- 
 racter of, 561 ; the confiscation of, 
 562-570 ; Henry George and, 563-568, 
 569 ; the relation of wages to the in- 
 crease in, 566 and n. ; Gossen and 
 Walras and the confiscation of, 574- 
 675 ; Sidney Webb and Ricardo'a 
 theory of, 681-583 ; interest regarded 
 as, 582; "economic rent," 582 n., 
 583 n. ; the Fabian doctrine and 
 Ricardo's theory of, 587 
 
 Rerum Novarum, Encyclical, 501 n. 
 
 Revolution, Proudhon on, 320 n. ; 
 Marxism and, 471-472 ; Neo-Marxism 
 and, 481-482 ; Buchez on Christianity 
 and, 496 ; the anarchists and, 637-640, 
 641 
 
 Revolution, French, the Physiocratio 
 system and, 44, 104; socialism and, 
 199 n. ; the leaders of, and private 
 property, 199 n.-200 n. ; 205, 214, 223 
 
 Revolution, the Industrial, 65, 104, 111 
 
 Revolution of 1848, Blanc and, 256; 
 Proudhon and, 300-308, 311 n. ; and 
 socialism, 300 ; 436-437 
 
 Revolutionary Cafec/tim,Netchaien"s,639 
 
 Reybaud, M., 300-301, 306, 354 
 
 Ribbes, M. de, 492 n. 
 
 Ricardo, D., x, xiv ; against the idea that 
 nature is the only source of value, 16 ; 
 his conception of what rent is, 16; 
 and Adam Smith's reference to utility, 
 75 n. ; and international trade, 98, 99, 
 100, 163-164, 363 and n.-364 and n. ; 
 influence on political economy, 108, 
 138, 175 ; and distribution, 114, 139-40 ; 
 and wages and profits, 114, 157-163, 
 373 ; and crises, 117, 177, 192 ; com- 
 pared with J. B. Say, 118; regarded 
 as an Optimist, 119 n. ; one of the 
 Pessimists, vi, 119-120, 192 ; hia 
 place in economics, his work and 
 literary style, 138-139 ; his career, 
 139 n. ; his theory of rent, 138, 140 
 141-157, 164, 335, 338, 339, 370, 545- 
 546, 547-548 and n., 552-553, 554 n., 
 655 n., 558-559. 676 ; his theory of 
 value, 138, 140-141, 149-151, 240; 
 and labour and value, 140, 144 n., 332 ; 
 and the law of diminishing returns, 
 146-147, 373, 576; and the balance 
 of trade theory and the quantity theory 
 of money, 164-165 ; and paper money, 
 165-168; Sismondi and, 174-175, 
 177 and n., 880 ; and machinery, 
 180 n., 181 and n, ; and wages and 
 population, 189 ; the Saint-Simonians 
 and, 227; 228; and property, 228;
 
 666 
 
 INDEX 
 
 Ricardo Continued 
 
 264; List and, 269; 287, 322, 824; 
 and the proprietor, 336; 348, 349; 
 and the income of capital, 350 ; 353 ; 
 and individualism, 355 ; 362, 371, 379, 
 386 n., 390 ; and the identity of public 
 and private interests, 410; Bodbertus 
 on his theory of value, 415 n. ; 416, 
 453 n. ; the Marxian school and, 466 ; 
 his method, 466 ; man's right to the 
 land, and his theory of rent, 561 ; 564, 
 566 n. ; Sidney Webb and his theory 
 of rent, 581-583 ; the Fabian doctrine 
 and his theory of rent, 587 
 
 Bichelot, H., 265 n. 
 
 "Bight to exist, the," 607 n. 
 
 "Bight to the whole produce of labour, 
 the," 607 n. 
 
 " Bight to work, the," 300, 301, 303, 319, 
 599, 607 n. 
 
 Bist, C. f 172, 342 n., 423 n., 539 n. 
 
 Biviere, Mercier de la, one of the 
 Physiocrats, 3 ., 5 ; on the social 
 order, 7 ; on the " natural order," 
 8 W.-9 n., 9, 10 TO., 11 ; and the origin 
 of the term laissez-faire, 11 n. ; on the 
 creation of value, 13 and n. ; on 
 property as a " divine " institution, 
 21 ; on the landed proprietor, 23 n. ; 
 on property as the parent of social 
 institutions, 25 ; on the regard to be 
 paid to the peasants, 26 n. ; on the 
 fallacy that wealth grows from foreign 
 trade, 28 ; on freedom of trade, 29 n.- 
 30 n. ; on the balance of trade 
 theory, 31 ; on reciprocity, 31 ; on 
 laws, 34 n. ; and Catherine the Great, 
 34 ; on despotism, 35 n. ; on taxa- 
 tion, 40 n. ; on the relation of ex- 
 penditure to production, 42 n. ; on the 
 felicity following on the establishment 
 of the " natural order," 46 TO. ; 232 
 
 Bochdale Pioneers. 263 n., 243, 244, 605 
 
 Bodbertus, J. K., 73 n. ; and Siamondi, 
 198 ; and the products of labour, 293 n.; 
 294, 316 ; on the relative returns of 
 capital and labour, 341n.-342 n. ; 369 ; 
 and State Socialism, 414-415, 428, 
 431 ; and Lassalle, 414-415, 416, 417, 
 433, 434 ; French origin of his ideas, 
 415, 416, 423; his works, 415 n.- 
 416 TO. ; his political and economic 
 views, 416-417 ; his social theory, 417- 
 432, 590 ; and the State, 261, 418, 429- 
 430, 441; and production, 419-421, 
 423, 430 ; and the utilisation of the 
 means of production, 421 ; and distribu- 
 tion, 421-428, 430-431 ; and labour's 
 share of the national product, 425- 
 426, 427 ; and the " brazen law," 
 426 ; his theory of crises, 426-427 ; 
 and the regulation of national pro- 
 duction and distribution, 427-429 ; 
 and the State and economic functions. 
 
 430-431 ; the State Socialists and hia 
 doctrine, 430 ; 437, 443, 448 TO., 450, 
 475 ; and Professor Schaffle, 590 n. 
 
 Eodrigms, E., 211, 212 
 
 Bodrigues, 0., 203, 204 n., 211 
 
 Eogers, Thorold, 52 n. 
 
 Boscher, W., 106 TO., 196, 379 and n., 
 380 n. ; founder of the Historical 
 school, 381-383 ; 389, 400 n., 402 
 
 Eossi, P., 315 n., 352, 375, 379 
 
 Boubaud, the Abbe see Baden, Mar- 
 grave of 
 
 Bound, J. H., vi 
 
 Bousiers, P. de, 495 n. 
 
 Bousseau, J. J., 1 ; and the Physio- 
 crats, 6 n. ; and the natural state com- 
 pared with the social state, 7 ; 120 n. ; 
 and private property, 200 n. ; 238 n. 
 596 
 
 Eoyal Economic Society, 506 n. 
 
 " Bural economy," 2, 3 n., 5 
 
 Buskin, John, 196, 251, 510 and n., 511- 
 513 
 
 Eutten, Father, 498 . 
 
 SABOTAGE, 481 n. 
 
 Sadler, Michael, 67 
 
 Saint-Leon, M., 500 n. 
 
 St. Paul, 588 
 
 Saint-Simon, C. H., and Fourier, 201 n. ; 
 quality of his socialism, 201-202 ; his 
 career, 202-203 ; his works, 203 n. ; his 
 earlier philosophic system, 203 ; his 
 economic ideas, 204; his "Parable," 
 204-205; on the future of the indus- 
 trial classes, 205 n. ; on industry, 
 205 TO. ; and the new industrial system, 
 205-211, 224 ; and socialism, 209-211 ; 
 the Saint-Simonians and their doctrine, 
 211-231; and capital, 214; and A. 
 Comte's theory of the three estates, 
 222 ; and history, 224 ; on politics, 
 225 n. ; on philanthropy in social re- 
 organisation, 225 n. ; Engels on, 228 ; 
 and private property, 217; 233, 256; 
 and Protection, 265 TO.; 290, 300; 
 Proudhon and, 311 TO. ; 318, 323, 352, 
 402, 404, 405 ; Eodbertus and, 418 ; 
 450, 470, 475, 486 
 
 Saint-Simonians, the, 169, 184 ; and 
 Sismondi, 193 ; and the equalitarians, 
 200 n.-201 n. ; and their socialist con- 
 temporaries, 201 n. ; and collectivism, 
 
 201, 202, 211, 218-220 ; their doctrine, 
 
 202, 213-225 ; and governmental con- 
 trol, 207 TO. ; the development of their 
 doctrine from Saint-Simon's, 211 ; 
 earliest members of the school, 211 ; 
 organisation of the school, 211-212 ; 
 Enfantine and the downfall of the 
 school, 212-213 ; and private property, 
 199-202, 213-225, 294 n. ; and " ex- 
 ploitation," 215-216 ; and production, 
 217-218. 226-227: and inheritance.
 
 INDEX 
 
 667 
 
 217-218; and the historical method 
 in the criticism of private property, 
 221-224 ; their socialism, 225, 230 n. ; 
 part played by members of the school 
 in practical economic administration, 
 226; and banks and credit, 226; in- 
 fluence upon the socialists, 227 ; and 
 distribution, 229 ; and the general 
 and particular interest, 229-230; on 
 the disadvantages of the spontaneous 
 economic forces, 230 ; and profits and 
 wages, 216 n. ; and value, 216; com- 
 pared with the Associationists, 231 ; 
 Fourier on, 245 ; and Protection, 
 265 n.; and the State, 289 n. ; List 
 and, 289 n. ; 293 ; Proudhon and, 
 296 ; 297 ; Stuart Mill and, 367, 372 ; 
 378, 381, 415 and n. ; Bodbertus and, 
 421, 423; 465 n. ; and class an- 
 tagonism, 471 n. ; and the confiscation 
 of rent, 562 
 
 Saint-Simonism, 112 ; Fourier and, 201n.; 
 212, 219, 254, 255 
 
 Sainte-Beuve, and Sismondi, 193 ; and 
 Proudhon, 292, 295 n., 298 n. 
 
 Sand, George, 263 
 
 Sangnier, M., 496, 502 n. 
 
 Sartorius, G. F., 106 
 
 Saumaise, C., 503 n. 
 
 Savigny, F. K. von, 882 
 
 Saving, Adam Smith on, 73 
 
 Sax, Professor, 522 n. 
 
 Saxony, 281 n. 
 
 Say, J. B., xii, 34 n. ; and production, 
 56 n. ; and capital, 56 ; and produc- 
 tive and unproductive works, 62, 
 348 n. ; and the entrepreneur, 65 n., 
 113-114, 550 n.; 70; on Adam 
 Smith's theory of distribution, 80 ; 
 and distribution, 93, 113-114, 422 ; on 
 the loss of England's American colonies, 
 103-104 ; on the Wealth of Nations, 
 106; and Adam Smith's doctrines, 
 107-117 ; his career, 107 n. ; and the 
 Physiocrats, 108-109 ; and political 
 economy, 110-111, 175, 178; on 
 machinery, 112, 181 ; and rent, 114- 
 115, 551, 554 n., 555 n., 556; his 
 theory of markets, 115; and over- 
 production crises, 115-117, 192 ; corre- 
 spondence with Ricardo, 139 n. ; 148; 
 on the poverty of the English worker, 
 171; Sismondi and, 175, 177, 178, 
 181 ; and the relative poverty of in- 
 dustrial society, 193; 201 n., 207; 
 Saint-Simon and, 209 n., 210 n. ; 228 ; 
 and property, 228 ; 264, 265 n. ; List 
 and, 269 n. ; 279 n., 280, 287, 298, 
 311 n. ; and anarchy, 311 n. ; 314, 
 322, 328 n., 335 n., 336 n., 352 n., 853, 
 375, 379, 390, 425, 615 n., 645 
 
 Say, Louis, 107 n., 266 n. 
 
 "Scarcity," 521 n., 522 n. 
 
 Bchaffle, A., 438 n., 469, 556-557, 590 n. 
 
 Schatz, A., 54 n., 357 n., 372 n. 
 
 Schelle, M., 4 n., 11 n. 
 
 Schmidt, Kaspar see Stirner, Mar 
 
 Schmoller, G., 196, 379 and n., 883, 
 385-386, 389 nn., 393 n., 395, 397, 400 
 403, 406 n., 407, 438, 443 n., 517, 647 
 
 Schdnberg, G., 439 
 
 School of Social Science, 494 
 
 Schulze-Delitzsch, F. H., 376, 434 and n. 
 
 Schumpeter, Herr, 547 n. 
 
 Schuster, B., 323 
 
 Schweitzer, Herr, 434 n. 
 
 Science, Bakunin and, 628-629 
 
 Seager, Professor H. B., 349 n. 
 
 Secretan, C., 560, 600 n. 
 
 Seebohm, P., vi 
 
 Se"gur-Lamoignon, M., 500 n. 
 
 Seignobos, C., 405 n. 
 
 Self-interest, Adam Smith on, as the 
 mainspring of progress, 86-87, 88. 89, 
 92, 95, 393 ; 99 ; the Classical school 
 and, 393-394; Wagner and, 894; 
 Stuart Mill and, 394, 404, 411 
 
 Seligman, Professor, 349 n., 570 n. 
 
 Semaines Sociales, 500 n. 
 
 Senior, N. W., 109 n., 168, 349-351, 
 858, 862 and n., 871, 372, 379, 549, 
 551 
 
 Sensi, Signer, 555 n. 
 
 Service, in Bastiat's theory of value, 
 332-335 ; place of the term in econo- 
 mic terminology, 3;i5 
 
 Service-value, Bastiat'a theory of, 332- 
 335 
 
 Shaftesbury, Lord, 67 ; Bobert Owen 
 and, 237 ; and Christian Socialism, 486 
 
 Shaw, G. Bernard, 579 n., 580 and n., 
 583 n. 
 
 Sidgwick, H., 329 
 
 Sillon, the, 502 
 
 Simiand, M., 388 n., 402 n., 538 n. 
 
 Sismondi, S. de, x, 111, 116, 117, 169 ; life, 
 173 n. ; and political economy, 178, 
 174, 175, 178, 196, 198 ; and Adam 
 Smith, 173, 174, 410; and Bicardo 
 and J. B. Say, 174-175; and Malthus, 
 
 175 ; and the English Corn Laws, 175; 
 and the abstract method in economics, 
 
 176 and n., 380 ; and production and 
 over-production, 176-177, 178-182 ; 
 and interest, 176 n. ; 192-193 n., 215 ; 
 and distribution, 177-178, 185, 186, 
 198, 422, 443 ; and the Classical school, 
 179-182, 195-196; and machinery, 
 180-182; and competition, 182-184, 
 193 n., 198, 410 ; and socialism, 184- 
 185 ; and the theory of the identity of 
 individual and general interests, 185- 
 186, 410; and the concentration of 
 capital, 187-189 ; on the regulation 
 of population by the revenue, 188-189 ; 
 and economic crises. 187, 190-192, 426 ; 
 and net and gross production, 189- 
 190, 420; his reform projects, 192-
 
 668 
 
 INDEX 
 
 Sismondi continued 
 
 197 ; the first of the Interventionists, 
 192 ; influence upon writers and 
 movements in the nineteenth century, 
 195-196 ; influence upon his con- 
 temporaries, 196,197 ; and State Social- 
 ism, 197 ; and the socialists. 196, 197- 
 
 198 ; Marx's debt to, 198 ; and private 
 property, 198; and "exploitation," 
 215, 216 ; 228 n., 230, 233, 256 ; on 
 liberty, 262 n. ; 264 ; and Protection, 
 264 re.-265 n. ; 289 ; Stuart Mill and, 
 367 ; and peasant proprietorship, 
 371 . ; 377, 378, 415 and n. ; and 
 production, 419, 421 ; 440, 450 ; and 
 increment value, 453 n. ; 475 ; and 
 guarantism, 599, 604 ; and Liberalism 
 and political economy, 647 
 
 Slavery, Le Play and, 491 n. 
 
 Smith, Adam, vi ; on the object of 
 political economy, 1 ; accredited the 
 founder of political economy, 2, 50- 
 51, 103 ; and Quesnay, 3, 55 ; Turgot 
 resembles, 4 TO., 47 ; and nature re- 
 garded as the only source of value, 16 ; 
 on " sterile " labour, 17 ; his career, 
 
 50 TO.-52 n. ; his Wealth of Nations, 
 
 51 et seq., 105 ; intimate with David 
 Hume, 50 TO., 53 ; and the Physiocrats, 
 51 TO., 55, 62-65, 69 ; his admiration 
 for Voltaire, 52 n. ; and Bernard de 
 Mandeville, 51 ; and Turgot, 55 ; and 
 the Tableau economique, 55 ; and the 
 division of labour, 66-68, 70-71 ; on 
 labour as the true source of wealth, 56- 
 57 ; and taxation, 61-62 ; on equality 
 in the State, 62 ; and productive and 
 unproductive workers, 62-63 ; and 
 the superior productivity of agriculture, 
 63-64, 65, 67, 108, 143 ; and rent, 64, 
 80, 141-143 ; and industry, 65-66, 67- 
 68 ; his sympathy for the worker, 66- 
 67; on profits, 67-80, 114; his 
 " naturalism," 68-88 ; and the spon- 
 taneity of economic institutions, 69- 
 88 ; and money, 71, 82-85, 115 ; and 
 capital, 71-73, 89-91, 272 TO.; on 
 saving, 73 ; on demand and supply, 
 73-85 ; his theory of prices, 74-82 ; 
 on " value in use " and " value in ex- 
 change," 75-77 ; on labour as the 
 measure of value, 77-78, 149 ; and 
 cost of production as the determinant 
 of value, 78-79 ; his theory of wages, 
 80; and distribution, 80, 93; on 
 the regulation of population to the 
 demand, 82, 188 ; on banks, 85 ; en 
 self-interest as the root of all economic 
 activity, 86-87, 88, 393; and the 
 homo ceconomicus, 86 ; and the " spon- 
 taneous order," 87-88 ; on Quesnay's 
 economic theory, 88 ; his " optimism," 
 88-93 ; and the harmony between 
 self-interest and the general well-being 
 
 of society, 92, 185, 410 ; on the duty 
 of the sovereign, 93, 94, 409 ; and eco- 
 nomic liberty, 93-97, 315 ; on the 
 inefficiency of State administration, 
 94-95 ; and Mercantilism, 98, 169, 
 314 ; and international trade, 97-102 ; 
 and Protection, 98-102; influence of 
 his thought, and its diffusion, 102- 
 107; and Lord North, 105; and Pitt, 
 105; J. B. Say and, 107-118; on the 
 basis and the aim of political economy, 
 110 ; and the entrepreneur, 114 ; and 
 Mai thus' s Principles of Population,12l; 
 compared with Eicardo, 138 ; and the 
 products of mines, 143 n. ; and the 
 interests of the landlords, 153 n. ; and 
 Free Trade, 153, 163, 287 ; 165, 166 ; 
 Sismondi and, 173, 174, 192 ; on 
 competition, 182 ; and high wages 
 and population, 189 ; 201 n., 204, 207 ; 
 Saint-Simon and, 209 n. ; on govern- 
 ment, 217, 625 ; 228 ; and property, 
 228 ; 264 ; on the Act of Union of 
 1800, 266 ; List and, 269 n., 270, 271 n., 
 273, 278 TO., 279 n., 280; and the three 
 stages in economic evolution, 271 n. ; 
 on national power, 271 n. ; 272 ; on 
 moral forces, 273 n. ; on the pros- 
 perity of Britain as the outcome of her 
 legal system, 273 TO.; 322, 323, 326, 
 338 TO., 355 TO., 371, 379, 380 and n., 
 390 ; and State intervention, 408- 
 410; and laissez-faire, 408,410; 416, 
 417, 418, 423, 438 n., 440, 516 ; Mr. 
 and Mrs. Webb on his theory that 
 labour is the cause of value, 581 TO. ; 
 588, 615 TO. ; simplicity of his system, 
 644 
 
 Smith, Prince, 376, 439 
 
 " Smithianismus," 438 
 
 Social biology, 590 n. 
 
 Social Catholicism, 495-503 ; and co- 
 operation, 496-500 ; and the emanci- 
 pation of the workers by themselves, 
 500 ; and the State, 501 ; and Protec- 
 tion, 501 TO.; and socialism, 501 ; 
 and the employer and the worker, 502 ; 
 compared with Social Protestantism, 
 503 
 
 Social Catholics, 494 
 
 Social Christianity, 509 
 
 Social contract, the, 6 n. 
 
 Social Democratic Federation, 579 n. 
 
 Social Democratic party, German, Eod- 
 bertus and, 417 ; 432 ; founded, 437 ; 
 480 TO. 
 
 Social economics, 1, 181, 645 
 
 " Social function," 335 
 
 " Social instinct," the, 632 ; Kropotkin 
 on, 632-633 
 
 Social League of Buyers, 500 TO. 
 
 Social Protestantism see Christian So- 
 cialism 
 
 " Social workshops," Blanc and, 301
 
 INDEX 
 
 669 
 
 Socialism, xi ; Adam Smith regarded as 
 the father of, 79 n. ; Adam Smith a 
 forerunner of, 92 ; Ricardo's theory 
 of value the starting-point of modern, 
 138 ; the Marxian theory of surplus 
 value and, 140 ; and the French Revo- 
 lution, 199 n.-200 n. ; equalitarian, 
 
 200 n.; the Saint- Simonians and,200 n.- 
 
 201 n., 212, 225, 227, 230 n., 231; 
 Saint-Simon and, 201, 202, 209, 210 n. ; 
 Saint-Simon the father of, 203 ; Robert 
 Owen and, 235 ; origin of the term, 
 235 n., 263 and n.; Wm. Thomp- 
 son and, 244 ; Leroux and, 263 ; 
 Proudhon and, 290-291, 296-299, 
 315; and the Revolution of 1848, 
 300-307; Marx and, 320, 470; 
 France the classic land of, 323 ; 
 Bastiat and, 323 n., 329 ; Stuart Mill 
 And, 352 n., 353, 358; the Liberal 
 school and, 354 ; Reybaud on, 354 ; 
 revival of, 377 ; Marx's Kapital and, 
 377; Rodbertus and, 417; State 
 Socialism and, 431 ; Lassalle and, 
 433 ; the Christian schools and,483-485; 
 the Social Catholics and, 500; the Sillon 
 and, 502 ; the Christian Socialists and, 
 509 ; modern changes in, 515-516 ; in 
 England in mid-nineteenth century, 
 579 ; of the Fabian Society, vii, 580 n.- 
 581 n., 584-587 ; Sidney Webb on the 
 present realisation of, 585; "juridical 
 socialism," 606, 607 n. ; criticism of 
 solidarity, 611 ; anarchism and, 640, 
 641 ; and violence, 641 ; and the State 
 and private property, 642 
 
 Socialists, favour Adam Smith's theory 
 of value, 75 ; Sismondi reckoned 
 among, 184 ; Saint-Simon reckoned 
 among, 210 n. ; Proudhon and, 296- 
 297 ; and the Revolution of 1848, 300 ; 
 335 ; and State Socialism, 414 ; Rod- 
 bertus and, 417 ; and capital, 459- 
 460 ; F. D. Maurice on the motto of 
 the socialist, 504 n. ; and interest and 
 rent, 568, 579 
 
 Society, the reality of, 618, 619 n. ; Kro- 
 potkin on, 625 n., 630, 631 n. ; Baku- 
 nin on, 625 n.-626 n., 630, 631 n. ; 
 the anarchist conception of, 629- 
 636 ; Proudhon and, 630, 631 n. ; 
 Jean Grave and, 630, 631 n. ; and 
 government, 631 
 
 Sociological analogy, the, 590-591 
 
 Sociology, 388, 392, 404, 590 
 
 Solidarity, xv ; in France, 136 n., 516; 
 Protection and, 289 n., 602; Proud- 
 hon and, 317 ; the Liberal school 
 and, 325; Bastiat and the law of, 
 344-345 ; origin of the term, 344 n., 
 587 ; modern conception of, 344 ; 
 Carey and, 345 ; and individualism, 
 356 n. ; State Socialism and, 439, 
 592, 601, 602-603; La Play's new 
 
 school and, 495 ; Gounelle on, 508 n. ; 
 the Christian Socialists and, 508 ; de- 
 velopment of the ideal, 587 ; the 
 ancients and, 588-589 ; heredity and, 
 588; A. Comte and, 589; bacteri- 
 ology and, 589 ; the sociological ana- 
 logy and, 590-591 ; growth and uni- 
 versality of, 591-692; the Solidarity 
 school, 592 n.-593 n. ; Gide on, 593 n. ; 
 a new watchword, 593 ; M. Bourgeois 
 and, 593-594, 596, 597-599 ; and 
 natural solidarity, 594-599; pro- 
 gress of the movement, 593-594 ; 
 Durkheim and, 599-600 ; a move- 
 ment towards universal unity, 600- 
 601 ; practical applications of, 601- 
 607 ; fiscal reform and, 602 ; and 
 association, 602, 613-614 ; the syndi- 
 calists and, 603 ; the mutualists and, 
 603-604; and co-operation, 604; the 
 ftcole de Nlmes, 605 n. ; and the 
 mutual credit society, 606 ; and private 
 property, 606 ; and jurisprudence, 
 606 ; criticism of, 607-614 ; the 
 Liberal school and, 607-608; evolu- 
 tion and, 609 ; and collective respon- 
 sibility for misdemeanour, 610 ; the 
 moralists and, 610-611 ; socialist 
 criticism, 611 ; its moral influence, 
 611-612; and individuality, 612- 
 613; and exchange, 613-614; dis- 
 tinguished from charity, 614 n. ; the 
 anarchists and social solidarity, 630 ; 
 632 
 
 Solidarist, or Solidarity, school, 592 n.- 
 593 n., 601 
 
 Solvay, E., 242, 318-319 
 
 Sombart, W., 271 n., 386 
 
 Sorel, G., 209, 321, 447-448, 466 nn., 
 467 n., 473 n., 474 n., 479 nn., 480 n., 
 481 nn., 482 and nn., 483, 515, 638 n., 
 641, 642 
 
 Souchon, A., xi 
 
 Sovereign, the, Adam Smith on, 93, 94, 
 409 
 
 Soeialpolitik, 178 
 
 Spain, anarchism in, 640 
 
 Spence, T., 560 and n. 
 
 Spencer, Herbert, xiii, 356, 376, 560, 
 590 nn. 
 
 Spontaneity of economic institutions, 
 Adam Smith and, 68-85, 87, 88, 89 
 
 Stael, Mme., 173 n. 
 
 Stangeland, C. E., 121 n. 
 
 Stanislaus II, King of Poland, and the 
 Physiocrats, 5 
 
 State, the, in the Mercantilist view, 27 ; 
 in the Physiocratic view, 27 ; the 
 functions of, in the Physiocratic doc- 
 trine, 33-37 ; Adam Smith on the func- 
 tions of, 95 ; the sole inheritor of 
 property, in the Saint-Simonians 1 
 system, 223 ; Blano and, 261, 262 ; 
 Dupont- White and, 408 n., 440, 441 :
 
 670 
 
 INDEX 
 
 State, the continued 
 
 Walras and, 413 ; Bodbertns and, 418- 
 419, 429-431 ; Hegel on, 435 n. ; 
 Fichte and, 435 W.-436 n. ; the Con- 
 gress of Eisenach and, 437 ; Wagner 
 and, 438 n., 439-440; the duties of, 
 under State Socialism, 439; in- 
 capacity of, as an economic agent, 439 ; 
 and the individual, 442-443 ; the 
 Christian schools and, 484 ; Le Play and, 
 488 ; the Social Catholics and, 501 ; 
 Carlyle on the Classical ideal, 511 ; 
 the anarchists and, 615, 623-624, 625, 
 626, 627, 630, 641 ; syndicalism and, 
 641 
 
 State intervention, xv, 407 et seq. ; Adam 
 Smith and, 94-97, 408-410; Malthus 
 and Bicardo and, 164 ; Sismondi and, 
 197,413; the French Liberal school 
 and, 325; Eastiat and, 325 n., 408- 
 409 ; 377, 378 ; Stuart Mill and, 411, 
 413; Cournot and, 413; Lassalle and, 
 434-435 ; Kingsley on, 605 n. See 
 State Socialism 
 
 State Socialism, xi, xv, 197, 221, 259, 
 261, 262, 804-305, 346, 377, 387, 
 889 n., 407 ; origin of, 410, 413, 438 ; 
 not simply an economic doctrine, 414 ; 
 Rodbertus and, 414-415, 417, 428, 431, 
 432 ; Lassalle and, 414, 432 ; Wagner 
 and, 414 ; and socialism, 431 ; Andler 
 and the philosophical origin of, 435 n. ; 
 Fichte and, 435 n. ; principles and 
 characteristics of the movement, 436- 
 448 ; and the Classical school, 438 ; 
 and solidarity and Lassalle, 439 ; and 
 government and the individual, 439- 
 443 ; and distribution, 443-444 ; and 
 production, 444 ; Bismarck and, 445 ; 
 in Germany, 445-446 ; influence in 
 politics, 447 ; and economic Liberalism, 
 447 ; syndicalism and, 447-448 ; the 
 Christian schools and, 485 ; and 
 economic theory, 515 ; modern develop- 
 ment of, 516 ; the Fabians and, 586 ; 
 592, 593 n. ; and solidarity, 601, 602- 
 603 
 
 Stationary state, Stuart Mill and, 373- 
 374 
 
 Statistics, the science of, and economics, 
 407 n. ; 645-646 
 
 Statute of Apprentices, the, 104, 170 
 
 Statutes of the International Brotherhood, 
 639 
 
 Statutes of the International Socialist 
 Alliance, 639 
 
 Stein, H. F. K., 106 n. 
 
 Stein, L. von, 294 n. 
 
 " Sterile classes," the, in the Physiooratic 
 system, 14, 21, 24 ; Adam Smith and, 57 
 
 Sterile labour, in the Physiocratic system, 
 16-17 
 
 Stewart, Dugald, 62 n. 
 
 Stiegler, M., 692 n. 
 
 Stirner, Max (Kaspar Schmidt), 615-619, 
 622-623, 628, 630 
 
 Stoker, Pastor, 507 
 
 Storch, H. F. von, 118 n., 379 
 
 Strong, J., 506 n. 
 
 Stumm, Baron, 507 n. 
 
 Sully, Due de, 17 
 
 Supply, price and, 519 
 
 Surplus labour, Marx's theory of, 450- 
 459, 474-475 
 
 Surplus value, Marx's theory of, 184, 198, 
 228, 294, 450-459 ; Sismondi and, 184- 
 185, 198, 475; decline of the theory 
 of, 516 
 
 Surplus values, the taxation of, 569-570 
 
 Switzerland, Christian Socialism in, 
 607 
 
 Syndicalism, 321, 447, 448, 472 n., 473, 
 479-483, 491 ; the Social Catholics and, 
 498 and n. ; the Sillon and the C.G.T. 
 and, 502 ; and solidarity, 603 ; and 
 anarchism, 619 n., 641-642 ; and the 
 State, 641-642 ; its ideal, 642 
 
 Syndicat, the, 480-481 
 
 Synthetic socialism, 573 
 
 Syntheticism, 573 
 
 Tableau economique, Sn., 5, 18-19, 20 n., 
 21, 162, 534 
 
 Taillandier, Saint-Bend, 616 n. 
 
 Tariffs, in France, 266, 269, 280-281 ; in 
 Germany, 266-269, 280-281; in the 
 United States, 269; the economic 
 nature of, 282 
 
 Taxation, the Physiocratic theory of, 38- 
 45 ; Adam Smith and, 61-62 and nn., 
 102 ; development of the theory of, 
 645 
 
 Theory, economic, recent revival of, 615 
 
 Thierry, A., 203, 211 
 
 Thiers, L. A., 303 
 
 Thomas, 6., 302 and n. 
 
 Thomas, P. F., 263 n. 
 
 Thompson, B., 156 n. 
 
 Thompson, W., 194, 201 n., 244, 450 n. 
 
 Thornton, W. T., 361, 371 n. 
 
 Thiinen, J. H. von, 148 n., 352, 558 
 
 Tocqueville, A. C. de, 303 
 
 Todt, Pastor, 507 
 
 Tolstoy, Count Leo, 510, 511, 512, 513-514 
 
 Tooke, T., 109 n. 
 
 Torrens, Colonel, 349 n. 
 
 Tourville, the Abbe de, 494, 495 . 
 
 Toynbee, A., 196, 374, 379, 386 n., 387 
 
 Trade, the Physiocrats and, 27-33 
 
 Trade, Free see Free Trade 
 
 Trade unionism, Bobert Owen and, 
 236 n.; Stuart Mill and, 361, 362 n. ; 
 the Neo-Marxians and, 479 ; Le Play 
 and, 491 ; 496 n., 504 ; Durkheim and, 
 600 ; the syndicalists and, 603, 642 ; 
 the French anarchists and, 640 
 
 Travail, Le, co-operative society, 257 n. 
 
 Treiteclike, H. G. von, 443 n.
 
 INDEX 
 
 671 
 
 Trosne, G. P. Le, one of the Physiocrats, 
 4 n. ; on the earth as the sole produc- 
 tive source, 12 n., 13 ; and the " net 
 product," 14 n., 15 n. ; on the Tableau 
 economique, 19 ; on exchange, 27 n. ; on 
 Free Trade, 29 n. ; 49, 118 n. 
 
 Trusts, Ollivier on, 325 
 
 Tucker, J., 54 
 
 Turgot, A. B. J., one of the Physiocrats, 4 
 and n. ; on the universality and im- 
 mutability of the " natural order," 10; 
 and the origin of the term laitsez-faire, 
 11 n. ; 12 n. ; on artisans and agri- 
 culturists, 14 and n. ; on mines and the 
 " net product," 14 ; on the circula- 
 tion of wealth, 18; and the Tableau 
 economique, 20 n. ; and property, 25 n. ; 
 on the " good price," 30 n. ; on Pro- 
 tection, 31 n. ; and the edict establishing 
 Free Trade in corn, 32 ; and interest, 
 33, 50 n. ; distinguished from the other 
 Physiocrats, 33, 46-47 ; on industry 
 and agriculture, 37 n. ; on the burdens 
 of the poor, 42 n. ; and the " iron 
 law," 42, 157, 453 n. ; on value, 46- 
 47 ; and Condillao and Galiani, 47 ; 
 60 ; acquainted with Adam Smith, 51 n., 
 65 ; 117 ; and the law of diminishing 
 returns, 146-147 n., 340 ; 222 n., 228 n., 
 298 
 
 " UNEARNED INCREMENT," rent is, 545 ; 
 the confiscation of, 558-570 
 
 United States, zii ; increase of popula- 
 tion in, 124 n. ; growth of per capita 
 wealth of the population in, 131 ; 
 and tariffs and Protection, 269, 278- 
 279 ; List on the economic condition 
 of, 279 ; cultivation and rents in, 
 339 ; Christian Socialism in, 506 
 
 Unity, the movement towards universal, 
 600 
 
 University economists, 436 
 
 Ure, A., 171 n. 
 
 Usury, the Catholic Church and, 503 n. 
 
 Utilitarian Radicals, 586 
 
 Utilitarian school, 352 
 
 Utility, social, 24, 91 ; Dunoyer and, 348 
 and n. 
 
 Utility theory, 328 n. ; Bastiat and, 335- 
 338 
 
 Utopia, More's, 246 
 
 Utopian socialism, 232 
 
 VALUE, the accretion of, constitutes pro- 
 duction, 16 ; nature the only source 
 of, 16; the Physiocrats and, 46, 
 49; Turgot on, 46-47; Galiani on, 
 47 ; Condillac and, 48-49, 74, 75 ; Adam 
 Smith's theory of, 74-80, 149 ; Ricardo's 
 theory of, 138, 140-141, 149-151, 240, 
 332 ; Sismondi and, 184-185 ; Marx 
 tnd, 185, 293 n., 466 and n., 474, 583 ; 
 Marx's theory of surplus value, 184, 
 
 450-459; Proudhon and, 293 n.; 
 Bastiat's theory of service-value, 832- 
 335, 338; Carey and, 332; Ferrara 
 and, 333 n.; in Bastiat's utility 
 theory, 335-338 ; the Classical law of, 
 360, 558; Rodbertus and, 415 n. ; 
 Aristotle and, 451 n. ; determined by 
 cost of production, 520, 526 ; defini- 
 tion of, 523 ; the Classical school and, 
 630 n. ; the Mathematical school and, 
 630 n. ; Aupetit and, 530 n. 
 
 " Value in use," and " value in exchange," 
 75-76, 451 
 
 Value, surplus see Surplus value 
 
 Vandervelde, E., 221, 470 n. 
 
 Varlin, M., 459 n. 
 
 Vereinfilr Sotialpolitik, 437 
 
 Vidal, F., 259, 304-305, 414, 420 n. 
 
 Yilleneuve-Bargemont, Vicomte A. de, 
 197 
 
 Villerme, L. R., 171, 491 n, 
 
 VUley, E., 327 . 
 
 Vinet, A. R., 509 
 
 Voltaire, and the Physiocrats. 6 ; 32 ; 
 hi&L'Hommeavec Quarante Ecus, tin.; 
 43 ; Adam Smith and, 51 n. ; 52 n. 
 
 WAGE fund theory, Stuart Mill and, 361- 
 362, 374 ; Walker and, 362 n., 549 ; 
 Cairnes and, 374 ; 456 
 
 Wages, the Physiocrats and, 43 ; Con- 
 dillac on, 49-50 ; Adam Smith on the 
 relation of, to rent, 64 n. ; Smith's 
 theory of, 80; Ricardo and, 114, 157- 
 163; Sismondi and, 176 n. ; Stuart 
 Mill and, 360 n., 369-370; 353; the 
 law of, of the Classical School, 360- 
 362 ; Cobden on, 360-361 ; the " bra- 
 zen law " of, 361, 426. 433, 453 n., 528; 
 Bdhm-Bawerk and the Classical school 
 and, 520 ; final utility and, 527-528 ; 
 the productivity theory of, 527-528, 
 649-550 ; the Hedonists and, 541 ; 
 relation of, to profit, 550-551 ; and 
 interest, Henry George on, 665 ; 
 relation of, to the increase in rents, 
 666 and n. 
 
 Wagner, A., 222, 393 n., 394, 396 nn., 
 401 n., 403, 414, 416, 431 n., 433 n. ; 
 and State Socialism, 438 and n., 439, 
 440-441, 443 n., 444 ; and the State 
 and the individual, 442 
 
 Wakefield, Gibbon, 34'J n. 
 
 Walker, A., 550 n. 
 
 Walker, F., 362 n., 549-552 
 
 Wallace, A. R., and land nationalisation, 
 561, 677 
 
 Wallas, Graham, 159 n. 
 
 Walras, L., on Free Trade, 30; 75; 
 J. B. Say and, 114 ; and land na- 
 tionalisation, 155, 561, 571, 672 n., 
 573-577 ; and " scarcity," 351 ; 521 n n 
 5-J2 n.; 876, 380, 3H2 and n. ; on 
 the State, 413 ; 4'J5, 529 n. ; his econo-
 
 672 
 
 INDEX 
 
 Walras, L. continued 
 
 mic system, 533-536, 541-542; 537, 
 538 ., 540 n., 544 ; and rent and 
 profit, 552; and the individual and 
 the State, 573-574 ; and the confisca- 
 tion of rent, 574-577 ; 631 n. 
 
 War of Independence, American, 103- 
 104, 202 
 
 Waring, Colonel, 253 n. 
 
 Watt, James, 65 
 
 Wealth, the Physiocratio conception 
 of the circulation of, 18-26 ; a 
 material element, in the Physiocratio 
 view, 27 ; Quesnay regards agricul- 
 ture as the source of all, 56 ; Adam 
 Smith's view of the origin of, 56-57 ; 
 Adam Smith on, 83 ; solely a product 
 of the soil, in the Physiocratio view, 
 348 
 
 Wealth of Nations, 51 et seq., 353 
 
 Webb, Mr. and Mrs. Sidney, 170, 221, 
 387, 580, 581, 583, 584, 585, 586 
 
 Weber, Max, 381 n. 
 
 Weill, G., 202 n., 203 n., 226 n. 
 
 Weitling, W., 323 
 
 Wellington, Dnke of, 366 
 
 Wells, H. G., 680 
 
 West, SirE., 147 n., 149 n. 
 
 Weulersse, G., 5 n., 22 n., 26 n. 
 
 Wieser, F. von, 522 n. 
 
 William II, Emperor of Germany, 446, 
 
 507 
 
 Wilson, G., 96 n. 
 Wirth, M., 416 n., 417 n. 
 Wollemborg, 508 TO. 
 Wolowski, L., 304 
 Woman question, Saint- Simonism and, 
 
 254 ; Fourier and, 254 
 " Working men's associations," 305-306, 
 
 319 
 
 Worms, B., 590 n. 
 Wiirtemberg, Tariff Union between 
 
 Bavaria and, 268 
 
 YOUNG, A., 136 n., 371 
 Yule, Udny, 407 n. 
 
 ZOLA, E., 254 n. 
 
 Zollverein, formation of the, 268 ; 280 
 
 Zollvereinsblatt, 280 n., 288
 
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