UNIVERSITY OF CALIFORNIA 
 AT LOS ANGELES
 
 STEIKES AND SOCIAL PROBLEMS
 
 By the same Author. 
 Principles 
 
 OF 
 
 POLITICAL ECONOMY. 
 
 Volume I., 15s. 
 
 A TREATISE ON MONEY 
 
 AND 
 
 ESSAYS ON MONETARY PROBLEMS. 
 
 Thibd Edition. 
 Price 7s. 6d. 
 
 HISTORICAL PROGRESS 
 
 AND 
 
 IDEAL SOCIALISM. 
 
 Second Thousand 
 
 Price Is. 6d.
 
 STRIKES 
 
 AND 
 
 SOCIAL PROBLEMS 
 
 BY 
 
 J. SHIELD NICHOLSON, M.A., D.Sc. 
 
 PROFESSOR OF POLITICAL ECONOMV IN THE UNIVERSITY OF EDINBURGH 
 
 " Where shall we find a man that is willing to serve God gratis?" 
 
 Thomas a Kempis. 
 
 LONDON 
 ADAM AND CHARLES BLACK 
 
 1896
 
 
 PREFACE 
 
 The contents of this volume in their original form 
 were, for the most part, given as addresses during the 
 last five years, and were intended to deal in a popular 
 
 \ manner with various social problems. 
 
 The first six treat specially and directly of the 
 conflicts between Labour and Capital, and of the 
 interests of both in conciliation. 
 
 The next four, though dealing indirectly with the 
 
 5 same topics, are designed to show more generally the 
 
 ^ importance of economic principles in legislation and 
 
 ^ administration. 
 
 V, The last two were suggested by a voyage around 
 
 Africa, and are intended to illustrate the application of 
 these principles in undeveloped countries. One of the 
 best examples, perhaps, of the necessity of constantly 
 appealing to the most elementary and generally 
 admitted principles is furnished by the continuance 
 under British dominion of slavery in Zanzibar. 
 
 As the best mode of defence is often attack, and 
 the best mode of illustration is often contrast, it has 
 been impossible to avoid controversy. Tu the case of 
 
 202950
 
 vi PREFACE 
 
 a prize-fighter it is always taken for granted that in any 
 display of his science he gives and receives punishment 
 without malice. Is it too much to hope that at this 
 time of day the political economist may claim some part 
 of that indulgence so readily accorded to the natural 
 man ? At any rate I shake hands with my opponents, 
 and for more particular explanations and apologies I 
 beg to refer my reviewers to the essay on " Political 
 Economy and Journalism " {infra Essay VIII.) 
 
 I am much indebted to Mr. A, B. Clark, M.A., for 
 the Index, and to the proprietors of various journals 
 for the privilege of republication.^ 
 
 J. SHIELD NICHOLSON. 
 
 The University of Edinburgh, 
 January 1896. 
 
 ^ Essays V. and VI. have been transferred from my Look on Money 
 ami Monetary Prohlems, I. and VII. were first published in the North 
 British Economist, III. in the Contemporary Review, VIII. in the 
 Economic Journal, IX. in the Times and in the Journal of the 
 Statistical Society, and X. in the Scotsman; Essays II., IV., XI., and 
 XII. have not been published before.
 
 CONTENTS 
 
 I 
 
 PAGE 
 
 Strikes and a Living Wage . . . . .1 
 
 II 
 
 Labour Combinations and Competition . . .22 
 
 III 
 
 Profit-Sharing ....... 45 
 
 IV 
 
 The Reality of Inditstrial Progress . . .70 
 
 V 
 The Living Capital of the United Kingdom . . 97 
 
 VI 
 
 Capital and Labour : their Relative Strength . . 117 
 
 VII 
 
 A Plea for Industrial Liberty .... 137
 
 viii CONTENTS 
 
 VIII 
 
 PAGE 
 
 Political Economy and Journalism .... 153 
 
 IX 
 
 The Reaction in Favour of the Classical Political 
 
 Economy . . . . . . .172 
 
 X 
 
 Old Age Pensions v^ersus an Old Commandment . . 194 
 
 XI 
 
 A Voyage around Africa ..... 201 
 
 XII 
 
 Slavery in Zanzibar ...... 222 
 
 INDEX 227
 
 STRIKES AND A LIVING WAGE^ 
 
 About three months ago it fell to my lot to take part 
 in the meetings of the British Association at Notting- 
 ham. One of the items on the list of excursions was 
 the inspection of a colliery. Owing to the great coal 
 strike, however, this pleasure was denied us, but by 
 way of recompense we saw some features of the strike 
 itself. Two of these were constantly forced on the 
 attention : it was impossible to go about without meet- 
 ing numbers of soldiers and policemen ; and equally in 
 evidence were numbers of men with various kinds of 
 money boxes. The military were keeping order, and 
 the colliers were asking support for the strikers. 1 
 must say it struck me that both sets of men seemed 
 heartily sick of their task ; and no wonder, for, to give 
 things their proper names, we were confronted with 
 coercion on one side and pauperism on the other. 
 
 When laws are maintained by military force, and 
 able-bodied men appeal to the charity of the public for 
 necessaries, it needs no showing that there is something 
 
 1 Address to the Edinburgh Chamber of Commerce, December 1893. 
 
 1
 
 2 STRIKES AND A LIVING WAGE 
 
 seriously wrong, and that, if possible, a remedy should 
 be provided. Under the circumstances, then, when 
 people were looking for remedies on all sides, it was 
 natural to ask the members of the Economic Section, 
 Has not political economy something to say ? What 
 is the good of your science if you cannot apply it to 
 practical problems ? We were reminded that, at a 
 former meeting of the British Association — I think it 
 was at Belfast — the members had succeeded in bring- 
 ing to an end a local strike, and it was insinuated that 
 something must have gone wrong with political 
 economy in these latter days, as it was now so power- 
 less. When the question was put to me, I replied in 
 the most approved Scottish manner with another 
 question : What are tlie facts of the case ? The 
 ancient philosopher who offered to move the earth 
 wanted something to stand on, and we lesser philoso- 
 phers of to-day want something to stand on, even to 
 reopen a coal mine. But to the question, What are 
 the facts ? I could get no answer, or rather I got too 
 many answers — all of them different. Take, for in- 
 stance, the actual point in dispute, the 25 per cent 
 reduction. Of course, the first and natural impression 
 was that the reduction referred to the gross earnings, 
 and suddenly to take away a quarter of a man's wages 
 seemed a very serious matter. But, on inquiry, we 
 were told that the reduction only referred to the excep- 
 tional rise that had taken place gradually since 1888 
 — a rise of 40 per cent. Well, then, that looked as 
 if the wage of 1888, being left untouched, one quarter 
 was to be taken from this 40 per cent rise, still leav- 
 ing, compared with that year, a rise of 30 per cent.
 
 STRIKES AND A LIVING WAGE 3 
 
 This would be a reduction of about 7 per cent in the 
 gross earnings. But, again, on appealing to higher 
 authority, we found that this also was a mistake. 
 The 25 per cent reduction was to be applied to the 
 wage of 1888, and the rise that had been obtained 
 since was to be left intact, the effect on the gross earn- 
 ings being about 17 per cent reduction. 
 
 I am afraid this will require an arithmetical illustra- 
 tion. Suppose, then, that wages in 1888 were on the 
 average 30s., and that by 1893 they rose 40 per cent, 
 namely, to 42s., the meaning of the 25 per cent re- 
 duction was that you were to take a quarter from 30s., 
 i.e. 7s. 6d., reducing it to 22s. 6d., and to this you 
 were to add the 12s. rise, making the total 34s. 6d, 
 
 I find that the President of the Manchester Chamber 
 of Commerce explained at their last meeting that this 
 was the true interpretation, although he regretted to 
 see that some of the most active leaders of the Miners' 
 Federation said the reduction applied to the gross 
 present earniugs, whilst many of the public thought it 
 referred oi]ly to the 40 per cent rise.^ 
 
 I for one cannot conceive why such a serious pro- 
 posal should have been couched in the form of an 
 arithmetical puzzle, with the correct answer the one 
 that was least expected. Perhaps there was some 
 
 ^ In an article in the Economic Journal, December 1893, entitled 
 the "Coal Dispute of 1893," Mr. C. M. Percy, apparently a coal owner, 
 states that the 25 per cent reduction meant that the advance of 40 per 
 cent was to be reduced to an advance of 15 per cent on the prices of 
 1888 — "in other words, 17^ i^er cent off the gross earnings." In the 
 very next article, entitled, "The Lock-out in the Coal Trade," Mr. 
 Clem. Edwards, apparently one of the leaders of the men, says that 
 "the immediate cause of the trouble was a request of the coal owners 
 that their men should accept a reduction of 25 fcr cent in wages."
 
 4 STRIKES AND A LIVING WAGE 
 
 vague idea that the miners would see that under the 
 scheme proposed they still would have 4s. Gd. above the 
 standard of 1888, assuming that to be 30s. But I 
 venture to say that anything to do with money should 
 be put in the clearest and most straightforward way ; 
 the reflections and consolations can be introduced after. 
 Take a converse case by way of illustration. Suppose 
 that in 1888 the income-tax was 9d. in the £, and 
 that it had been reduced gradually to 6d. in 1893, 
 and suppose that the Chancellor of the Exchequer 
 wished to put on another Id., do you think any tax- 
 payer would bless him any the more if he announced 
 that he proposed to make a reduction on the standard 
 tax of 9 d. in 1888 of 22-| per cent ? Yet that would 
 be another way of saying that he proposed to add Id. 
 to the present 6d. 
 
 To return to the reduction in the miners' wage, the 
 mode of announcement made a great many people, in- 
 cluding the leaders of the men, suppose that the men 
 were to be suddenly mulcted of a quarter of their earn- 
 ings, whilst others thought it was to be a quarter of 
 an exceptional rise, and thus public sympathies were 
 divided. Now it appears that the masters really meant 
 something between the two — about 17 per cent of 
 the total wage — and in all probability this was a some- 
 what high demand with a view to a future compromise. 
 
 If the mode of announcement was intended to soften 
 and conciliate, it competely failed, and the implied 
 assumption that 1888 was to be considered a standard 
 rate naturally led the men to ask whether 1893 might 
 not be taken as the standard, and that is perhaps the 
 paternity of the living wage.
 
 STRIKES AND A LIVING WAGE 5 
 
 The search for facts in other essentials seemed 
 equally vain. What were profits ? Could they bear 
 a reduction ? Some people told me that mines they 
 were concerned in had been losing money out of 
 capital for a considerable time, that is to say, instead 
 of profits there were losses. Other people told me that 
 there were mines in which other people (not themselves) 
 were concerned where the profits ranged from 10 to 
 40 per cent. 
 
 It was the same with wages. It was easy to get 
 figures of rates actually paid, but that is not enough. 
 We want to know also the regularity of the employ- 
 ment, and how much any irregularity is due to want 
 of employment, and how much to holidays. The rate 
 of wages is one thing, but the earnings over the year 
 is quite another, and vastly more important. Further, 
 we must ask, especially when we come to a living wage, 
 how far will the money wage go ? What about the 
 price of food, clothes, and other articles of consumption ? 
 It was obviously hopeless for any outsider to form an 
 opinion on such a confused mass of evidence, and on 
 the merits of the question at issue the economist can 
 say no more than the chemist. But, at the same time, 
 there were some illustrations of economic principles in 
 reference to strikes to which I propose to call your 
 attention. In the first place, however, I must apologise 
 for the extreme simplicity of the principles. I am 
 afraid I shall be accused of wasting your time with 
 speaking plain common sense. Allow me an illustra- 
 tion. In recent years a great change has come over 
 the practice of physic, according to the best authorities. 
 Instead of dosing and drenching, they order fresh air
 
 6 STRIKES AND A LIVING WAGE 
 
 and sunshine ; and instead of the old delicacies for the 
 invalid, tliey insist on a plain, simple diet. Now, some 
 people, when they imagine that one or more of their 
 vital organs are out of order, and the physician simply 
 orders fresh air and sunshine, are not only sceptical, 
 but offended. Every doctor will tell you that the poor, 
 in particular, like their medicines to be strong and 
 nasty. Well, there is a fashion in economics as there 
 is in medicine. Unfortunately, however, whilst doctors 
 of medicine have been steadily advancing towards 
 simplicity and reliance on nature, the doctors of 
 economics have been performing the reverse movement, 
 and for all social and industrial evils they propose 
 highly complex and artificial remedies. Now, in my 
 opinion, we want more fresh air and sunshine, and not 
 so much quackery. But to leave metaphor, let me 
 remind you that in every department of life we are apt 
 to overlook what is simple ourselves, and we constantly 
 take for granted that other people could not have over- 
 looked anything that ought to be obvious. And it 
 seems to me that in strikes this is especially the case, 
 as is shown by painful experience. 
 
 What is a strike ? It is not a battle ; it is not a 
 revolt of slaves against their owners ; it is not even a 
 political agitation. A strike is in reality a peculiar 
 method of doing business. When a strike ceases to 
 be conducted on business principles, when it is pro- 
 longed not with the idea of gain, but on account of 
 class hatred, or for the propagation of revolutionary 
 ideas, it fails in its primary function, it is not business. 
 No strike ever began simply because the working 
 classes wished to injure the masters and to destroy
 
 STRIKES AND A LIVING WAGE 7 
 
 their capital ; they are not so foolish. Nor are strikes 
 undertaken, in the first instance, to aid a political 
 party, even of the revolutionary kind. A strike, to 
 take the ordinary case, is intended to enforce a rise 
 or resist a fall in wages. The strikers think they 
 can make a better bargain by simultaneous combined 
 action ; in other words, it is partly a case of refusing 
 to accept a certain price and partly a case of exclusive 
 dealing. It is only at the later stages that the real 
 issue becomes confused and the business element is 
 lost sight of, and it is then that the most serious evils 
 arise. 
 
 But, I should like to know, how can a strike be 
 conducted on business principles unless the facts are 
 known ? And the first remedy I would suggest is, 
 not more legislation, but more light. It is quite true 
 that a board of conciliation or of arbitration cannot 
 enforce its recommendations ; but it can throw light 
 upon the subject in dispute, and point out what is for 
 the interest of both parties. And there can be no 
 doubt that the pressure of public opinion would be 
 brought to bear on the side of justice. The great 
 difficulty now, in bringing public opinion to bear, is 
 that the facts are not known. But if the question 
 had been thoroughly argued by a board of conciliation, 
 and if the contentious matter had been submitted to 
 qualified arbitrators, public opinion would declare 
 strongly against the side that rejected the decision. 
 It is not necessary for the public to know the details, 
 or even the main facts of the case : it is enough if 
 they accept the statement of the arbitrators. Some 
 people profess to think little of the force of public
 
 8 STRIKES AND A LIVING WAGE 
 
 opiuiou ; tbey want written laws, courts, and penalties 
 to remedy every abuse. But if they would reflect, at 
 every turn of their lives they are more or less under 
 public opinion, and as a matter of fact their conduct 
 is moulded much more by public opinion than by law. 
 The press of this country can inflict greater punish- 
 ment than the old pillory, and what most evil-doers 
 dread is not the penalty of the law, but the publication 
 of it. To point the moral with the great English 
 strike : If it could be shown that the misery of 
 thousands of women and children could be traced to 
 the refusal to accept a fair decision, or to culpable 
 ignorance on the part of the leaders of the men, even 
 now the strike is over, the public censure would act 
 in the way of prevention for the future. We cannot 
 suppose if the leaders of labour are so fond of flattery 
 as the practice of politicians leads us to believe, that 
 they would bear with perfect equanimity the opposite 
 treatment. And what is true of the men is still 
 more true of the masters ; for if they insisted on an 
 unfair demand public censure would be proportionately 
 stronger, because the interests of the many, including 
 the helpless and innocent, are sacrificed to the purely 
 selfish interests of a few. 
 
 I said a strike is in its essence a peculiar method 
 of doing business. I shall now try to show that it is 
 a peculiarly bad method even at the best, and that it 
 is especially bad for the men. During a strike the 
 masters lose the profits, and they also lose something 
 in the upkeep of their capital, as, for example, in 
 keeping tlie mines free of water. But, on the other 
 hand, they can get rid of their accumulated stocks
 
 STRIKES AND A LIVING WAGE 9 
 
 at very liigli prices, and these prices will not reach 
 their natural level till some time after the strike has 
 concluded. 
 
 And here I may remark in passing, that for the 
 masters an accumulation of stocks is an excellent 
 insurance fund against strikes ; and I observe that the 
 leaders of the men — on this very account — are now 
 advocating a restricted output as one of the necessary 
 supports of a living wage. I will deal with this 
 matter presently ; my point now is, that during and 
 after a strike, whether successful or not, the masters 
 receive some compensation for their losses, in the form 
 of higher prices for their goods. It is also important 
 to notice that it is only the profit and not the capital 
 that is lost ; the coal remains in the pit, the shafts 
 are not filled up, and the machinery escapes wear and 
 tear. 
 
 But consider the question from the point of view of 
 the men. Their loss during the strike is an absolute 
 dead loss ; the weeks spent in idleness are gone for 
 ever. According to the oldest proverbs and the latest 
 science, time is looked on as a flowing stream. If we 
 take a mill as representing capital, we may liken the 
 mill stream to the hours of labour ; if the stream works 
 the mill, every hour yields food, but when the stream 
 is turned aside, it flows past once for all ; the mill 
 remains, but the hours and weeks and months have 
 totally vanished. Let us translate the metaphor into 
 simple arithmetic. The great coal strike lasted seven- 
 teen weeks. Taking the figures I have already given, 
 the masters wished to reduce wages from 42s. to 
 34s. 6d., that is to say, 7s. 6d. a week. During the
 
 lo STRIKES AND A LIVING WAGE 
 
 time of the strike the men lost this 34s. 6d. for over 
 seventeen weeks — the amount would be nearly £30. 
 But it will be said, and it was said with a show of 
 triumph, that the men were victorious, and that they 
 have gone back to work without a reduction. That is 
 true, but it is easy to show that they must work 
 continuously for a year and a half at this higher rate 
 before they will have made up the loss during the 
 strike. As a matter of fact, they consented to a 
 possible revision in less than three months. If this 
 is a Waterloo, as we were told at the time, it is a 
 Waterloo in which the miners play the part of the 
 French. 
 
 Suppose, however, that wages are not reduced for 
 eighteen months, then by the end of that time the 
 miners will have earned just the same as if they had 
 continued at work all the time at the reduced rate. 
 The only difference is that in the one case they would 
 have worked ninety -five weeks, and in the other 
 seventy-eight only. It may seem at first sight as if 
 they had made a gain in this way, as they would have 
 given seventeen weeks less time for the same aggregate 
 wages. The gain is as fictitious as the victory. The 
 seventeen weeks was a period of wretchedness, not 
 only to the men, but to their families. Savings gave 
 way to debts, and debts to starvation. In some cases 
 the masters themselves fed the children of the strikers, 
 in others the only resource was public charity. Now, 
 an addition of so much to wages in the future is no 
 equivalent for these losses ; the money may be the 
 same, but the balance of comfort is altogether different. 
 What miner would have parted with 7s. 6d. in the
 
 STRIKES AND A LIVING WAGE ii 
 
 strike to be repaid 7s. 6d. after a year and a half? 
 To judge by similar cases, he would not have given 
 his ready money for seven times the amount at the 
 distant period. The 7s. 6d. during the strike might 
 give his children food for a week, but the same sum on 
 the top of 34s. 6d. would only bring extra comforts, 
 and not indispensable necessaries. 
 
 Another point to consider is that it by no means 
 follows that, supposing wages do keep up for a year 
 and a half, it will be owing to the strike. If they 
 had been reduced, they might have risen from natural 
 causes. 
 
 Again, every week the men remained on strike the 
 price of coal rose, and stocks were cleared off. This 
 artificial and temporary scarcity at last made it quite 
 possible to give the old rate of wages in the meantime, 
 and in other parts of the country the miners struck 
 for or obtained a rise owing to this very cause. This 
 again shows the hollow nature of the supposed victory 
 of the men. 
 
 There is one other point in connection with strikes 
 which I wish to notice before coming to the living 
 wage, and it is a point of crucial importance. During 
 the last fifty years the general rate of wages in this 
 country has risen greatly, and it is true that during 
 the same time there has been a steady advance in the 
 organisation, numbers, and wealth of Trade Unions. 
 At first sight, then, it may seem natural to conclude 
 that the rise in wages is due to the Unions, but this 
 conclusion is by no means obvious or certain. Accord- 
 ing to the Census Eeturns, the most numerous industrial 
 occupation is that of domestic service, and the next
 
 12 STRIKES AND A LIVING WAGE 
 
 most numerous that of agriculture. In both instances 
 the rise of wages has been considerable, and in the one 
 case there have been no Unions, and in the other 
 none of any importance. There are also many other 
 industries in which wages have advanced without 
 Unions ; and when we look beneath tlie surface, we 
 soon discover that the power of Unions to raise wages 
 is extremely limited. All the Unions can do is to 
 take advantage of favourable conditions ; they cannot 
 create these conditions. During the last fifty years 
 there has been an enormous expansion of trade, and 
 immense improvements in the methods of production. 
 More has been produced, and there has been more to 
 divide ; earnings — both wages and profits — have risen 
 from natural causes. The utmost the Unions can 
 possibly claim is that they have secured to labour a 
 greater share of the national income at the expense of 
 profits. They certainly cannot claim that they have 
 increased the total Vi^ealth ; they have neither invented 
 machinery, nor opened new markets, nor extended 
 credit. On the contrary, by strikes and restrictions, 
 they have probably diminished the national income, 
 and given a shock to security. It is even very doubt- 
 ful if, on the whole, in recent years they have increased 
 wages at the expense of profits. Under the fierce 
 competition of modern times, it is very hard to retain 
 exceptional profits ; and if the profits disappear in low 
 prices, they cannot, at the same time, go to raise wages. 
 The Trade Unionists themselves seem to be becoming 
 aware of this fact, and consequently Ave find them 
 crying out for all sorts of devices to keep up prices. 
 In a word, they wish to act in the style of trusts and
 
 STRIKES AND A LIVING WAGE 13 
 
 syndicates, and to create monopolies. Fortmiately, 
 experience shows they are not likely to succeed ; if 
 they did succeed, they could only injure the public, 
 and by their own showing at least two-thirds of the 
 public are the working classes themselves. And that 
 is one of the very simple things that is constantly 
 overlooked. We hear the leaders say to the men : You 
 must make the public feel your power ; you must put 
 Glasgow in darkness, and bring London to the verge 
 of starvation. But the public that will suffer are the 
 working classes themselves. 
 
 I think I have said enough to show that a strike is 
 a very bad method of doing business, especially for the 
 men. But, I shall be told, strikes are not merely 
 business ; they are intended to secure the general 
 welfare of the men, and in particular a living wage. 
 
 What, then, is a living wage ? And how are strikes 
 likely to assist in its attainment ? Before attempting 
 to answer these questions, allow me to make a few 
 remarks on hioh wao-es. 
 
 Even granting that the general condition of the 
 miners or other workmen when in ordinary employ- 
 ment is as good as the most optimistic views would 
 suggest, we should all be willing to allow that a still 
 further rise in their standard of comfort would not 
 only be desirable in itself, but a sign of national 
 prosperity. There was a time — in the pre-Adamite 
 period before political economy began — when it was 
 seriously maintained that the lower wages were, and 
 the worse the condition of the labouring poor, so much 
 the harder they would work, and so much greater 
 would be the national wealtli. The doctrine was even
 
 14 STRIKES AND A LIVING WAGE 
 
 pushed so far as to maintain that dear food was a good 
 thing, because people had to work more to obtain as 
 much as they required, and that even women and 
 children were forced to assist. But this miserable 
 superstition, that low wages caused greater productive 
 power, has long since given way to a generalisation that 
 is based on experience, namely, that cheap labour is 
 generally dear labour, and that high wages tend to 
 increase efficiency. 
 
 To resume : We all agree that a fair day's wage for 
 a fair day's work is a most reasonable and attractive 
 ideal. Indeed, we may go further and say that the 
 higher the wage and the less the work, provided always 
 that other classes are not injured, so much the better. 
 All that this means from the national point of view 
 is, that the greater the productive power of a given 
 amount of labour, so much the better. 
 
 But it is one thing to recognise an ideal, and, un- 
 fortunately, quite another to carry it into execution. 
 Many things are desirable, but few are attainable, and 
 in some cases the method of acquisition vitiates the 
 result. To pass from generalities to our particular 
 concrete case, I maintain that to suppose any class of 
 labourers can obtain a fair reasonable wage simply by 
 refusing to work below that rate, is a gross and mis- 
 chievous fallacy. It is, however, a fallacy that, for a 
 very simple reason, it is by no means easy to dispose 
 of, at any rate in the case of those who are interested 
 in maintaining it. 
 
 The difficulty in exposure lies in the multitude of 
 alternatives. As soon as you show that this minimum 
 — this living wage — cannot safely draw upon one
 
 STRIKES AND A LIVING WAGE 15 
 
 resource, at once some other fimd is made available. 
 The colliers, for example, would supplement any 
 deficiency in their minimum by reducing profits. If 
 it is said this might close the mines, then they point 
 to the royalties, and propose to nationalise the mines. 
 If it is shown that even this device might fail to keep 
 up the minimum, they cast their net wider. They 
 would make a federation of labour in general, and take 
 away the whole mass of profits. If the orthodox 
 economist still pursues with his old-fashioned weapons, 
 they point to the great body of consumers ; every one 
 needs coal, and therefore the price ought to be such as 
 to give those who supply this necessary a fair wage. 
 If it is still pointed out that there is still a fallacy, still 
 a possible leak in the minimum, then they say — if 
 indeed they have not said it before — that Government 
 ought to do something. If Government cannot, a 
 better Government should be devised ; and thus we 
 gradually pass from the terms of a contract between 
 the buyers and sellers of labour to all the vague 
 possibilities of social revolution. 
 
 I thought it best to indicate briefly these varied 
 alternatives in order to clear the ground. Most of 
 them, involving as they do a social revolution, may be 
 left to the Socialists to discuss. The point of interest 
 to practical people is that next February, when the 
 English coalowners and the miners are to meet to form 
 a Board of Conciliation, it is said that the leaders of 
 the men will again insist on a living wage as an iiii- 
 nltcraUc minimum. If they do, no conciliation will be 
 possible, and accordingly it is of the greatest importance 
 that the proposal should be thoroughly discussed before-
 
 i6 STRIKES AND A LIVING WAGE 
 
 hand. As a contribution to the discussion, I beg to ofl'er 
 a few objections founded on simple economic principles. 
 
 In the first place, if a living wage is to mean any- 
 thing, it must refer to the earnings over a considerable 
 period, say, for simplicity, a year. To get a high rate 
 for one or two days in the week, or one or two months 
 in the year, might mean a starvation wage. In other 
 words, a living wage without regular employment is a 
 delusion. Now, it may be all very well to strike for 
 higher wages, but who ever heard of a strike for more 
 regular employment ? Suppose the men absolutely 
 refuse to work for less than a certain rate, what will 
 happen ? Some employers with the least productive 
 mines must cease working altogether, and as a con- 
 sequence there will be an excessive supply of labour. 
 If the labourers agree to share and share alike, the 
 average earnings will obviously be below the living 
 wage. If they are not so communistic, some of them 
 will have to put up with no wages at all. 
 
 But, for the sake of argument, let us suppose that 
 the conditions of trade admit of the masters giving for 
 a time this supposed living wage — that is to say, the 
 rate actually current at present, with regularity of 
 employment. What guarantee is there that the con- 
 ditions of trade will continue ? Suppose the price of 
 coal falls, owing to a decrease in the demand. Latterly 
 very great economies have been made in the use of 
 coal, and the process may continue ; or foreign buyers 
 may turn to other sources of supply. In any case, if 
 the demand falls off, prices must fall ; and if prices 
 fall, wages must also fall, for it is out of the price 
 received for the product that they are paid.
 
 STRIKES AND A LIVING WAGE 17 
 
 But so far we have only looked at demand ; now 
 look at supply. The living wage — the high rate with 
 regular employment — will keep the supply of coal at 
 a high level, and not only so, but it will keep the 
 supply of miners at a high level. Labour will be 
 attracted from less favoured industries, and the children 
 will be brought up to the same calling. The least that 
 is expected of the living wage is that it will support 
 in comfort the miner and his family. We know, as 
 a matter of fact, that in recent years the number of 
 miners has increased more than in proportion to the 
 output of coal, and what is to prevent a further increase 
 if we assume that wages can be kept up artificially ? 
 I say artificially, for when the advocates of the living 
 wage are confronted with a possible fall in prices, they 
 say prices must be kept up, and if they are asked, 
 How ? they say. By a restricted output. Well, then, 
 I ask, even supposing you can keep up wages in this 
 artificial way, how are you going to keep down the 
 supply of labour ? 
 
 But for the sake of argument we have gone much 
 too far. Wages cannot be kept up in this manner. 
 The idea involves a contradiction. If the present rate 
 of wages with the present regularity of employment 
 just gives a living wage, if you restrict the employment, 
 and that is the only way to restrict the output, the 
 earnings must fall below the living wage. If 8s. a 
 day for five days a week is a living wage, 8 s. a day for 
 four or three days a week is less than a living wage ; 
 that is not political economy, it is simple arithmetic. 
 We must also remember that if the price of coal is 
 artificially raised, the demand will fall off, and the out-
 
 i8 STRIKES AND A LIVING WAGE 
 
 put may be more restricted than the promoters of the 
 scheme intended. 
 
 It seems to me that it would be a waste of time to 
 bring forward other objections, when those already 
 advanced are fatal to the proposal ; but, before I 
 conclude, allow me to say a few words on the broader 
 aspects of the question. 
 
 We are all agreed, I suppose — masters, men, and 
 outsiders alike — that strikes are an evil, and should 
 never be resorted to except as a last resource. Well, 
 then, it is most important to aflix the responsibility on 
 the persons who initiate or prolong a strike without 
 due cause. I know I shall be accused of denouncing 
 Trade Unions and glorifying capital if I say a word 
 of dispraise or even of caution to the leaders of the 
 men. But it is part of my duty to observe facts, and 
 to try to discover the strength and results of various 
 social tendencies. It is of no part of my interest — in 
 the ordinary selfish sense of the term — to appear to 
 defend capital and to attack labour. On the contrary, 
 with the present fashion of politicians vying with one 
 another in flattering the labouring classes, and promising 
 all kinds of boons, it is an un grateful task to throw 
 cold water upon what seems the warmth of charity and 
 kindliness. Allow me, then, to state, by way of excuse, 
 that the first public lecture I gave, about sixteen years 
 ago, was to working men on the origin and functions 
 of Trade Unions. At that time it required some 
 courage to give the Unions due justice, and I well 
 remember the amazement of most people of the middle 
 classes when they were told that strong Unions might 
 be very useful institutions. I have been abused, in the
 
 STRIKES AND A LIVING WAGE 19 
 
 most extreme language the rules of polite society admit 
 of, for defending Trade Unions, and now I shall, no 
 doubt, be equally abused for attacking them. The 
 matter is of no consequence except in this : I may at 
 least claim to be impartial. It is not pleasant for a 
 man at my time of life to be accused of being reactionary, 
 old-fashioned, and fossilised. But a public teacher has 
 first of all, and last of all, simply to look at the truth. 
 Well, then, I have to confess that in my opinion Trade 
 Unions have reached a point in their development at 
 wliich they are threatened with serious dangers. They 
 have often been compared to the old Craft Guilds, and 
 the comparison is instructive in more ways than one. 
 At the very time when England was beginning to 
 acquire the commercial supremacy of the world, when 
 the discovery of America, the Preformation, the break- 
 down of feudalism, and other social forces w^ere causing 
 a vast increase in material prosperity, on all sides there 
 were complaints of the decay of the towns. And what 
 was the reason? The principal reason was that the 
 Guilds, by their selfish restrictions and their monopoly 
 prices, had driven industry to places where it could 
 grow in freedom. Let the Unions be warned in time 
 — the attempt to keep up wages at the expense of the 
 consumer, or to force capital to work without profit, is 
 a suicidal policy. If we once lose our markets no 
 amount of strikes will restore them, and if freedom of 
 enterprise is once lost our markets are lost also, and 
 the living wage will dwindle down to starvation point. 
 The mass of the working men may not be able to 
 reason out the effects of economic tendencies, but their 
 leaders ought to have both the ability and the readiness
 
 20 STRIKES AND A LIVING WAGE 
 
 to look to the future. But how can we expect even 
 the leaders of the men to take the trouble to study 
 unpleasant facts when too often the leaders of public 
 opinion do not take such trouble, and talk and write 
 as if the industry of a great country could be carried 
 on by sentiment and flattery and vote-catching. If 
 the constitutions of the British working men are not 
 destroyed by the mass of adulterated sweets with which 
 they are regaled, they must have a strong vitality. 
 
 In conclusion, let me try to catch the spirit of the 
 times and speak in the prevailing fashion to the leaders 
 of the working men — as a cold-blooded economist I 
 shall gain no attention — let me too try a little flattery. 
 I will, then, compare the leaders of the men to the 
 members of the Cabinet. I will suppose that they 
 have in their hands the arbitrament of industrial peace 
 or war. Well, the most elementary knowledge of 
 history reveals the fact that nothing is more easy than 
 to plunge a nation into war : an insult to a flag, an 
 accident misinterpreted, a phrase of diplomacy a little 
 twisted — the smallest spark will put national feeling 
 ablaze, and let loose the horrors of war. The primary 
 duty of a minister of the Crown is to keep in 
 check the warlike passions of the nation. And the 
 primary duty of the leaders of the men is to foster a 
 spirit of conciliation, and not to arouse class hatred and 
 ill-feeling. The devotion of the men to their leaders 
 and to their fellows naturally excites our admiration; 
 so does the courage of soldiers even in a war of 
 aggression. But we have no sympathy for the generals 
 or diplomatists who make a useless sacrifice of life. 
 The greater the devotion and the courage of the men,
 
 STRIKES AND A LIVING WAGE 21 
 
 SO much greater is the responsibility of their leaders. 
 There was a time — not so long ago — when continental 
 statesmen looked with envy on the British Trade 
 Unions, which they regarded as the greatest safeguard 
 against Socialism and Anarchism. But if they have 
 read the violent speeches and considered the wild 
 proposals recently made by professed Unionists, they 
 will be inclined to change their opinion. Let me con- 
 clude by saying that the working classes of this country 
 are at present at the head of the world in efficiency 
 and wage-earning capacity ; and that they are so is 
 not due to legislation, or strikes or public charity, but 
 to native vigour and hard work on their own part, and 
 to enterprise on the part of capital. It will be an evil 
 day for Britain, and especially for the working classes, 
 if they begin to think that they can raise wages by 
 threats, and increase industry by shattering security. 
 
 I do not wish to exaggerate or to unduly magnify 
 the evils of the moment, but I must confess that to my 
 mind the doctrines recently propounded by the leaders 
 of the men, and by those who profess to sympathise 
 with them, are not only fallacious, but fraught with 
 danger to the national well-being.
 
 II 
 
 LABOUE COMBINATIONS AND COMPETITION^ 
 
 Put in tlie concrete, the question I propose to discuss 
 is this : How can strikes he prevented ? And if not 
 prevented, how can they he most speedily and satisfac- 
 torily settled ? 
 
 There you have an economic problem which at 
 the present time is of the most urgent and pressing 
 importance. This time last year the great coal 
 strike in England was at its worst ; in the summer the 
 railway strike in America threatened to assume the 
 dimensions of civil war ; and, later still, we have at our 
 doors the strike of the Scottish miners. The last is in 
 magnitude the least, but it would be well if the public 
 generally, and masters and men in particular, would 
 realise how much waste — and more than waste — is 
 involved in this "least." The newspapers have given 
 rough calculations in pounds sterling of the losses in 
 wages and profits in the coal industry, and of the 
 industries affected by it more or less directly ; but we 
 have become such a wealthy nation, and so accustomed 
 to millions, that we do not realise the injury in this 
 
 ^ University of Edinburgh, October 1894.
 
 LABOUR COMBINATIONS & COMPETITION 23 
 
 way. A strike is a species of warfare — let me take 
 an illustration from military history. The number 
 of miners engaged in the Scottish strike was greater 
 than the soldiers — all told — under the command of 
 Wellington at the battle of "Waterloo. And any one 
 who has read Wellington's own account of the materials 
 of which his army was composed knows very well that, 
 physically, morally, and intellectually, his men were far 
 inferior to the Scottish strikers. But these men saved 
 Britain and saved Europe by their sullen, dogged 
 courage. And certainly one redeeming feature in the 
 case of the miners is the loyalty and obstinacy — the 
 same sullen, dogged courage — with wdiich they stick to 
 their cause when they feel it is lost, and to their 
 leaders when they know they are divided. I do not 
 intend to pass an opinion on the point in dispute in 
 this particular case ; it is impossible for an outsider to 
 tell whether or not the masters could afford to accede 
 to the claims of the men ; my object is simply to bring 
 home to you that besides the mere pecuniary loss there 
 is a loss or waste of moral energy and endurance which, 
 applied in a different direction, would have benefited 
 not only the men themselves, but the whole community. 
 It will, no doubt, be replied that in this, as in similar 
 disputes, a question of principle was involved ; that the 
 conflict was not simply over a shilling or sixpence one 
 way or the other, but that the independence and happi- 
 ness of the miners and their families were at stake — 
 that they were fighting for the principle of a living 
 wage — the misleading name for a high standard of 
 comfort — at any rate for such a minimum as would 
 ensure the comforts and security of civilised human
 
 24 LABOUR COMBINATIONS & COMPETITION 
 
 beings. But if the means adopted to attain this ideal 
 were, as I believe, utterly wrong and based on false 
 ideas as to matters of fact, again we are confronted with 
 a lamentable waste of moral energy. It is this moral 
 element — this mixture of a noble ideal with ignoble 
 methods — that constitutes the great difficulty in all 
 strikes. It has been said, with little exaggeration, 
 that the foundation of all morality is sympathy; and 
 whatever the degree of ignorance, imprudence, jealousy, 
 or covetousness involved in a strike, there is also always 
 a large fund of sympathy. This truth received a re- 
 markable illustration in the great strike at Chicago. 
 The men directly concerned were only those employed 
 by one particular company in one subordinate branch 
 of the manufacture of railway material, but, out of 
 sympathy, the whole industry of that part of the world 
 was paralysed. It is this foundation on human 
 sympathy which renders it so difficult, and in some 
 cases impossible, to enforce the strict observance of the 
 law. I had recently the advantage of a conversation 
 with the American economist Professor Walker, who 
 was himself a distinguished officer in the great civil 
 war, on this very topic of enforcing the law by the 
 employment of force as illustrated in the case of 
 Chicago. He described to me in graphic terms how 
 these riotous crowds consisted partly of those dangerous 
 criminal elements that are found in all large cities, and, 
 to a far greater extent, of men who, in their normal 
 state, were hard-working, honest, and law-abiding 
 citizens, and he concluded : " You cannot fire on such 
 people." No doubt, he admitted, a point may be 
 reached at which firing may be the lesser evil, but to
 
 LABOUR COMBINATIONS & COMPETITION 25 
 
 fix this point in any case demands not only a knowledge 
 of what is technically right according to law, but what 
 is morally right according to human nature. Precisely 
 the same difficulty arises with regard to charitable 
 relief. On the one side the soup given to little children 
 makes the donor to some extent the partisan and 
 approver of the strikers, and removes so far one of the 
 inducements to peace, and on the other side — well, 
 there is no need to appeal to principles — on the other 
 side you have the hungry children. And here also it 
 may be urged that if they were not in a body actuated 
 by strong moral feelings, the men would not submit to 
 see their wives and families suffer. 
 
 It is time, however, to look at the other side of 
 the account in making a rough estimate of the moral 
 elements. Human affairs are always so complex that 
 even the best cause is marred by some of the agencies 
 which it calls into play. Tyranny has been practised 
 in the name of liberty, and cruelty in the name of 
 religion. And in a strike — which is avowedly a 
 species of industrial war — we must expect to dis- 
 cover that the strikers have no monopoly of morality. 
 We shall find, indeed, that in most cases not only 
 is there a waste of moral energy, but that it is turned 
 into positive evil by being applied to wrong purposes. 
 
 I have called attention to the bond of sympathy 
 that unites the workers, and makes them to a great 
 extent merge self-interest in the welfare, or supposed 
 welfare, of their class. The worst of it is, however, 
 that this intensification of class interest seems to in- 
 volve an opposition to the interests of other classes. 
 The masters concerned in the particular dispute are
 
 26 LABOUR COMBINATIONS & COMPETITION 
 
 naturally regarded with hostility, and gradually this 
 hostility is transferred to all masters. The strikers 
 appeal for sympathy to workers in other trades, 
 and as the conflict spreads it seems to become a 
 struggle between labour and capital in general, and 
 not between masters and men in some particular 
 industry. And thus in every strike the idea is 
 spread from one trade to another that the interests 
 of labour and capital are essentially opposed, that the 
 one can only gain at the expense of the other, and 
 even that every loss inflicted on capital is in some 
 way a gain to labour. You see evidences of this in 
 the destruction of property and the means of pro- 
 duction that takes place in extreme cases ; but more 
 important, though not so obvious, is the growth of 
 distrust and the decay of confidence and good feeling. 
 One of the worst results of a strike is that it makes 
 those who have no real cause of complaint imagine 
 that in some way they are being deceived by the 
 masters. This loss of mutual confidence is in turn 
 the source of other moral disorders. The masters as 
 a body are supposed not to look after the interests 
 of the producers whom they ought to lead ; they are 
 believed to be indifferent to the interests of the men 
 so long as they get a good profit on their capital or 
 a good commission on their management. And then, 
 by a natural transition, the blame, at first bestowed on 
 capital, is transferred to the public. The public are 
 regarded as participators in stolen goods. They know, 
 it is contended, or they ought to know, that the price of 
 the goods cannot afford a fair wage and a fair profit, 
 and if the profit is above the fair rate, the wage must
 
 LABOUR COMBINATIONS & COMPETITION 27 
 
 be so mucli more below. In this way the cry arises 
 that the public must be made to suffer ; that they 
 must be made to feel by privation the real value of 
 the toil of labour. And the end of it is that the 
 ill-feeling generated by some local dispute spreads 
 through the nation, and creates a general sense of 
 insecurity. Then, when the whole body politic has 
 become fevered and inflamed, it is supposed that only 
 drastic remedies will suffice, and the way is prepared 
 for an attempt at social revolution. In the meantime, 
 whilst the prophets are prophesying on the ideal 
 future and proposing the nationalisation of everything, 
 the very essence of nationality is being destroyed ; 
 for whether a nation seems bound together in name 
 by language, or by political allegiance, or by configura- 
 tion of territory, the real, living, binding force is the 
 mutual good-will of the people. 
 
 It may be thought that I have wandered far from 
 my theme, and that strikers have nothing to do with 
 patriotism and other old-fashioned virtues. But the 
 proceedings of the Congress of Trade Unionists is proof 
 sufficient, at any rate of the danger, of this line of 
 industrial development, or rather degeneration, becom- 
 ing the path chosen by the working classes. For the 
 outcome of these proceedings, briefly expressed, was 
 simply this, that landowners and capitalists are so 
 unjust, and inefficient, and untrustworthy that their 
 property must be taken from them and handed over 
 to the control of the State. And if that is to be the 
 war-cry of the new political party, the plan of cam- 
 paign must consist in intensifying this class hatred 
 and distrust; the working classes — the majority —
 
 28 LABOUR COMBINATIONS & COMPETITION 
 
 must be taught that the miuority — the men of pro- 
 perty and men of education — are only exploiters 
 of labour, who are to be suppressed as speedily as 
 possible. 
 
 It is not necessary, however, to anticipate the future 
 in order to see the evils of strikes from the point of 
 view of what may conveniently be termed industrial 
 morality. Let me consider a little more nearly the 
 principles and methods of the most common form of 
 strikes, that, namely, which is intended to enforce a 
 rise or prevent a fall in wages. A strike of this kind 
 involves an agreement of the workers concerned to 
 act collectively, instead of individually, in making a 
 bargain about their wages, with the refusal to work 
 unless certain terms are granted. Thus in place of 
 competition of labour we have combination of labour, 
 which in turn is met by combination of capital ; and 
 before considering the price demanded by labour or 
 the rate of wages, we may look at the effects of this 
 substitution — the substitution, namely, of collective 
 for individual action in labour bargains. The change 
 that has occurred in public opinion on this subject 
 during the present century is most remarkable. At 
 the beginning, in the first quarter — for the Com- 
 bination Laws were not repealed till 1824 — com- 
 binations of labourers were looked upon and treated 
 by the law courts practically as criminal conspiracies, 
 and it was not till 1871 that Trade Unions attained, 
 after a long and arduous struggle, their present legal 
 rights, and, indeed, some of the old disabilities re- 
 mained until 1875. During most of this time the 
 balance of public opinion was strongly against Trade
 
 LABOUR COMBINATIONS & COMPETITION 29 
 
 Unions, and it was taken for granted that although 
 they might do some good as benefit societies, they 
 were useless or mischievous in their attempts to 
 regulate wages. In the course of the last twenty 
 years, however, public opinion has changed greatly 
 and rapidly from one of antagonism to one of 
 approval, or at least of benevolent neutrality. 
 This change is due to several causes. In the first 
 place, the removal of penalties and the grant of legal 
 privileges was accompanied by a diminution of the 
 violent methods which are often the result of violent 
 repression. The oldest and strongest Unions became 
 so orderly that Continental statesmen regarded them 
 with envy as bulwarks against Socialism and Anarchy. 
 Many masters also were found to admit that dealings 
 with the Unions were more satisfactory than with in- 
 dividuals. At the same time, there was a considerable 
 change in the public estimation of certain principles 
 of political economy. Those who had adapted these 
 principles for popular consumption had, in their zeal 
 for simplicity, sacrificed accuracy. They had given 
 the public to understand that in all cases competition 
 must produce the best result, and that in all cases 
 the interference of governments and of combinations 
 must be injurious. A reaction was inevitable. Other 
 popular writers began to point out exceptions, and the 
 exceptions were multiplied to such an extent that 
 many people began to think the principles had 
 vanished. This reaction or conversion has now 
 attained such a pitch that the converted seem to 
 think that individual freedom is certain to be pro- 
 ductive of evil results, and that all virtue is to be
 
 30 LABOUR COMBINATIONS & COMPETITION 
 
 found in collectivism. To take a particular example, 
 it is supposed that any rate of wages not fixed by 
 a union is not a fair rate, just as any rent for land 
 not fixed by Government is supposed not to be a 
 fair rent. It is supposed, further, that the only and 
 sufficient remedy for low wages is combination (that 
 is to say, until the nationalisation of all industries 
 is achieved), and that the wages will rise in propor- 
 tion to the efficiency or consistency of the combina- 
 tion, just as the barometer rises in proportion to the 
 weight of the atmosphere. 
 
 It will be instructive, then, at the present time, 
 when the popular admiration of perfect competition 
 is said to be giving way to the new belief in perfect 
 combination, to contrast and compare the two principles. 
 It is so long since any one had a good word to say 
 for perfect competition that a display of its excel- 
 lencies ought to be as interesting as removing the dirt 
 from an old picture. Well, then, when the dirt is 
 removed what do we discover ? What is this ideal 
 of the old economists ? — the ideal, that is to say, 
 supposing that industrial competition could be carried 
 to perfection, or, in other words, that the practical 
 difficulties and obstructions could be overcome. You 
 will probably be astonished to learn that, as an ideal, 
 perfect competition is one of the most pleasing ever 
 contemplated by believers in the perfectibility of 
 mankind. The ideal — like every other ideal — is 
 thwarted in practice by various forces and. circum- 
 stances ; but, in considering the great principles 
 involved, the counteracting and modifying agencies 
 may be put aside, to be taken account of later.
 
 LABOUR COMBINATIONS & COMPETITION 31 
 
 If, then, we wish to understand what is involved 
 in perfect competition as affecting labour and wages, 
 we must assume, in the first place, the conditions of 
 a perfectly organised market. The labourers must be 
 regarded as the sellers, and the masters as the buyers 
 of labour. The law that determines the price is the 
 law of demand and supply. Competition of masters 
 tends to raise the price, competition of men to lower 
 it, until, by the higgling of the market, such a price 
 is adjusted that at that price the supply is just carried 
 off. Every one is familiar with this general law in its 
 simplest form ; everybody knows that the way to 
 induce buyers to take more of a thing is to lower the 
 price, and the way to induce sellers to bring out 
 more stock is to offer a higher price. Every one 
 knows too that competition tends to make prices in 
 the same market equal. Some buyers might be 
 willing for their purpose to give much more, and 
 some sellers to accept much less, but the actual price 
 given and received will depend on the general con- 
 ditions. A duke might be willing to pay a cook five 
 thousand a year rather than do his own cooking, and 
 a cook might be willing to accept his keep as wages 
 rather than do his own starving, but the actual market 
 price of a cook will be between the two extremes. 
 And the reason is that under competition all the 
 cooks (making allowances, of course, by a kind of 
 multiplication table for differences in quality), for 
 work of the same kind, must have the same wages. 
 
 Thus the first result of the principle of competition 
 applied to wages is that for equal efficiency there shall 
 be equal wages, and no scheme of Socialism, founded
 
 32 LABOUR COMBINATIONS & COMPETITION 
 
 upon reward according to deserts, ever aimed at more 
 perfect equality. 
 
 A second result is even more pleasing, but lias of 
 late been strangely overlooked. For the very essence 
 of this competition in a perfectly organised market is 
 that at the price all the supply shall be carried off. 
 The few who are fortunate enough to meet with the 
 keenest buyers do not get a high price, whilst the rest 
 are left in the lurch, but competition goes on on both 
 sides until the supply and demand are made equal. 
 What does this imply? What is the meaning as 
 applied to labour ? It is this : that all the supply 
 must be disposed of, or, in other words, that all the 
 labour must be employed. The logical result of 
 perfect competition is not only that all who are 
 employed shall be paid at the same rates, but that 
 all must find equal employment. Under this system 
 — perfectly carried out — you cannot have one man 
 working overtime and another working no time, but 
 the hours of labour must be so adjusted that the 
 distribution of employment is equal. Thus the second 
 result of perfect competition is the most perfect 
 fraternity — it is just as if every labourer said to 
 every other, " after you," for the simple reason that 
 the performance cannot begin till all find equally good 
 places. 
 
 But this equality of wages and fraternity in 
 employment is not brought about by authority — by 
 magistrates and military, or by government clerks and 
 policemen. The moving force of the whole system is 
 liberty. No man is compelled to sell his labour ; no 
 man is forced to work ; and no employer is forced to
 
 LABOUR COMBINATIONS & COMPETITION 33 
 
 take labour if he objects to the price, or start his works 
 if he objects to the returns. The basis of perfect 
 competition is perfect liberty. 
 
 You will see now that I was justified in saying 
 that perfect competition was like a picture which only 
 needed the dirt to be taken off to reveal its ideal 
 beauty ; for if it could be realised, there would be 
 realised, but in a far nobler form, the dream of the 
 idealists of the great French Revolution — liberty, 
 equality, and fraternity. I say in a nobler form, 
 because, instead of equality being determined by heads, 
 it would be determined by brains. 
 
 It is not as an ideal that competition fails, but, as 
 in other ideals, the difficulty is in practice. In one 
 word, the labour market is not perfectly organised, and 
 it is mainly to meet this disorganisation that com- 
 binations have been devised. 
 
 Let us compare, then, with the ideal of competition 
 the ideal of combination, as foreshadowed in recent 
 disputes. The ruling idea is monopoly. All the 
 labourers of a certain kind are to bind themselves 
 to make a collective bargain through their leaders or 
 agents. Those who will not join the union are to be 
 deprived of work altogether, and the Government is 
 to be called on to prevent the influx of labour to 
 districts which are su]3posed to be already sufficiently 
 provided. The spirit of monopoly is to reign supreme. 
 Hours of labour, rates of wages, conditions of work — 
 all are to be adjusted by the managers of those great 
 labour syndicates. 
 
 The bargain to be struck — the rate of wages to be 
 determined and agreed upon — is to depend not on 
 
 3
 
 34 LABOUR COMBINATIONS & COMPETITION 
 
 supply and demaud, not on the conditions of trade, 
 but on the princij^le of a living wage or a minimum 
 standard of comfort. Here it may be thought we 
 have the most attractive feature of labour combinations. 
 The exclusiveness and the authority — the restriction of 
 liberty and the sacrifice of liberty — are only justified 
 by the end in view, and that end is said to be the 
 improvement of the material condition of labour, and 
 the provision of such a minimum as is worthy of a 
 civilised being. 
 
 It is, however, worse than useless to set up an 
 ideal if the means adopted to attain it are calculated 
 to remove it farther from the grasp. If a minimum 
 wage is insisted on — if men will not work except at 
 that rate — this wage will presumably be above the 
 rate that would be the natural effect of competition. 
 For if it were no higher it would be absurd to waste 
 time and money in securing what could be obtained 
 at once without any expense. The market rate is 
 obviously the rate at which, under the circumstances, 
 having regard to all the conditions at the time, a 
 bargain can be concluded. Except in times of panic 
 and disorganisation, anything can be sold — at a price. 
 Suppose, then, that the minimum wage demanded is 
 above the competition rate. What will be the result ? 
 The inevitable result will be that there will be a 
 lessened demand for labour. Works that only just 
 paid at the lower rate must be shut up, if the price 
 of the commodity remains the same ; and if the price 
 of the article rises, that of itself will check the demand 
 of consumers, and in turn will limit production. There 
 is no escape from this general law. Suppose the
 
 LABOUR COMBINATIONS & COMPETITION 35 
 
 minimum rate is established and work is resumed at 
 that rate, then, as soon as the shortness of supply- 
 caused by the strike has been remedied, industry must 
 be contracted. If this were not the case, if mere 
 insistence on a certain rate were sufficient to secure 
 it, if nothing but obstinacy and endurance for a few 
 months were necessary, what is to fix the minimum ? 
 Why should it not be raised to five pounds or fifty 
 pounds a week ? The absurdity is seen in an extreme 
 case, but in the less extreme case the absurdity is still 
 there if it is not seen. 
 
 "Well, then, if industry is contracted, what becomes 
 of the minimum wage ? A certain number cannot 
 find employment at all. What is the alternative ? 
 Some get a living wage, and others get a dying wage. 
 The other alternative is that all work, but work fewer 
 hours and fewer days ; and if the rate per hour or per 
 day is higher, the amount earned in a week, or a month, 
 or a year, is less. But a man does not live on the 
 rate of wages, but on the amount of earnings. 
 
 It is sometimes said by working men, by way of 
 retort. Look at the professions : lawyers and doctors 
 and others make open or tacit combinations to insist 
 on a minimum standard of fees ; but the reply is 
 obvious : no amount of combination will secure them 
 a minimum standard of income. 
 
 It is said also. Look at official salaries of all kinds, 
 e.g. the Civil Service ; but here also it is forgotten that 
 the numbers are definitely limited, and the only valid 
 principle to apply is that the rate of payment shall 
 correspond to what is earned by similar ability and 
 efficiency in other branches in which competition
 
 36 LABOUR COMBINATIONS & COMPETITION 
 
 prevails. If a higher rate is given, there is on the 
 one side a waste of public money, and on the other 
 those who benefit do so, not by their own labour and 
 exertions, but by chance, or some form of jobbery or 
 favouritism. In precisely the same way, if, owing to 
 circumstances, a labour combination can fix wages 
 above the natural market rate, there is on the one 
 side a tax on all consumers of the commodity. If, 
 for example, in any district the importation of coal 
 could be prevented, and by strict combination the 
 price raised, obviously all the consumers must suffer. 
 And, on the other hand, only a certain number of 
 workers can find employment, and the rest, for equally 
 arduous work in other callings, must receive less wages 
 — as, for example, agricultural labourers and navvies 
 less than the miners, after making all allowances for 
 different degrees of hardship. 
 
 You will observe that I have admitted, what indeed 
 no one denies, that a labour combination may, under 
 certain conditions, for the time raise the rate of earnings 
 above the competition rate, just as any other syndicate 
 may for the time raise the price of any other article. 
 But this exceptional gain must come from the pockets 
 of others. Precisely the same principle is involved as 
 in protection. If the importation of all sorts of food 
 products were prohibited, prices would rise, and for the 
 time agricultural wages and profits would also rise ; 
 but it is needless to point out that the country as a 
 whole would be injured, and in the end there would 
 be a reaction on agriculture itself. 
 
 Another point of resemblance with protection may 
 also be noticed. Protection begets protection : if one
 
 LABOUR COMBINATIONS & COMPETITION 37 
 
 industry is allowed to tax the others by monopoly, 
 they in turn will seek for similar privileges. This is 
 the experience of all nations. But universal protection 
 means universal restriction, and that again means 
 lessened production, lessened national income, and 
 lessened consumption. Similarly, the general result 
 of universal combinations of labour will be to lessen, 
 on the whole, the national production, and thereby the 
 national consumption. 
 
 If, then, the attempt to fix wages by means of 
 combinations above the competition rate must in the 
 end defeat its own object, are we to say that labour 
 combinations are useless ? Such a conclusion is not 
 justified either by theory or experience. It is quite 
 possible that through a tacit or open combination of 
 masters, as was observed by Adam Smith, wages may 
 be kept down below the rate that the conditions of 
 trade could afford. And in such a case combination must 
 be met by combination. If the masters do not compete 
 with one another for labour, one of the conditions 
 essential to a competition rate of wages being fixed is 
 absent. Again, there are many useful functions that 
 may be performed by associations of labour, as is shown 
 in the history of the older Trade Unions, But it is 
 one thing to ensure that labour secures the best 
 terms possible in the state of trade and the best 
 conditions of labour, and it is qviite another to try to 
 make a " corner " in labour, and to try to raise wages 
 by acting in the spirit of monopoly. 
 
 In the same way the ideal of a living wage — the 
 notion that all labourers should have so much material 
 comfort as to give them freedom for moral and spiritual 
 
 202950
 
 38 LABOUR COMBINATIONS & COMPETITION 
 
 activity — that is an ideal which every one ought to 
 approve of and try to promote. But an ideal of this 
 kind cannot be reached by the simple device of sitting 
 down and denying the old proverb that half a loaf is 
 better than no bread ; no amount of denial will take 
 the wisdom out of that old saying, and it is a matter 
 of simple arithmetic that even if a strike is successful, 
 it may take years to replenish the loss of months. 
 In the labour of life it is not enough simply to set 
 up an ideal ; the difficulty is never in seeing and de- 
 siring something better, but in obtaining it. And the 
 minimum rate of wages — the minimum standard of 
 comfort — can only be effectively raised by a multitude 
 of efforts in a multitude of ways. A universal strike 
 cannot do it, and the State cannot do it. A universal 
 strike would be about as effective as a general fast or 
 a public mourning as a means of improving the con- 
 dition of labour, and a decree of the State to raise the 
 average income would be of equal value with a decree 
 to raise the average temperature of the climate. If 
 you only think out what is involved in the progress of 
 the labouring classes — how that progress is affected 
 by inventions, science, and education, by the growth of 
 foreign trade and better international relations, by 
 credit and the organisation of banking, by confidence 
 and the accumulation of capital, and by a number of 
 other agencies, some so obvious and some so obscure 
 as to elude our notice, — you will see that this progress 
 can only be maintained and accelerated by giving free 
 play to all the forces that have made for progress in 
 the past. The short cuts pointed out to the progress 
 of labour are like the short cuts in the Pilgrims Pro-
 
 LABOUR COMBINATIONS & COMPETITION 39 
 
 grcss, but tlie pilgrim was never quite so foolish as 
 to think he might make progress by refusing to walk 
 unless his burden was made lighter. 
 
 It is always dangerous to push metaphors too far, 
 and it is time to remind you that if, in the progress of 
 society, short cuts to Utopia are delusive, we must 
 still be guided by general principles. An unprincipled 
 man, as all know, is a bad man, and if a man without 
 any principles at all is bad, how much worse must he 
 be who is guided by bad principles. It is of the 
 utmost importance to the working classes, and thus to 
 the whole nation, that the guiding principles which 
 they adopt should be sound. If they are really con- 
 ducive to their own welfare, we may be sure the nation 
 at large will not suffer. But the great difficulty in the 
 choice of principles of action is that very often the 
 right is the mean between extremes, as true courage 
 lies between reckless audacity and cowardice. So it 
 is with competition and with combination. Both may 
 be pushed to an extreme — an extreme of excess or an 
 extreme of deficiency. In the present century we may 
 find examples of excessive competition, as shown by 
 the series of evils which led to the factory legislation. 
 But if the first quarter of the present century was 
 marked by excess in competition and deficiency in 
 combination, in the last quarter the positions have 
 become reversed. The leaders of the working classes — 
 to judge by recent utterances — have already pushed 
 the principle of combination to the extreme of excess, 
 and that of competition to the extreme of deficiency. 
 They think — or they assert — that combination is the 
 one refuge, and competition the one destroyer, of
 
 40 LABOUR COMBINATIONS & COMPETITION 
 
 labour. The vastness of modern combiuations and the 
 magnitude of the battles between labour and capital 
 seem to have affected their sense of proportion. I gave 
 you just now a reminiscence of the wisdom of Aristotle, 
 the father of the golden mean. Let me give you 
 another. You will find in his classification of the 
 virtues two that are not generally put in our modern 
 lists — the virtues, namely, of magnificence and of 
 prudence or practical wisdom. The characteristic of 
 magnificence is greatness of expenditure, especially in 
 great public functions. In ancient Greece the magni- 
 ficent man often made a display of this excellence in 
 offering sacrifices to his gods. In our own day the 
 nearest approach to public sacrifices seems to be found 
 in strikes, and the leaders seem to vie with one another 
 in the greatness of the expenditure they can achieve, 
 and in the magnificent spectacle they can present to 
 the public. They proclaim the numbers out of work, 
 and the numbers of their families, and the thousands 
 sj^ent in relief, and the millions lost to the public, with 
 the same pride with which an ancient idolater would 
 have proclaimed the numbers of the victims and the 
 greatness of his expenditure. 
 
 The virtue of magnificence is readily liable to the 
 abuse of excess, especially when the supplies are drawn 
 from the pockets of other people. It is not only, or 
 principally, the leaders of the working men, but our 
 statesmen, the leaders of the public, who are becoming 
 rapidly affected with an excess of this virtue; they 
 are becoming day by day more magnificent; they are 
 vying and contending with one another in magnificence, 
 or at least in the promises of magnificent displays at
 
 LABOUR COMBINATIONS & COMPETITION 41 
 
 the public expense. I should much like to know for 
 how much a year the insurance companies of the 
 country would guarantee only one item in the scheme 
 of one leader — the purchase of dwelling-houses for 
 workmen by State credit. Three acres and a cow for 
 the villager was a mild proposal compared with three 
 rooms and a kitchen for everybody. 
 
 On the other hand, the ancient virtue of prudence 
 or practical wisdom is falling aw\ay to the extreme of 
 deficiency. In their emulation in magnificence our 
 statesmen are teaching the people to forget there are 
 such things as prudence and the other elementary 
 virtues which are the constituents of natural common" 
 sense — self-reliance, industry, foresight, and perseverance. 
 The people are taught to believe that the State is the 
 greatest of all combinations, and is able to provide 
 everything regardless of individual effort. 
 
 It is extremely improbable that such a modern and 
 radical change in the aims and methods of Trade Unions 
 as that shown at the Norwich Congress could have taken 
 place but for the fact that the leaders of public opinion 
 are always preaching, in season and out of season, the 
 doctrine of the omnipotence of the State. Is it to 
 be wondered at that when the working classes are 
 expressly invited to say what they want and they 
 shall have it, they should have taken the statesmen 
 at their word, and have given a very large order — 
 amounting, indeed, to a programme of collectivism, 
 which, if carried out, would destroy the present social 
 system ? 
 
 It may be said — and I believe with truth — that long 
 before this nationalisation of everything is attempted,
 
 42 LABOUR COMBINATIONS & COMPETITION 
 
 or at any rate reaches dangerous dimensions, a reaction 
 will set in, and common sense will return. 
 
 But the interests of a nation are not to be treated 
 on the principles of a theatre of varieties, and whilst we 
 are playing with Socialism the real business of life is 
 being neglected. I began this address with calling 
 attention to the evils of strikes, especially on the moral 
 side, and put the question. How can strikes be pre- 
 vented ? Let me conclude by indicating what, in my 
 view, offers the only chance of an effective remedy. 
 Strikes are an evil that arise from the conflict of the 
 two great principles of action we have been considering 
 — competition and combination. Under actual con- 
 ditions — in which competition is necessarily imperfect 
 in many ways — combinations of labour are certain to 
 be resorted to. It is no doubt true that a great 
 majority of working men do not belong to unions, 
 but, without going into figures, the records of strikes 
 show that quite enough belong to them to have great 
 influence in the national industries. On the other side, 
 and prior in point of time, we have associations of 
 masters. These are facts that must be recognised — 
 just as in international politics we must recognise the 
 existence of large armies. 
 
 Well, then, if the object is to prevent collisions, 
 there are two methods which experience recommends. 
 In the first place, masters and men must recognise 
 the extent, not only of the divergence, but of the com- 
 munity of their interests. The most mischievous 
 result of many recent speeches, which intellectually are 
 simply silly, is that morally they are inflammatory 
 and calculated to set people by the ears. But it is
 
 LABOUR COMBINATIONS & COMPETITION 43 
 
 no use saying that under all circumstances the interests 
 of masters and men are identical — it is not true, and 
 it is not even plausible. Our second object, then, must 
 be to make as clear as possible the extent of this 
 divergence of interests, and also the relative powers 
 of both sides to carry out their threats. If peace 
 cannot be kept by showing there is nothing to fight 
 about, the next best plan is to show that the claim 
 cannot be made good by war. Many wars and many 
 strikes might have been averted if only the antagonists 
 had known accurately the conditions under which the 
 struggle would take place. 
 
 Broadly speaking, I believe all the effective remedies 
 for strikes may be placed under one or other of these 
 heads — first, recognition of identity of interests, and, 
 secondly, a real grasp of the difference in dispute and 
 of the chances of success in case of conflict. Both 
 these remedies may be included under a wider term, 
 and that term is conciliation. It is the fashion at 
 present — it is a bad sign this change of fashion in 
 principles — it is the fashion to sneer at industrial 
 conciliation and to point out the failures of various 
 Boards. It is forgotten that with conciliation, as 
 with other good things and good people, we generally 
 only hear of the failures. And there can be no 
 question that unless masters and men will take all 
 possible pains to find out and to let one another know 
 the conditions of trade, conflicts must take place. It 
 is in this way, and perhaps in this way only, that 
 Government can be of real service. If the Board of 
 Trade were to collect and publish reliable information 
 on the state of different industries much good might
 
 44 LABOUR COMBINATIONS & COMPETITION 
 
 be done. The worst of it is that the idea still prevails 
 that everything in the nature of business must be con- 
 ducted in secrecy. But this fear of light and love of 
 darkness will gradually disappear with the spread of 
 real knowledge and real education. At the end of 
 last century there was a great outcry against a census 
 being taken of the numbers of the people, lest the 
 kings of the earth should know our weakness. Many 
 other instances might be given, but it is time to con- 
 clude. For us, at any rate, one thing is abundantly 
 clear — the only way we, as outsiders, can hope to 
 assist in the prevention of industrial conflicts is by 
 a patient study of the forces by which industry is 
 governed. We must learn, in the first place, to look 
 at social problems in a calm scientific spirit, to examine 
 them on all sides with that same care that the physi- 
 ologist bestows on bodily health and disease. It has 
 been said that genius is patience, and certainly the 
 only substitute for genius is patience. 
 
 The one thing I shall have continually to impress 
 upon you is this : BE patient ; do not expect to rush 
 at once to great discoveries, but learn first of all to 
 understand the present before you attempt to guide 
 the future.
 
 Ill 
 
 PEOFIT-SHAEING i 
 
 Eecent events demand a few prefatory remarks to the 
 present article. It was written before the troubles in 
 connection with the London Gas-works had begun, 
 and without the least idea that a scheme of " profit- 
 sharing " was to be brought forward to defeat the 
 demands of the Trade Unions concerned in the struggle. 
 No more forcible illustration, however, could have been 
 given of the necessity of accurately estimating the 
 meaning, limitations, and possibilities of " profit- 
 sharing " as a method of preventing industrial strife, 
 and the views here expressed, though closely applicable 
 to this latest contest, have at any rate the merit of 
 the impartiality of general arguments on economic 
 tendencies. 
 
 Profit-sharing is a method of conducting business, 
 and not a form of charity, although, of course, like all 
 good business, it takes account of moral elements. 
 The principle on which it is based is by no means 
 new. It is in truth a special form of the most 
 general and far-reaching of all economic principles, 
 
 ^ Contemporarij Review, January 1890.
 
 46 PROFIT-SHARING 
 
 namely, that the work done will vary according to the 
 interest of the worker in the result. The greatest 
 agriculturalists of antiquity, the Eomans, discovered 
 that slave labour exacted by fear and torture was 
 slovenly and inefficient, and they established a system 
 by which the colonus or cultivator became directly 
 interested in the amount and quality of the produce. 
 The Eomans were not philanthropists. The celebrated 
 Cato and the older writers on agriculture thought it 
 cheaper to work slaves at high pressure and shorten 
 their lives. The new method of agriculture established 
 by the Eomans in one of its main branches grew into 
 the celebrated mMaycr system which still prevails 
 largely over the south of Europe. The essence of 
 this system is that the landowner provides the capital 
 and receives a share in the produce, normally one-half. 
 
 In England, as Professor Thorold Eogers has 
 admirably shown, one of the greatest agencies in the 
 emancipation of the serfs and the establishment of 
 the famous yeomanry was the land-and-stock lease, 
 in which the stock was let with the land, and the 
 owner took a considerable part of the risk. Here 
 also the partial identity of interests created was 
 closely analogous to profit-sharing. 
 
 A few other examples may be quoted to illustrate 
 the variety in forms and the widespread application 
 of the principle. Fisheries have been, and still are, 
 generally conducted in such a way that part at least 
 of the reward of the workers depends upon the result. 
 In the Scottish herring fishery, for example, the men 
 sometimes work for the curers at definite wages, but 
 more often take their " chance," as they call it.
 
 PROFIT-SHARING 47 
 
 Again, on both sides of the Border, sheep-farmers 
 very commonly allow the shepherds to keep a certain 
 number of sheep with their own, so that they may be 
 directly interested in the welfare of the whole flock. 
 The method of payment by commission in addition to 
 a certain fixed salary has been adopted on a large 
 scale in all kinds of business, and especially in France 
 prizes {gratifications) are often given for quality of 
 work, economy, and general efficiency. 
 
 It is well to look at the question in the first place 
 in the broad aspects suggested by these examples for 
 several reasons. Most people in this country like 
 to keep their business and their charity quite separate, 
 and there is no maxim more popular than " Business 
 is business." If practical men can once be brought 
 to see that profit-sharing in some form or other has 
 proved an excellent plan of conducting business they 
 will be more likely to give it a trial than if it is 
 considered only as a method of elevating the working 
 classes. 
 
 Again, it must be distinctly recognised that the 
 principle must be applied in different ways according 
 to circumstances — the kind of industry, the class of 
 workers, the nature of the markets, and the like. 
 
 Lastly, the full bearing upon the general wages 
 question cannot be seen if the attention is confined 
 simply to the details of one or two experiments, 
 especially when they have been conducted in a 
 foreign country. 
 
 At the same time, however, in these days when the 
 air is teeming with all kinds of socialistic theories, it 
 is certainly desirable to study actual living examples
 
 48 PROFIT-SHARING 
 
 of success, and also to account for any prominent 
 cases of failure. For such an appeal to experience 
 tlie literature of profit-sharing now affords ample 
 materials. The decision of the Society founded in 
 Paris in 1878 for " the practical study of the various 
 systems under which workmen participate in profits " 
 is a good illustration of the need which, even in France, 
 the country par excellence of ideas, industrial reformers 
 feel that they have of the aid of hard facts. This 
 Society, in order to preserve the absokitely practical 
 character of its studies, determined to admit to 
 membership none but persons actually engaged in 
 manufacture or commerce. An annual Bulletin in 
 quarterly numbers gives some two hundred pages of 
 information collected by the members on the progress 
 of the participatory movement.^ 
 
 It is, however, to Germany that one naturally turns 
 for a complete compilation of facts and theories with 
 ancient and modern instances. Professor Bohmert 
 has written an elaborate work,^ in the first part of 
 which he gives the theoretical and historical side of 
 the question, whilst a special part is devoted to an 
 examination of more than one hundred actual cases 
 taken from nearly every country in Europe, as well 
 as from England and America. 
 
 Nor has the subject failed to attract the attention 
 of English economists. J. S. Mill, in the chapter in 
 
 * Profit-Sharing between Capital and Labour, p. 45, by Mr. 
 Sedley Taylor, a work to which, throughout this article, I am much 
 indebted. 
 
 ^ Die Geioinnbetheilmig, Leipzig, 1878. Translated into French 
 and brought up to date, Paris, 1888.
 
 PROFIT-SHARING 49 
 
 his Political Economy on the Probable Future of 
 the Labouring Classes (bk. iv. c. 7), gave an account 
 of the first and most successful experiment l)y ]\I. 
 Leclaire, who is justly regarded as the father of 
 profit-sharing in the strict sense of the term. Pro- 
 fessor Jevons in a paper on " Industrial Partnerships " 
 (1870) and W. T. Thornton in his work On Labour 
 (1870) did much to make the principle and the 
 most striking examples of its application familiar 
 to English readers, and the subject has found a 
 place in all the best text-books since the work of 
 Mill. Quite recently two important works on Profit- 
 sharing have appeared — one by Mr. Sedley Taylor 
 (1884), and the other, by an American, Mr. N. P. 
 Gilman (1889). In both of these books the case 
 is presented with great impartiality, and with a 
 full sense of the difficulties and dangers as well 
 as of the direct and indirect benefits of the system. 
 
 There are, indeed, few economic proposals of a 
 practical kind which have been so long, and so 
 persistently, and with such authority, presented to 
 the public ; and yet it must be confessed that hitherto, 
 in this country especially, profit-sharing has received 
 much more attention from the theoretical economist 
 than from the practical man. Compared with the 
 great mass of industry conducted on the ordinary 
 system of payment by wages, either by piece-work 
 or time, the amount of profit-sharing in the specific 
 sense of the term (according to which in addition 
 to the wages usually current for the same work the 
 labourers receive a share in the surplus profits) is 
 practically infinitesimal. The latest returns compiled 
 
 4
 
 50 PROFIT-SHARING 
 
 by Mr. Biisliill,^ Coventry, show that there are less 
 than thirty firms in the kingdom which have adopted 
 the plan, and the number of labourers employed is 
 only about 10,000. The numbers are from one point 
 of view considerable, but compared with the millions 
 of ordinary wage -earners, they are insignificant — 
 especially when we remember that many celebrated 
 economists and social reformers in the last forty years 
 have not only given the plan their cordial approval 
 but a wide publicity. 
 
 It will naturally occur to most readers who know 
 anything of trade that if profit-sharing really possessed 
 the merits claimed for it as a method of business, and 
 not merely as a philanthropic scheme, it would have 
 been much more generally adopted. It is notorious 
 how in these days of excessive competition every new 
 idea, tried by one firm with any success, at once finds 
 imitation — e.g. artistic advertising. The first thing, 
 then, that those who advocate profit-sharing on its 
 merits must do, is to explain why it has hitherto 
 obtained so little practical recognition, especially 
 amongst the English -speaking nations which have 
 taken the lead in most great industrial changes ; and 
 an inquiry into the nature and results of profit-sharing 
 may advantageously follow the same lines. 
 
 One reason, undoubtedly, why the system has not 
 even been tried at all generally lies in the fact, that 
 even in our day the economic value of various 
 so-called moral forces is altogether under -estimated. 
 The self-interest of employers and of parents ought to 
 have made the long series of Factory Acts unnecessary. 
 
 ^ Quoted by Mr. Scliloss, Fortnightly Revicio, Oct. 1889.
 
 PROFIT-SHARING 51 
 
 It ought to have been evident to master manufacturers 
 that excessive hours of v^ork, bad air, and other 
 notorious evils, not only caused a degradation of 
 labour, but that labour so degraded wsls inefficient. 
 Parents ought to have seen that it would pay them 
 better in the long-run to have their children properly 
 educated and brought up in a healthy manner, even if 
 they regarded them merely as sources of revenue. 
 But it is more than doubtful if either sanitation or 
 education would have been promoted, even to the 
 interest of those most directly concerned, by reliance 
 simply upon that interest. In spite of example and 
 precept, the economic value of moral forces, except 
 of the most obviovis kinds — e.r/. trustworthiness in a 
 manager — is rarely recognised. The chief reason why 
 productive co-operation is a comparative failure is, 
 that the value of business capacity is under-rated, and 
 efficiency is sacrificed to nominal cheapness in manage- 
 ment. It may be allowed, then, that on analogy with 
 corresponding business methods, profit-sharing may be 
 perfectly sound and practicable in spite of the fact 
 that it has made so little headway. Any one can see 
 at once the value of a new mechanical process ; but 
 an improvement in the mechanism of human motive 
 power is not so easily understood. 
 
 Another cause of the slow progress of the movement, 
 also of a general character, and therefore more liable 
 to be overlooked, is the popular conception, usually 
 entertained both by masters and men, of the natural 
 economic relations of labour to capital, and of wages 
 to profits. The greatest industrial success achieved 
 by labour in this century, judged by the ordinary
 
 52 PROFIT-SHARING 
 
 standards of numbers, funds, and results, is undoubtedly- 
 Trade Unionism. Co-operation, boards of conciliation, 
 sliding-scales, and other methods of social reform have 
 obtained a certain amount of practical support from 
 labour, but, directly and indirectly, Trade Unionism has 
 done more for the welfare of the working classes than 
 all these other methods put together. Trade Unionism 
 has, in fact, been so successful that it has now reached 
 the point of development at which the danger to be 
 feared, on the analogy of corresponding forms in 
 industrial history, is the danger of excessive power. 
 But the outcome of Trade Unionism is at the best an 
 armed peace — the Unions may be, and are to a large 
 extent, benefit societies, but essentially they are great 
 fighting organisations. If there is a rise in prices an 
 advance of wages is demanded, and if there is a fall a 
 reduction is resisted. The natural result is that both 
 in the minds of masters and men there seems to be an 
 irreconcilable opposition between profits and wages, and 
 it is generally believed that the one can rise only at 
 the expense of the other. This is one crucial difficulty 
 which profit-sharing as a practical scheme must over- 
 come before it can hope to be widely adopted. 
 
 The nature and force of this difficulty can only be 
 appreciated when the characteristic features of profit- 
 sharing are fully realised. In the typical case the work- 
 men are to receive the ordinary rates of wages current in 
 the neighbourhood, and these rates are in general fixed 
 at the maximum possible according to the state of 
 trade by the action of strong Trade Unions. Yet, 
 under the proposed scheme, the master is to set aside 
 only a fixed percentage for himself by way of interest
 
 PROFIT-SHARING 53 
 
 on capital, provision for wear and tear and the like, 
 and anything earned beyond tliis rate is to be divided 
 in certain proportions between the employer and the 
 employed. It certainly looks, at first sight, as if the 
 master was compelled to pay the market rate of wages, 
 but to receive something less than the market rate of 
 profits. And this supposition is strengthened when it 
 is observed that the labourers are never to be called 
 upon to share in exceptional losses, and that at the 
 outside in bad years they can only fail to receive the 
 exceptional bonus obtained in good years. Surely 
 masters may naturally argue that if they are to meet 
 the losses of a depression they must be able to draw 
 upon the gains of an inflation. 
 
 There is only one possible answer to this objection, 
 and this is the answer which was given by M. Leclaire, 
 and which is the kernel of the whole matter. Under 
 the stimulus of 'profit-sharmg the workers must create the 
 additional profits vjhich they are to receive. If they do 
 not increase the efficiency of their labour or make 
 economies by avoiding waste of materials, or by taking 
 greater care of tools and machinery, if, in a word, they 
 do not for the same wages in some way or other either 
 increase the out-put or diminish the cost of production, 
 then profit-sharing is simply a gain to the workers at 
 the expense of the masters. 
 
 On the other hand, if the system works well, it 
 is plainly possible for wages and profits to rise 
 simultaneously. That the system can be made to 
 work well, the exj^erience of the Maison Leclaire, now 
 extending over nearly half a century, furnishes at once 
 a striking and most interesting proof. The story has
 
 54 PROFIT-SHARING 
 
 been often told, and Mr. Gilman deserves praise for 
 having once more imparted freshness to the subject, 
 " by tracing the development of the Maison Leclaire 
 in close connection with the circumstances of its 
 founder's life." Nor is this the only example of 
 success. In an industrial census of the whole world 
 150 is certainly a very small number of firms to quote 
 as evidence of the acceptance of the principle ; but 
 when it is found that this number includes various 
 kinds of business, and that the proportion of failures 
 is much below the average, and in most cases due to 
 extraneous causes, the appeal to experience has more 
 weight than appears at first sight. For an inductive 
 proof, however, the reader must turn to the volumes 
 already quoted ; it is plainly impossible to compress 
 such a proof within the limits of an article. 
 
 To return to the examination of the causes why, 
 especially in the United Kingdom, the progress of 
 profit-sharing has not been greater, another reason is 
 at once suggested by the appeal just made to experience. 
 The English practical man is only too fond of saying 
 that " an ounce of fact is worth a ton of theory," and 
 unfortunately in this case the facts with which he is 
 most familiar seem to be against the system, at any rate 
 on the surface. The failure of the experiment made 
 by Messrs. Briggs is even more widely known than the 
 success of the Maison Leclaire, and the English attempt 
 which next to this has attracted most attention — that 
 made by Messrs. Fox, Head, and Co. — was also 
 abandoned after eight years' trial. These two examples 
 have had so much influence in practically dissuading 
 employers from making the experiment for themselves
 
 PROFIT-SHARING 55 
 
 that, even in an argument of a general kind, they 
 demand a certain amount of attention. As regards 
 the Whitwood Colliery of Messrs. Briggs, very full 
 information is given by Mr. Sedley Taylor in a 
 memorandum ^ offered to him for publication by two 
 of the original partners. It will be seen from this 
 document that the Messrs. Briggs themselves do not 
 consider the abandonment of the system in their own 
 case a decisive test of its unfitness for this country, 
 for they state explicitly at the conclusion of the paper 
 that " nothing that has occurred seems to show that 
 the system inaugurated at Whitwood may not 
 eventually be generally and successfully adopted, and 
 lead to a more intimate union of interests and a more 
 cordial feeling between capitalists and their workmen." 
 In response to a request by Mr. Sedley Taylor for 
 further information, Mr. Archibald Briggs stated that 
 down to 1872, about seven years, the bonus paid to 
 the workmen was really earned by extra care and 
 economy, and that the outside shareholders also reaped 
 a benefit, but in the two years of great inflation which 
 followed, the bonus paid to workmen was more than 
 was earned by the extra efficiency of labour, and thus 
 from a business point of view the shareholders were 
 not so well off" as they would have been without the 
 system of profit-sharing. He also said that in his 
 0]3inion no isolated concern could reap the full benefits 
 of the plan, and that the greatest advantages could 
 only be secured by its being generally adopted, and 
 altering the whole tone of the relations between 
 employer and employed, and doing away with the 
 ' Profit-Sharing between Capital and Labour, p. 117.
 
 56 PROFIT-SHARING 
 
 antagonistic comhinations of one class against the 
 other. 
 
 To the present writer, after a careful examination 
 of the evidence, the main cause of the faihire of the 
 Whitwood experiment seems to lie in the fact that 
 from beginning to end the principal object aimed at 
 was to provide a substitute for the influence of the 
 Trade Unions, and not simply to increase the efficiency 
 of the whole concern with the view of creating a 
 divisible bonus. The chief reason given by Messrs. 
 Briggs for the original adoption of the scheme was, 
 that during a period of ten years four strikes had 
 occurred, lasting in the aggregate seventy-eight weeks, 
 and it was supposed that if the workmen were allowed 
 to become industrial partners they would have no 
 further interest in strikes. Whilst every one must 
 approve of any method which diminishes the number 
 and severity of strikes, and equally of every advance 
 towards a better understanding of their mutual 
 interests by masters and men, it seems fallacious to 
 argue that, as matters stand, it is not for the interest 
 of those workmen who join an industrial partnership 
 to give any support to the action of Trade Unions. For 
 it must be remembered that the essence of the system 
 as a method of business is to pay a minimum interest 
 on capital and also the market rate of wages before 
 there can be any bonus to divide. 
 
 But it is easy to see that the bonus paid to labour 
 must always be small compared with the market rate 
 of wages, and, accordingly, that it is for the economic 
 interest of the workmen to look first to the best mode 
 of increasing the ordinanj rate of wages, which in the
 
 PROFIT-SHARING 57 
 
 concrete means the action of Trade Unions. The men 
 in the Whitwood Collieries were fully alive to this 
 elementary fact, and the immediate cause of the 
 breakdown of this industrial partnership was an 
 attempt to keep the men from attending a meeting 
 of Unionists. At the same time, whilst the men 
 naturally considered that the bonus, large as it was 
 during the years of inflation, was not large enough to 
 make them independent of their unions, the share- 
 holders, apart from the actual managers, naturally 
 thought the bonus was to a great extent taken from 
 profits, and not from additional earnings ; and on the 
 matter of fact, there can be little doubt that in the 
 two years of very high prices the opinion of Mr. A. Briggs, 
 already quoted, was correct, and that the bonus paid 
 to labour was not due to extra exertion or economy, 
 but mainly to the accidental rise in prices. As a 
 consequence, just as labour looked for the market rate 
 of wages, capital looked for the market rate of profits, 
 and it was announced that the minimum interest 
 reserved to capital before any participation of surplus 
 was allowed would be raised from 10 to 15 per cent. 
 Even after this rise, the outside shareholders grumbled, 
 because they thought their profits were lower than they 
 ought to have been. 
 
 The position was one of great difliculty, and when 
 the plan was first adopted no one had ever dreamed of 
 such an abnormal rise in prices. Both Mr. Sedley 
 Taylor and Mr. Gilman maintain that the rise of 
 profits (reserved) from 10 to 15 per cent was un- 
 justified and contrary to the essence of the scheme. 
 Of course, if it had been foreseen that such a rise
 
 58 PROFIT-SHARING 
 
 was possible, a provision should have been inserted 
 in the original agreement, and in this way a certain 
 amount of friction would have been avoided. As 
 matters stood, however, there appears to be no reason 
 why, as Mr. Briggs points out, wlien wages had risen 
 50 per cent (without the bonus) the interest on 
 capital should not also receive an increment (apart 
 from the bonus), esjDecially as no one could tell how 
 long the " boom " would last, though there was little 
 doubt that very lean years would follow on the natural 
 over-production of the fat years. But although there 
 was some friction over the division of the unexpected 
 surplus, and neither the shareholders nor the men were 
 satisfied, this was not the principal cause of the 
 abandonment of the system. It was not a dispute 
 over the " bonus " but over the ordinary rate of wages 
 and the conditions of work which really led to the 
 disruption. The men wished to support the Trade 
 Unions, and the shareholders practically threatened to 
 fine them heavily if they did. 
 
 The failure of the profit-sharing system adopted by 
 Messrs. Fox, Head, and Co., in their ironworks at 
 Middlesborough, may also be largely ascribed to the 
 hostility shown towards the Trade Unions. It was 
 definitely stipulated that no employt^s were to belong 
 to Trade Unions ; and in return the employers agreed 
 not to join any association of employers. But, as 
 Mr. Oilman's criticism ^ shows very plainly, the work- 
 men must have found in the eight years' experiment 
 that Messrs. Fox, Head, and Co. were asking much 
 more than they gave. In the first place, 10 per 
 
 ^ Profit-Sharing, p. 274.
 
 PROFIT-SHARING 59 
 
 cent interest with 6 per cent for renewals and depre- 
 ciation of the works and plant, and 1^ per cent 
 for bad debts, constituted a large reserve from profits, 
 and the highest bonus earned by labour in the best 
 year seems to have been 4 per cent. The firm also 
 secured for itself immunity from strikes, and it 
 decided for itself any question of wages and prices, 
 whilst the workmen had to cut themselves off from 
 the Unions which not only tried to obtain a maximum 
 wage, but also carefully looked after the general condi- 
 tions of labour. Trade Unions, however, have done 
 too good service for too long a time to be abandoned 
 for such a small bribe as a bonus on wages. Thus, 
 an examination of the two most celebrated cases of 
 failure tends to prove that the failure was due to an 
 insufficient recognition of actual industrial conditions 
 and an exaggerated idea of the magnitude of the real 
 changes introduced by profit-sharing. 
 
 Both " industrial partnership " and " profit-sharing " 
 are apt to suggest a much closer identity of interests 
 than is really involved in this method of business, and 
 it may be questioned whether it would not be better 
 to adopt some such simple name as " bonus system." ^ 
 The term " partnership " is certainly misleading, for 
 neither in the conduct of the business nor in responsi- 
 bility for losses are the workmen " partners " ; and 
 even as regards profits they have no share in the 
 " interest," which is reserved, nor in the " wages of 
 management," nor in the " reward for risk " — the three 
 elements into which gross profits are generally analysed. 
 
 ^ In the neighbouring collieries the Whitwood scheme was commonly 
 spoken of as "Briggs' bonus."
 
 6o PROFIT-SHARING 
 
 What the workmen really share is the increased earnings 
 due to a better use of capital by labour. 
 
 Every one will admit that a system of profit-sharing, 
 as usually understood, offers favourable opportunities 
 for the improvement of the relations between masters 
 and men; but it would be a great mistake, both in 
 theory and fact, to suppose that a " share in the 
 profits," or a bonus on wages, as it is more properly 
 called, is the only possible foundation of a cordial 
 understanding between masters and men, and the 
 only way to obtain various social advantages. On 
 the other hand, in considering the causes of the slow 
 progress of the system practically, some weight must 
 be given to the fact that the purely business principle 
 has been overshadowed in the public mind with these 
 secondary influences. There is no reason why the 
 least charitable and least philanthropic of masters 
 should not adopt some form of extra payment for 
 extra results, some simple form of profit-sharing, any 
 more than that he should adopt piece-work instead of 
 time wages ; but many masters are inclined to think 
 that their workmen out of their own wages can make 
 savings and invest them, and also provide themselves 
 with decent recreation and, if they choose, education. 
 Accordingly, although those more elaborate schemes of 
 profit-sharing which set aside so much for social pur- 
 poses, pensions, insurance against accidents and the 
 like, and which allow, if they do not compel, the 
 savings of the workmen to be invested in the shares 
 of the concern — although such schemes are much 
 more attractive to social reformers and seem to offer 
 much greater advantages, still they tend to alarm the
 
 PROFIT-SHARING 6i 
 
 average man of business and to make liim think that 
 profit-sharing is in reality a form of charity — at his 
 expense. And even from the point of view of the 
 workmen it may be doubted whether it is always 
 prudent to rely upon their particular business for old 
 age, provision for sickness and children, and so forth, 
 rather than on benefit and insurance societies ; and 
 they might often prefer to have any bonus they could 
 earn placed entirely at their own disposal. Thus, the 
 indirect social advantages which have justly received 
 such high praise in a few celebrated cases — e.g. Leclaire 
 and Godin — may really have prevented the spread of 
 the system in a more elementary form. Those who 
 could not or would not imitate these great philan- 
 thropists on the social side have thought that they 
 need not look at the question at all. 
 
 Again, many employers who take a great interest 
 in their workmen, and are ready and anxious to pro- 
 mote their welfare in many ways, still object most 
 strongly to giving them any voice even indirectly in 
 the management, and they think that if profit-sharing 
 were introduced their independence would be sacrificed. 
 This objection takes many forms. It is said, for 
 example, that if workmen are allowed to share in the 
 profits they will insist upon seeing the books, and will 
 distrust the returns made by the masters. To this it 
 is answered that the accounts might be submitted to 
 sworn accountants, whose decision should be final. 
 But, again, it is objected that the rate of profit earned 
 must necessarily be made public, seeing that the 
 amount of bonus will depend upon it, and thus, if the 
 rate is high, that competition might be increased.
 
 62 PROFIT-SHARING 
 
 whilst, in case of bad trade, it is feared that the non- 
 payment of a bonus after a payment for some years 
 might even lead to a partial loss of credit. Thus, 
 whether profits were very high or very low, it would 
 not be to the advantage of the firm that the fact 
 should be known. Again, it is said that in years of 
 good trade large profits might be earned for a time, 
 which were in no w^ay due to the extra exertions or care- 
 fulness of the men (as in the case of the Whitwood 
 Collieries during the great inflation), and that these 
 profits ought to be set against the exceptional losses 
 of a depression, in which, although the workmen may 
 not receive a bonus, they never share in the actual 
 loss. 
 
 The general result of all these objections is that, 
 rightly or wrongly, masters think that under a system 
 of profit-sharing their profits would, in the long-run, 
 be less, and that they would also be hampered in the 
 management of their business. ExjDcrience has shown 
 that these fears are certainly exaggerated, and also 
 that they are generally expressed by those who have 
 never given the system a trial ; but at the same time 
 they do much towards explaining the small amount of 
 favour which the system has practically received from 
 the great mass of employers. When the other reasons 
 already advanced are also taken into account, it is not 
 difficult to understand why profit-sharing has hitherto 
 altogether failed to realise the expectations formed of 
 it by very good judges ; and few would now be inclined 
 to endorse the opinion of Prof. Jevons ^ in 1870, that 
 " the sharing of profits is one of those apparently 
 1 Methods of Social Reform, p. 125.
 
 PROFIT-SHARING 63 
 
 simple inventions at the simplicity of which men will 
 wonder in an after-age." 
 
 The method of inquiry hitherto pursued in this 
 paper has been, in the main, to consider why this 
 " apparently simple invention " has met with so little 
 practical recognition. It remains now to indicate the 
 way in which this experience from the past may be 
 utilised for the future. To some the natural conclu- 
 sion would be that a tree which has borne so little 
 fruit for half a century might now be cut down and 
 burned. To my mind, however, to continue the simile, 
 what the tree needs is a liberal use of the pruning 
 knife and the lopping off of a mass of luxuriant but 
 unfruitful foliage. 
 
 In the first place, in the light of experience and in 
 the present condition of industry, it is ridiculous to 
 suppose that " profit-sharing " can be a substitute for 
 Trade Unions. Any ordinary firm which intends to 
 give the system a fair trial should be prej)ared to 
 leave the employes absolutely free to take part in the 
 meetings and policy of the Unions, just as it should 
 reserve to itself the right of joining combinations of 
 the masters. The reason for this course is obvious. 
 A bonus on wages, after the reserved profits have been 
 allotted to the masters, is not an economic equivalent 
 for the abandonment by the men of their Unions, 
 which have so much influence in determining the 
 rates of wages and the conditions of employment. 
 Again, the Unions are so strong in a great number of 
 industries, that it would be extremely impolitic for a 
 new and weakly institution to provoke their hostility. 
 
 Secondly, it must be remembered that the so-called
 
 64 PROFIT-SHARING 
 
 share in the profits is simply an addition to and not a 
 substitute for wages. Even if the system were adopted 
 almost universally, the working classes would still in 
 the main depend upon the ordinary rate of wages, 
 which again is determined by the conditions of in- 
 dustrial demand and supply. All that Trade Unions 
 themselves can do is to see that the best bargain is 
 made which the conditions of the market allow ; and 
 profit-sharing can do no more. 
 
 Profit-sharing as such furnishes no guarantee against 
 instability of earnings and fluctuations in employment, 
 No system of division of the proceeds can be a guarantee 
 that the proceeds will be forthcoming. The greatest 
 perseverance would be no remedy against over-produc- 
 tion or the loss of a foreign market, or an enormous rise 
 in the price of raw material, or the popular adoption 
 of some substitute for an old staple. But in the great 
 mass of industries, fluctuations in wages and employ- 
 ment are the most crying evils of the day. In some 
 businesses of a peculiar character and with well- 
 established custom these evils are not felt, but the 
 great industries of a manufacturing country are not of 
 this fortunate kind. Thus, profit-sharing at the best 
 will not of itself be a suflicient remedy for some of the 
 most serious evils affecting labour. 
 
 Thirdly, there are other methods of obtaining the 
 social advantages connected with the most celebrated 
 examples of profit-sharing. It is not every business 
 that could provide, like that of M. Godin, for the 
 education, amusement, and general comfort of its 
 members, and the example in this country which 
 comes the nearest to it — Saltaire — does not, I believe,
 
 PROFIT-SHARING 65 
 
 adopt the profit-sharing principle. Supposing that 
 profit-sharing were as widely spread as its most ardent 
 supporters desire, it would probably not be an un- 
 mixed gain for the country at large if, for general 
 social purposes, every business establishment aimed at 
 becoming self-sufficing and independent. 
 
 When, however, all this pruning has been accom- 
 plished, the stem and its main branches — the principle 
 and its logical consequences — are left intact. And 
 that principle, as pointed out at the outset of this 
 article, is not a principle of charity or philanthropy, 
 but essentially an economic principle. In every 
 business in which time-wages are paid there is always 
 a great waste of time. Nor can this waste be con- 
 sidered as a pleasure to the workmen themselves. 
 Every one knows that it is really much more 
 pleasant to work with brisk, lively energy, and with 
 interest, than to idle and dawdle, and be always look- 
 ing at the clock. Again, if piece-work is adopted, it 
 is well known that quality is sacrificed to quantity, 
 unless the supervision is stringent and effective. 
 
 But so long as the time-worker is paid simply for 
 time, and the piece-worker for quantity, there will be 
 a loss in the value of the output, a loss which is a 
 gain to nobody. Apart from this, there is a further 
 loss in the waste of material, carelessness in the use of 
 machinery, and the like, when the workers have no 
 interest in the general result. Accordingly, it is quite 
 clear that in most businesses there is room for extra 
 earnings, and the best way to secure this end is to 
 give a large share to those who by their efforts or care 
 contribute to the result. Profit-sharinfj of this kind
 
 66 PROFIT-SHARING 
 
 must be advantageous to all concerned. The master 
 obtains a share of the income in proportion to his 
 wages of superintendence, and the workmen obtain 
 their bonus on wages. If this bonus is paid at con- 
 siderable intervals, or is invested in the form of shares, 
 the compulsory saving thus effected is strictly analogous 
 to that which has produced such good results in the 
 old co-operative societies. 
 
 The question has been treated on the whole from 
 the business point of view, and profit-sharing has been 
 considered mainly as increasing the efficiency of the 
 productive agents ; but the more successful the system 
 is as a method of business, so much the more will it tend 
 to bring about those moral and social results for which 
 in most quarters it is generally recommended. The 
 constant effort to make the most of the concern, the 
 creation of a keen a^prit de corps amongst the workers, 
 the knowledge that to a large extent the interests of 
 masters and men are identical, the application of a 
 share of the profits to social purposes, the opportunity 
 for the gradual accumulation of capital out of extra 
 earnings, and the consequent sense of independence — 
 all these are factors which make for the moral elevation 
 both of masters and men, and tend to diminish the 
 friction between classes. If profit-sharing is a business 
 success, there is little doubt that the rest will follow. 
 Even in private firms it is those on the margin of 
 bankruptcy, and not those with exceptional profits, 
 which give labour the least reward for the hardest 
 work. The best business for the master is, as a rule, 
 best also for the men. But if profit-sharing does not 
 prove a good method of business, it is vain to talk of
 
 PROFIT-SHARING 67 
 
 the social improvements which would follow on its 
 general adoption — for the simple reason that it will 
 never be generally adopted. 
 
 An illustration may be taken from co-operation. 
 The co-operative societies for distributive purposes 
 amongst the working classes have been a wonderful 
 success. In Great Britain they have a membership of 
 about 900,000, and sell goods to the amount of nearly 
 £33,000,000 per annum. The net profits are about 
 £3,000,000. Now, after making full allowance for 
 the moral enthusiasm of the original founders, and for 
 the co-operative spirit of the present members, there 
 can be little doubt that this great success is in the 
 main to be ascribed to economic causes — e.g. better 
 quality of goods, and, directly or indirectly, lessened 
 cost. The co-operative productive societies, from the 
 moral standpoint, offer much greater attractions, but 
 they have succeeded only to a small extent, and again 
 the principal causes of failure are purely economic — 
 e.g. competition and inferior business capacity. 
 
 But the co-operative movement furnishes a still 
 more definite illustration of the position that profit- 
 sharing must in the first place stand or fall on its 
 economic merits. At the Co-operative Congress in 
 1888^ it was recommended that, "by whomsoever 
 productive enterprises are establislied — by either the 
 wholesale or distributive societies, or by organisations 
 of the workino- men themselves — an alliance be formed 
 on equitable conditions for the sharing of profits and 
 risks between the worker, the capitalist, and the con- 
 sumer." A copy of this resolution was sent to the 
 1 See Report for 1889, p. 28, and Appendix Wll., p. 40.
 
 68 PROFIT-SHARING 
 
 different societies, and questions were put in a circular 
 as to tlieir treatment of tlieir workers. "To this 
 circular only 199 sent replies, of which 138 said that 
 they had no productive works, Avhile 61 gave replies 
 more or less full to the question : ' Does the society 
 admit the workers employed in it productively to any 
 share in the profits of its business ? ' " Five societies 
 only replied in the affirmative and 46 in the negative} 
 To the question : " Would the society be disposed to 
 enter into any plan by which the whole profits in 
 production, or any, or what part of them might be 
 applied for the permanent benefit of the workmen by 
 providing against sickness, disability from age, or 
 assurance on death ? " Ten societies reiolicd in the 
 affirmative and 30 in the negative. 
 
 Could a more convincing proof be offered of the 
 contention that however attractive may be the moral 
 aspects of profit-sharing, it must, for practical purposes, 
 be considered in the first place as a matter of business ? 
 It is too much to hope that the ordinary capitalist 
 will regard the question from a higher standpoint than 
 the managers of the co-operative distributing agencies 
 which also take up production, encouraged as they are 
 by the public opinion of the great body of co- 
 operators. 
 
 Profit-sharing is capable of a much wider extension 
 than it has yet attained, but the first condition of 
 success is that the nature of the economic principles 
 
 ^ The returns referred to were made by the distributive societies, and 
 do not include those occupied only with production. The figures 
 quoted in the Appendix (a])parently later) arc 264 replies — 181 no 
 productive works, 10 affirmative, and 61 negative.
 
 PROFIT-SHARING 69 
 
 on which it rests, as well as the industrial forces with 
 which it must work, should be fully realised. 
 
 At the same time the stress laid on the business 
 side of the question in this paper must not be mis- 
 understood. The ideal of profit-sharing is to make 
 the best use not only of the physical strength and the 
 technical skill, but also of the moral energy of all the 
 workers, the managers included ; and the principal 
 obstacle in its path, as in every department of in- 
 dustrial progress, lies in the fact, noticed at the outset, 
 that the economic value of moral forces is constantly 
 under-rated.
 
 IV 
 
 THE REALITY OF INDUSTEIAL PROGEESS ^ 
 
 Long ago philosophers made the discovery that the 
 human miud is swayed to and fro by contrast. We 
 fix the attention on one thing, and in an interval, 
 never very long, we are forced to think of the opposite. 
 The principle pervades the whole thinking life of 
 humanity. We read in the lives of the saints that in 
 the midst of a religious ecstasy, induced by fasting, 
 prayer, and self-abasement, suddenly evil thoughts 
 would intrude that no effort could drive away until 
 despair again yielded to hope. The truth of history 
 has been echoed in the imagination. You will all 
 remember how, in crossing the river of death in the 
 very sight of the Celestial City, Christian could 
 remember nothing of the sweet refreshments he had 
 met with in the way of his pilgrimage, but was 
 haunted by the memories of old sins and by the 
 apparitions of evil spirits. 
 
 And so it is throughout ; we cannot rest in the 
 present ; hope drives us forward and memory back- 
 ward, and, in both instances, in the cpiest of contrast. 
 Youth dreams of the fame of manhood, and manhood 
 
 1 Edinburgh Typograpliia, November 1894.
 
 THE REALITY OF INDUSTRIAL PROGRESS 71 
 
 remembers the aspirations of youth. By this same 
 force of contrast, in spite of all our selfishness, we are 
 impelled to look out of ourselves. We are never 
 content — we cannot for the most part even live — in 
 isolation ; and in the communion with our fellows the 
 closer the bondage of afiection the greater the delight. 
 It was well said by Lord Bacon in his essay " Of 
 Friendship," " A crowd is not company, and faces are 
 but a gallery of pictures, and talk but a tinkling 
 cymbal where there is no love." But this interest in 
 the welfare of others is not altogether satisfied by 
 friendship, or even the family affections. The ancient 
 Eomans were justly considered one of the most cruel 
 of peoples, but it was in a Eoman theatre that the 
 famous line of the dramatist was received with accla- 
 mation, " I am a man, and there is nothing human 
 that I think is not akin to me." I have attempted a 
 literal translation, but you will find the same thought 
 in the well-known line, " One touch of nature makes 
 the whole world kin." And thus it comes about that 
 in all nations, at all times, people have been led inevit- 
 ably to speculate both on the probable origins and the 
 probable futurity of the human race. How often has 
 the wish been expressed by some of the finest speci- 
 mens of mankind that they would die content if only 
 once in a century, or in a thousand, or in a million 
 years, or if only once again after some indefinite, un- 
 certain period they might awake to see how the world 
 of men was getting on ; and the same thought must 
 occur sometimes to the least imaginative when he is 
 reminded of the everlasting, ever-present contrast that 
 in the midst of life we are in death.
 
 72 THE REALITY OF INDUSTRIAL PROGRESS 
 
 But if we can only dimly forecast the future, every 
 year adds to our knowledge of every branch of the 
 history of the past, and under this expanding know- 
 ledge the very meaning of history has changed. "We 
 are no longer content with the lives of kings and 
 narratives of battles and intrigues. We want to know 
 age by age the real life of the people, and we carry 
 our inquiries even beyond the beginnings of civilisa- 
 tion. No part of this real life is left untouched ; we 
 search the tombs and heaps of refuse for evidences of 
 food and clothing, we uncover rude dwellings beneath 
 the ground and beneath the w^ater, and we fill in the 
 missing links by observing the practices of savage 
 peoples at present existing. By the same restless spirit 
 of inquiry we try to construct the mental and spiritual 
 life of our ancestors ; we look into the inner meaning 
 of old customs and superstitions until we can almost 
 read the thoughts of primitive man. 
 
 When we make a survey of this kind, when we 
 trace century by century the lives of the generations 
 of our race, one question is constantly forced on the 
 attention: In this series of changes is there any real 
 progress ? And then we are led to the further ques- 
 tions : If there has been real progress, what are the 
 causes ? Is tlieir force already spent, or will the pro- 
 gress of the future be even more real and glorious ? 
 It is only with a part of this large subject of the pro- 
 gress of humanity that I propose to deal, the part 
 which for want of a better term may be styled indus- 
 trial progress. But at the same time I use the phrase 
 in no narrow sense, for we cannot separate altogether 
 the material and the moral elements. Industrial pro-
 
 THE REALITY OF INDUSTRIAL PROGRESS 73 
 
 gress is wider than the progress of mechanical inven- 
 tion, though that is an essential part. 
 
 Perhaps some of you may think that as regards the 
 reality of industrial progress there can be no two 
 opinions, and that is the reason why I have stated 
 that the phrase must receive a liberal interpretation. 
 We must look beyond the mere discoveries of the arts 
 and sciences to their effect on the general welfare of 
 the people. When we take this broader view we find 
 that there is a widely-spread opinion or suspicion that 
 our progress is to a great extent delusive. Consider, 
 for example, this passage from John Stuart Mill, 
 which you will find in that book of his Political 
 Economy which treats of the progress of society, and 
 must be regarded as a deliberate conclusion, founded 
 on a reasoned proof. " Hitherto," he writes, " it is 
 questionable if all the mechanical inventions yet made 
 have lightened the day's toil of any human being. 
 They have enabled a greater population to live the 
 same life of drudgery and imprisonment, and an in- 
 creased number of manufacturers and others to make 
 fortunes." It is a belief of this kind that gives any 
 strength it may have to the movement in the direction 
 of socialism or collectivism, and is at the root of such 
 proposals as the limitation of the hours of labour, the 
 provision of old age pensions, and the further exten- 
 sion of the principle of graduation in taxation. You 
 will see, then, that the inquiry I put before you is well 
 worthy of study, not merely as of speculative interest, 
 but on account of its important practical bearings. If 
 in a nation like this, which is rightly regarded as the 
 best example of progressive societies, Mill's opinion is
 
 74 THE REALITY OF INDUSTRIAL PROGRESS 
 
 at all well-fouuclecl, we cannot wonder that the work- 
 ing classes should seek to use their political power to 
 promote their physical well-being. 
 
 Before going farther, it is worth noting that the 
 general idea of progress is comparatively of modern 
 growth, and taking the whole world is even now by 
 no means generally accepted. There seems to be a 
 natural tendency in races, as in individuals, to idealise 
 their youth. One of the earliest Greek poets, Hesiod, 
 who wrote nearly a thousand years before Christ, 
 describes in succession the various ages, and names 
 them after the metals in the order of excellence, and the 
 earliest age is the golden and the last is the iron in 
 which the poet laments that his lot has been cast. 
 And in the literature of every people at every period 
 we find constant references to the good old times — 
 the present is iron, the past is golden. Even at the 
 time of the great French Eevolutiou, the idea pre- 
 vailed that the happiest state was the original state of 
 nature, and that mankind had deteriorated under the 
 influences of government. 
 
 In our own day and generation the idea of progress 
 has found its main support in the theory of evolution. 
 In the origin of species, according to Darwin, we may 
 trace through an infinite number of minute additions 
 the passage from the lowest to the highest forms of 
 life ; if we could fill in all the links, we should be able 
 to trace the descent of man himself from a creature, 
 compared to which a jelly-fish is high in the scale of 
 development. It is, then, no wonder that with such 
 vast changes in the past we should look for equally 
 vast changes in the future, and even come to regard
 
 THE REALITY OF INDUSTRIAL PROGRESS 75 
 
 progress as one of the essential conditions of life. But 
 when we look to the forces which have, according to 
 this theory, effected the progress of animal life, and 
 seek to apply them to the future development of man, 
 we are checked by a startling discovery. 
 
 In the animal world we are told that the essence 
 of progress is to be found in a struggle for existence, 
 a perpetual waste and destruction of life, and an occa- 
 sional survival of the fittest. But if the same laws 
 are to apply to the progress of mankind — if a few of 
 the fittest are to survive by the sacrifice of millions of 
 the weakest — we seem to be forced to tlie melancholy 
 conclusion of Mill, and progress becomes a mere fiction. 
 So much has this idea, that progress rests on sacrifice, 
 impressed itself upon the latest philosophical writers, 
 that they have been forced to call in the aid of religion, 
 and religion of a very peculiar kind. 
 
 In effect this last position amounts to saying that 
 the mass of the people can only be induced to sacrifice 
 their present interests for the supposed future of the 
 race because they are impelled to do so by a blind 
 instinct which overpowers their reason. Surely no 
 better instance could be found of the general principle 
 with which I started, that the human mind is governed 
 by contrast, and is always oscillating between extremes. 
 
 The theory of Darwin, which was at first received 
 with execrations because it was supposed to undermine 
 revealed religion, — this theory is now supposed to re- 
 quire for its application to mankind a general instinctive 
 belief in religion of such a sort that it is beyond our 
 reason to grasp. We are told we must choose between 
 anarchy and decay on the one side and this blind belief
 
 76 THE REALITY OF INDUSTRIAL PROGRESS 
 
 on the other — that if men listened to reason, progress 
 must cease ! 
 
 There I leave the general question of progress. I 
 have said enough to show that we cannot take for 
 granted any general progress of humanity, and still less 
 can we deduce from this general idea of progress the 
 particular species that is termed industrial or economic. 
 But if general principles and theories will not suffice 
 we must have recourse to facts — to the actual facts 
 bearing on the case. And that is, after all, the true 
 scientific method. The best way, the only way, to test 
 the reality of industrial progress is to compare the 
 actual industrial condition of the race or of the nation 
 at different epochs with the present condition. But 
 in making a comparison of this kind we must rest con- 
 tent with taking samples or represeutative instances. 
 Take, for example, the apparently simple question of 
 the increase in the aggregate of the material wealth of 
 the country. Even when we seek to compare our 
 present wealth with our wealth fifty, or even ten, years 
 ago, we have nothing like complete records — we have 
 a census of people, but no census of possessions. 
 
 The further we go back the greater the difficulty. 
 But still the difficulty must not be exaggerated. A 
 good anatomist, it is said, can construct an extinct 
 creature from a single bone ; and we can obtain, with a 
 little trouble, an abundance of facts, which, properly 
 interpreted, will enable us to construct the industrial 
 organisms of the past. 
 
 As already explained or suggested, in examining 
 the reality of industrial progress there are two funda- 
 mental questions : the question of 2^^'odiiction and the
 
 THE REALITY OF INDUSTRIAL PROGRESS 77 
 
 question of distrihution. In the first place, we may 
 look at the nation as a great and intricate piece of 
 machinery, constructed for the production of wealth of 
 all kinds ; we may look at the annual produce of the 
 lands, mines, fisheries ; at the number, size, and quality 
 of the houses ; at the various species of manufactures 
 and handwork ; we may, in short, regard the nation 
 as a whole, and try to sum up the aggregate yield to 
 its labour. But beneath this question of production 
 there is the question of distribution — the mode in 
 which this wealth is distributed or divided between 
 different classes and individuals. It is here that the 
 reality of progress is most often and most readily called 
 in doubt. It might indeed be supposed that the first 
 question as to the increase in the productive capacity 
 of the nation as a whole needs no proof, and calls for 
 no description, and that the second question as to the 
 progress in the distribution of wealth is the only one 
 of any interest or importance. But I hope to show 
 you that the two are so intimately connected — that 
 the production and the distribution or division are so 
 intertwined — that you cannot understand one without 
 the other. 
 
 Let us begin, then, with some typical representative 
 instances in the progress of productive power. Take 
 first agriculture in the broadest sense of the term — as 
 covering all the produce of land. Thanks to the 
 labours of the late Thorold Eogers, we have continuous 
 records of agricultural products in England for six 
 centuries. And there can be no doubt, whether we 
 take quantity, quality, or variety, the improvement has 
 been enormous. Six centuries ago the average yield
 
 78 THE REALITY OF INDUSTRIAL PROGRESS 
 
 of wheat per acre was not a quarter of what it is at 
 present; the cattle, sheep, and horses w^ere poor and 
 stunted, and diseases of all kinds were frequent and 
 destructive, so that the losses of the farmer were enor- 
 mous. Winter roots and artificial grains were unknown, 
 so that in the autumn stock was killed down to be 
 salted. There were very few fruits and vegetables. 
 If we look at mines and minerals, the progress in pro- 
 ductive power is still more astonishing. The best way 
 to realise the change is to observe the difference in the 
 density of the working population round the great coal 
 and iron fields. And more astounding still is the 
 growth of manufactures of all kinds, especially in the 
 present century, consequent on the improvements and 
 extension of machinery. Fifty years ago the author 
 of a famous work on the progress of the nation said 
 that it would fill many large volumes to describe the 
 improvements in mechanical appliances that had taken 
 place in the first part of the century, and more volumes 
 and larger volumes would be required to bring down 
 the history to our own times. It is the same with 
 the means of communication, not merely in the actual 
 transfer of things and persons from place to place, by 
 land and water, but in the interchange of thought by 
 the telegraph and telephone. 
 
 This improvement in communication has increased 
 the aggregate wealth passed into the country to an 
 enormous extent ; witness the glut of food of every kind 
 flowing to us from the ends of the earth, and filling 
 our farmers with alarm. 
 
 There can be no question that a given amount of 
 labour applied in almost any direction will produce
 
 THE REALITY OF INDUSTRIAL PROGRESS 79 
 
 far more than it did, and, in addition, produce things 
 which in former ages could not be produced at all. 
 And if we look for the causes of this great difference, 
 we soon discover that they may all be summed up in 
 (me great generalisation, namely, the increase in man's 
 power over nature and the advance in human skill and 
 intelligence. 
 
 I am quite aware that the fact of the continuous 
 increase of human skill in the production of wealth is 
 so obvious that it may seem superfluous to call atten- 
 tion to it. We are very apt to put down anything 
 with which we have become familiar as perfectly 
 natural, and requiring no further explanation, and 
 giving rise to no fruitful deductions. But a little 
 reflection will show that such a conclusion, however 
 common, is far too hasty. 
 
 In other departments of human skill and of great 
 human interest we do not find the same continuity of 
 progress. In nearly every department of art, in 
 poetry, painting, sculpture, and architecture, we cannot 
 make the same boast. Here it is quite common to 
 find that the old is better than the new, and that the 
 genius of a great man is a subject for inferior imita- 
 tion rather than development. 
 
 In the production of wealth, on the other hand, in 
 the adaptation of matter for what are termed the 
 material wants, it is rare to find that the original 
 genius does more than give the general lines on which 
 subsequent labour must proceed. It is really, when 
 we look beneath the surface, a matter for astonish- 
 ment that scarcely any economy in human labour, and 
 scarcely any device for moulding nature to man's will,
 
 So THE REALITY OF INDUSTRIAL PROGRESS 
 
 has ever been lost, and indeed has in general been 
 improved upon. Before the records of history began, 
 some of the greatest mechanical discoveries were 
 made, and they spread over the world, and were 
 handed down from generation to generation, in spite 
 of all the trammels of barbarism. We are apt to 
 pride ourselves on the great discoveries of the present 
 century, but if we were to consider all the arts of pro- 
 duction, including those that appear to us so natural 
 and simple as to spring from the instinct of mankind, 
 we should find that we owe far more to past centuries 
 than to the present. The pre-historic man who in- 
 vented wheels was the worthy precursor of the man 
 who made them run on rails, and our great ships are 
 the lineal descendants of the genius of the man who 
 first made a raft. 
 
 To the general law of the continuity in the pro- 
 duction of wealth, of the persistence and improvement 
 of various processes, there are exceptions which, how- 
 ever, confirm the general rule. It is said, for example, 
 that it is impossible at the present time with all our 
 knowledge to make some of the peculiar flint instru- 
 ments, especially the very fine, saw-like edges, which 
 were made in abundance by primitive races when the 
 country was a howling wilderness. 
 
 We find other instances, also, in which an art 
 or process has reached a high degree of develop- 
 ment, and has then been lost altogether, or subject to 
 degradation, as it is called — for example, methods of 
 colouring glass, of engraving gems, and various other 
 species of artistic work. But it will be found on 
 examination that these arts have fallen into decay.
 
 THE REALITY OF INDUSTRIAL PROGRESS 8i 
 
 owing; in general, to a species of substitution, and 
 certainly not owing to any general decay of intelligence 
 and meclianical skill. 
 
 An example on a large scale may be taken from 
 the use of machinery. The extended use of machinery 
 in various manufactures has caused a certain loss of 
 skill in works made by hand. We admire the fine 
 work of the craftsmen of the IMiddle Ages and of 
 antiquity, and we compare it with our machine-made 
 goods of all kinds, and may almost feel inclined to 
 imagine that human skill has been blunted in the 
 course of ages, and especially that the general adoption 
 of machinery, although certainly giving cheapness and 
 plenty, has at the same time put the producers — the 
 men themselves — on a lower level. 
 
 And yet there cannot be the slightest doubt, when 
 a full examination is made of the work at present 
 carried on in any great industrial nation, that a much 
 higher order of intelligence is required than was the 
 case in a simpler order of society. 
 
 We may take a practical test even over such a short 
 period as the last fifty years. Sir Eobert Giffen, in an 
 interesting essay on the progress of the working classes, 
 has proved that whereas fifty years ago the two 
 lowest paid classes of labour in the United Kingdom 
 constituted each one-third of the whole manual labour 
 class, they now constitute only one-eighth each, and the 
 remaining highest paid class, which was only one- 
 third fifty years ago, is now three-fourths of the 
 whole. Thus the machinery, which it was feared 
 would crush the intelligence of mankind, has, on the 
 contrary, raised it to a higher level. The notion that 
 
 6
 
 82 THE REALITY OF INDUSTRIAL PROGRESS 
 
 one thinking man in a spare moment invents a 
 machine which condemns a thousand to cease to think 
 may be morbidly fascinating, but as a type of modern 
 industry it is utterly false. It is as false as the 
 corresponding idea that in the Middle Ages all the 
 labourers were highly skilled artists. The fact is that 
 during this very period nine-tenths of the working 
 population was engaged in agriculture of the rudest 
 kind, and the true type of mediaeval industrial society, 
 if a sample be taken of the great bulk, is to be found, 
 not in the workshops for various artistic designs, but 
 in the most backward and isolated agricultural village 
 of the West of Ireland, 
 
 So far, then, as the production of wealth is concerned, 
 there is no difficulty in reaching the conclusion that 
 for centuries the progress of the nation has been real 
 and continuous. In a few particulars — in themselves 
 no more than sufficient to emphasise the general rule 
 — there have been exceptions, that is to say, develop- 
 ment in one direction appears to have involved degra- 
 dation in another. But, on the whole, so far as the 
 productive power of the nation is concerned, every 
 generation has not only inherited the powers of its 
 predecessors, but has done something to increase that 
 power. And the explanation in its most general form 
 is as irresistible as the conclusion. This continuous 
 increase of power is due simply to a continuous in- 
 crease of knowledge. And this increase of knowledge 
 and industrial skill is not entirely, or even mainly, 
 shown in particular individual cases ; it is to a much 
 greater extent manifested by the superior industrial 
 organisation of the whole community, and by the ever-
 
 THE REALITY OF INDUSTRIAL PROGRESS 83 
 
 iacreasing division of labour, in the widest sense of 
 the term. 
 
 Obvious as this explanation may seem, its full 
 meaning is seldom realised by those who take up 
 extreme positions in the constant battle between labour 
 and capital. The advocates of the rights of labour are 
 apt to narrow the term labour so as to mean little 
 more than muscular exertion, and to forget that with- 
 out the higher industrial skill manifested in endless 
 varieties of superintendence and design, the lower 
 forms of labour would be unproductive. To take one 
 simple example of the banking system of this country 
 and the marvellous system of credit which may be 
 considered entirely the product of mental labour — if 
 this system were suddenly broken down, the whole 
 industry of the country would be at a standstill, as 
 complete and universal as if all the unskilled labourers 
 suddenly struck work. 
 
 Nothing but an all-pervading despotism of the 
 most irresistible kind, such as no nation ever did, or 
 ever would submit to, could again set the industry of 
 the nation in motion if this credit system, which is 
 the growth of ages, were destroyed. And yet to the 
 toilers in the fields and the mines, the work of the 
 banker may seem either absolute repose, or else a 
 species of recognised social robbery. 
 
 But if the champions of unskilled labour rush to 
 one extreme, the champions of what may be called 
 dead capital run to the other. It is, no doubt, quite 
 true that the actual material accumulations of the 
 past are an important factor in production. But just 
 as it is easy to give too narrow a meaning to labour, so
 
 84 THE REALITY OF INDUSTRIAL PROGRESS 
 
 also it is easy to give too narrow a meaning to capital. 
 Adam Smith was, as usual, guided by sound common 
 sense when he boldly declared that the abilities and 
 skill of the inhabitants of a nation formed the most 
 important part of its fixed capital. Capital in the 
 narrow sense of dead material wealth would be more 
 helpless even than unskilled labour without the assist- 
 ance of all kinds of professional skill, and without 
 the organisation of industry which has been developed 
 by that skill in the past. 
 
 Thus the progress of the future, as of the past, in 
 the production of wealth must rest mainly on the 
 silent growth of knowledge, which in industry, above 
 everything, is power. And, observe, this knowledge 
 is not merely narrow technical skill, as the extreme 
 advocates of technical skill are too ready to think ; it 
 is not merely the knowledge of the memory and 
 multiplication of the rule of thumb, but the thorough 
 broad education of the faculties which alone render it 
 possible to take advantage of happy accidents and 
 fortunate opportunities. 
 
 It is time, however, to pass from this comparatively 
 simple aspect of industrial progress which is summed 
 up in the growth of man's power over nature, to the 
 much more difficult problems connected with the dis- 
 tribution of wealth. 
 
 No one can be so blind as to deny the increase of 
 productive power, but many are found to speak of the 
 increasing inequality of social conditions, and of the 
 retrogression, or, at best, the stagnation of industrial 
 societies in the general condition of labour — that is, in 
 reality, of the great mass of the population.
 
 THE REALITY OF INDUSTRIAL PROGRESS 85 
 
 In making comparisons on this subject — in attempt- 
 ing, for example, to compare the clistril)ution of wealth 
 in the fifteenth and nineteenth centuries, or even fifty 
 years ago and at present — it is necessary to take certain 
 precautions which are familiar to trained statisticians, 
 but are too often overlooked by those whose discontent 
 with the present finds expression in praise of the past. 
 
 The first precaution which is absolutely essential is 
 to be certain that you are comparing the same things. 
 At the present time the working classes, in the 
 narrowest sense of the term — of those who do manual, 
 labour — must include thousands of sub-classes com- 
 pared with hundreds or tens in earlier centuries. If, 
 then, you wish to obtain a fair idea of the general condi- 
 tion of the working classes, by taking samples, you must 
 be careful to see that your samples are really repre- 
 sentative, and that you do not compare the lowest 
 grades of to-day with the higher grades of former times. 
 Yet this is a mistake which is constantly made. An 
 enthusiastic pessimist takes as a sample of the working 
 classes at present the lowest paid agricultural labourer 
 in the kingdom, and compares him with the villeins or 
 serfs in the Middle Ages. He allows that the villeins 
 were under certain disadvantages as regards personal 
 freedom, but insists that as a recompense they held, on 
 the average, thirty acres of land and valuable common 
 rights. But, fortunately for human progress, though 
 unfortunately for the argument founded on these 
 samples, the comparison is not made between similar 
 grades in the social scale. The villein of the Middle 
 Ages does not correspond to the lowest agricultural 
 labourer of modern times ; on the contrary, to make
 
 86 THE REALITY OF INDUSTRIAL PROGRESS 
 
 the comparison at all just, the villein should be com- 
 pared with the substantial tenant-farmer ; and if we 
 seek for the proper mediaeval type of our lowest 
 agricultural labourer, he will be found in the slave 
 pure and simple — the chattel which could be bought 
 and sold. Even after slavery in the simple sense had 
 been abolished, or fallen into disuse, the amount of 
 personal freedom was strictly limited. In the reign of 
 good Queen Elizabeth it was enacted that all persons 
 between the ages of twelve and sixty, not otherwise 
 employed, were compelled to serve in husbandry, by 
 the year, " with any person that keepeth husbandry, 
 and will require any such person so to serve within 
 the same shire where he shall be so required," and the 
 act applies to unmarried females between the ages of 
 twelve and forty. The justices of the peace were at 
 the same time empowered to fix the rates of wages, 
 and fines were imposed on those who gave and received 
 more than the rate fixed. 
 
 I cannot in the time at my disposal go more fully 
 into the question of the progress of the agricultural 
 labourer in general, but enough has been indicated to 
 show the danger of comparing the samples taken from 
 very different grades of a very wide class. This, how- 
 ever, is only one example of the general error. If it is 
 unfair to take the lowest agricultural labourer as a fair 
 type of the labour employed in agriculture, it is still more 
 unfair to take that type as a fair sample of the working 
 classes in general. The working classes consist, as 
 pointed out, of many species, rising from the lowest 
 form of unskilled labour to the most highly trained 
 skilled labour; and even a roughly approximate estimate
 
 THE REALITY OF INDUSTRIAL PROGRESS 87 
 
 of the progress of the working classes would have to 
 take into account a great many samples. But yet 
 another caution must be added. 
 
 I have hitherto followed the usual course of speak- 
 ing of the working classes in the narrowest sense of 
 those employed in manual labour, using that term also 
 in its narrowest sense. But we ought to remember 
 that one of the chief characteristics of industrial 
 progress in the production of wealth (to which the first 
 part of this essay was devoted) was the increase in 
 those branches of labour which are not included in this 
 usual narrow meaning of the working classes. 
 
 There are many teachers, clerks, and professional 
 men of various kinds whose labour is absolutely 
 necessary for carrying on the business of a great 
 industrial society, who work quite as hard, and who 
 do not receive more pay than many artisans. 
 
 Thus, if we extend the term working classes to 
 include this large group, still more samples must be 
 taken for an estimate of progress. And then the 
 question naturally arises — if the lower grades of 
 professional labour are included, why should not the 
 higher grades also be embraced in a proper estimate of 
 the working classes ? Of course, in some questions it 
 would obviously be absurd to give such a wide mean- 
 ing to the phrase working classes, but in the general 
 question of the progress of the great mass of the people 
 it is quite clear that if we use the term working 
 classes as equivalent to the great mass of the people, 
 we must give the term working classes a very wide 
 meaning. 
 
 I said a little ago that the question of the pro-
 
 88 THE REALITY OF INDUSTRIAL PROGRESS 
 
 duction of wealth was intimately connected with the 
 question of its distribution, or, if you prefer the word, 
 its division amongst the different classes of the com- 
 munity. There is no greater delusion than to suppose 
 that as regards the distribution of wealth the progress 
 of society has consisted in making the rich richer and 
 the poor poorer, and that a small minority of the nation 
 has been benefited at the expense of the great masses 
 of the people. 
 
 Now it seems to me there is one absolutely con- 
 clusive answer to this fallacy — an answer that is 
 much more simple and much more sure than taking 
 problematical estimates of incomes reckoned in money. 
 Stated in general terms the answer is this : If we 
 look to the occupations of the people, — that is to say, 
 of the whole nation, — if we look to the work they do 
 and the things they produce, then we discover that 
 it is utterly absurd to say that all this labour, or 
 even the greater part of it, is devoted to satisfying 
 the insatiable wants of a comparatively small rich class. 
 
 We can base the argument upon unquestionable 
 facts, such as the occupations of the people as shown 
 in the Census, and the actual consumption of com- 
 modities as shown in the Eeturns of the Board of Trade. 
 I shall not attempt to condense a mass of blue books 
 into a few sentences, but the argument is so clear 
 and convincing that a few samples will suffice. As a 
 guarantee, however, that the samples are not unfair, 
 I will take as a guide the material wants of a human 
 body. Tlie most pressing is the want of food and 
 drink. Let us begin, then, with the claims, and needs, 
 and desires of that most vulgar, most necessary organ.
 
 THE REALITY OF INDUSTRIAL PROGRESS 89 
 
 the stomach. I can, of course, only give you samples 
 of the things that enter into the mouth, but they will, 
 I think, suffice. 
 
 There were in 1891 in the United Kingdom 
 upwards of 33,000,000 of sheep, 11,000,000 of 
 cattle, and 4,000,000 of pigs. Besides this there 
 were imported enormous quantities of liv^e stock and 
 meat of various kinds. Now I think it would be a 
 very interesting sum to work out : " If all this meat 
 is consumed by a few bloated aristocrats and plutocrats, 
 what must be the average size of their stomachs ? " 
 The answer would come out in hundreds of thousands 
 of cubic feet. 
 
 Now pass from food to drink. In 1891 {Statistical 
 Journal, March 1894) there were retained for home 
 consumption in the United Kingdom more than 
 200,000,000 pounds of tea, more than 30,000,000 
 barrels of beer, 39,000,000 gallons of spirits, and 
 14,000,000 gallons of wine. 
 
 Now the slightest consideration shows that all this 
 drink could not possibly be consumed except with 
 the help of the masses of the people. The quantities 
 are too large to be got rid of by a comparatively small 
 class of wealthy people. It is, of course, difficult to 
 put a precise meaning into such a vague expression, but 
 suppose we say this small wealthy class is one million 
 of people. Well, if they consumed all the tea, that 
 would come to about four pounds a week per head, 
 including the children. Fancy the condition of a 
 child who drank four pounds of tea in a week ! I 
 may note in passing that the increase in the actual 
 consumption of tea per head of population is one of
 
 90 THE REALITY OF INDUSTRIAL PROGRESS 
 
 the best tests of general prosperity, and in less than 
 fifty years has risen more than threefold. 
 
 Precisely the same argument may he applied to 
 the other bodily wants. Consider clothing. If we 
 take account of the quantities of cotton and wool 
 manufactured for home consumption, you will easily 
 see that they must be spread over the backs, not of a 
 class, but of the masses. I do not wish to bewilder you 
 with figures, and I shall only briefly indicate how this 
 argument from the quantities of commodities is con- 
 firmed by examining the occupations of the people as 
 shown in the Census. You will see from the vast 
 numbers employed that they can only be employed in 
 providing for the wants of the whole community. In 
 the United Kingdom there are (Census 1891) nearly 
 a million workers in iron and steel, nearly a million 
 in wool and cotton manufactures, and the grand total 
 of those employed in industrial and commercial pursuits 
 is over ten and a half millions. 
 
 You sometimes find attempts are made to under- 
 rate the advantages of division of labour and of larger 
 industries on the ground that the system is only good 
 for employers. It is forgotten that one necessary 
 condition for production on a large scale is a large 
 market. But in the last resort what does that mean ? 
 It means that it will never pay to produce on a large 
 scale, unless the products are scattered up and down 
 the length and breadth of the land, and find their way 
 into the houses of the masses of the people. 
 
 If time permitted, I should like to make further 
 and more detailed appeal to the Census Eeturns. I 
 should like to show you that even when we get
 
 THE REALITY OF INDUSTRIAL PROGRESS 91 
 
 beyond necessaries, in the largest sense of the term, — 
 inchiding not merely bread and water, but fresh meat, 
 beer, and spirits, — even when we ascend from these 
 necessaries into the classes of luxuries, we find a very 
 large consuming power. Take, for example, the num- 
 bers employed in books and newspapers, in education 
 of all kinds, in medicine, in the transport of persons by 
 land and sea ; you will again find that there must be 
 a wide diffusion of these services and their products. 
 
 I should also like to show you in detail the com- 
 position of the unoccupied class, i.e. those without any 
 specified occupation or calling, but I must content 
 myself with a general description. At first sight this 
 class looks very large, upwards of 50 per cent out of 
 the population ; but when you deduct the children and 
 young persons who are being trained for future occupa- 
 tions, and the old people who have retired from busi- 
 ness, and the married women who are occupied with 
 their families, and other women who are engaged in 
 domestic duties, the number of these between the ages 
 of twenty and sixty -five without occupation is very 
 small ; for example, in England and Wales (Census 
 1881) under 200,000. But of this class a fair pro- 
 portion were engaged in work of various kinds which 
 cannot be classed in the Census returns — directing 
 charitable institutions, prosecuting scientific and literary 
 studies. A certain number, again, must be deducted 
 on account of being physically and mentally unfitted 
 to take part in active life, and thus the remainder, 
 constituting the really idle portion of the community, 
 cannot exceed a few thousands. 
 
 Thus the analysis of the unoccupied class confirms
 
 92 THE REALITY OF INDUSTRIAL PROGRESS 
 
 the conclusion derived from the analysis of the occupied 
 classes : the great mass of the people at large are 
 engaged in some form of work, and from the nature of 
 that work, from the general conditions of production, 
 from the inter-dependence of national industries, and 
 the inter-lacing and inter-twining of interests, that 
 work, though primarily undertaken at the prompting 
 of self-interest, must indirectly benefit the community at 
 large. The work of the nation is done for the nation. 
 
 Compare now in broad outline this working England 
 of to-day with the England of the Middle Ages which 
 we are invited to look back on with regret. In 
 mediaeval England the great bulk of the working 
 population were engaged in a rude species of agricul- 
 ture. They lived in houses which were little better 
 than mud-huts, they were fastened to the soil by all 
 the strength of law and custom, they were periodically 
 decimated by plagues and pestilences, and the fruits 
 of their labour supported swarms of corrupt ecclesiastics 
 and brutal men-at-arms. 
 
 Or, if you do not care to go so far back, take that 
 immortal chapter in Macaulay's History'^ in which he 
 describes the state of England in 1685. Consider 
 especially the rate of wages compared with the price 
 of necessaries. Throughout his description Macaulay 
 has in view, by way of contrast, the state of England 
 
 ^ Macaulay, Hist. vol. i. pji. 413, etc. According to this account 
 four-fifths of the peoi^le were employed in agriculture, and Sir William 
 Petty, the principal authority, says people were not in the lowest stage 
 who received 4d. a day with food, or 8d. without food, i.e. 4s. a week 
 without food. The rates of wages fixed by justices were sometimes 
 lower, e.g. 3s. 6d. September to March. Of course, sometimes they 
 were better, rising to 6s. in winter and 7s. in summer — the highest.
 
 THE REALITY OF INDUSTRIAL PROGRESS 93 
 
 ill 1848 — the time of writing — and he is astounded 
 at the progress effected. But it is not too much to 
 say that since that time the progress effected has been 
 still greater. 
 
 It is impossible at this time to enter into details as 
 to the nature and operation of the causes, but of the 
 
 With reference to manufacturers Macaulay quotes a ballad in which a 
 master clothier speaks as follows : — 
 
 In former ages we used to give, 
 
 So that our workfolks like farmers did live ; 
 
 But the times are changed, we will make them know. 
 
 We will make them to work hard for sixpence a day, 
 Though a shilling they deserve if they had their just pay ; 
 If at all they murmur and say 'tis too small, 
 We bid them choose whether they'll work at all. 
 And thus we do gain all our wealth and estate 
 By many poor men that work early and late. 
 
 Nor were these low money wages counterbalanced by low prices of 
 commodities — in fact, in many respects the real wages were still lower 
 than tliese figm-es would indicate. The price of wheat was 50s. a 
 quarter, so that even shopkeepers and yeomen could not afford it. 
 Meat was cheaper, but still so dear that half the families of the common 
 people (about 880,000) ate animal food twice a week, and half none 
 at all. ' ' It seems quite clear that the wages of labour estimated in 
 money were in 1685 not more than half of what they are now (1848) ; 
 and there were few articles important to the working man of which 
 the price was not in 1685 more than half of what it now is. . . . 
 Among the commodities for which the labourer would have to pay 
 higher in 1685 than in 1848 were sugar, salt, coals, candles, soap, 
 shoes, stockings, and in general all articles of clothing and all articles 
 of bedding." In 1685 one-fifth of the population were paupers; in 
 1848 only one-tenth in bad years, to one-thirteenth in good. 
 
 It is needless to refer to the rise both in money and in real wages 
 since 1848 (cf. Sir Robert Giffen's Progress of the JVorJcing Classes, 
 Essays in Finance, Series II.) As regards 2^aw^cm)« — with a similar 
 interpretation to that of Macaulay — it is now roughly one-twentieth 
 (cf. Booth Statistical Journal, June 1894).
 
 94 THE REALITY OF INDUSTRIAL PROGRESS 
 
 general answer there can be no doubt. The essence of 
 the progress of the nation lay in the substitution for 
 a distribution of the national wealth whicli rested on 
 force, on prejudice, on caste, on superstition, on privi- 
 leges of birth and station, of a distribution which more 
 and more gave the fruits of labour to those who 
 laboured, and more and more in proportion to the 
 value of their labour, to the rest of the community. 
 
 Observe, I do not insinuate that even at the present 
 time this industrial ideal has been fully attained, or 
 even fairly approached. There is still much labour of 
 the greatest utility to the community performed for 
 very little reward, and there is often much reward 
 obtained through some fortunate seizure of a happy 
 occasion for very little labour, or even for placing 
 impediments and obstructions in the way of real 
 progress. But a comparison of the past with the 
 present shows that the chief point of difference in the 
 distribution of wealth — the most striking, the most 
 characteristic difference — is that under present con- 
 ditions, more than at any previous period, the wealth 
 of the nation is given to the workers of the nation in 
 proportion to the value of their work to the community. 
 I repeat that I do not mean that the industrial ideal 
 has been fully attained, but I repeat also that it is 
 more nearly attained at present than at any former 
 period. And tliat is progress ! 
 
 If now we look for the causes of this development, 
 they are, of course, many and various in character ; but 
 there is one cause which stands out above the rest in 
 a remarkable degree. In former times constant efforts 
 were made to strangle industrial freedom and industrial
 
 THE REALITY OF INDUSTRIAL PROGRESS 95 
 
 competition of all kiuds. The mediaeval legislator tried 
 to fix wages, and not only to fix wages, but to fix the 
 labourer to the station and the very place in which he 
 was born. Craftsmen and traders were placed under 
 all kinds of restrictions in their business — restrictions 
 which to us seem simply so ridiculous that we are apt 
 to lose sight of their vexatious and injurious character. 
 Even the consumer was not left to his own devices, but 
 a fatherly government laid down in the law of the land 
 the food people might eat, the drink they might drink, 
 and the garments wherewith they might be clothed. 
 
 In one word, custom and law bound the industry 
 of the nation not only with strong ropes, but with 
 thousands of minute threads, and, in the main, the 
 industrial progress of the nation has consisted in 
 breaking through these ropes and threads and in 
 substituting for the commands of the state, freedom of 
 contract, and for the rigid customs of the community, 
 freedom of competition. 
 
 I do not for a moment intend to imply that at 
 present the Government has no industrial functions, and 
 that progress has consisted entirely in the repeal of 
 antiquated laws. But I think you will find that those 
 laws which it has been found desirable to continue and 
 to extend, and which seem to control the freedom of 
 individuals and classes, are in reality, for the most 
 part, designed, by restraining to some extent the freedom 
 of a small minority, to extend the freedom of very 
 large majorities. If, for example, by factory legislation 
 you take steps to assure the health and the education 
 of children, you may indeed check the freedom, or 
 rather the license of a few employers, but you extend
 
 96 THE REALITY OF INDUSTRIAL PROGRESS 
 
 the real freedom of thousands of children ; or, to take 
 another example, if you put the promoters of companies 
 under certain restraints, you really give, by increasing 
 security, greater freedom of investment to the public at 
 large. 
 
 In conclusion, then, just as the marvellous increase 
 in productive power has, in the main, been due to an 
 increase in knowledge, so the increasing tendency for 
 those who produce wealth to be rewarded according to 
 their labours has been, in the main, due to an increase 
 in freedom ; the ideal may be still far off, but through 
 the centuries the progress made towards a just distribu- 
 tion has been real and continuous, because more and 
 more men have been left to their own judgment, their 
 own self-reliance, in making bargains about their labour, 
 instead of accepting the dictates either of a great state 
 or a little community. 
 
 Thus in the industrial, as in the moral world, the 
 watchwords of progress have been knowledge and 
 freedom.
 
 THE LIVING CAPITAL OF THE UNITED 
 KINGDOM 1 
 
 Almost all systematic writers on Political Economy 
 have discussed the question whether or not the skill of 
 the artisan, credit institutions, the national organisation 
 of industry, and other intangible elements in the social 
 fabric should be included in the wealth of the individual 
 or the nation. Adam Smith boldly places under " fixed 
 capital " the acquired and useful abilities of all the 
 inhabitants or members of the society, on the grounds : 
 first, that the acquisition of such talents " by the main- 
 tenance of the acquirer during his education, study, or 
 apprenticeship always costs a real expense, which is a 
 capital fixed and realised as it were in his person " ; and, 
 secondly, because the improved dexterity of a workman 
 may be considered in the same light as a machine or 
 instrument of trade " which facilitates and abridges 
 labour, and which, though it costs a certain expense, 
 repays that expense with a profit." J. S. Mill, on the 
 other hand, insists at the outset that " in propriety of 
 classification the people of a country are not to be 
 counted in its wealth. They are that for the sake of 
 
 ^ Economic Journal, March 18'Jl. 
 
 7
 
 98 LIVING CAPITAL 
 
 wliicli its wealth exists. The term ' wealth ' is wanted 
 to denote the desirable objects which they possess, not 
 inclusive of, but in contradistinction to, their own 
 persons." It is true that at a later stage in his work 
 Mill attempts to distinguish between the skill and the 
 personality of the artisan, and to include the former 
 under M'ealth and not the latter, but in doing so he 
 destroys the value of his first position. For just as 
 there are close analogies between the living instrument 
 and the dead, as clearly expressed by Adam Smith, 
 there are also differences of vital importance. To take 
 but one example : tlie interest derived from dead capital 
 must for many purposes be contrasted with the wages 
 obtained for skilled labour. 
 
 Without entering further into this very thorny 
 subject of accurate definitions, it may be premised that 
 the application of the term " capital " to skill and the 
 like will be justified or not according as we wish 
 to emphasise resemblances or differences. In many 
 inquiries we certainly ought to draw a sharp line 
 between capital and labour in the narrow and popular 
 senses of the terms, especially in cases where ethical 
 considerations cannot be altogether excluded. At the 
 same time, however, there are other occasions upon 
 which analogy will be more useful than contrast, and 
 such an occasion is offered by the problem I propose to 
 discuss in the present paper. 
 
 Briefly stated, that problem is to find the money- 
 value of the " living capital " of the United Kingdom — 
 that is to say, the " capital " fixed and embodied in 
 the people as distinguished from the lands, houses, 
 machinery, and the like.
 
 OF THE UNITED KINGDOM 99 
 
 The problem is by no means new, and is, in fact, 
 old enough to possess the interest of a revival. It 
 was a favourite topic with Sir William Petty and his 
 followers in " political aritlimetic." It may be worth 
 while to quote Petty's general description of his method, 
 and also to give a particular example. The principle 
 is explained as follows ^ : " Suppose the people of 
 I'^ngland to be six millions in number, and tliat their 
 expense at £7 per head be forty-two millions ; suppose, 
 also, that the rent of the lands be eight millions and 
 the yearly profit of all the personal estate be eight 
 millions more ; — it must needs follow that tlic labour of 
 the 2Jeople must have supplied the remaining twenty-six 
 millions, the which being multiplied by twenty {tlte 
 mass of mankind heing worth twenty years' purchase as 
 ivell as land) makes five hundred and twenty millions 
 as the value of the whole people : which number, 
 divided by six millions, makes above £80 sterling to be 
 the value of each head of man, woman, and child, and 
 of adult persons twice as much ; from whence we may 
 learn to compute the loss we have sustained through 
 the plague, by the slaughter of men in wai", and by the 
 sending them abroad into the service of foreign princes." 
 The concluding sentence indicates the uses of the 
 method : but a more interesting example may be 
 given — no less than the most " thorough " solution of 
 the Irish problem ever attempted, so "thorough," indeed, 
 that Petty is careful to explain that it must be looked 
 upon rather as a " Dream or Besvery than a rational 
 Proposition." ^ He begins by saying that he has heard 
 
 ^ Political Arithmetic, p. 192, edition 1G99. 
 - Op. cit. p. 226.
 
 loo LIVING CAPITAL 
 
 many wise men, " when they were bewailing the vast 
 losses of the English in preventing and suppressing 
 rebellions in Ireland, M'ish (in such their melancholies) 
 that the people of Ireland being saved that island were 
 sunk under water." This is the key to the position. 
 The people of Ireland are " living capital " in a dis- 
 advantageous situation. If they were transported to 
 the more populous districts of England and Wales and 
 the Lowlands of Scotland their labour would be worth 
 so much more, and the value and strength of this really 
 " United " Kingdom would be so much greater. The 
 example is amusing by its grotesque detail, and it is 
 interesting to note that the same argument is applied 
 also with relentless logic to the Highlands of Scotland. 
 The principle, however, on which it is based is perfectly 
 sound, and has recently been much insisted on by 
 American economists. Up to certain limits the increase 
 of population in a given area more than proportionately 
 increases the productive power of the people. The 
 principle is, in fact, one of the main elements in the 
 advantages of division of labour. 
 
 Following Petty's example up to the end of last 
 century most writers who made estimates of the 
 national wealth included as the principal item the value 
 of the " living capital." In recent times, however, 
 this element has been altogether dropped from the 
 calculation. The omission is, I think, unfortunate in 
 many ways, and especially in that it unconsciously 
 leads people to exaggerate the importance of the 
 material wealth of the nation in the narrowest sense of 
 the term. Some years ago a thrill of gratified pride 
 passed through the country when Mr Giffen calculated
 
 OF THE UNITED KINGDOM loi 
 
 that its material wealth (or capital as he called it) was 
 accumulating at the rate of some two hundred and 
 forty millions per annum. A more recent calculation 
 by tlie same statistician to the effect that, in spite of 
 depression and low prices, accumulations were still 
 going on, though not so rapidly, was also received with 
 undisguised satisfaction — especially by the owners of 
 dead capital. Mr Giffen, it is right to bear in mind, 
 took great pains to explain, especially on the last 
 occasion, that his estimate was necessarily made in a 
 very rough manner. The essence of his plan is to 
 begin with national income as the basis, and to 
 capitalise the various kinds of incomes at different 
 numbers of years' purchase. This income is partly 
 obtained from the income-tax returns (and is so far 
 reliable as a minimum), but apart from this calculation 
 a number of arbitrary and conjectural elements are 
 introduced. There are important classes of income 
 which do not pay income-tax, and there are items of 
 property which do not yield income at all, e.g. the furni- 
 ture in houses and public buildings. Again, of some 
 important classes of income only a certain portion is 
 supposed to be due to capital in the strict sense of the 
 term, — that is to say, as distinct from labour. Thus 
 only one-fifth of the incomes of trades and professions 
 (in Schedule D) is accounted for in this way — the re- 
 mainder being, in the language of the economists, 
 " wages of superintendence." Of the income of the 
 lower middle class and the labouring classes a still 
 smaller proportion is set down as due to capital proper. 
 It is plain also that the number of years' purchase 
 selected in different cases is somewhat arbitrary, and
 
 I02 LIVING CAPITAL 
 
 in every case must depend partly on the rate of 
 interest. It is necessary that these qualifications 
 should be borne carefully in mind, for there is some- 
 thing so pleasantly definite about two hundred and 
 forty millions per annum that the steps in the calcu- 
 lation are liable to be forgotten. 
 
 It is well, also, that some of the teaching of the 
 older economists should be remembered — that capital, 
 although saved, is always being consumed, and that, 
 as Adam Smith says, " 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." If this learning is somewhat too 
 musty, at any rate the American statistician, Mr 
 Atkinson, may be heeded when he states that the 
 richest nation has never more than the value — all 
 told — of two or three years' production in hand in a 
 concrete form, and that the whole world is always 
 within a year of starvation. The recent accumulations 
 of dead capital, when regarded in this manner, will 
 assume somewhat less startling proportions. 
 
 A far better way, however, of restoring the due 
 economic perspective seems to be to revert to the 
 method of Petty and the early masters, and to assign a 
 value to living, as well as to dead, capital. In order 
 to make the comparison as fair as possible, I shall first 
 of all take Mr Giffen's figures for the various classes of 
 income, and also for those parts of the various incomes 
 supposed to be derived from the possession of capital 
 iu his sense. In this way a first approximation will be 
 made to tlie income derived from "living" capital, and 
 greater accuracy may be then attained by considering
 
 OF THE UNITED KINGDOM 103 
 
 ill more detail certain kinds of income, and also certain 
 comparatively permanent sources of " wealth " (personal) 
 which do not yield income. 
 
 The fundamental difficulty, which has probably 
 thrust this problem into the background, is to pass from 
 income to capital. We are all familiar with capital 
 valuations of lands, houses, etc., based upon the 
 revenues which they yield, but since the abolition of 
 slavery in civilised communities we are not familiar 
 with the capitalisation of wage-earning power. The 
 short and simple dogmatism of Petty, already quoted, 
 as to the mass of mankind being worth twenty years' 
 ]Hirchase as ivell as land, seems, at any rate, to require 
 elucidation. Why should the mass of mankind, it 
 may well be asked, be worth neither more nor less 
 than land ? If laud becomes worth thirty years' pur- 
 chase, will mankind rise in value in equal proportion ? 
 and if land falls in value, will humanity fall also ? 
 The " indestructible and original powers of the soil " 
 are, by implication, as immortal as man is mortal, 
 and, unlike him, require no care or labour for their pre- 
 servation; and the points of contrasts between land 
 and mankind might be indefinitely increased. 
 
 This preliminary difficulty, however, must in some 
 way be surmounted before the comparison between 
 " dead " and " living " capital can be effected ; and a 
 few facts may be noticed which serve to show that 
 the valuation of human beings is not so remote from 
 ordinary thought as at first sight appears. Con- 
 stantly, for example, cases are occurring in the law 
 courts which recall the methods of compensation 
 adopted by our Saxon forefathers. A money-value is
 
 104 LIVING CAPITAL 
 
 placed upon husbands, Avives, sons, and daughters, and 
 even upon their component parts. The loss of a leg 
 has its value appraised equally with blighted affections 
 and shocks to the system. Again, to look at the 
 question from another point of view, every father of a 
 family knows that it costs a considerable sum to rear 
 children to a self-supporting age, and the higher the 
 trade or profession selected so much the greater is the 
 cost. 
 
 Estimates were recently given in a newspaper, 
 expressly for the guidance of parents, of the total cost 
 of qualifying for various employments. 
 
 These instances, however, do not at once suggest 
 any practicable method of valuing the total human 
 stock of a nation, with its infinite variety of ages, 
 occupations, and abilities. A simple enumeration and 
 summation is plainly impossible. The difficulty in- 
 volved in the ages alone, from this point of view, 
 seems at first sight almost insuperable. 
 
 We must exclude the very old and the very young, 
 so far as earning-power is concerned, or even regard 
 them as of negative value — but where shall we draw 
 the line ? 
 
 The clue to the solution seems to be given in the 
 practice of insurance companies, based on the principle 
 that whilst the individual dies the race remains, and 
 not merely the race, but the classes and divisions of 
 the race remain to a great extent uniform. Life 
 insurance is mainly concerned with age and mortality, 
 but a similar principle may be applied to the occu- 
 pations of tlie people. The individual lawyer or 
 carpenter perishes, but the profession or the trade
 
 OF THE UNITED KINGDOM 105 
 
 survives, like a Platonic idea. In a stationary 
 economic condition of a people, we might sujiposc that 
 every trade and profession is an immortal, unchanging 
 corporation. In this way we can see that Petty was 
 justified in valuing the people as he valued the land 
 — both are permanent sources of income. If the 
 society under consideration is progressive, we are still 
 more justified in this method of procedure in arriving 
 at a minimum valuation. If wages are rising and the 
 number of workers is increasing, we may be certain 
 that after an interval of, say, ten years, the value of 
 the " living capital," however estimated, will be greater 
 than at present, and this living capital may be regarded 
 as of the most permanent kind. 
 
 When this principle is once admitted, the only 
 difficulty is to separate that part of the total income 
 of the community, due to living labour in every sliape 
 and form, from that part due to capital in the narrow 
 sense of the term. As the main practical object of 
 this paper is to supplement Mr. Giffen's familiar 
 estimates, it will be convenient, as already indicated, 
 to take his figures to start with. 
 
 In an essay ^ on the progress of the working 
 classes, Mr. Giffen states : — " The capitalist as such 
 gets a low interest for his money, and the aggregate 
 return to capital is not a third part of the aggregate 
 income of the country (which may be put at not less 
 than £1200 millions), and is, as I should estimate, 
 not much more than a fourth part." It follows at once 
 from this that the value of the " living capital " is, at 
 any rate, nearly three times the value of the dead. 
 
 ^ Essays in Finance, 2nd Series, p. 403.
 
 To5 LIVING CAPITAL 
 
 If it be objected that this simple method of A'ahiatiou 
 is iUiisory, I reply that it is actually less illusory than 
 Mr. Giffen's own calculations, for the living capital of 
 the race is less perishable than much of the so-called 
 material capital. 
 
 Uut the full strength of the case can only be seen 
 when the details of Mr. Giffen's method are examined. 
 Take, for example, the table quoted in his recent work 
 on the Growth of Capital (p. 11). The object of 
 this table is to give the amounts of the principal 
 classes of income, and to capitalise those parts of these 
 incomes which are supposed to be derived from capital 
 proper. Now it will be found that of the total income 
 of the trades and professions for 1885, namely, £180 
 millions, only one-fifth part is supposed to be derived 
 from capital, and this is capitalised at only fifteen 
 years' purchase. But the curious thing is that in the 
 other items of income no such corresponding division 
 is made. The largest item in the national inventory 
 is the value of the houses. This is obtained by simply 
 capitalising the return of rental under Scliedule A in 
 the income-tax returns at fifteen years' purchase, by 
 which a gross value of nearly £2000 millions is 
 obtained. But it is perfectly plain that houses would 
 not yield a return of between 6 and 7 per cent unless 
 a certain portion were actually earned by tlie constant 
 expenditure of labour. Similarly as regards the in- 
 come from lands, farming capital, railways, water- 
 works, and all kinds of companies, a division ought to be 
 made in the same way as in the income derived from 
 trades and professions. The value of the dead capital 
 would in this way suffer a corresponding diminution.
 
 OF THE UNITED KINGDOM 107 
 
 Some idea of the importance of this point may be 
 obtained from considering the aggregate figures of 
 incomes (paying income-tax) and the corresponding 
 capital — the former, taking Mr. Giffen's figures, being 
 (roughly) £429 millions, and the latter £7620 millions. 
 This gives the average of years' purchase at 18, or, 
 in other words, the yield to the capital is about 5|- 
 per cent. 
 
 Now it is plain that if the pure rate of interest, as 
 indicated by railway debentures and corporation stocks, 
 is only about 3 per cent, this extra return to capital 
 must be considered as mainly due to the labour in- 
 volved in maintaining and employing the capital. 'J'he 
 element of risk when the question is considered from 
 the national point of view is obviously of comparatively 
 small importance. 
 
 Passing now from the capital owned by those pay- 
 ing income-tax to the other principal items in the 
 national inventory, the first in importance is the 
 ■' movable property not yielding income, e.g. furniture 
 in houses, works of art, etc." This valuation is made 
 by simply taking half the ^•alue of the houses, and 
 reaches the round figure of £1000 millions or thereby. 
 For the purpose in hand it is only necessary to observe 
 that even to make a proper use of this movable pro- 
 perty involves a large amount of labour, which is 
 unrepresented in the wage -earning or profit -earning 
 classes. The musical and artistic skill, for example, 
 " fixed and embodied " in young ladies should be in- 
 cluded in an estimate of living capital, just as much 
 as their pianos and paint-boxes are included in the 
 dead capital. It is plain that the value of the greater
 
 io8 LIVING CAPITAL 
 
 part of movable property would vanish but for the 
 acquired abilities of the inhabitants. A simple ex- 
 ample will make this point clear. The more widely 
 spread the love of art of the highest kind, so much 
 greater will be the value of old pictures. In the 
 ancient world, when slaves were trained in all kinds 
 of accomplishments, a very high value was placed 
 upon natural abilities and education, and the mere 
 fact of personal freedom cannot be held to destroy the 
 meaning of an economic estimate. But this argument 
 must, if valid at all, be carried further. 
 
 In order to make an adequate estimate of the value 
 of living, on the same basis as in the case of dead, 
 capital, the men, women, and children must be con- 
 sidered not merely as creating or giving value to so 
 much material wealth, but as in themselves constitut- 
 ing, like the movables of the inanimate inventory, more 
 or less permanent sources of enjoyment. Domestic- 
 ated humanity may properly be considered to have a 
 money-value — first, because it costs a very real ex- 
 pense to produce and maintain ; and, secondly, because 
 it furnishes pleasures which common experience shows 
 rank very high in the scale of limited and desirable 
 things. This second ground of valuation is of import- 
 ance qualitatively, as showing tlie real basis of the 
 comparison, but it is plainly unworkable quantitatively, 
 and it therefore seems necessary to fall back upon cost 
 of production for a measure, as in the case of public 
 property, which also is not directly exchangeable. 
 
 Take, first of all, a simple hypothetical case to illus- 
 trate the principle. Five shillings a week for fifteen 
 years is about £200, and this does not seem an
 
 OF THE UNITED KINGDOM 109 
 
 extravagant estimate for bringing up the child of a 
 superior artisan or tradesman. The value of the house 
 in which the child is reared would probably be some- 
 thing less than this sum ; in other words, an " economic 
 man " could more easily purchase a house in fifteen 
 years than rear a child during that period. 
 
 The example is plain enough, but to advance from 
 the particular to the general is by no means so simple. 
 Several distinct difficulties are involved — difficulties 
 of age, sex, and social position, for example. Seeing 
 that only very general results arc aimed at, something 
 like Mr. Giffen's simple method of halving a known 
 item seems very attractive ; if the dead movables are 
 half the value of the houses, why should the living 
 not be roughly estimated in the same manner ? As 
 the object of the present inquiry is mainly comparative, 
 in default of any better plan the value of the house 
 may provisionally be taken as the basis of the valua- 
 tion of the people in it, just as it is taken as the basis 
 of their expenditure for purposes of taxation. 
 
 It only remains, then, to determine this quantita- 
 tive relation of the two valuations — the cost of pro- 
 ducing the people compared with the cost of producing 
 the house. The principle applied must be simple and 
 general ; it is impossible to make a summation of 
 problematical figures for different classes. The best 
 clue to the selection seems furnished by the example 
 already taken. We may compare roughly the rental 
 of the house with the expenditure on the persons it 
 contains. Now, according to Mr. Giffen's tables, the 
 total rental of houses is about £128 millions, whilst 
 the total income of the nation is about £1300 millions,
 
 no LIVING CAPITAL 
 
 from which it follows that ten per cent is spent upon 
 house-rent. If we take the nsual figure of five persons 
 to every house, and further assume that ten per cent 
 of income is spent upon the complete maintenance of 
 each person and ten per cent on rent, we shall still 
 have four-tenths of the income left over. Accordingly 
 it does not appear beyond the mark, taking the family 
 as a permanent institution in the sense already ex- 
 plained, to consider every " person " as of equal value 
 with the house in which he lives, and every family of 
 five times the value of the house. As this part of the 
 estimate of the living capital presents most difficulty, 
 and is most liable to be misunderstood, some further 
 explanation or justification may be derived from the 
 following considerations. In the first place, in the 
 Census Eeturns nearly 60 per cent of the population 
 are placed in the " unoccupied " class. On analysis, 
 however, it appears that this class comprises children 
 and young persons who are preparing for occupations 
 of various kinds, and women who, as wives and 
 daughters, are occupied with household duties. Now 
 a child has as just a claim from the present point of view 
 to valuation as a colt, and the employment of domestic 
 servants and governesses shows that the unpaid work 
 of women of the class described ought to be considered 
 of at least equal value. liut secondly, even the 
 " occupied " classes must be considered not merely as 
 earning income, but as furnishing in their private 
 capacity utilities to the community or to their families 
 on which a value may properly be placed. There is 
 no difficulty in seeing that in an estimate of " living 
 capital " some allowance must be made for the people
 
 OF THE UNITED KINGDOM in 
 
 themselves (apart from their wealtli-producing power) 
 — the difficulty is to determine the most reasonable 
 measure. Cost of production or of maintenance (if 
 we consider the various classes as immortal species) 
 has the advantage of simplicity, and may also be sup- 
 ported by various analogies, c.y. public works, light- 
 houses, roads, breakwaters, W'ould naturally be valued 
 by their original cost and the additional annual outlay. 
 It is not necessary to enter into particulars regard- 
 ing all the items in Mr. Giffen's table of material 
 wealth. The general result is perfectly plain ; the 
 closer and more critical the examination, so much the 
 greater appears to be the relative importance (taking, 
 as far as possible, the same basis and method of cal- 
 culation) of the " living " to the " dead " capital. It 
 has already appeared in the course of this inquiry that 
 the method of calculation adopted by ]\Ir. Giffen is, 
 in some respects, inconsistent. There seems to be no 
 sufficient reason discoverable for' the precise figures 
 adopted for turning income into capital, nor for decid- 
 ing what part of income ought to be considered as 
 derived from capital proper, and what part from the 
 management of the capital, farmers' capital, for ex- 
 ample, is calculated on the basis that it yields over 
 12 per CQwt 'per annum — 
 
 fortunatos nimiiiii), sua si Loua norint, Agricolas ! 
 
 In conclusion, atter this reiteration of the necessity 
 of caution, an attempt may be made to give the ap- 
 pearance of numerical precision to the estimates of the 
 national capital, living and dead. For the latter, Mr. 
 Giffen makes a grand total of some £10,000 millions.
 
 112 LIVING CAPITAL 
 
 Of this amount, however, tlie movable property in 
 houses, etc., and the Government and local property in 
 the shaj)e of buildings, docks, etc., to the amount of 
 nearly £1500 millions do not yield income, whilst 
 another £500 millions of capital is invested abroad. 
 Thus the dead capital in the country yielding income 
 is about £8000 millions, and the income yielded 
 (deducting that from foreign investments) is about 
 £500 millions. 
 
 Now it will be observed that the pure interest on 
 £8000 millions at 3 per cent is £240 millions only, 
 or not quite half the amount {i.e. £500 millions) put 
 down as derived from dead capital. It follows, adopt- 
 ing the principle examined above, that the other 3 per 
 cent, or thereabouts (or the other half of this income), 
 must be put down to the " living capital " associated 
 with the dead capital ; in other words, if the capital 
 (in the ordinary sense) of the country actually yields 
 G per cent, whilst tlie rate of interest, pure and simple, 
 is only 3 per cent, half this total yield is due to the 
 labour of the capitalist. Now the capitalist {i.e. the 
 species, not the individual) qua labourer, remains as 
 much a permanent factor of the industrial resources 
 of the country as the land itself, and therefore we may 
 fairly assume that the aggregate value of the living 
 capitalist (considered as an enduring species) is, on 
 Mr. Giffen's showing (adequately interpreted), about 
 equal to the aggregate value of his capital, i.e. about 
 £8000 millions. 
 
 In giving, however, an estimate of the national 
 " living " capital, it will be best to take the items in 
 the order of their importance. The figures, as Mr.
 
 OF THE UNITED KINGDOM 113 
 
 Giffen says of his comparatively small " dead " capital, 
 are so large tliat a million or so is of no consequence, 
 and the calculation must be made in a very rough 
 manner. 
 
 Assume, then (following Mr. Giffen as already 
 quoted), tliat the income of labour in the ordinary 
 sense is £800 millions per annum. At thirty years' 
 purchase this gives the value of labour qua labour as 
 £24,000 millions. Next consider the capitalist as 
 an employer and worker and not merely as the 
 receiver of interest. Mr. Giffen assumes that four- 
 fifths of the income under Schedule D (trades and 
 professions) is really not interest but earnings of 
 management. This, however, amounts to upwards of 
 £140 millions, and capitalised as before extends 
 beyond £4000 millions. To this amount must be 
 added the £8000 millions derived, as already 
 explained, from considering the management of the 
 aggregate national dead capital. The total is thus 
 £12,000 millions. Next we must consider the 
 people of the country not as mere producers, labourers, 
 or employers, but as " things in themselves," or rather 
 superior domestic animals reared for their affectionate 
 dispositions and intellectual and moral activities. 
 Here, as already explained, it seemed best to take a 
 rough empirical rule founded on " cost of production." 
 For the present purpose it has been assumed that 
 every " person " is worth, or rather costs, at least as 
 much as every " house." Without stopping to expand 
 the meaning of the inverted commas we reach at once 
 a sum-total of £10,000 millions. 
 
 Lastly, taking the income of those who return under
 
 114 LIVING CAPITAL 
 
 Schedule E (official salaries and the like), and capital- 
 ising in the usual way, we conclude the inventory of 
 the national living capital with the modest item of 
 £1000 millions. 
 
 The results, arranged in order, are : Living labour 
 (ordinary), £24,000 millions; living labour (trades 
 and professions), £12,000 millions; domesticated 
 humanity (all kinds ■^), £10,000 millions ; professional 
 salaried officialdom, £1000 millions — in all, a grand 
 total of £47,000 millions. 
 
 Thus, the living capital of the United Kingdom is, 
 taking the estimate given above, about five times the 
 value of the dead ! 
 
 Or, to illustrate the general by the particular, the 
 just ransom, appraised on commercial principles, of the 
 men, women, and children, would be five times as 
 great as the market price of all the material wealth — 
 lands, houses, railways, mines, furniture, pictures, and 
 the infinite variety of instruments of production and 
 objects of consumption ! 
 
 This estimate of living capital is no doubt open to 
 question, both as regards the principle on which it is 
 based and the actual figures adopted. But the im- 
 portant point to observe is, that it is as well founded 
 and as useful as the corresponding estimate of capital 
 in the narrower sense of the term. 
 
 It may be well to restate the general principle in 
 the light of the conclusion. There are two main 
 positions. First of all, the people of the country are 
 
 ^ As explained above, this item is obtained by considering the 
 people as valuable "things in themselves," and not merely as wage- 
 earners.
 
 OF THE UNITED KINGDOM 115 
 
 regarded (like the dead caj^ital) as earning so niucli 
 income. There can be no qnestion whatever that the 
 part of the national income dne to personal exertion of 
 all kinds is far larger than that derived from the pnre 
 interest on previous accumulations, or from the rent of 
 appropriated natural agents. The relative proportions 
 assigned, it may be remarked, might have been set 
 down still more in favour of " living " capital if other 
 considerations had been allowed for, as, for example, 
 the " abstinence " involved in saving. It seemed best, 
 however, not to carry the analysis beyond the point 
 already accepted in the corresponding estimate of 
 " dead " capital, which has always been kept in view. 
 
 Exception may, no doubt, also be taken to the 
 method of capitalising this income ; but in a stationary, 
 and still more in a progressive, state of society, it 
 seems legitimate to look upon this income as derived 
 from permanent sources — in short, to acknowledge 
 that life is as permanent as land. Now, in capital- 
 ising permanent kinds of income, where, from the 
 national point of view, risk may be omitteil, the rate 
 of interest must obviously be the basis, and at present 
 thirty years (or even thirty-three) may be fairly 
 taken. 
 
 But secondly, just as Mr. Giffen and others give a 
 value to that part of dead capital which does not 
 yield income {e.g. the furniture in houses), so a value 
 must be given to " living " capital simply as a perma- 
 nent source of enjoyment. Here the natural basis 
 (seeing that exchanges of this kind of capital are not 
 now made) seems to be cost of production. As regards 
 the precise method to be adopted, opinions may differ ;
 
 ii6 LIVING CAPITAL 
 
 my owu choice was intiuenced largely, apart from the 
 reasons already given, by the idea of making the com- 
 parison with the dead capital as close as possible, A 
 more accurate method, however, might with some 
 difficulty be founded upon aggregate national estimates 
 of various hinds of annual consumption, expenses of 
 education, and the like. 
 
 The uses to which the general result may be applied, 
 after making every possible allowance for correction, 
 are so various and far-reaching, that they demand a 
 separate investigation. It is sufficient now simply to 
 allude to such problems as Socialism and the relations 
 of labour and capital (in the narrow sense) ; national 
 education of all kinds ; and, finally, the nature of the 
 progress of civilisation in its historical aspects, as 
 indicated by the growth of " living capital."
 
 VI 
 
 CAPITAL AND LABOUE: THEIR RELATIVE 
 STRENGTH i 
 
 In the first number of the Economic Journal I 
 published a paper entitled the " Living Capital of the 
 United Kingdom." The central idea was to estimate 
 in terms of money the value of the people of this 
 country, i.e. the living capital, by methods similar to 
 those which had been used for calculating the value of 
 the material wealth or the dead capital : the lands, 
 houses, railways, etc. At first sight, no doubt, there is 
 something paradoxical in saying that a man as such, 
 not being a slave, apart from his possessions is actually 
 worth so many pounds sterling ; and the paradox 
 seems to be magnified as we ascend from the individual 
 to the whole nation. Yet there is after all a very real 
 meaning in an estimate of this kind. The living 
 capital, like the dead, costs much to produce and keep 
 in a state of efficiency : there is a very real expense 
 in rearing and educating children before they are 
 capable of earning their own living. Capital (in the 
 ordinary sense) must be sunk in them just as in coal- 
 
 ^ Economic Journal, September 1892.
 
 n8 CAPITAL AND LABOUR 
 
 pits or ships ; there is probably no machine that takes 
 so long to bring to working order as a human being — 
 the average man is the most costly of animals. 
 
 And from another point of view also humanity may 
 be said to possess value : man not only costs much 
 wealth, but produces much wealth. In the last resort 
 all wealth is due to the manipulation by man of the 
 forces of nature, or, without going so far, man earns an 
 income in the shape of wages, just as land, houses, 
 and machines earn rent and interest. Thus then on 
 examination the paradox disappears, and it seems 
 theoretically possible to estimate the value of mankind 
 on the grounds both of cost and of earning capacity. 
 
 A good many things, however, are theoretically 
 possible but practically impossible — we may know 
 how to do sums, but we cannot do sums without 
 figures ; and where are we to find the figures the 
 summation of which will give us the value of a 
 nation ? The answer is that, as in the case of the 
 material wealth of a nation, we can only obtain our 
 results indirectly. In material wealth we start with 
 the income-tax or succession duties, or some other 
 official estimate of certain portions of income or 
 capital, and then we make very rough estimates for 
 the remainder, as, for example, when we assume that 
 the movables contained in houses are of half the 
 value of the houses. 
 
 Computations of the national wealth — even in a 
 country like the United States where some attempt is 
 made at an enumerated valuation — are necessarily 
 very rough and, considered absolutely, untrustworthy. 
 But one of the most important principles of statistics is
 
 THEIR RELATIVE STRENGTH iig 
 
 that for relative purposes — for purposes of comparison — 
 if we adopt the same methods, the proportions may be 
 sufficiently correct to be valuable in spite of original 
 errors in the absolute amounts. Take, for example, 
 the question of the comparative growth over a period 
 of ten years in the wealth of the various parts of the 
 United Kingdom — England, Wales, Scotland, Ireland. 
 We may be wrong — far wrong — in the absolute 
 amounts assigned, but if we adopt the same methods 
 and apply them under the same conditions the com- 
 parative results may be quite trustworthy or at any rate 
 worthy of consideration for practical purposes. 
 
 In the same way if we apply the same methods to 
 estimate the relative values of living and dead capital, 
 valuable results, though only proportionate and relative, 
 may emerge out of aggregates which in themselves 
 make no claim to strict accuracy. 
 
 The object of the present paper is to draw some 
 practical conclusions, and not to reassert or justify the 
 methods and results of my previous calculations. At 
 the same time, one part of the theoretical method 
 adopted may be adverted to on the ground that it has 
 directly an important practical application. In esti- 
 mating the value of various kinds of labour I proceeded 
 on the assumption that although the individual jJcrishcs 
 the species survives. Take, for example, a stationary 
 state of society; assume that the population, methods 
 of production, and general distribution of wealth remain 
 practically the same for a hundred years. In such a 
 society there will probably be not a single individual 
 alive throughout the period, and yet under the condi- 
 tions assumed there will be all the time about the
 
 I20 CAPITAL AND LABOUR 
 
 same Dumber of people of various ages aud about the 
 same number engaged in various occupations. The 
 individual carpenters, drapers, lawyers, etc., will have 
 passed away, but their places will have been taken by 
 others. In fact, just as we used to be told that every 
 particle of the body was changed in seven years, whilst 
 the body was still supposed to be the same, so we may 
 assume that the body of carpenters, etc., remains the 
 same though the component elements have changed. 
 It follows then at once that we may look upon the 
 various species of labour in a stationary state as practi- 
 cally immortal or, what is more to the point, may con- 
 sider labour as durable as land. 
 
 If then we are justified in taking the capital value 
 of land at thirty years' purchase, we ought to estimate 
 the capital value of labour at the same rate. It is 
 true that to get wages labour must do work ; but it is 
 also true that to get rent land must also do work. 
 
 Now it seems to me that this very idea of the per- 
 manence of labour, — and for the present I use labour in 
 its ordinary sense, and not, as later on, as inclusive of 
 all grades between the prime minister and the shoe-black, 
 — this very idea apart from any quantitative expression 
 is fruitful of practical results ; for the idea which makes 
 the labourer immortal makes his wages or reward also 
 continuous. Much harm has been done by considering 
 the living labourer as an individual, and dead capital 
 as a species — the former as liable to all the accidents 
 of life and to the certainty of death, the latter as inde- 
 structible and immortal. People speak of the conflict 
 between capital and labour, and by capital they mean 
 what they say, but by labour they mean individual
 
 THEIR RELATIVE STRENGTH 121 
 
 labourers, and the conflict seems something like that 
 between an express engine and a tunnelful of navvies, 
 where the engine must always get the best of it. 
 
 But if we regard labour as meaning labourers, we 
 should regard capital as meaning the various concrete 
 capitals of various individuals — if the one is perishable 
 so is the other. The owner of a ship or a factory or 
 any other form of capital can get no profit unless his 
 capital is employed, and if it remains unemployed and 
 un cared for, it loses value, and in many cases the 
 value may disappear altogether. A man who cannot 
 employ his capital loses his income as surely as the 
 labourer out of work loses his wages ; the former likes 
 it no more than the latter, and it is notorious that the 
 capitalist will carry on his business even after profit 
 has disappeared simply to keep up his capital. It is 
 well known that in several cases lately in England 
 farmers were allowed to stay on rent-free — in some 
 cases even the landowners in addition undertook 
 certain repairs. Was this charity ? Possibly to some 
 extent, but certainly business also, for otherwise the 
 farms would have been ruined. 
 
 Instead, however, of regarding both capital and 
 labour as equally perishable let us consider botli as 
 equally permanent. We are thus able to confer on 
 labour some of the advantages which are generally 
 only ascribed to capital. No complaint is more 
 common in regard to ordinary labour than the uncer- 
 tainty of employment owing to fluctuations in trade. 
 We are constantly reminded that most wages are paid 
 by the week, and that a labourer is liable to dismissal, 
 and thus indirectly to starvation and death. But
 
 122 CAPITAL AND LABOUR 
 
 though this may be true of a labourer it is not true of 
 labour. To say that all the labour of a country, or 
 even a considerable part, could be dismissed by capital 
 into starvation is palpably absurd. I am not forgetting 
 that lock-outs may occur. But they are not so common 
 as strikes, and at any rate they are only for differences 
 — for a relatively small percentage of wages or some 
 relatively small change in the conditions of employment. 
 I never heard of a capitalist dismissing all his hands 
 as an offended lady may dismiss her cook ; still less 
 would a body of masters meet together and agree to 
 dismiss all their men simply to show their authority. 
 The losses involved in the stoppage of the employ- 
 ment of capital are too serious for amusements of this 
 kind. 
 
 Accordingly if we regard labour as a whole, and 
 consider a sufficient period, we jfind that the uncertainty 
 of employment is reduced to moderate dimensions. I 
 see from official returns ^ made as to the state of the 
 skilled labour market that when about 4 per cent are 
 out of employment this is described as indicating only 
 a moderate demand for labour. But if, when 96 per 
 cent are employed, the demand is only moderate, what, 
 I ask, becomes of the uncertainty of employment ? It 
 must be remembered also that many of these un- 
 employed are on strike. Surely a moderate degree of 
 thrift and a very little foresight ought to keep the 
 wolf from the door. 
 
 I trust I have not made my point so clear as to 
 appear a truism — if I have, a particular example may 
 serve for the obscuration necessary to interest. The 
 1 Board of Trade Journal, October 1891.
 
 THEIR RELATIVE STRENGTH 123 
 
 advocates of a peasant proprietary, and generally the 
 laudatores ruris, dwell on the uncertainty of the wages, 
 and thus of food and shelter, of the dweller in the cities 
 compared with the happy peasant. No doubt in many 
 respects the peasant has the advantage, but hardly in 
 the matter of certainty of income if we compare classes. 
 Consider, for example, the present famine in Eussia, 
 the potato famine in Ireland in 1846, and the periodic 
 returns of scarcity in Scotland under the old crofting 
 system. 
 
 The truth is, that the wage-earners of this country as 
 a whole — I refer to the great mass of ordinary labourers 
 — have a much more stable income than the mass of 
 peasant proprietors in other countries ; the yield to 
 labour on the large system of industry is more certain 
 than the yield to land of the j5e;'i/'c culture. Apart 
 from this it must also be observed that the former is 
 greater in amount and therefore leaves a larger margin 
 for saving or insurance in case of need. 
 
 Apply now this idea of permanence to the family. 
 It is true that the family is not now so emphatically 
 the unit of society as in ancient times, but for the sake 
 of clearness a reference may be made to simple con- 
 ditions of society. At one stage of development — for 
 many centuries — the family was actually regarded as 
 permanent. The permanence of the family was the 
 most prominent element in the practical religion of early 
 societies. Bequest outside the range of the family was 
 unknown, and there was practically, though not technic- 
 ally, common holding of the property. Now although 
 in modern societies the individual is accentuated, the 
 institution of the family has not disappeared : parents
 
 124 CAPITAL AND LABOUR 
 
 support tlieir children in necessity, and children their 
 parents. In many countries such snppoi't is compul- 
 sory by law : I believe I am right in saying that in 
 Scotland a man is liable for the support of his mother- 
 in-law, even if his wife is divorced. At any rate there 
 is no doubt still a sufficient cohesion in the individual 
 members to justify the practice of many economists of 
 taking the family as the unit in considering the capa- 
 city for earning wages. Now from the point of view of 
 investment of earnings, an ordinary labourer cannot do 
 better than give his children a sound education — 
 physical, moral, intellectual. The peasant proprietor 
 in many cases starves and overworks his family to feed 
 his land ; from the point of view of national economy 
 there could be no greater mistake — the living capital 
 should feed upon the dead capital, and not the dead 
 upon the living. 
 
 But the idea of the permanence of life is not yet 
 exhausted. Hitherto labour has been regarded as con- 
 sisting only of the lower grades of labour, but the 
 peculiarity of a modern industrial society as compared 
 with the simple ancient agricultural societies is the 
 great complexity and variety in labour in the true sense 
 of the term. Consider the " unoccupied " class of the 
 Census. ^ If we put aside children under fifteen who 
 may be assumed to be " occupied " with their education ; 
 women, who are occupied with domestic duties ; old 
 men about sixty-five years of age ; and if we assume 
 further that of young persons between fifteen and 
 
 ^ I.e. those returned l)y rank, property, etc., and not by occupation ; 
 nominally for England and "Wales 57 per cent of the population. 
 {Census of 1881.)
 
 THEIR RELATIVE STRENGTH 125 
 
 twenty in the so-called " unoccupied " class many are 
 preparing for professional life, then the " unoccupied " 
 class — in the sense of the really idle portion of the 
 community (England and Wales) — is reduced to very 
 small dimensions: out of 25,000,000 it does not 
 amount to 200,000. Of these again many are en- 
 gaged in managing their estates, in scientific or literary 
 pursuits, and various forms of social work. Thus of 
 men between twenty and sixty-five the -vast majority 
 are engaged in some form of labour in the extended 
 sense of the term. 
 
 Now in the permanent stationary society we are 
 considering, it is true that the groups of workers remain 
 relatively the same, but it is not true that there is a 
 system of oriental castes. There must always be 
 hewers of wood and drawers of water, but the curse, 
 if it be a curse, does not descend unto the children or 
 children's children. Just as in his imaginary Eepublic 
 Plato provided that if a golden child happened to be 
 born of iron parents he should be promoted to the 
 golden rank, so also in the actual system of industrial 
 competition and natural liberty the strong rise and the 
 weak sink in the social scale. All of us know cases of 
 men in the highest stations sprung, as we say, from 
 nothing, and also cases in which before the third gener- 
 ation the children of the great capitalist have dropped 
 to a low level. And the more education is spread so 
 much the more effective does this competition become. 
 And here I may remark parenthetically that the best 
 economic justification of free education and of assisted 
 education of various kinds is that the strong may have 
 opportunities for showing their strength, or in other
 
 126 CAPITAL AND LABOUR 
 
 words, that the workers of tlie nation shall be occupied 
 according to their capacity. 
 
 To resume then : We couple with the idea of per- 
 manence the idea of permutation — the permanence of 
 occupations with the permutation of individuals — and 
 thus we narrow at once the chasm between so-called 
 capital and labour, or between classes and masses. Of 
 course I do not mean to imply that at present all have 
 equal opportunities — that would only be possible under 
 an omniscient, infallible, and absolute despotism. It is 
 enough to say that those who speak of the tyranny of 
 capital and the slavery of labour make a very ill use 
 of language, and overlook what is unquestionably the 
 most important fact in the history of civilisation — 
 namely, the break-up in progressive societies of slavery 
 and serfdom. 
 
 It is time, however, to pass from the meaning and 
 method of computing living capital to the comparative 
 results and their consequences. The principal result 
 obtained in the calculation was that for the United 
 Kingdom, the value of the people — the men, women, 
 and children — was £47,000 millions, compared with 
 about £10,000 millions, the value of the dead capital — 
 the lands, houses, furniture, etc. Now I confess that 
 to me this result seemed rather startling, and some of 
 the consequences, although obvious, seemed startling 
 also. But unfortunately I forgot that with the vast 
 majority of people anything expressed in terms of 
 millions is expressed in terms of unknown quantities. 
 I made out the value of the people of the country to 
 be £47,000 millions sterling, but if the result had been 
 instead one million or a hundred thousand millions, to
 
 THEIR RELATIVE STRENGTH 127 
 
 most people it would have been as interestiug and as 
 intelligible as the distance of some fixed star. For 
 ordinary reasoning anything above a million is practic- 
 ally infinity. But although the magnitude of the 
 absolute amounts of living and dead capital eludes the 
 intellectual grasp, it is not so with the relative amounts. 
 Forget then the millions and consider only the pro- 
 portions. Eegarded in this way my result was that if 
 we reckon up the value of the people in the same way 
 as we reckon up their possessions — that is, if we take 
 the principles both of earning capacity and of cost of 
 production and maintenance — then the value of the 
 living capital is about five times the value of the dead. 
 We have got rid of our millions — even savages can in 
 general count five fingers on one hand. There is 
 certainly no doubt that, whatever methods we adopt, 
 this general proposition is true — the value of the people 
 of a community, whether considered as earning income 
 or as involving cost, is much greater than that of their 
 material wealth, including productive capital and objects 
 of enjoyment. 
 
 We have again approached the clear and watery 
 lucidity of the truism, yet it seems to me that this very 
 general proposition is a most potent economic instru- 
 ment both for the destruction of fallacies and the 
 extraction of truth. Consider just one or two fallacies. 
 We are told that the wealth of the community is 
 gradually being concentrated in a few handc!, and that 
 in the natural evolution of society we shall have 
 ultimately — ^just before Socialism is established — if I 
 may again use figures, an upper ten thousand possessing 
 all the wealth, and a lower ten millions doing all the
 
 128 CAPITAL AND LABOUR 
 
 labour, and doing all the labour for their masters the 
 upper ten. Now apply the truism at which we arrived. 
 The great mass of the labour of a nation is devoted to 
 satisfy the wants, not of a few individuals, but those of 
 the mass of the nation itself. Instead of labour being 
 used mainly to pile up heaps of dead capital in the 
 hands of a few, it is used mainly in the creation and 
 maintenance of living capital embodied in the labourers 
 and their families. Take a rapid survey of the pro- 
 duction and consumption of the material wealth of the 
 United Kingdom. We have the most productive agri- 
 culture in the world, and practically none of that produce 
 is exported. We may indeed assume that at present we 
 grow hardly half the food we consume. Now it needs no 
 demonstration that the upper ten thousand could not, 
 even with the aid of their servants, horses, and dogs, 
 consume this wealth. It must go to the bulk of the 
 people, it must be converted into the living capital of 
 the nation. Consider our manufactures, in which our 
 supremacy is still greater. Does a fraction of society 
 wear all the cotton and cloth, use all the pots and pans, 
 all the boots and shoes, all the blankets, and, in a word, 
 all the produce of manufacture on a large scale ? It 
 is utterly absurd ; production on a large scale is only 
 possible with a market on a large scale, with consumption 
 on a large scale. Thus again the great bulk of our 
 manufactures nnist go to the great bulk of the nation. 
 It is true a large part is exported, but then exports are 
 paid for by imports, and the most important part of 
 these is again food and the raw material for more 
 manufactures. We might in this way go through all 
 our great staple industries, but one more example must
 
 THEIR RELATIVE STRENGTH 129 
 
 suffice. Consider the enormous capital sunk in railways. 
 People are too fond of looking simply at the interest 
 obtained by the shareholders, wliich is generally ex- 
 aggerated, and wages obtained by the workers for their 
 work. But look at railways from the national stand- 
 point. It is notorious that as regards passengers the 
 great majority are third-class, and the passenger service 
 of the great railways would not pay unless they were 
 used by the mass of the people. Similarly with the 
 goods traffic : there again we see even more clearly that 
 the service is conducted not for the few, but emphatically 
 for the many — not to pile up luxuries in the houses of 
 the rich, but to minister to the physical wants of the 
 great mass of the people. 
 
 To resume then : If we look upon a nation from the 
 standpoint of the permanence of various classes, we see 
 from the very nature of modern industry that the great 
 mass of the annual produce must be consumed by the 
 great bulk of the people. ^ 
 
 Let us now consider the question more directly 
 from the point of view of production, so as to discover 
 the relative importance of living and dead capital 
 considered as parts of modern industrial organisation. 
 The chief results of my calculations were that if we 
 take the dead capital which yields income as the basis 
 of comparison, then ordinary labour, considered as living 
 capital also earning income, is three times as valuable, 
 
 1 " The whole consumption of the inferior ranks of the people, or of 
 those below the middling rank, it must be observed, is in every country 
 much greater not only in quantity but in value than that of the 
 middling and of those above the middling rank. The whole expense 
 of the inferior is much greater than that of the superior ranks." — 
 Adam Smith, book v. chap. ii. 
 
 9
 
 I30 CAPITAL AND LABOUR 
 
 and the labour of tlie employers and of all the various 
 professions is about one and a half times as valuable 
 as the dead instruments of production (including land). 
 Thus on the whole, for carrying on the various employ- 
 ments of the nation, labour of all kinds, from the highest 
 to the lowest, is four and a half times as important as 
 land, machinery, railways, etc. Stated quite generally, 
 the result is that the productive powers of the nation 
 depend much more upon its living people than upon 
 its previous accumulations and its material instruments. 
 Consider the question for a moment from the historical 
 standpoint, and compare the productive capacity of the 
 country at the present time and (say) in the fifteenth 
 century. Our present production is greater, not so 
 much because of the accumulations of material wealth, 
 but mainly through the greater efficiency of labour of 
 all kinds, especially the higher grades of labour devoted 
 to practical science and the organisation of industry. 
 In other words, our great inheritance from the past is 
 not to be found in the storehouses of the rich and 
 the treasuries of kings, but in the living brains of the 
 people. ^ 
 
 We have again reached what may seem a truism, 
 but again we have an application to a popular fallacy. 
 It is too often assumed that the inequalities in the 
 distribution of wealth are mainly due to the monopoly 
 by a few individuals of the material instruments of 
 production. No doubt at one time when society, 
 mainly agricultural, rested on slavery or serfdom, a 
 principal cause of inequality of fortune was to be 
 found in the unequal distribution of land and the 
 ^ Cf. List, National System (trausktion), p. 1-10.
 
 THEIR RELATIVE STRENGTH 131 
 
 instruments of production. But with the progress of 
 society this cause has become of minor importance. 
 The principal cause now of inequality of income is 
 not the partial monopoly of the material instruments 
 of production, but the partial monopoly of brain-power 
 of various kinds. We must look at society as a whole, 
 and not be deceived by a few exceptional cases. That 
 I may not seem to be beating the air, let me give an 
 extract from a prominent Socialist — Mr. Sydney Webb. 
 " A fortunate few," he says, " owing to their legal power 
 over the instruments of wealth production, are able to 
 command the services of thousands of industrial slaves 
 whose faces they have never seen, without rendering 
 any service to them or to society in exchange." ^ Ap- 
 parently from the last clause the writer has in view 
 especially the owners of land. Take agricultural land. 
 In this country the great land-owners let their land to 
 tenant-farmers and receive about as much interest on 
 their capital as the owners of consols. If a tenant- 
 farmer has not brains or business capacity — if he does 
 not look after his farm — he will speedily become 
 bankrupt. Take manufactories : unless they are pro- 
 perly managed they must be closed. And so through 
 the whole range of instruments of production ; the 
 owners as such, by way of rent or interest, may obtain 
 a moderate return to their capital, but the real man- 
 agement of labour — in Socialistic phraseology the ex- 
 ploitation of labour — is left to another class. This is 
 allowed apparently in the next passage I w411 quote 
 from the same writer. " A larger body of persons 
 contribute some labour, but are able from their culti- 
 ^ Economic Journal for June 1891.
 
 132 CAPITAL AND LABOUR 
 
 vated ability or special education to choose occupations 
 for M-hicli the competitive wage is high owing to the 
 small number of possible competitors." Well, take as 
 an example of cultivated ability or special education 
 the employers of labour generally. Surely their higher 
 wages, if they happen to be high, are not due to absence 
 of competition. The competition is notoriously so fierce 
 that any initial advantage is soon neutralised unless 
 there is also initial ability. The men who make money 
 in business are in the main those who conduct their 
 business best, and who make or adopt improvements 
 of various kinds. Take the professions : no doubt 
 special education is required, but it is certainly not 
 the small number of possible competitors that makes 
 wages high. As a matter of fact the competitors are 
 so numerous that a professional man of only ordinary 
 ability may often make no wages at all. The most 
 potent cause of inerpiality of wealth is inequality in 
 brain-power. There are a few who in almost any 
 occupation would rise to the top, and many who would 
 equally sink to the bottom. There are certain kinds 
 of brain -capacity, the outcome of a conjunction of 
 natural ability, education, experience and, it may be, 
 opportunity, which are comparatively rare, and, like 
 other rare things, command a scarcity value ; intellects 
 of this sort also directly or indirectly save much labour, 
 or increase the efficiency of labour, or more generally 
 add to the wealth of society, and therefore (taking an 
 average) deserve this scarcity value. It is to minds 
 of the creative order that the industrial progress of 
 society is originally due ; by new ideas they break 
 through routine, and open up new markets, new in-
 
 THEIR RELATIVE STRENGTH 133 
 
 dustries, new methods. Tliere are again men of lesser 
 creative power, but capable of carrying out these ideas — 
 men of great force of character and practical wisdom. 
 For one George Stephenson there are many railway 
 managers, and for one manager many porters. It is 
 not necessary to illustrate further the descending scale 
 of capacity, but it is necessary to insist on the general 
 principle ; for the idea is still prevalent that all that 
 any person requires to rise in the industrial world is 
 opportunity in the shape of capital, and that in brains, 
 so far as any are required, all men are equal. But in 
 industry, as in science, in war, in literature, in art, 
 there is no such equality. It is not merely a differ- 
 ence of degree that may be balanced by greater per- 
 severance. No amount of jDerseverance will make a 
 short-sighted man see so far as an ordinary person, or 
 an ordinary person so far as a man with a telescope. 
 The industrial world is full of opportunities, but the 
 difficulty is to see them. 
 
 It may seem that I have wandered far from my 
 subject, and that the relative capacities of brains have 
 little to do with the relative importance of living and 
 dead capital. But it seems to me that nothing is 
 better calculated to illustrate the position that the 
 mere possession of wealth, the mere ownership of pre- 
 vious accumulations, does not give the owners the 
 tyranny over labour. Previous accumulations may 
 obtain 4 per cent interest, but this is relatively a 
 small part of the national income. Four -fifths of 
 what is called profits is simply wages of one form of 
 labour, or rather of many forms of labour of a highly- 
 skilled character.
 
 134 CAPITAL AND LABOUR 
 
 We are now iu a position to see that the question 
 as to the relative strength of labour and capital is 
 ambiguous, and the answer must depend on the mean- 
 ing ascribed to the terms. Take first the general 
 question. If we mean by labour simply manual 
 labour, and we throw all the mental labour into the 
 scale of capital — if every one who does not work with 
 his hands is considered as a capitalist, or is conjoined 
 with capital against labour — then in any general con- 
 flict — if such were conceivable — capital must be vic- 
 torious. The destruction of such an intangible thing 
 as credit, the mere closing of all banks, would of itself 
 stop business, as surely as the refusal of the captains 
 and officers of ships to navigate must stop foreign food 
 supplies. A general revolt of this kind of labour (i.e. 
 ordinary manual) against this kind of capital (i.e. in- 
 cluding all above this class) might produce anarchy 
 for a time, but then its power would cease. 
 
 If, however, we throw into the scale of labour all 
 those who make their income by some form of work, 
 and confine the term capital to the dead instruments 
 of production, then no doubt labour is stronger. But 
 with this wdde meaning of labour, and narrow meaning 
 of capital, a general conflict between labour and capital 
 is still less conceivable, for the obvious reason that in 
 this sense we are all labourers. 
 
 The simple truth, however, is that, wherever we 
 draw the line between the capitalist and the labourer, 
 anything in the nature of a general conflict is impossible. 
 In modern industry the two are inextricably mingled, 
 the two factors are necessary to the result, and that 
 result includes not only the satisfaction of the most
 
 THEIR RELATIVE STRENGTH 135 
 
 urgent physical wants, but also, in part at least, of all 
 the highest needs of civilisation. 
 
 It follows from the same line of argument that the 
 nearer we approach to a general conflict between labour 
 and capital — again, wherever you draw the line — the 
 more speedily it must close. For the more you widen 
 the area of conflict, the greater the dislocation of 
 industry, and the greater the discomfort, and even 
 privation, created. A simultaneous strike of all those 
 engaged in transport — by railway, by road, by sea — 
 would at once create a famine worse than any due to 
 natural causes. Astonished at this obvious inference, 
 the less instructed of the New Unionists call on us to 
 fear and tremble before the power of labour. But 
 they forget that the lower you descend in the social 
 scale, the greater would be the misery. So long as 
 any semblance of law was kept up, so long as absolute 
 anarchy was avoided, those with money or credit would 
 be served first from any accumulated local stores. 
 
 For a moment let us narrow the area of conflict 
 still more. Let us take the case of an ordinary strike 
 (say) for an advance in wages. In such a case is 
 capital or labour the stronger ? The only answer is 
 that it depends entirely upon circumstances which 
 differ in almost every instance. But one thing is 
 certain, if any set of labourers by a fortunate display 
 of strength obtain more than the market for their labour 
 justifies, their triumph will be very short-lived. A 
 monopoly in any form of labour is of all monopolies the 
 most difficult to maintain. 
 
 It is, however, impossible in this paper to enter on 
 the question of particular individual struggles between
 
 136 CAPITAL AND LABOUR 
 
 capital and labour. Throughout I have treated the 
 subject from the national point of view ; I have looked 
 on the nation as a gigantic organism, the parts of 
 which are constantly renewed, and in the course of 
 centuries are not only renewed but developed. From 
 this standpoint the conflicts between capital and labour 
 are temporary local ailments ; and if the nation is to 
 remain even stationary — still more, if it is to be pro- 
 gressive — the relations between capital and labour, 
 and the relations between the higher grades of labour 
 and the lower, and between the brain-worker and the 
 hand-worker, must be those of the sound mind to the 
 sound body. Anything like a general conflict between 
 labour and capital can only be compared to national 
 suicide.
 
 VII 
 
 A PLEA FOE INDUSTEIAL LI BEET Y ^ 
 
 I HAVE entitled the subject of my lecture to-day " A 
 Plea for Industrial Liberty," because in the time at my 
 disposal I cannot introduce the various exceptions and 
 qualifications which the most ardent supporters of 
 liberty would allow in favour of authority. All I can 
 hope to do is to set forth some of those important 
 principles which, since the time of Adam Smith, have 
 been considered sufficient to establish the presumption 
 in favour of individual freedom and enterprise, as 
 against governmental routine and control. My apology 
 for taking such a trite theme is that there has recently 
 appeared a strong tendency to deny the validity of this 
 presumption, — a tendency revealed not only in theo- 
 retical writings, but in the actual course of legislation, 
 and in the demands made by influential sections of 
 public opinion for all sorts of reforms wdiich are sup- 
 posed to be practicable. 
 
 Whilst admitting with Adam Smith and every 
 other economist that Governments have certain in- 
 dustrial functions to perform, and, with the progress of 
 
 ^ Edinburgh University, October 1892.
 
 138 A PLEA FOR INDUSTRIAL LIBERTY 
 
 civilisation and the increasing complexity of society, 
 certain functions now from which they were formerly 
 free, I still hold that in matters of industry the sphere 
 of authority is small compared with that of natural 
 liberty ; and not only so, but comparing the present 
 with the past, the former sphere — that of authority — 
 has, I maintain, become relatively much smaller ; for 
 Governments have abandoned many of their old duties, 
 or supposed duties, not so much from inclination or 
 reasonable preference as from necessity. The position 
 I wish to enforce has been admirably expressed by the 
 late Sir H. Maine — " Legislation has nearly confessed 
 its inability to keep pace with the activity of man in 
 discovery, in invention, and in the manipulation of 
 accumulated wealth ; and the law even of the most 
 advanced communities tends more and more to become 
 a mere surface stream, having under it an ever-changing 
 assemblage of contractual rules with which it rarely 
 interferes except to compel compliance with a few 
 fundamental principles, or unless it be called in to 
 punish the violation of good faith." 
 
 Well, then, if this is broadly true, — if the principle 
 altogether outweighs the exceptions, — it follows that 
 it must be either useless or mischievous for Govern- 
 ments to go on adding to the exceptions, altogether 
 regardless of the principle. 
 
 Before proceeding to notice the arguments in 
 support of the principle of natural liberty, it may be 
 well to unfold the meaning. The very heart of the 
 principle is freedom of contract. The whole structure 
 of modern industry rests upon exchange, in the last 
 resort the exchange of services. The annual con-
 
 A PLEA FOR INDUSTRIAL LIBERTY 139 
 
 sumption of the poorest working man depends upon 
 an infinite series of contracts. Consider first his earn- 
 ings, they depend upon a contract with his employer ; 
 but the employer must furnish materials and instru- 
 ments of production, and he must sell the finished 
 product, otherwise he can pay no wages. Thus the 
 employer is dependent upon all kinds of contracts. 
 Consider next the expenditure of the workman. As 
 Adam Smith long ago explained in an eloquent passage, 
 the number of people whose industry is employed in 
 procuring the conveniences of life for the most common 
 day-labourer exceeds all computation — even his coat 
 alone is the produce of the joint labour of a great 
 multitude of workmen. But this labour is not directed 
 by authority from above ; it is not the labour of slaves 
 or of Government employees ; it is labour that is 
 governed by contract of some kind or other. 
 
 Next in importance to freedom of contract as a 
 principal constituent in the system of natural liberty 
 is the institution of private property. From the 
 economic point of view, this institution implies that a 
 man has a right to dispose of the results of his labour 
 and of his saving, and also to dispose of what he has 
 acquired by contract or by gift. In a modern industrial 
 society the chief basis of private property is in reality 
 contract. We may, indeed, speak of the right to enjoy 
 the fruits of one's own labour, but how are the fruits 
 of one to be separated from tlie fruits of others ? Can 
 a man enjoy the eighteenth part of many pins, or the 
 millionth part of a big ship ? Obviously the only 
 practical foi'm of enjoying the fruits of one's labour is 
 in spending the money earned as wages. But wages,
 
 I40 A PLEA FOR INDUSTRIAL LIBERTY 
 
 again, under a system of industrial freedom, are the 
 result of contract. 
 
 Similarly as regards saving. People do not actually 
 put aside so much corn, or meat, or iron, and fill the 
 country with innumerable hoards like squirrels or 
 ravens. What people save in the first place is money, 
 and this money is invested. But, again, every invest- 
 ment is a matter of contract. 
 
 Take a concrete case — the case of a millionaire who 
 has made a fortune in trade. The fortune is the result 
 of an infinite series of bargains. And what does the 
 fortune imply ? He has not accumulated so much 
 actual treasure ; his actual personal wealth is generally 
 comparatively small : what he has accunmlated is in 
 reality the right to demand the fulfilment of an in- 
 definite number of contracts. His money — mainly in 
 the shape of figures in bankers' books and other docu- 
 ments — enables him to set in motion and control so 
 much of the productive capacities of the nation of 
 which he is a member. But he can only do so by 
 making bargains. 
 
 The third important element in the system of 
 natural liberty is security. Without security, freedom 
 of contract and private property are empty names. 
 Security is a condition precedent. Only consider the 
 effects of a commercial crisis — which is comparatively 
 a very mild shock to security. For the time being, it 
 suffices to disorganise the whole industry of a nation, 
 and even the trade of the world. Such effects are, 
 however, transitory compared with the arbitrary violence 
 of Governments. Many of the richest countries of the 
 world, so far as natural resources and vigorous inhabit-
 
 A PLEA FOR INDUSTRIAL LIBERTY 141 
 
 ants are concerned, are poverty-stricken, simply throug]i 
 want of security. 
 
 We may now compress the meaning- of industrial 
 liberty into a sentence. The essence of the system is, 
 that people are left free to make the best bargains 
 they can, and to do with the fruits of their bargains 
 what they please. The primary duty of Government 
 is simply to afford security against force or fraud. T 
 do not say that is the only duty, but the primary duty. 
 There are a number of secondary duties which arise 
 when the parties to the contracts cannot be supposed 
 to be on an equal footing, as, for example, in the case 
 of children or persons of weak intellect. There are 
 also certain industrial functions which a Government 
 may perform to greater advantage than private people, 
 e.g. the management of the coinage and the post office. 
 I only mention these secondary duties and functions 
 of Government, however, to show by contrast the 
 magnitude of tlie primary duty, which is essentially to 
 provide a fair field or an open market for making 
 bargains. 
 
 I do not think a calculation has ever been made as 
 to the amount of industrial work performed by the 
 Government of such a country as this, compared with 
 that of private enterprise. But it is quite plain that 
 a Government cannot work without money, and the 
 amount of the governmental expenditure is a small 
 part of that of the whole nation. Again, as regards 
 contract, and even as regards security, the function of 
 Government is mainly passive ; a few contracts are 
 forbidden, a few clauses in a few contracts are com- 
 pulsory, and a few contracts come before the law courts
 
 142 A PLEA FOR INDUSTRIAL LIBERTY 
 
 for enforcemeut or iuterpretation ; but, on the whole, 
 taking the life of the nation in its entirety, these 
 exceptions are, as I say, comparatively few. For the 
 most part, peoj)le make what contracts they like, and 
 they trust simply to the good faith of the other parties 
 for their fulfilment. The law, as Maine said in the 
 passage already quoted, is a mere surface stream, which 
 reveals rather than controls certain eddies in the great 
 river of national life. So much, then, for the meaning 
 of industrial liberty — a maximum of individual freedom 
 with a minimum of governmental control — the system 
 which prevails most in the most advanced communities, 
 and wiiich is historically the outcome of centuries of 
 striving against all sorts of rigid customs and the 
 caprices of arbitrary power. 
 
 Here it must be admitted that the mere existence 
 of such a system as the latest birth of time is not a 
 proof that it is the best; and, as I said at the outset, 
 there is a strong tendency at present to extend the 
 sphere of authority and contract that of liberty. This 
 tendency is principally due to the growth of democratic 
 principles of Government. It is imagined that if the 
 people are themselves the rulers — if they choose 
 delegates to do their bidding, and dismiss them if they 
 fail — then there can be practically no limits assigned 
 to the beneficial interference of Government ; for in 
 the last resort it is the peoj)le interfering on behalf 
 of the people. Thus in the end we are logically con- 
 ducted to a system of State Socialism ; and comj)etition 
 and freedom are displaced by regulation and control. 
 
 Now it needs no demonstration that if people once 
 get firmly possessed with the idea that a Government
 
 A PLEA FOR INDUSTRIAL LIBERTY 143 
 
 of their choice can do nearly everything, there will not 
 be much delay in making experiments. So long as 
 the idea of liberty was dominant, and the presumption 
 was against the Government, that of itself formed a 
 preliminary barrier to the adoption of various schemes. 
 Let me illustrate by an example — the particular case 
 of Free Trade. So long as your general rule is in 
 favour of Free Trade, you have only to show that 
 some commercial treaty or financial proposal offends 
 against this princij)le to secure its condemnation. But 
 once you reject this general simple rule, and profess to 
 decide every case on its own merits, you are certain to 
 think the merits overcome the demerits, for the simple 
 reason that the former are particular, concrete, and 
 obvious, whilst the latter are general,, indirect, and 
 below the surface. Accordingly, we find, as a matter 
 of fact, that Protection tends to spread like an epidemic 
 once it obtains a footing. And what is true of the 
 particular case of Free Trade is true of the whole 
 system of governmental control. If there is a strong 
 current of opinion against it, little will be done — 
 possibly in some cases too little ; if, on the other hand, 
 the reliance on Government is strong, much will be 
 attempted, and probably in most cases far too much. 
 It appears, then, that the question on which side the 
 presumption lies is by no means purely abstract; on 
 the contrary, it has most important practical bearings. 
 What, then, are the arguments which to Adam 
 Smith and his distinguished followers seemed sufficient 
 to establish the presumption in favour of natural 
 liberty. These arguments are principally two — the one 
 negative, showing the evils or uselessness of govern-
 
 144 A PLEA FOR INDUSTRIAL LIBERTY 
 
 mental interference; the other positive, showing the 
 benefits and advantages of individual liberty. Each of 
 them may obviously be expanded into a number of 
 component elements. 
 
 Let us look first at some of the evils or imperfec- 
 tions of Government management. 
 
 First of all, then, a Government can do nothing 
 without money, and money means taxation. But the 
 limits of taxation that are not injurious to a nation 
 are soon reached. Taxes that fall on w^ages are not 
 likely to seem agreeable to those who earn the wages ; 
 taxes on capital, or the profits of capital, are likely to 
 drive capital to more favoured regions, or else to check 
 accumulation ; and the other sources of taxation are 
 comparatively small. Our present system of taxation 
 is so little burdensome as regards the masses of the 
 people that we are apt to think it might be indefinitely 
 extended. Take a single example. Mr. Charles 
 Booth proposes that a pension should be provided for 
 every person over the age of sixty-five, at a cost of 
 £15,000,000 a year. Well, if this principle were 
 pushed to its logical conclusion, the country would be 
 ruined by taxation. If a person is entitled to a pension 
 simply because he has reached a certain age, why not 
 also because he has attained a certain degree of un- 
 avoidable misfortune ? There are employments so 
 severe and unhealthy that the workers are worn out 
 long before sixty-five ; there are, further, the victims 
 of accidents and diseases of various kinds. Where 
 would be the justice of giving to a man of the physique 
 of Mr. Gladstone a pension of 5 s. a week at sixty-five, 
 whilst a worn-out steel grinder, with his lungs ruined
 
 A PLEA FOR INDUSTRIAL LIBERTY 145 
 
 with steel-dust, is left to die unassisted before he is 
 sixty ? If you adopt this scheme of Mr. Booth's, the 
 natural sense of justice will make it grow rapidly, 
 and every growth will mean more taxation. 
 
 Another objection is that, if you give authority 
 for one thing, indirectly you increase it in other things. 
 Eestraint begets restraint, and then the natural re- 
 action begets lawlessness. Suppose, for example, that 
 a compulsory universal eight-hours' day were actually 
 established by law, consider the multitude of inspectors 
 who would be required, and the multitude of regula- 
 tions so that their inspection might be possible. I 
 said restraint begets lawlessness. A notable example 
 is furnished in the good old smuggling days, when 
 everything was taxed to such an extent that, as Adam 
 Smith said, " To pretend to have any scruple about 
 buying smuggled goods would in most countries be 
 regarded as one of those pedantic pieces of hypocrisy 
 which, instead of gaining credit with anybody, serve 
 only to expose the person who affects to practise them 
 to the suspicion of being a greater knave than most of 
 his neighbours." "When such was the state of public 
 opinion, no wonder that the glamour of romance was 
 cast on the smuggler and his calling. But, as often 
 happens on examination, the romance rests upon a per- 
 version or suppression of degraded living and revolting 
 crime. The cruelties practised by armed gangs of 
 smugglers on those who were even suspected of being 
 informers were incredibly brutal ; men were done to 
 death with prolonged tortures of the worst kind. This 
 is, of course, an extreme case ; but the fact remains 
 that undue restraint increases crime. 
 
 10
 
 146 A PLEA FOR INDUSTRIAL LIBERTY 
 
 A third objection to governmental control is 
 found in the fact that a Government must choose 
 between making its officials follow an exact, rigid 
 routine of set rules, or else allow them to act accord- 
 ing to their own caprice. The former plan stifles 
 industry ; the latter fosters jobbery. It is no wonder, 
 then, that economists have arrived at the general con- 
 clusion that most industrial operations, except those of 
 the simplest kind, are much worse done by Government 
 than by private agency. Examples of the inefliciency 
 of both kinds — of routine and jobbery — are found in 
 the management of the supplies for armies in the field, 
 as in the notorious case of the Crimean War. Eoutine 
 sent tlie things to the wrong places, and jobbery made 
 the things worthless. But if a Government cannot 
 manage the industrial operations of war, what industrial 
 operations can be properly entrusted to it ? 
 
 Finally, the strongest argument against the system 
 of authority is the cumulative historical argument. 
 Its very strength, however, renders it difficult of state- 
 ment, for it requires to be supported by a wide survey 
 and a mass of details. I cannot, then, do more than 
 state that the verdict of history, speaking broadly, is, 
 that governmental regulation of industry has been, for 
 the most part, either useless or mischievous. 
 
 I have devoted so much of my lunited time to the 
 negative argument founded on the incapacity of Govern- 
 ments that I can do little more than state in general 
 terms the leading points of the positive argument. 
 
 In the first place, then, it is maintained that as a 
 means to the attainment of economic ends of all kinds 
 industrial liberty is better than authority and control.
 
 A PLEA FOR INDUSTRIAL LIBERTY 147 
 
 It is better as regards the production of wealth. 
 People know a great deal better than Governments 
 can tell them the best way to manage their own busi- 
 ness so as to get the best return. If some industry or 
 method of industry does not succeed — if it will not 
 pay fair wages and profits — the capital and labour flow 
 into other employments under a system of liberty ; 
 whilst under the opposite system Governments try to 
 bolster up antiquated methods and cause a waste of 
 national energy. Some years ago the French Govern- 
 ment thought it would be an excellent thing to en- 
 courage the French shipbuilding and carrying trade. 
 The ancient jealousy of this country was revived. 
 Accordingly they instituted a system of bounties — 
 bounties on building and bounties on carrying. For 
 a time the shipbuilders of this country were greatly 
 alarmed. Now I see, according to recent consular 
 reports, these bounties have utterly failed. All the 
 aids of the State in France have not been sufficient to 
 counterbalance the enterprise and energy of unpro- 
 tected industry in Britain. It would be easy to multi- 
 ply examples, but there is no necessity. It is admitted 
 on all sides — even by Socialists — that, so far as pro- 
 duction is concerned, the system of free competition is 
 the most effective. The only danger is of supposing 
 that what is true of the whole is not true of the parts 
 — of imagining that though it would be absurd for 
 Government to attempt to direct all production, it can 
 meddle advantageously with particular branches. With 
 this very business of shipping, in which our interests 
 are equal to the rest of the world, our Government 
 has probably surpassed the limit of judicious meddling.
 
 148 A PLEA FOR INDUSTRIAL LIBERTY 
 
 Again, as regards the distribution of wealth — the 
 shares allotted to the different classes and members 
 of the community — it is maintained that the general 
 principle of freedom of contract is better than the 
 command of the State. Here, however, the difficulty 
 of proof is greater, because opinions differ as to the 
 kind of distribution which is best. Some think the 
 closest approximation to equality, and others again 
 refer to some standard of needs or wants. ISTow, it 
 may be admitted at once that the system of liberty 
 does not tend to equality, nor can it be said to lead 
 to a maximum of satisfaction and placid content. On 
 the contrary, it is pervaded by a spirit of restlessness 
 and emulation and striving, and its firstfruits are the 
 extremes of riches and poverty. The greater the 
 liberty, the greater the discontent, and the greater the 
 inequality. In this land of freedom, who is satisfied 
 with his position ? who desires to rise no higher ? who 
 to possess no more wealth ? Probably not one in a 
 hundred, and he is despised for his weakness rather 
 than admired for his philosophy. But we must re- 
 member that it is this restless energy that, above 
 everything else, has placed the Anglo-Saxon far in 
 front of all competitors. 
 
 Nor is the spirit of liberty so opposed as might at 
 first sight appear to the spirit of justice. The ideal of 
 freedom is that a man chooses his own work and 
 place according to his talents, and obtains in return as 
 much as his services are worth. Exceptional ability 
 of any kind obtains an exceptional reward, whilst 
 ordinary labour fetches an ordinary price. The ideal 
 is reward according to desert, and this ideal seems at
 
 A PLEA FOR INDUSTRIAL LIBERTY 149 
 
 least as near as equality to natural justice. No douLt 
 it may be said, with truth, that the ideal is not 
 actually attained, and that as a matter of fact, under 
 our system of liberty, some are made rich by oppor- 
 tunity, and others — most deserving — are made poor 
 by neglect or ill -fortune. But we must take the 
 general broad results. No reality can attain to the 
 ideal ; and if liberty falls short of justice it often 
 happens that the true remedy is not more authority, 
 but fuller liberty. Take the case of those who strive 
 to gain a living from land that is too poor in quality 
 and insufficient in quantity — the ugly case of agrarian 
 pauperism, or congested areas. Of what avail is it to 
 reduce rents, and grant fixity of tenure and compensa- 
 tion for improvements, when the utmost return to the 
 patch of land is insufficient for the decent support of 
 the tenant ? The only real remedy in such a case is 
 to break down the prejudices that bind him like a serf 
 to the soil, and to make him feel that he is a free 
 man with the world before him where to choose. 
 
 As with the production of wealth, so with its 
 distribution. No one could seriously maintain that, 
 with the complexity of modern industry any Govern- 
 ment could allot to all its people their tasks, and 
 apportion to them their wages. There is no clanger 
 that the principle of liberty will be torn up root and 
 branch, and replaced by that of authority. The 
 danger is that people begin to imagine that what 
 cannot be done as a whole may be done piecemeal, 
 and that Governments should be called on to interfere 
 here and there with the conditions of particular 
 industries, or with various fragments of the industrial
 
 I50 A PLEA FOR INDUSTRIAL LIBERTY 
 
 system. Thus at present, to revert to an example 
 already quoted, there is an outcry for fixing the hours 
 of labour either generally or in special trades, or at 
 any rate with local option. Now, it may be admitted 
 as possible in theory, and even as possible in practice, 
 that if Governments do interfere in this imperfect 
 tentative way, the immediate direct advantages may 
 outweigh the indirect and remote disadvantages. In 
 cases where there is no real freedom possible — e.g. 
 the employment of little children — there can be no 
 question as to the benefits of authority. In such a 
 case freedom of contract so-called, is freedom of 
 coercion. 
 
 But the whole of my argument presupposes that 
 we are concerned with persons of full age and responsi- 
 bility, persons capable of giving a vote and forming 
 some kind of opinion. Well, then, I say it may be 
 admitted, even as regards these able-bodied and able- 
 minded adults, that government by regulation and 
 authority might secure them certain advantages, either 
 in work or reward, which of themselves by open 
 bargaining or free contract they could not obtain, or 
 at any rate not so speedily or obviously. In such 
 cases, then, it may well be asked, ought respect for 
 an abstract principle, regard for liberty, independence, 
 self-reliance, to be followed as an end for its own sake ; 
 ought a sentiment or conviction of this kind to induce 
 people to reject the aid of Government as they would 
 reject some form of degrading charity ? 
 
 The answer to this question leads up to the strongest 
 argument that can be advanced in favour of the system 
 of industrial liberty. Hitherto we have looked on
 
 A PLEA FOR INDUSTRIAL LIBERTY 151 
 
 liberty as a means simply to the attainment of certain 
 economic ends, as if, other things being eqnal, it were 
 a matter of indifference whether the thing desired 
 were obtained as a gift from the State, or as the result 
 of individual effort. But other things are not equal, 
 and it is by no means a matter of indifference. 
 Industrial liberty is only part of that larger liberty 
 which through centuries has been the motive power of 
 human progress, and in this island to a greater extent 
 than on any other portion of the earth. Industrial 
 liberty has advanced side by side with the destruction 
 of political inequality, of religious intolerance, and of 
 all kinds of antiquated laws and customs founded upon 
 privilege and prejudice. No general statement can 
 bring home to the mind the continuous struggle of 
 liberty against authority, and the incalculable benefits 
 which have been the result. It must suffice to say 
 that there is no great deed in our history in which the 
 love of liberty did not bear a prominent part. And 
 if you wish for a proof, what better proof — next to 
 the page of history itself — can be found than this, 
 that there is not one of our great poets, from Chaucer 
 to Tennyson, who has not sung the praises of liberty, 
 and set in rhythm the achievements of liberty. But it 
 is of no avail to assent to the praise of liberty, and at 
 the same time to assert that this assent is purely an 
 abstract pious opinion, and that every case must be 
 weighed on its merits according simply to the benefits 
 expected. If liberty is still to be a power for good, it 
 must be cherished for its own sake, and every free 
 man must take care that he does nothing that may 
 even seem like a sacrifice of independence. A man
 
 152 A PLEA FOR INDUSTRIAL LIBERTY 
 
 wlio is always calling on the Government for this and 
 that, is in spirit no better than a pauper who clamours 
 for more out-door relief, and it was not by people of 
 this poor spirit that the greatness of this empire was 
 built up. It was by men who had a passionate love 
 of liberty for its own sake. The thought has been 
 admirably expressed by Tennyson, and I cannot con- 
 clude better than by quoting his familiar stanzas : — 
 
 You ask me, why, tlio' ill at ease, 
 
 Witliin this region I subsist. 
 
 Whose spirits falter in the mist, 
 And languish for the purple seas. 
 
 It is the land that freemen till, 
 That sober-suited Freedom chose, 
 The land, where girt with friends or foes 
 
 A man may speak the thing he will. 
 
 Should banded unions persecute 
 
 Opinion, and induce a time 
 
 When single thought is civil crime, 
 And individual freedom mute ; 
 
 Tho' Power should make from land to land 
 The name of Britain trebly great — 
 Tho' every channel of the State 
 
 Should fill and choke with golden sand — 
 
 Yet waft me from the harbour-mouth, 
 
 Wild wind ! I seek a warmer sky. 
 
 And I will see before I die 
 The palms and temples of the South.
 
 VIII 
 
 POLITICAL ECONOMY AND JOUPtXALISM^ 
 
 It is a matter of common remark that the serious 
 questions which at the present time attract most atten- 
 tion in the press are of an economic character. There 
 are, for example, the endless disputes between labour 
 and capital and the varied proposals for conciliation 
 and other remedies ; there are the schemes for employ- 
 ing the unemployed and extending relief to the poor ; 
 taxation both local and imperial is steadily advancing ; 
 commission follows commission to inquire into the de- 
 pression of trade in general or of agriculture in parti- 
 cular, or to investigate the causes and consequences of 
 the recent monetary disturbances ; even the old con- 
 troversies between free trade and protection, large and 
 small farms, and similar opposites, renew their quarrel- 
 some youth, and, not to weary you with familiar details, 
 every branch of journalism — daily and weekly, secular 
 and religious — is constantly occupied with economic 
 problems. 
 
 This growth of public interest in practical economic 
 
 ^ Address at the Annual Meeting of the Britisli Economic Associa- 
 tion, London, June 1894.
 
 154 POLITICAL ECONOMY AND JOURNALISM 
 
 questions, of which the journalistic attention is the 
 most certain sign, has not been accompanied by a 
 corresponding extension of the systematic study of 
 political economy as a science. People who take up 
 with eagerness some particular question pay no regard 
 to the principles and theories of the subject as a whole ; 
 just as other people like gardening and flower-shows, 
 but not botany. This indifference to political economy 
 in its broader aspects is of comparatively recent growth. 
 Thirty years ago it was commonly studied by thought- 
 ful men, and especially by those who were called upon, 
 by speech or writing, to instruct or advise the public. 
 Political economy was regarded as the one branch of 
 social science that rested on sure foundations, and the 
 laws of political economy were referred to with a respect 
 that sometimes bordered on superstition. It is then 
 surely remarkable that this interest in the theory 
 should have declined precisely during the period when 
 economic problems have come more and more to the 
 front. 
 
 I do not for a moment mean to imply that the 
 general theory of political economy has ceased to be 
 studied. During this very period every branch of the 
 theory has been investigated with a critical precision 
 that was never before attempted. The journal of this 
 association and the corresponding reviews in other 
 countries bear constant testimony to the labours of 
 scientific economists. But my point is that the subject 
 as a whole is not studied to the same extent as formerly 
 by those who take an active part in public affairs, and 
 especially by journalists, and yet it may be questioned 
 if it was ever more important for journalists to make
 
 POLITICAL ECONOMY AND JOURNALISM 155 
 
 a systematic study of political economy. For one 
 person who reads a solid book there are thousands who 
 read regularly articles in newspapers. It is these 
 articles that to a large extent — probably to a larger 
 extent than the Church, public meetings, and all other 
 similar influences — mould popular opinion, which again 
 in its turn moulds legislation and governmental action. 
 A proportionately grave responsibility rests upon 
 the writers, a responsibility that cannot be transferred 
 to the readers. A writer in the press who spreads 
 false ideas — although merely from careless ignorance 
 — injures the health of the nation as much as a man 
 who by careless ignorance spreads a fever. 
 
 I have used the term " false " ideas with much hesi- 
 tation, for I know you will at once translate it into 
 Greek, and I shall be accused of inviting the journalist 
 to suppress economic heterodoxy and to inculcate the 
 orthodox faith. I should as soon think of inviting the 
 clergy of all denominations to accept the same creed 
 as regards the world to come as of inviting the jour- 
 nalists of all classes to write the same things on the 
 interests of this world. I say at once that I have not 
 the slightest intention of using an occasion of this kind 
 for the purpose of advocating opinions of which I 
 approve or of decrying the opinions of others. I am 
 neither so presumptuous nor so foolish as to insinuate 
 even indirectly to journalists how they should manage 
 their business — of all forms of freedom the freedom of 
 the press is in these days the most fundamental, and 
 by freedom I do not mean only freedom from the law 
 but freedom under the law — freedom from all forms of 
 custom and authority that are weighty only because
 
 156 POLITICAL ECONOMY AND JOURNALISM 
 
 they are petrified. But there is a sense in which, with 
 all possible scope for freedom, w^e may all agree that 
 there are false ideas which are against the public in- 
 terest. Such are all the ideas which come from not 
 weighing the evidence as regards the facts, from not care- 
 fully analysing the facts, and from rushing to conclu- 
 sions that the facts will not support. Such are all the 
 ideas which arise from the associations entwined round 
 words and names, from neglecting to observe, in the 
 words of Locke, what ideas the words really stand for. 
 And such too are the ideas wdiich, even when the facts 
 and words are clear, spring from incorrect reasoning. 
 
 Now I make bold to say that there is only one 
 way of getting rid of false ideas of this kind, and that 
 is by systematic study and careful preliminary training. 
 
 My object then is to impress upon journalists the 
 advantage, and I would almost say the duty, of becom- 
 ing thoroughly familiar with economic methods and 
 principles apart from the particular problems with which 
 they are called upon to deal. I do not ask them to 
 get up a creed or to look up the best interpretation of 
 disputed texts, or to quote authorities with an appear- 
 ance of relevancy. It would be strange indeed if, 
 whilst pleading to the utmost of my power for industrial 
 liberty, I should seek to fetter it wdiere it is most 
 needed — namely, in journalistic enterprise. All I ask 
 is that journalists should recognise the difficulty and 
 complexity of social problems, that they should admit 
 they cannot be settled offhand, and that, on the con- 
 trary, they call for the strongest efforts of the most 
 highly trained minds even for adequate discussion. 
 
 It is then, I think, matter for grave regret that the
 
 POLITICAL ECONOMY AND JOURNALISM 157 
 
 study of political economy in its general aspects has 
 not kept pace with the attention given to particular 
 problems. The consequence is that the latter do not 
 receive the searching criticism which they need — 
 whether eventually accepted or not. People are con- 
 tent with the immediate apparent effect, and leave out 
 of consideration effects which, though not so obvious, 
 may soon prove to be more important. 
 
 The present attitude of journalism to scientific 
 economics is at any rate, compared with that of the 
 previous generation, one of indifference, and in the first 
 place it seems desirable to offer some explanation of 
 the change. The causes are varied and complex. 
 
 The most important is probably the persistent mis- 
 representation by popular writers of the teachings of 
 eminent economists. Carlyle in a severe attack of 
 dyspepsia, physical and mental, applied the term dis- 
 mal to the men and the thing, forgetting or ignorant of 
 the high eulogium passed on Adam Smith by Robert 
 Burns, Mr. Ruskin tortured his imagination and 
 the English language to express his loathing for what 
 nobody ever was or ever wrote — the economist to his 
 view was a one-eyed flat fish with the side on which 
 there was an eye always in the mud. 
 
 It is hardly necessary to recall, and certainly not 
 necessary to refute, the more particular calumnies with 
 which economists were assailed. Malthus was sujDposed 
 to recommend prudential immorality and infanticide, 
 and Eicardo was credited with the iron law of wages 
 which made this supposed counsel of Malthus sweet 
 and reasonable. Even Mill, in spite of his defence of 
 socialism^ was considered to be the champion of capital
 
 158 POLITICAL ECONOMY AND JOURNALISM 
 
 against labour ; whilst the father of them all — Adam 
 Smith — the eulogist of the Navigation Laws and the 
 advocate of Imperial Federation, was imagined to be 
 the author of " peace at any price." I cannot refrain 
 from quoting one passage which at any rate disposes 
 of this delusion. "A coward, a man incapable either 
 of defending or of revenging himself" — observe it is 
 more than defence — " evidently wants one of the most 
 essential parts of the character of a man. He is as 
 much mutilated and deformed in his mind as another 
 is in his body, who is either deprived of some of its 
 most essential members or has lost the use of them. 
 . . . Even though the martial spirit of the people were 
 of no use towards the defence of the society, yet to 
 prevent that sort of mental mutilation, deformity, and 
 wretchedness, which cowardice necessarily involves 
 in it from spreading themselves through the great 
 body of the people, would still deserve the most serious 
 attention of government ; in the same manner as it 
 would deserve its most serious attention to prevent a 
 leprosy or any other loathsome and offensive disease, 
 though neither mortal nor dangerous, from spreading 
 itself among them." 
 
 But although the abuse of the economists was as 
 ill-founded as this specimen shows, it answered its 
 purpose. Seeing that the essence of successful journal- 
 ism is to be popular, it was only natural that a subject 
 which was made to appear essentially unpopular should 
 be either avoided or attacked. Political economist 
 became a term of reproach. I well remember, soon 
 after I came to Edinburgh, hearing one of my most 
 genial colleagues protest with some warmth that he
 
 POLITICAL ECONOMY AND JOURNALISM 159 
 
 Avas not a political economist. The most remarkable 
 feature, however, in this abuse of political economy is 
 that even if it were well founded it would only apply 
 to a small part of the subject. There is surely nothing 
 dismal in tracing, as Adam Smith does, the different 
 progress of opulence in different nations, and the 
 causes of the transference of commercial supremacy. 
 And the progress of opulence is fundamental in all 
 progress. In the words of the greatest living Avriter 
 on the philosophy of history- — I'rofessor Flint : " The 
 whole political and moral, intellectual and spiritual 
 development of society largely depends on the economic 
 phenomena and changes which it is the business of 
 political economy to explain. The general historical 
 movement of humanity cannot be understood by men 
 who are insufficiently acquainted with the various 
 phases of economic history and with the laws of 
 economic facts. The growth of science and philo- 
 sophy, the culture of art and literature, the develop- 
 ment of morality and religion, have all, indeed, richly 
 contributed to make history what it is ; but even 
 collectively they have only in part determined its 
 course, and have all been to a far greater extent than 
 is commonly supposed dependent on conditions of an 
 economic character. The sciences of history and of 
 political economy are therefore so closely related that 
 one of them cannot exist in any well-developed form 
 when the other does not." 
 
 It is true that history is to a large extent tragedy, 
 and economic history is no exception ; but we never 
 approach — to take but one example — the sickening 
 horror of religious persecution. And on the other
 
 i6o POLITICAL ECONOMY AND JOURNALISM 
 
 hand it is on the economic side that the reality of 
 human progress is most marked. The nineteenth 
 century cannot rival the sixteenth in painting, or 
 sculpture, or poetry, and probably the highest develop- 
 ment of all the fine arts was attained by the Greeks 
 two thousand years before. But in everything that is 
 embraced under industrial progress we are immeasur- 
 ably in advance of our predecessors. It will be said 
 that pauperism still abounds in the richest nations ; it 
 is forgotten that we have abolished slavery and serfdom, 
 put the curb on pestilence, and turned famine into a 
 glut of food. A large part of our pauperism is itself a 
 sign of progress ; under ruder conditions the weakly 
 members are enslaved or perish. Pauperism is part of 
 the penalty we pay for liberty. Only abolish liberty, 
 and in fifty modes you may abolish pauperism. 
 
 But the term industrial covers much more than 
 merely material progress. There is nothing more false 
 than the opposition drawn between political economy 
 and common-sense morality. The very soul of our 
 present industrial system is good faith, and the road to 
 success still lies through the old-fashioned virtues which 
 we are ashamed to mention. 
 
 Next to the gross misrepresentation of the teachings 
 of the economists by popular writers, as a contributory 
 cause of the neglect of economic study, we may place 
 the dissensions of economists themselves. Mill was 
 succeeded by men of considerable critical ability, but 
 they lacked the principal quality necessary for con- 
 structive work — the faculty, namely, of absorption. 
 The first requisite of originality is to thoroughly 
 master the work already done, and to treat tliat work
 
 POLITICAL ECONOMY AND JOURNALISM i6i 
 
 as a basis for further advance ; otherwise originality is 
 only another name for ignorance. It was unfortunate 
 for political economy that Cliffe Leslie and Jevons in 
 different ways led people to suppose that the work 
 of their predecessors was useless or unsound. Cliffe 
 Leslie vastly overrated the value of the German 
 historical method, and on the other hand equally 
 exaggerated the supposed abstract and hypothetical 
 character of English political economy. He was a 
 voluminous correspondent, and his opinions were ex- 
 pressed even more strongly in his letters than in his 
 published writings. Every one knows the mixed meta- 
 phor which Jevons divided between Mill and Eicardo, 
 and his intention of adapting Adam Smith for a text- 
 book so that their pernicious influence might be 
 neutralised. Even Cairnes, who was nothing if not 
 orthodox, delighted to emphasise his disagreements 
 with Mill, though in most cases they arose from 
 misunderstanding. 
 
 The controversy on methods w\as transferred to 
 principles. The theory of wages, which was funda- 
 mental in Mill's work, was abandoned by that writer, 
 but the change was never incorporated in his Friyicijdes. 
 Thorold Eogers separated the Eicardian theory of rent 
 into a truism and two errors, and described with his 
 usual dogmatic bluntness the abstract political economy 
 in general as a " crude metaphysic." 
 
 At length Professor Sidgwick appeared as a peace- 
 maker, and announced that "the waves of disputation 
 were in danger of submerging the really sound and 
 valuable results of previous thought." He showed 
 that the most abstract writers had also used history 
 
 11
 
 i62 POLITICAL ECONOMY AND JOURNALISM 
 
 and induction, and that the historical school needed 
 guiding principles. 
 
 But it was not so easy to get rid of the popular 
 impression that the old political economy had been 
 abandoned by the new exponents of the science. 
 
 This impression has been strengthened in quite 
 recent years by the general adoption of a mass of new 
 technical terms, and of the intricate refinements of the 
 theory of utility. Our old friend, the man on the 
 margin of cultivation, who gave such an appearance of 
 unreality to Eicardo's theory of rent, so that Mill was 
 constrained to call it the j^ons asinorum of economics — 
 our old friend, like other patriarchs, has begotten an 
 innumerable progeny of marginal increments. It is 
 possible that the new developments and the new 
 language may ultimately lead to greater scientific 
 precision, but, if so, it will only be attained at the 
 cost of popularity. 
 
 Now it seems to me that on this point also the 
 opinion of the older writers is the better. They hold 
 that as far as possible the economist should use words 
 in their popular sense. Amongst other advantages 
 there is one that is of special interest in connection 
 with my present subject. I have spoken hitherto only 
 of the advantage the journalist may gain from scientific 
 economics — and I shall have to return to this side of 
 the question presently — but we must not overlook the 
 indebtedness of political economy to journalism. When 
 I was appointed to the chair in Edinburgh, Cliffe Leslie 
 gave me two excellent pieces of advice. The first — 
 I may say it is absolutely irrelevant to my present 
 subject, but it is worth putting on record — was, if I
 
 POLITICAL ECONOMY AND JOURNALISM 163 
 
 felt ill a difficulty iii a lecture, to stop and ask the 
 students some questions ; and the second was to read 
 the Times every day. 
 
 Now for my own part I confess that I have learned 
 as much political economy from newspapers as from 
 books. There is nothing more interesting than to 
 observe living examples of principles and tendencies. 
 And we cannot pick up a newspaper without finding 
 an economic problem, or at least a fresh illustration. 
 If there is one thing better for the economist after a 
 mastery of principles than reading newspapers, it is 
 writing for them. But this intimate connection and 
 reciprocal advantage will be lost if the economist 
 conceals his thoughts in technical language. What 
 journalist ever ventured in a leader to use the phrase 
 "final utility," the very centre piece of the new 
 terminology ? 
 
 We seem then reduced to a pretty pass. For the 
 purposes of journalism the old economists are con- 
 sidered too old. As one of my reviewers put it, Adam 
 Smith is still more archaic than Mill. As a matter of 
 fact, we have not yet caught up Adam Smith's pro- 
 gramme, but people think we have, and that is enough. 
 The new economists, on the other hand, are too new. 
 The technical language which was intended of itself to 
 show the limits of the application to practical problems 
 has, in effect, concealed those limits, and as a conse- 
 quence most journalists who have studied the new 
 theories at all have simply looked up the answers 
 without doing the work of the sums, and have quoted 
 their authorities in a way which the latter would be 
 the first to repudiate.
 
 i64 POLITICAL ECONOMY AND JOURNALISM 
 
 I come now to the moral of this long argument. 
 The main use of political economy to the journalist is 
 not to provide him with the opinions of authorities 
 upon practical questions, for the very good reason that 
 in most cases these opinions are not directly applicable, 
 owing to changes of circumstances. Adam Smith, for 
 example, asserted that farmers could have nothing to 
 fear from the freest importation of corn, and more 
 generally that the freest importation of the rude pro- 
 duce of the soil could have practically no effect upon 
 the agriculture of the country. But this opinion — as 
 the context shows — was only valid, having regard to 
 the means of communication and of transport, and 
 to various other conditions. It would obviously be 
 utterly wrong to use the authority of Adam Smith for 
 the statement that British agriculture could not suffer 
 from foreign competition. It would be easy to multi- 
 ply cases in which the opinions of economists have 
 been quoted without any reference to qualification, 
 context, or circumstance. And the effect of this mis- 
 directed appeal to authority has been simply to weaken 
 that authority. 
 
 The great difficulty of economic problems is their 
 complexity, and the greatest merit of recent writers is 
 their recognition of this complexity. Political economy 
 lost its influence for the time being mainly because it 
 had become stereotyped into a brief creed of simple 
 dogmas. This was not the fault of the original writers. 
 Nobody ever complained of the simplicity of Eicardo, 
 or of the dogmatic brevity of Adam Smith. It was 
 the necessity of putting free trade into popular war- 
 cries and easy parables in order to stimulate political
 
 POLITICAL ECONOMY AND JOURNALISM 165 
 
 action that was the principal cause. Fortunately we 
 have again begun to recognise — for it is a revival and 
 not a discovery — the complexity of economic questions, 
 and the inter-action of economic forces. The recog- 
 nition of this complexity carries with it the necessity 
 of systematic training. To the untrained eye — to take 
 an illustration — the problem of the accumulation of 
 capital appears quite simple and natural, as simple and 
 natural as the movement of the sun round the earth. 
 But the sun does not move round the earth, nor is 
 capital one of the natural fruits of it. 
 
 This example might find a parallel in every branch 
 of economic inquiry. Pauperism is complex, so is 
 taxation, and the connection between the two is still 
 more complex. 
 
 And the worst of it is, the examples are not 
 imaginary, but are constantly recurring. The budget 
 comes round every year, and the statesman must 
 propose, and the press dispose ; tlie poor are always 
 with us, and the journalist must be prepared to discuss 
 the latest statistics and the newest remedies of 
 pauperism. Let me again point the moral, and this 
 time, if the phrase be permitted, I will take a low 
 moral, of tlie " honesty is the best policy " order. 
 
 The journalist who has been trained in economic 
 studies will have a readiness and variety of resource 
 that his untrained rival will envy. Instead of being 
 able to abuse the Government, he can abuse the budget 
 itself, clause by clause. And it will not be that 
 common sort of abuse that is equally available to the 
 man in the street. All taxes are bad, even the oldest, 
 and they all have bad consequences. The most
 
 i66 POLITICAL ECONOMY AND JOURNALISM 
 
 interesting shades of this badness are not obvious to 
 the untrained eye, but when pointed out they afford a 
 pleasant surprise like a picture puzzle. The journalist 
 who has seriously studied finance will find his reward. 
 He can show that a tax offends against four canons 
 and twelve rules, and is condemned by whole chapters 
 of experience. At this time of day there are no new 
 taxes ; it is only the amounts that are new ; but he can 
 give a shock of novelty to those who know no better, 
 and the peculiarities of a bad tax are always interesting 
 to the tax-payer. 
 
 Conversely, if in the interests of party politics it is 
 the duty of the journalist to defend the budget, he can 
 show that taxes are necessary, that expenditure must 
 grow with civilisation, that, in the words of Adam 
 Smith, defence is of more importance than opulence, 
 that equality of taxation means equality of sacrifice, 
 and he can find precedents and examples that would 
 do credit to a criminal lawyer. 
 
 And when all journalists who do budget articles on 
 both sides of politics are well versed in the theory and 
 history of taxation, we shall have the case placed 
 before the public in all its aspects, and shall be spared 
 tlie ignominy of seeing a Chancellor of the Exchequer 
 having to become his own journalist. 
 
 Perhaps, however, one of the greatest advantages 
 that would follow from a wider study of the general 
 subject by journalists would be that questions which 
 are really of an economic character would be taken, to 
 a mucli greater extent, out of the field of party politics. 
 As it is, on many social and economic questions, states- 
 men are supposed either to keep silence or to say
 
 POLITICAL ECONOMY AND JOURNALISM 167 
 
 certain things simply in the interests of their party. 
 The consequence is that in some cases the discussion 
 is inadequate and timid, and nothing is done, whilst in 
 others it takes the form of a competition in generosity, 
 and something is done a great deal too quickly. 
 
 There is a recent example of the restraints sought 
 to be imposed on a party leader Ly the press, which 
 illustrates very forcibly the need for greater breadth 
 in the determination of the neutral zone between 
 economics and politics. I refer, of course, to the 
 attacks made upon Mr. Balfour for the expression of 
 his views on the currency question. Now I make bold 
 to say that there is no question before the public at 
 present which is less of a party question. The 
 practical interest to this counrty, that is to say, having 
 regard to actual, immediate, visible interest, is centred 
 in India. India is face to face with more debt or 
 more taxes, and an increase of either means an increase 
 of discontent, and fortunately the discontent of India 
 has not become, like that of Ireland, a party question. 
 
 It is admitted on all sides that something must be 
 done, but the difficulties are so great that they will 
 tax all the statesmanship of the country. I cannot 
 conceive how, under these circumstances, it should be 
 thought desirable for our leading politicians to imitate 
 the ostrich and silently swallow their newspapers and 
 hide their heads in the sand. What the press ought 
 to complain of is not that Mr. Balfour has spoken, but 
 that other leaders have not spoken. We have had too 
 much of the golden silence and too little of the silver 
 speech. 
 
 There is a branch of the journalistic art which
 
 i68 POLITICAL ECONOMY AND JOURNALISM 
 
 would gain greatly from the study of political economy 
 — the art, namely, of reviewing. So many books are 
 published which deal directly or indirectly with 
 economic questions that a reviewer might find it worth 
 while to get up the subject simply for this purpose. 
 He would then be able to lay on the praise in less 
 uniform thickness, or in the converse case to expose 
 errors and plagiarisms in a way that would interest the 
 general reader. Simple flattery or abuse in general 
 terms is apt to become wearisome. It might even be 
 contended with some appearance of plausibility that it 
 is the duty of a reviewer to know something of the 
 subject witli which he has to deal. As it is, reviews 
 occasionally appear in respectable organs that can only 
 be described as a disgrace to journalism. I read 
 recently in a review that the French assignats were 
 not depreciated through excessive issues, but simply 
 through the discredit of the French Government. Now, 
 according to the best authorities, this Government had 
 issued by the end of 1796 notes to the nominal value 
 of £1,800 millions sterling, of which upwards of 
 £1,400 millions were in circulation. Could any one 
 with the slightest acquaintance with finance, theoretical, 
 historical, or practical, suppose that, in a country like 
 France at the time, such a mass of paper could be 
 circulated without depreciation ? The same writer in 
 the same article shows that he does not know even 
 the meaning of the law of supply and demand. He 
 appears to think that, because the Eicardian political 
 economy has gone out of fashion, the law^s of arithmetic 
 no longer hold good. Now I ask, in the interests of 
 the morality of journalism, is it fair for a man to
 
 POLITICAL ECONOMY AND JOURNALISM 169 
 
 condemn without reserve, under the cover of anonymity, 
 a work on a quasi-technical subject of which he knows 
 absohitely nothing ? 
 
 It is, however, perhaps too much to expect a young 
 man of advanced views to read any books except the 
 most recent. I wish then to point out that economic 
 training may be acquired by reading the newest and 
 most popular books, if only the reader bears in mind 
 the old adage about the new and the true and the 
 rarity of the combination. One of the most useful 
 modes of training is the detection of fallacies and con- 
 tradictions, and the discovery of old truths disguised 
 in new words. But to suppose that at least once a 
 year a subject is to be revolutionised is to altogether 
 over-estimate the originality and frequency of human 
 genius. Swift once announced that two young gentle- 
 men had discovered that there was no God, and to-day 
 we are all agape because Mr. Kidd has discovered that 
 there is a God, and that religion is the basis of civil- 
 isation. Mr. Kidd has expressed some old truths in 
 a very fresh and remarkable way. But after all I 
 question if his central idea was not put more vigorously 
 by Burke. " We know," wrote Burke, " and, what is 
 better, we feel inwardly that religion is the basis of 
 civil society. We know, and it is our pride to know, 
 that man is by his constitution a religious animal. 
 All persons possessing any portion of power ought to 
 be strongly and awfully impressed with an idea that 
 they act in trust, and that they are to account in 
 that trust to the one great Master, Author, and 
 Founder of Society." And again he says : " One of 
 the first and most leading principles on which the
 
 I70 POLITICAL ECONOMY AND JOURNALISM 
 
 commonwealtli and the laws are consecrated is that 
 the temporary possessors and life-renters in it, un- 
 mindful of what they received from their ancestors, 
 and what is due to posterity, should not act as if they 
 were the entire masters ; that they should not think 
 it among their right to cut off the entail or commit 
 waste on the inheritance by destroying at their 
 pleasure the whole original fabric of their society ; 
 hazarding to those who come after them a ruin 
 instead of a habitation, and teaching their suc- 
 cessors as little to respect their contrivances as they 
 had themselves respected the institutions of their fore- 
 fathers. By this unprincipled facility of changing the 
 state so often and so much and in so many ways as 
 there are floating fancies in fashion, the whole chain 
 and continuity of the commonwealth would be broken. 
 No one generation could link with another. Men 
 would become little better than the flies of summer." 
 
 There you have in Burke with the French Revolu- 
 tion blazing before him precisely the same idea which 
 the expectation of a coming social revolution has 
 forced upon Mr. Kidd. There are differences of course. 
 Burke does not oppose religion to reason ; he is con- 
 tent to base it both on reason and instinct. It is 
 worth observing also that he quotes in his favour 
 Cicero, and Cicero in turn quotes Plato, and Plato 
 possibly found the idea in " a wood near Athens," or 
 more probably got it from a poet or an Egyptian. 
 
 In conclusion, let me appeal to journalists to make 
 a serious study of political economy, not merely for 
 the power it will give them in treating practical 
 questions — not merely because it will improve their
 
 POLITICAL ECONOMY AND JOURNALISM 171 
 
 professional capacity, but on the higher grounds of 
 public duty. Every day we see events and hear 
 proposals that threaten security and liberty, and with 
 them the national well-being. The great restraining 
 force is in the press ; the press, it is hardly too much 
 to say, has taken the place of the king's peace. And 
 similarly in reform, in improvement, in progress, it is 
 to the press we look to give light and nourishment to 
 the ideas that otherwise must perish at their birth. 
 
 But freedom without knowledge is anarchy, and no 
 man can discover for himself the result of the labours of 
 generations of his fellows. The man of science who 
 writes on microscopical germs finds it necessary to study 
 his predecessors, and is it to be expected that the 
 highest and latest works of evolution, the civil societies 
 of mankind, are to be understood by simply looking 
 in a mirror, and neglecting the observations of previous 
 writers ? We can understand neither the past nor the 
 future if we trust to our own unaided reason. The 
 works of the dead are granaries stored with the harvests 
 of the past and the seeds of the future.
 
 IX 
 
 THE EEACTION IN FAVOUR OF THE 
 CLASSICAL POLITICAL ECONOMY 
 
 It may naturally be expected in the address which, as 
 President of this Section, I have the honour to deliver, 
 that some attempt should be made at originality, or at 
 any rate at novelty. Accordingly, I hope that I shall 
 fall in with the traditions of my office by defending 
 a series of paradoxes and by running counter to a 
 variety of popular opinions. I will only premise that 
 however paradoxical I may appear, and however much 
 T may seem to strain at singularity, I shall speak 
 always to the best of my ability with the utmost good 
 faith, and I shall endeavour to give only the results of 
 my most deliberate convictions.^ 
 
 The central paradox which I propose to defend — 
 the root of the whole series — is that the so-called 
 orthodox or classical political economy, so far from 
 being dead, is in full vigour, and that there is every 
 sign of a marked reaction in favour of its principles 
 and methods. The singularity of my position may be 
 
 ^ Address to the Economic Science and Statistical Section of the 
 British Association, Nottingham, 1893.
 
 THE CLASSICAL POLITICAL ECONOMY 173 
 
 indicated by a word and a phrase. The word is 
 Saturn ; the phrase, " we are all Socialists now." I 
 shall try to show that the traditional English political 
 economy has neither been banished to Saturn nor 
 stifled by socialism, and that in fact it is stronger than 
 ever. This renewed vigour is no doubt largely due to 
 the attacks made .upon it on all sides in increasing 
 force for the last twenty years. The dogmatic slumber 
 induced by popular approval has been rudely shattered, 
 and although some of the more timid followers of the 
 orthodox camp thought they had been killed when 
 they were only frightened and awakened, the central 
 positions are more secure than before. 
 
 Consider, in the first place, the question of scientific 
 method and the closely allied question of the relation 
 of political economy to kindred sciences. The method 
 practically adopted by Adam Smith and Eicardo, and 
 reduced to scientific form by Mill and Cairnes, and 
 quite recently and still more effectively by Dr. Keynes, 
 must still be regarded as fundamental. It has sur- 
 vived and been strengthened by two distinct attacks. 
 In the first place, the extreme advocates of the histori- 
 cal method attempted to reduce political economy to a 
 branch of history and statistics. They were concerned 
 to pile up facts and add up figures, and they seemed 
 to think that no guiding principles were necessary. 
 But compilations of this kind are, properly speaking, 
 not even history, still less are they political economy. 
 History does not consist simply in collecting facts ; the 
 facts must be grouped, arranged, and connected in an 
 orderly manner. A room full of old newspapers is 
 not history, though it may contain much material for
 
 174 THE REACTION IN FAVOUR OF 
 
 history. There was really nothing new in this extreme 
 form of the historical method. It was a reversion to 
 a primitive type. The plan had been adopted by 
 chroniclers time out of mind; they embedded facts, 
 signs, wonders, and traditions, as the mud of a river 
 embeds what happens to fall in it. The facts are the 
 fossils of the historian, and he has to make a very few 
 go a long way. In economic literature we have an 
 example of this method in the Annals of Commerce of 
 Anderson and Macphersou. The simple device is to 
 collect all the facts and opinions about commerce all 
 the world over, and arrange them under the year in 
 which they happened. The basis of classification is 
 time pure and simple, and at the best we have an im- 
 perfect collection of materials which must be sifted 
 and weighed to be of any service. ■"• 
 
 Now compare this method of simple accumulation 
 — this attempt to write a biography of Father Time as 
 a man of business — with the historical method adopted 
 
 ^ On the subject of "Method" generally, see Cossa's Introduction 
 to the Study of Political Economy (new edition, translated by L. Dyer, 
 Macmillan, 1893). For illustration of the extreme historical method, 
 see specially pp. 410 et seq. " One serious reproach cannot but be 
 made against SchmoUer, and that is based upon his denial of any 
 possible use for the deductive method in economics as a science. He 
 bids us patiently wait until we have completed the accumulation of 
 historico-statistical materials dealing with the economic conditions of 
 all times and places ; but not all of us can wait so long" (0^^ cit. p. 
 414). This criticism is perhaps too severe, and Roscher, Kuies, and 
 Brentano have laid much more emphasis in theory than in practice 
 on the historical method, but the central fact remains that the tradi- 
 tional English method was attacked in the way described. In this 
 country the late Professors Cliffe Leslie and Thorold Rogers may be 
 cited. The Economic Interpretation of History by the latter is full of 
 bitter attacks on the so-called "speculative" political economy.
 
 THE CLASSICAL POLITICAL ECONOMY 175 
 
 by Adam Smith ; at least two-thirds of the JFealth of 
 Nations is history, and it is history of the first rank, 
 and it is so because it is history that is introduced for 
 the illustration, confirmation, or qualification, as the 
 case may be, of principles. It does not follow because 
 the principles are fundamental that the facts are 
 warped and distorted ; it simply means that the facts 
 are made intelligible. Take, for example, his account 
 of the economic aspects of the feudal system. He 
 brushes away the technicalities and looks into the 
 inner life as easily as William the Conqueror at the 
 Council of Salisbury. Or, to take a modern instance, 
 he is like a naturalist who puts aside the parts of the 
 creature he does not want in order that he may see 
 what he does want more clearly. This is a very 
 different matter from suppressing truth and warping 
 facts to suit preconceived opinions. It is needless to 
 say that Adam Smith made some mistakes, e.g. in the 
 treatment of the mercantilists ; it ought to be equally 
 needless to say that he made some remarkable dis- 
 coveries of the processes of economic development. 
 
 Adam Smith also made large use of the comparative 
 method ; he literally ranged from China to Peru in 
 his survey of mankind. What is the underlying 
 assumption in this procedure ? It is simply that in 
 economic affairs, in matters of buying and selling in 
 the widest sense of the terms, in satisfying wants by 
 labour, in the accumulation of wealth, there are cer- 
 tain characteristics of human nature that may be re- 
 garded as fundamental. These are no doubt subject 
 to modifications by other influences, but modification 
 is not total suppression or eradication. How long
 
 176 THE REACTION IN FAVOUR OF 
 
 would it take the Ethiopian to change his skin under 
 a different climate ? And is it not proverbial that 
 human nature is more than skin deep ? I think the 
 Ethiopian might become very pale in complexion long 
 before he would learn to prefer low wages to high 
 wages, and much labour to little labour. 
 
 Economists may learn something from the poets. 
 Why do the creations of the greatest poets live and 
 move ? Why do we assent at once to their reality ? 
 Simply because they are like ourselves, and we feel with 
 Goethe that we ourselves could commit the same crimes 
 in debasement, and achieve the same glory in exalta- 
 tion, of spirit. The gods and goddesses, the sylphs and 
 fairies, are only shadows. Can any man read Shake- 
 speare or Homer — to say nothing of undoubted histori- 
 cal records — and deny that a large part of human 
 nature, especially that part with which economists 
 have to deal, is subject to but little variation ? Know- 
 ledge grows and is handed on from age to age, and 
 the power of man over nature steadily increases, but 
 the feelings are renewed with every generation. The 
 children of the nineteenth century may be precocious 
 and priggish, but they are not nineteen centuries old. 
 Let me remind you, though I am anticipating my 
 argument, that the latest and most advanced scientific 
 economics — that which the Austrian economists have 
 evolved out of the conception of utility — in reality 
 lays more stress than Adam Smith did on the univer- 
 sality of the feelings of mankind. The only difference 
 is that he knew that he was speaking plain prose, and 
 they sometimes think they are only speaking subjec- 
 tive philosophy. In consequence, Adam Smith's men
 
 THE CLASSICAL POLITICAL ECONOMY 177 
 
 and women are more real and less uniform than the 
 offspring of the new analysis. But the point of im- 
 portance is the recognition of certain characteristics 
 of human nature as fundamental; there is no other 
 justification for the use of the comparative and histori- 
 cal methods in the broad manner of Adam Smith. 
 
 There are, however, still evidences in recent writers 
 of the influence of that narrow view of history which 
 tries to avoid principles, in order to make an impress- 
 ionist record of facts. Impressionism may be good 
 art, but it is bad science. Too much stress, for ex- 
 ample, is laid on the mere enumeration of statutes 
 and preambles, and too little attention is given to the 
 far more difficult question. How far was the law 
 operative, and how far was the preamble a just de- 
 scription ? But signs are not wanting that the broader 
 method of Adam Smith is gaining ground. The work 
 of Mr. Seebohm on the English Village Community is 
 a splendid example, worthy to be placed on a level 
 with the best chapters of the Wealth of Nations ; and 
 Dr. Cunningham throughout his excellent history has 
 informed facts with principles. 
 
 But it is time to observe that the traditional 
 method of English political economy was more recently 
 attacked, or rather warped, in another direction. The 
 hypothetical or deductive side was pushed to an 
 extreme by the adoption of mathematical devices. I 
 have nothing to say against the use of mathematics, 
 provided always that the essential character of mathe- 
 matics is borne in mind. Mathematics is a formal 
 science that must get its materials from other sciences. 
 It is essentially as formal as formal logic. Tlie mathe- 
 
 12
 
 178 THE REACTION IN FAVOUR OF 
 
 matician is an architect who must be provided with 
 stones and wood and labour by the contractor. It is 
 one thing to draw a plan, another to erect a building. 
 In economics there are certain relations which are 
 most easily expressed in mathematical form. One of 
 my greatest obligations to Professor Marshall is that 
 when I began the study of political economy at Cam- 
 bridge some twenty years ago, he advised me to read 
 Cournot. And before going further I should like to 
 say that I think one of the greatest signs of power 
 in Professor Marshall's Principles is that he has 
 transferred his mathematical researches and illustra- 
 tions to appendices and footnotes, and in his preface 
 also he has admirably stated the limits and functions 
 of mathematics in economic reasoning. I also gladly 
 avail myself of this opportunity of expressing my con- 
 currence with the views of Professor Edgeworth in his 
 excellent address on this topic as President of this 
 Section in 1889. 
 
 But less able mathematicians have had less restraint 
 and less insight ; they have mistaken form for sub- 
 stance, and the expansion of a series of hypotheses for 
 the linking together of a series of facts. This appears 
 to me to be especially true of the mathematical theory 
 of utility. I venture to think that a large part of it 
 will have to be abandoned. It savours too much of the 
 domestic hearth and the desert island. 
 
 I announced my intention at the beginning of run- 
 ning counter to some popular opinions. I ask for 
 your patience and forbearance when I say that in my 
 opinion the value of the work of Jevons as regards 
 the main body of economic doctrine has been much
 
 THE CLASSICAL POLITICAL ECONOMY 179 
 
 exaggerated. I am ready to admit that much of his 
 work in finance and currency and in many special 
 problems is excellent. But he was, I think, too 
 deficient in philosophical grasp and intellectual sym- 
 pathy to give the proper place to a new conception ; 
 witness his treatment of Mill and Eicardo. Again, 
 Jevons was not a mathematician of the first rank : he 
 struggles with the differential calculus as a good man 
 struggles with adversity. 
 
 The older economists maintained that price was 
 the measure, not of utility, but of value, and value 
 could not be reduced simply to utility. Things they 
 said might have a high value in use and but little 
 value in exchange. Jevons, by making the distinction 
 between final and total utility, thought that he had dis- 
 covered a method by which utility might be measured 
 by price. No doubt, if we make adequate hypotheses, 
 qualifications, and explanations, this may be done ; and, 
 in the same way, if we introduce enough cycles and 
 epicycles we may explain or describe the motions of 
 the stars. But price is essentially the expression of 
 objective and not of subjective relations — that is the 
 older view in modern phraseology : the attempt to 
 make a kind of pre-established harmony between the 
 two leads to unreality. Price depends upon demand 
 and supply, and the degree of utility is one element 
 affecting demand. In my view the distinction between 
 final and total utility is of qualitative importance ; it 
 is of service in explaining the real advantage of ex- 
 change ; although the essential character of this ad- 
 vantage has been explained by Adam Smith and his 
 successors. The precision of the new phraseology,
 
 i8o THE REACTION IN FAVOUR OF 
 
 especially when translated into curves, gives definiteness 
 and sharpness to the conceptions. The subject is too 
 intricate for more detailed consideration in this place. 
 I will only add that in my view Professor Marshall's 
 criticism of Jevons may be carried much further, with 
 a still further rehabilitation of Eicardo/ 
 
 There is another direction in which I think the 
 mathematical economists have wandered far from 
 reality. I allude to the stress laid upon what are 
 called marginal increments. There is a tendency to 
 magnify the effects of the last portion of supply or 
 the last expression of demand. I will only say that 
 this doctrine is very apt to run into the fallacy which 
 may be popularly described as the tail of the dog 
 fallacy — the idea being that the tail wags the dog and 
 the tip of the tail wags the tail.^ 
 
 To resume in a sentence : the method of the 
 so-called orthodox English economists has only been 
 modified and supplemented, not revolutionised and 
 supplanted, by the historical and mathematical methods 
 of recent writers, and this, in my opinion, is being 
 recognised more and more. 
 
 I pass on to consider a closely allied question — 
 the question, namely, of the limitation of the boundaries 
 of the subject-matter of political economy. In my 
 
 1 For detailed criticism of the measurement of utility by price, and 
 of " Consumers' Rent," see my Princijjles of Political Economy (Book 
 I. chap. iii. and Appendix). Prof. Edgeworth has replied (Bconoviic 
 Journal, March 1894), and I have noticed his objections {Economic 
 Journal, June 1894). 
 
 2 I do not mean to imply that "marginal increments" are of no 
 value in economics. The criticism is directed against exaggerated 
 stress, not against legitimate use.
 
 THE CLASSICAL POLITICAL ECONOMY i8i 
 
 view one of the greatest merits of the orthodox 
 economists was the careful distinction they drew 
 between economic and other social sciences. They 
 refused to merge it in the misty regions of general 
 sociology, and they excluded from its borders the 
 rocks and quicksands as well as the green pastures 
 of ethics and religions. This specialisation, they 
 argued, was necessary if any real advance was to 
 be made beyond the expression of platitudes and 
 sentiments. They allowed that in practical social 
 problems there were in general other considerations 
 besides the purely economic ; but these they left to 
 the jurist, the moralist, or the politician. For a time, 
 however, especially under German influences, attempts 
 were made to break down these boundaries, and the 
 economist was elevated to the position of universal 
 philanthropist and general provider of panaceas. Mill 
 himself was partly to blame for the excursions which 
 he made into the applications of social philosophy to 
 practice. It is to these excursions we are indebted 
 for the fantastical notion of the unearned increment, 
 and the curious idea that it is the duty of people to 
 leave the bulk of their money to the State, or rather 
 the duty of the State to take it. Fortunately, how- 
 ever, for the progress of economics, this ideal of 
 breadth without depth has not become dominant, and 
 any force it had is already spent. The advances made 
 in other social or less vaguely human sciences have 
 been so great that the economist is obliged to exclude 
 them from his domain. 
 
 Still to some extent the view prevails, especially 
 in Germany, that it is the business of the economist
 
 i82 THE REACTION IN FAVOUR OF 
 
 to discover tlie general conditions of social well-being, 
 and to show how they may be realised. If such an 
 attempt were seriously made it could only end in the 
 projection of the personality of the writer into an 
 ideal, and one ideal would succeed another like a set 
 of dissolving views. Suppose, for example, that I 
 personally were to attempt to set up an ideal, and, 
 not having imagination enough to create a new one, 
 I were to turn to ancient Greece. There is some- 
 thing very fascinating about the life of the typical 
 Athenian in the best day of Athens. Physical beauty 
 and vigour were considered as essential as keenness of 
 intellect, appreciation of the fine arts, and skill in 
 oratory ; and this intense self-realisation w^as tempered 
 by ardent patriotism and a strong sense of the duties 
 of citizenship. The principal blot, from the modern 
 point of view, was the institution of slavery and the 
 relegation of most industrial functions to slaves. I 
 might as an economist, if this breadth of view were 
 justified, take it on myself to show how modern life 
 might be Hellenised, and by leaving out slavery and 
 introducing a little Christian charity a very pleasing 
 ideal might be made, and then I might go on to show 
 what steps Government should take to realise this ideal. 
 In the meantime, however, my friend Dr. Cunning- 
 ham might take as his type one of the equally fascinating 
 religious communities of the Middle Ages, and by leav- 
 ing out some of the superstitions and inserting a few 
 Hegelian contradictions, he might construct an equally 
 attractive ideal, and proceed to direct the statesman 
 how it might be carried into practice. But when all 
 the other economists had worked out similar projects
 
 THE CLASSICAL POLITICAL ECONOMY 183 
 
 — Professor Sidgwick, for example, on the lines of 
 Bentham, and Professor Edgeworth with his love of 
 measurements on the lines of Pythagoras — the diffi- 
 culty would arise, Who was to be the ultimate arbiter ? 
 And to this question no one would accept the answer 
 of the rest. 
 
 Perhaps it may seem that my illustration goes be- 
 yond the argument ; let me, then, state the position in 
 general terms. According to the traditional English 
 view it is not the business of the economist to decide 
 all the disputes that may arise even regarding funda- 
 mental questions in ethics, religion, fine art, education, 
 public law, administration — to decide, in a word, the 
 first duty of man and the last duty of governments. 
 His sphere is much more limited, and the limits have 
 been indicated with tolerable precision by the classical 
 English economists. Even in England, however, there 
 has been a tendency in recent years to remove the old 
 landmarks, and I do not mean simply on the part of 
 socialists, but by those who in the main profess to 
 accept the English traditions. 
 
 Just as the German idealists think it is the busi- 
 ness of the economist to discover the way to the 
 perfectibility of the species, the English realists im- 
 pose upon him the duty of finding the road to the 
 greatest happiness of the greatest number. In technical 
 language political economy is the economy of utility. 
 No doubt, at first sight, this aim seems to be both 
 definite and practical. From the old inquiry, " How 
 nations are made wealthy," to the new inquiry, " How 
 nations are made happy," it seems a natural and easy 
 transition. For the essence of wealth is to possess
 
 i84 THE REACTION IN FAVOUR OF 
 
 utility, to satisfy desires, to create happiness. It is 
 obvious also that the happiness of a people depends 
 largely on its economic conditions in the narrowest 
 sense of the term; it depends, that is to say, on 
 the amount and distribution of its material wealth. 
 Accordingly it seems plausible to maintain that the 
 economist ought to discover by his calculus of utility 
 those principles of production and distribution that 
 will lead to most happiness. 
 
 Plausible and natural, however, as this transition 
 from wealth to happiness may seem, it may readily 
 lead to the abandonment of the central position of the 
 classical economists. The steps are worth tracing. 
 The first deduction made from the general principle 
 of utility is that it obeys a law of diminishing return. 
 Every additional portion consumed or acquired of any 
 commodity gives a decreasing satisfaction, and passing 
 through the point of satiety we reach the negative 
 utility of being a nuisance. Illustrated by the usual 
 curve, this law assumes the character of a mathematical 
 axiom. 
 
 The next step is to show that the rich man derives 
 very little utility (or happiness) from his superfluity, 
 whilst if his abundance were divided amongst the poor, 
 a great amount of happiness would be created. It 
 seems to follow at once that, assuming an average 
 capacity for happiness, the more equal the distribution 
 of wealth the greater will be the happiness of the 
 people. Never did any theory of equality assume 
 such a simple and scientific form ; it is like the 
 advent of primitive Christianity in the guise of a new 
 philosophy.
 
 THE CLASSICAL POLITICAL ECONOMY 185 
 
 The practical question remains, " How is this ideal 
 to be carried out ? " Obviously it is too much to 
 expect that the principle of natural liberty and the 
 policy of laisser-faire may be left to work out this latter- 
 day salvation. Competition, it is said, may be well 
 enough for the strong, but is the destruction of the 
 poor and weak. Accordingly it seems easy to prove, 
 or at least to presume, that great powers must be given 
 to the State. It only remains to bring in the principle 
 which Mill flattered himself was his chief contribution 
 to economic theory, viz. that the distribution of wealth 
 depends entirely on the opinions of mankind, that these 
 opinions are indefinitely pliable, and that, therefore, 
 no schemes of distribution can be called impracticable, 
 and we arrive at the conclusion of the whole matter. 
 And practically that conclusion is nothing less than 
 State Socialism. 
 
 It needs no demonstration, however, that nothing 
 could be more opposed to the traditional English 
 political economy. What, then, becomes of my con- 
 tention that it remains unshaken, and that there are 
 signs of a strong reaction in its favour ? The truth is 
 that this conclusion has again brought into prominence 
 other portions of the old doctrine that had been allowed 
 to fall into the background. We are confronted with 
 the limited power of the State and the infinite variety 
 of individual enterprise. To the older economists the 
 difference seemed so great that they considered the 
 presumption against State interference to be established. 
 The rule, it is true, was never absolute and unqualified. 
 Adam Smith himself indicated some of the most 
 important of these exceptions, and the list has been
 
 i86 THE REACTION IN FAVOUR OF 
 
 extended by liis successors. But these exceptions 
 were all based upon reasoned principles, such as the 
 incapacity of the persons concerned, e.g. children to 
 make fair contracts, or the lack of individual interest 
 in public works, e.g. the maintenance of roads, and the 
 importance of the highest security, as in the regulation 
 of the issues of bank notes. And in spite of all 
 these exceptions — strengthened and purified by these 
 exceptions — the presumption remained undisturbed. 
 Eecently, however, some writers, under the influence 
 of the ideal of maximum happiness and impressed by 
 the power of the State, have sought to extend its 
 interference far beyond these admitted principles. But 
 I venture to say, so far as this movement had any 
 theoretical support, the reaction has already begun. 
 
 The fundamental importance of freedom of contract 
 has become more apparent than ever through the 
 application of the comparative and historical methods 
 to jurisprudence; the proposition that the progress of 
 society has been from status to contract has almost 
 acquired the force of an axiom. The analysis, too, of 
 modern industrial systems in which division of labour 
 has become more and more intricate and interdepend- 
 ent, has shown the hopelessness of the attempt to 
 transfer the management and control to the State. 
 Changes in the methods of production, in the diffusion 
 of knowledge, and in the transport of material com- 
 modities, have been so rapid and so great that no 
 executive Government could have overtaken them. 
 In the most advanced communities, even that legisla- 
 tion which is necessary for the new conditions lags 
 behind ; even those elementary forms which simply
 
 THE CLASSICAL POLITICAL ECONOMY 187 
 
 aim at giving an interpretation to contracts in doubtful 
 cases, or which are necessary for the adjustment of 
 responsibility (as in bankruptcy and partnership), 
 are behind the times. The growth of joint -stock 
 enterprise has outstripped the development of the law 
 of companies, and there is a crop of new frauds without 
 corresponding penalties. 
 
 Turning to the executive and administrative func- 
 tions of Government, the analysis of existing conditions 
 shows that we have not yet overtaken those exceptions 
 admitted by the strongest supporters of laisser-faire. 
 The British Government has, it is true, wasted its 
 energies in devising temporary expedients of various 
 kinds, but it has not yet accomplished the programme 
 of Adam Smith, Not only are there privileges and 
 restrictions that ought to have been abolished long 
 ago, but on the positive side the programme is not 
 complete. AVe have just begun universal education 
 on the lines laid down by Adam Smith, but his scheme 
 for Imperial federation is not yet within the range of 
 practical politics. We have effected great financial 
 reforms, but we still fall far short of the full develop- 
 ment of his principles. Even in matters of currency 
 and banking — in relation to which the function of the 
 State has always been recognised — we are lamentably 
 in need of reform. 
 
 But if the State cannot overtake those duties which 
 are so necessary and persistent that they were forced 
 on the attention of the strongest supporters of laisser- 
 faire, how can we possibly justify the assumption of new 
 functions which rest upon no better principle than the 
 vague idea that the State ought to do something ?
 
 i88 THE REACTION IN FAVOUR OF 
 
 This leads me to observe that not only theoretically 
 but practically signs ^ of a reaction in favour of the 
 old position are rapidly increasing. The experiments 
 already made at playing the role of omnipotence and 
 omniscience, against which Governments were so 
 emphatically warned by Adam Smith, have begun to 
 bring forth fruit after their kind — thorns that were 
 carefully nursed by the legislature, instead of producing 
 grapes, have produced more thorns and worse thorns. 
 
 A principle of the widest application in ethics 
 and politics as well as in economics, which may be 
 described as the principle of formal justice, has begun 
 to operate in a remarkable manner. A Government 
 which lends its powers and assistance to one set of 
 people must be prepared to act in a similar manner in 
 all similar cases. If once this principle is abandoned, 
 Governmental action becomes either a matter of chance 
 or depends upon clamour and jobbery. It is wonderful 
 how quickly the human mind discovers analogies in 
 grievances, and how soon one cry leads to another. 
 Microbes are not more rapid and relentless in their 
 multiplication. A plain man may have his doubts 
 
 1 This is the statement that has evoked most criticism. Many of 
 my critics have said that if there is a reaction it is only in theory and 
 not in practice. But in the first place I say only signs of a reaction. 
 Had the reaction been in full flood I should have chosen some more 
 novel topic, and secondly, I insist that the signs are there. In the 
 United States, for example, there is the reaction against the M'Kinley 
 tariff, pensions, and inflation ; in Great Britain proposals for land 
 nationalisation, old age pensions, compulsory and universal eight 
 liours' day have not taken practical shape ; judicial rents in Ireland 
 and Scotland are already in arrear, and generally the experiment at 
 double ownership in land is a failure. [Since this note was written 
 there has also been the General Election of 1895.]
 
 THE CLASSICAL POLITICAL ECONOMY 189 
 
 about the similarity of triangles and consent to ar- 
 bitration on the question, but he has no doubt that 
 for the purpose of governmental grants and aids his 
 needs are similar to his neighbour's. And the plain 
 man is right. How can we justify the use of State 
 credit for the purchase of lands in Ireland and fishing 
 boats in Scotland, if we are not prepared to give 
 similar aid to the poor of England who are similarly 
 situated? If we grant judicial rents in the country 
 why not in the towns, and if we fix by law one set of 
 prices why not all prices? 
 
 We must not be content with looking at the im- 
 mediate effects of legislation; we must consider also 
 the secondary and more remote consequences. If a 
 legislator thinks that there are none of importance, 
 let him read a chapter of Adam Smith — in the original 
 and not in the stale pemmican of popular dogmatism. 
 And if he still thinks that every law must be con- 
 sidered in isolation on its own merits, that it is a 
 temporary remedy for a passing emergency, then let 
 him resign his seat in Parliament; he has mistaken 
 his vocation; in the name of common sense and the 
 happiness of the greatest number let him cease to be 
 a legislator and become a policeman. 
 
 There is an old fable about the gradual entrance, 
 little by little, of the camel into the tent of the Arab. 
 The British Government — I speak irrespectively of 
 parties, for with the frankness of my old masters in 
 political economy I make bold to say both are equally 
 to blame — the British Government is beginning to 
 find that the camel is getting too far into the tent. 
 The admission of a sinGjle ear is nothing to the ad-
 
 igo THE REACTION IN FAVOUR OF 
 
 mission of the hump, aud the knees and the rest of 
 the beast. Now the ear may be interpreted to mean 
 the grant of a few thousand pounds to Scottish fishers, 
 the hump is universal old-age pensions at a cost of 
 some fifteen or twenty millions a year, and for the 
 knees you may take the nationalisation of land at a 
 cost of some two thousand millions, and for the whole 
 beast you have the complete Socialist programme. 
 The conclusion that when the beast was in the Arab 
 was out needs no interpretation. 
 
 Let us leave fables for something the exact opposite, 
 namely, taxes. It was a favourite doctrine of the old 
 economist that taxes are a burden and the visits of 
 the taxgatherer are odious. This doctrine also is 
 beginning to reassert itself Tlie State can do nothing 
 without money, and it generally does things in the 
 most expensive manner. Fortunately in this country 
 we have not yet reached the limits of tolerable taxa- 
 tion, but at the present rate of growth of Imperial and 
 local expenditure we are rapidly approaching those 
 limits. Now, if there is one position that has been 
 firmly established in theory and confirmed by the 
 abundant experience of many nations, it is that exces- 
 sive taxation is ruinous to a country. We have to con- 
 sider not only the net proceeds but the indirect cost in 
 all its forms, not only the mere cost of collection, but 
 the effects on industry and on the energies of the people. 
 
 It may, of course, be replied that those who demand 
 a large increase of expenditure for public purposes do 
 not propose to tax the poor, but only to take the 
 superfluities of the rich — to take, as it is sometimes 
 said, twenty shillings in the pound from that part of
 
 THE CLASSICAL POLITICAL ECONOMY 191 
 
 every income which extends above £400 a year. The 
 certain effect of this kind of taxation would be that in 
 a very short time nobody would have more than £400 
 a year, and the sources of taxation would dry up just as 
 people had become used to and dependent on govern- 
 mental assistance. 
 
 The general argument may be summarised in the 
 favourite phraseology of the day. The utility of every 
 increment of governmental w^ork rapidly diminishes, 
 and the disutility of every increment of taxation 
 rapidly increases. Both propositions, I may add, 
 were abundantly proved before the language I have 
 just employed was invented, and the old language, if 
 less scientific, conveyed a more emphatic condemnation. 
 
 I will conclude by calling your attention to one 
 more position of the classical economists, and one that 
 is the foundation of their whole system so far as they 
 deal with the principles of governmental action. They 
 maintain that even if the State could do something for 
 individuals as cheaply and effectively as they could do 
 it for themselves, it is in general better to trust to 
 individual effort. The decisive consideration is the 
 effect on the character and energies of the people. 
 Self-reliance, independence, liberty — these were the 
 old watchwords — not State reliance, dependence, and 
 obedience. In the matter of pauperism, for example, 
 they teach us to distinguish between the immediate 
 effects of relief which may be beneficial and the effects 
 of reliance on that relief which may be disastrous. 
 They are bold enough to maintain that the conditions 
 of life of the dependent pauper should not be made 
 by aids and allowances better than that of the in-
 
 192 THE REACTION IN FAVOUR OF 
 
 dependent labourer. They insist on the great historical 
 distinction between the sturdy rogues and vagabonds 
 — who can work and will not — and the impotent 
 poor, the poor in very deed, who cannot support 
 themselves. They look upon the payment of poor 
 rates as they look upon other forms of taxation — 
 namely, as the lesser of two evils; they do not try 
 to persuade themselves and other people that it is a 
 duty which is essentially pleasant. And I confess 
 that I never yet met a man who had the audacity to 
 assert that he enjoyed paying poor rates, but I have 
 known many men who have given of their substance 
 to a far greater extent with a cheerful spirit. It is 
 the compulsion that sticks in the throat, and there is 
 no more instructive chapter in economic history than 
 that which describes the slow, painful processes by 
 which Englishmen gradually adopted compulsory 
 assessment for the relief of the poor. I shall be told 
 that these old economic doctrines are cold and hard 
 and opposed to the principles of Christian charity. 
 The retort is easy : If Christian charity realised a 
 tithe of its ideal, there would be no need for relief on 
 the part of the State. If I, too, may quote Scripture 
 for my purpose I would say : Go to the ant, thou 
 sluggard ! It does not take ten ants to relieve another 
 ant, and in this land of ours there are more than ten 
 professed Christians to every pauper. 
 
 It is time, however, to bring this discourse to an 
 end, and not to begin a sermon ; which, moreover, 
 according to my masters the old economists, is beyond 
 our domain. Yet I shall be bold enough to end with 
 these words of advice : To the student I would say :
 
 THE CLASSICAL POLITICAL ECONOMY 193 
 
 Political economy has a vast literature, and you will 
 not find all the good concentrated in the last marginal 
 increment ; you must master the old before you can 
 appreciate the new ; a portion of truth just rediscovered 
 for the hundredth time by some amateur is not of such 
 value as a body of doctrines that have been developed 
 for more than a century by economists of repute. 
 And to the legislator I would say : Vaster than the 
 literature of political economy is the economic ex- 
 perience of nations ; the lessons to be learned from 
 tlie multitudinous experiments of the past can never 
 become antiquated, for they have revealed certain 
 broad features of human character that you can no 
 more disregard than the vital functions of the human 
 body. Just as Harvey did not invent but discovered 
 the circulation of the blood, so Adam Smith did not 
 invent but discovered the system of natural liberty. 
 And nothing has been better established than the 
 position that legislation which neglects to take account 
 of the liberties of individuals is foredoomed to failure. 
 If they cannot break through the law they will get 
 behind the law. The first duty of the legislator is to 
 take account of the natural forces with which he must 
 contend, and the classical economists have made a 
 survey and estimate of these forces which, based as it 
 is on the facts of human nature and the experience of 
 nations, it would be wilful folly to overlook. 
 
 13
 
 X 
 
 OLD AGE PENSIONS VERSUS AN OLD 
 COMMANDMENT ^ 
 
 It may, perhaps, in these days of the higher criticism, 
 still be permissible to the devil to quote Scripture for 
 his purpose, but for an economist to use one of the 
 Ten Commandments as a text for a little sermon 
 would surely seem too old-fashioned. I ^Yill tlierefore 
 begin with the theory of evolution, and so bring in 
 my Scripture with suitable apologies to modern science. 
 According to the theory of evolution, we find in 
 existing societies, as in organisms, not only tlie highest 
 perfection yet attained, but also all varieties and 
 degrees of imperfection — not only survivals of the 
 fittest, but reversions to ancient failures ; in brief, we 
 constantly discover even in the most civilised nations 
 a great deal of the " past in the present." Not only 
 do we find a persistence in the types of character of 
 individuals, but a similar persistence in the types of 
 classes and institutions. It is as true to-day as it was 
 in the most ancient times that the poor never cease 
 out of the land. And we may go further and say 
 
 1 Scolsvian, 12tli October 1895.
 
 OLD AGE PENSIONS 195 
 
 that to a very great extent the poor of our age are 
 very like the poor of former ages ; in poverty as in 
 other things the same causes produce the same effects. 
 Speaking broadly, there have always been, as there are 
 at present, two great classes of the poor : the poor 
 through misfortune and the poor through wilfulness ; 
 the deserving and the undeserving ; the aged and 
 infirm, and the sturdy rogues and vagabonds. The 
 central problem of poor relief (as shown, for example, 
 in the long series of poor-laws in England and 
 Scotland) has always been to combine assistance in 
 the one case with repression in the other, to diminish 
 distress and at the same time to prevent pauperism. 
 If, then, we discover in the history of pauperism and 
 poverty that in the past certain modes of relief have 
 been both directly and indirectly beneficial, and with- 
 out any of the disastrous consequences attendant 
 on other modes, we ought to be very careful before 
 instituting any change which might lessen the efficacy 
 of these well-tried remedies. There is no one simple 
 remedy ; the causes of poverty are too many and too 
 complex. 
 
 There is, however, one great cause of poverty which 
 is dominant in every period — namely, old age. With 
 few exceptions, after a certain period of life, earnings 
 and opportunities for earnings diminish, until there is 
 not sufficient income even for material necessaries. 
 Now for this particular kind of poverty there is 
 one remedy which has been tried almost universally, 
 a remedy to which no olijection can be raised except 
 that it is not always sufficient. This remedy is the 
 assistance given by children in the vigour of life to
 
 196 OLD AGE PENSIONS 
 
 their parents who can no longer work. This is a 
 kind of mercy tliat is indeed twice blessed — it blesseth 
 him that gives and him that takes ; it is a good thing 
 for the children to make the moral eftbrt to give, and 
 it is only part of the natural honour of old age to 
 receive. The old Commandment, " Honour thy father 
 and thy mother, that thy days may be long upon the 
 land wdiich the Lord thy God giveth thee," only gives 
 a religious sanction to one of the most deeply-rooted 
 social instincts of humanity. It may, of course, be 
 objected by the evolutionist that the tendency of all 
 progress has been towards the disintegration of the 
 family and the lessening of the rights and duties of 
 blood relationship ; and no doubt liistory supports this 
 general principle of individualism ; but we cannot 
 apply the principles of independence to those who are 
 by nature dependent — e.g. to young children or to old 
 people verging as regards power of work on a second 
 childhood. At the recent meeting of the British 
 Association it was ably contended that it was absurd 
 to attempt to govern nations in the lower stages 
 of development by rules only applicable to highly 
 civilised nations — and the contention found general 
 support. It is only going a stage further to recognise 
 that the most highly civilised nation is an amalgam of 
 nations, and that different principles of legislation 
 must be applied in different cases. And sometimes of 
 necessity and sometimes of choice Governments have 
 recognised this adaptation of principles — e.g. in factory 
 legislation, land tenures, etc. Especially has this 
 been the case in dealing with pauperism. 
 
 As the law stands at present both in England and
 
 OLD AGE PENSIONS 197 
 
 Scotland, children who are able to do so may be 
 compelled to support their parents in case of need. 
 The direct and indirect effects of this law have been 
 admirably brought out in the case of Scotland in the evi- 
 dence given to the Royal Commission on the Aged Poor 
 by Mr. M'lSTeilljthe Secretary to the Board of Supervision. 
 He shows that in nearly every instance the mere offer or 
 threat of the poorhouse is sufficient to induce the sons, 
 or, it may be, other relatives, to furnish the assistance 
 necessary. It is equally clear that if outdoor relief 
 were offered unconditionally it would be as generally 
 accepted as indoor relief is now refused. Under the 
 present system pauperism in Scotland has steadily 
 diminished with the growth of prosperity ; but so far 
 as this particular cause is concerned, this decrease 
 would at once be replaced by an increase if such 
 gentle persuasion were no longer offered to the relatives. 
 It is not the mere acceptance of aid from the State 
 that offends this old spirit of " clannishness," it is only 
 the dishonour in breaking the " old Commandment " 
 that spoils the gift. To extract money from the State, 
 like the converse case of the evasion of taxes, has 
 always been considered highly honourable to the 
 extractor or the evader. 
 
 Now the ostensible object of old age pensions to be 
 partially or wholly provided by the State is to do away 
 with any taint of dishonour. But most of the authors 
 of these schemes have recoiled from the obvious ob- 
 jections to universal and adequate State pensions — e.g. 
 the direct cost of upwards of twenty millions sterling 
 — and, further, they profess to embody discriminating 
 clauses which it is maintained would counteract any
 
 198 OLD AGE PENSIONS 
 
 tendency to pauperisation. The favourite device is to 
 induce people in their youth to contribute a certain 
 sum towards the acquisition of five shillings a week after 
 the age of sixty-five, the inducement being an equal 
 contribution by the State to make up the requisite 
 amount. The first objection to such a proposal is that 
 in essence it amounts to a bounty on a peculiar form 
 of thrift, and economically it is open to the objections 
 common to most bounties. Why should the State 
 artificially encourage this jDarticular form of saving ? 
 Why should not equal assistance be given to the work- 
 ing man who insures his life for the benefit of his wife 
 and family, or to him who accumulates a little capital 
 against illness or want of employment, or to another 
 who gives a special start in life to children ? And 
 whilst it is plain that the forms of thrift are manifold, 
 it is by no means plain that saving for old age is so 
 much the best as to deserve exceptional treatment. 
 On the contrary, there is a kind of gloomy selfishness 
 about it — something like buying in one's youth a 
 superior coffin, the State (to complete the simile) pro- 
 viding the lid when the time comes, by way of reward- 
 ing the foresight of the occupant. 
 
 It may be further objected that it is very doubtful if 
 the bounty in support of old age pensions would suffice 
 to overcome the natural disinclination in the case of the 
 very people for whom it is intended. What will appear 
 the present valuation of a favour to come after forty or 
 forty-five years ? — and such a meagre favour when (and 
 if) it does come. It is worth observing in this connec- 
 tion that when it is pointed out to the advocates of this 
 form of old age pensions that Gs. a week is not very
 
 OLD AGE PENSIONS 199 
 
 much, it is replied that the recipients will in most cases 
 receive help from their children and other relatives. 
 This is Mr. Chamberlain's position, as stated in his evi- 
 dence before the Eoyal Commission on the Aged Poor 
 (vol. iii. p. 664, question 12,218): "Do you consider that 
 this payment of 5 s. a week is sufficient for subsistence ? 
 — No, certainly not, unless the insurer has some other 
 means of livelihood. But what I feel, and what I 
 believe would be the result, is that a man having 5s. 
 a week would be a welcome guest in the houses of his 
 friends or relatives, who cannot now entirely afford to 
 support him. He would bring a little addition to the 
 household income, which w^ould enable them to receive 
 him." The principle, it will be observed, is thus ad- 
 mitted that the aged poor ought to receive assistance 
 from relatives, and that without such assistance the 
 pension scheme would fail in its primary object. But, 
 on the analogy of similar cases, it seems probable that 
 the contribution by the State would simply save so 
 much to the relatives, without really increasing at all 
 the comfort of the aged poor themselves ; the aid given 
 by the State would so far tend to dry up the aid given 
 by other people. 
 
 One other argument may be noticed, which also 
 indirectly supports the old commandment. It is 
 commonly urged that those who have worked all their 
 lives for the benefit of the community ought in their 
 old age to receive support from the community in 
 return. But it may be replied that, apart from the 
 general truth that in civilised societies all industry in- 
 volves highly complex co-operation, this idea of work- 
 ing for the community must be set down as a pious
 
 200 OLD AGE PENSIONS 
 
 fiction. To profess to trade for the public good is, 
 as xVdam Smith tells us, an affectation not very common 
 among merchants ; and to profess to work for the 
 public good is an affectation not very common among 
 working men ; as the former trade for profit, so the 
 latter work for wages. On the other hand, it is abun- 
 dantly true to say that people are induced to work 
 for wages, not only to satisfy their own personal 
 necessities and inclinations, but also to provide for 
 their families. To bring up children to an age to 
 support themselves, and to fit them for a start in life, 
 must absorb a large part of every working man's 
 income for a considerable time. If, then, the theory 
 of the payment for services rendered is to be made a 
 basis of poor relief, it applies most obviously to the 
 case of aged parents who have brought up their children 
 to wage-earning years. It will be a bad outlook for 
 the country when a plain man comes to believe that 
 his old parents have no claim on him, and will only 
 consider them welcome guests when they bring in two 
 half-crowns every Saturday night — one of their own 
 and one from the State. 
 
 In conclusion, it may be pointed out that the object 
 of the present paper has been strictly limited — namely, 
 to inquire into the probable effects of the substitution 
 (so far as it operates) of the principle of reliance upon 
 children for that of reliance on the State. There are, 
 of course, many cases in which the aged poor cannot 
 obtain adequate assistance from any relatives, just as 
 there are still more cases which no scheme of State- 
 aided pensions could touch.
 
 XI 
 
 A VOYAGE AEOUND AFRICA ^ 
 
 It is always difficult to realise tlie just relations 
 between any science and its application to practical 
 problems. The difficulty is peculiarly great in political 
 economy. Some of its principles can be stated with 
 such clearness and simplicity that they are readily 
 accepted, but this very facility of acquisition often 
 leads to the notion that they are of little value. In 
 ideas, as in things, we are apt to think little of what 
 we get with little trouble ; we think most of the things 
 we cannot quite afford, and most also of the ideas we 
 cannot quite understand. In recent years political 
 economy has been enriched by many ideas which are 
 just beyond the margin of ordinary intelligence, and 
 they have been appropriately expressed in language 
 which, indeed, wears the semblance of English, but 
 which is just beyond the range of ordinary usage, and 
 requires an economic dictionary for its interpretation. 
 There are other ideas which are regarded with even 
 more awful admiration, for they demand for adequate 
 expression the language of the higher mathematics. 
 The natural consequence of this influx of difficult 
 
 1 University of Edinburgh, October 1895.
 
 202 A VOYAGE AROUND AFRICA 
 
 and strange ideas is that the old principles are thonght 
 of little account ; they seem as stale and unprofitable 
 as a copy of the Ten Commandments would have 
 appeared to an old Israelite whose heart was set upon 
 a basketful of brand-new graven images. Not that 
 I would for a moment insinuate that the old economic 
 principles are to be looked upon as commands, and 
 still less as commandments ; it is quite enough if in 
 their practical form they are placed on the same level 
 as maxims of worldly wisdom or counsels of prudence, 
 or as dictates of common sense approved by the 
 experience of nations. 
 
 Now, perhaps, the best way to show the importance 
 and the vitality of these old principles is to give new 
 illustrations of their working — illustrations drawn from 
 actually existing conditions, but different from those 
 with which we are every day surrounded. 
 
 It was my lot, for the sake of my health, to start 
 last March on a four months' voyage round Africa,^ 
 touching at several of the principal ports, and also at 
 Bombay ; and although I was not able to take full 
 advantage of my opportunities, certain impressions 
 were forced upon me, which I hope may answer the 
 purpose, I will not say of enforcing, but of illustrating, 
 some of those economic principles which, on account 
 of their simplicity and familiarity, are apt to be dis- 
 regarded. In order to preserve some kind of method 
 and some sense of proportion, I will take in order the 
 three great agents in in'oduction — Nature, Labour, 
 
 ^ I beg to oiler my best thanks to the owners, captain, and officers 
 of the S.S. Johanneshurcj for their considerate kindness througliout 
 the voyage.
 
 A VOYAGE AROUND AFRICA 203 
 
 Capital, — and then give a few examples of the influence 
 of law and government. 
 
 And first of all as regards the power of Nature in 
 affecting the kind and amount of a country's wealth, 
 one of the earliest truths Ave meet with in economic 
 literature — it was stated emphatically by John Locke 
 — is the very small proportion of wealth that is fitted 
 for man's use by nature alone. People are apt to 
 suppose that in the tropics nature provides a perpetual 
 feast, and that neither labour nor capital is required 
 in its preparation. But a slight glimpse of tropical 
 regions is sufficient to correct the mistake. Not only 
 are there extensive tracts burnt into desert, but even 
 the banks of the rivers, in spite of the luxurious 
 vegetation, are by nature equally inhospitable. The 
 Ijrushwood is impenetrable without the labour of 
 cutting paths, and just as, unaided, one might die of 
 starvation on the sea in spite of its wealth of fish, 
 so, unaided, one might die in an African forest in spite 
 of all the abundance of the fruits of nature. I shall 
 never forget my first acquaintance with the impene- 
 trable tangle of the banks of an African river ; the 
 narrow path where we landed to visit a picturesque spot 
 was as effectually closed as by lofty walls ; it w^as 
 impossible to wander from it through the dense masses 
 of thorny scrub. 
 
 And not only in these regions are the gifts of 
 nature less than are generally supposed, but the 
 burdens and obstacles, the pests and pestilences, the 
 scourges and evils wherewith nature torments man- 
 kind are worse. It is perhaps not too much to say 
 that in many parts of Africa fever is as common as in
 
 204 A VOYAGE AROUND AFRICA 
 
 this country a cold in the head. Where nature is left 
 to herself and has a swamp or marsh to work in, fever 
 seems as unavoidable as the heat of the sun. Such, 
 for example, is the case with the finest natural harbour 
 in Africa — Delagoa Bay. It is the only harbour in 
 South East Africa that is not guarded by a dangerous 
 bar, and large vessels can anchor in a wide river that 
 can be entered at any state of the tide. But on 
 either side there is a swamp, and the consequence 
 is that all the resident Europeans are liable to 
 frequent and severe attacks of fever. I may mention 
 — though it anticipates a little the order of procedure 
 which I laid down — that we find in these conditions 
 another illustration of a minor economic principle. 
 Labour of all kinds is dear, and difficult to obtain, 
 the simple explanation being that people will not stay 
 in such a place at the risk of their lives without high 
 pay, and the pay is squandered in riotous living, just 
 as happens on the advent of a great plague. 
 
 It was in Delagoa Bay that I was fortunate enough 
 to see an example of those destructive pests that are 
 only found in tropical or semi-tropical regions. As 
 we approached the land we saw what seemed to be 
 a dark brownish cloud moving along the high ground 
 above the shore. It was an immense army of locusts, 
 devouring everything before them. 
 
 Before passing from this influence of nature I will 
 give one more instance of its power of a more pleasing 
 character. Within a few years there has sprung up 
 in the middle of South Africa a city which is rich 
 enougli to import all the luxuries of Europe and 
 attract adventurers from all parts of the world. From
 
 A VOYAGE AROUND AFRICA 205 
 
 the first port to the last in South Africa you hear in 
 these days of only one place — this marvellous city of 
 Johannesburg — the actual if not the nominal capital 
 of the Transvaal Republic. 
 
 Now there can be no question that this extra- 
 ordinary upstart in a wilderness of this latest product 
 of civilisation, with all its energies for good and for 
 evil, for virtues and vices, intensified — this mushroom 
 growth is due in the first place purely to an accident 
 of nature, this accident being simply rich deposits of 
 gold that require for full and rapid exploitation the 
 resources of European skill and capital. It is a 
 repetition, with local differences, of Australia and 
 California in the early fifties. In using the expres- 
 sion mushroom growth I must not be understood to 
 imply that the decline and the decay will be equally 
 rapid. On the contrary, as far as one can gather, this 
 region is also highly favoured with the minerals that 
 are the basis of manufactures, and is the centre of a 
 tract well adapted for all kinds of agricultural jDroduce. 
 But the accident of the gold will quicken by genera- 
 tions the natural development of those more solid 
 industries. 
 
 Just as nature offers very little ready for man's 
 consumption, so also labour alone, unaided by capital, 
 can make but little impression on nature. This 
 observation, no doubt, sounds very trite and obvious, 
 but for all that it is constantly overlooked. The root 
 idea of socialism in most of its forms is that labour — 
 meaning manual or bodily labour — is the principal 
 agent in the production of wealth, and therefore ought 
 to obtain the greater part of the produce. Just before
 
 2o6 A VOYAGE AROUND AFRICA 
 
 I reached Zanzibar the renjiiants of the '•' Treeland " 
 expedition led by Hertska had been obliged to return 
 without making a settlement at all — a striking 
 example of the helplessness of labour without capital 
 and skill. 
 
 To understand how little labour alone can accom- 
 plish, there can be no better plan than to look at 
 the beginnings of industry in new countries that are 
 just being brought under the powers of civilisation. 
 There we can often see side by side a native village 
 and a European town. At Port Elizabeth, for example, 
 one of the principal ports in South-East Africa, I went 
 to see on the outskirts a Kaffir village. It was 
 evident that even as regards the lowest material 
 wants — shelter, clothing, food — labour unaided gives a 
 very poor return, whilst as regards the wants higher 
 in the scale there is no return at all, simply because 
 there is no endeavour. But as the old economists 
 insisted (and as usual their teaching was summarised 
 in an admirable form by Mill) the necessary condition 
 of progress in backward nations is the creation of new 
 wants and new desires. So long as the native races 
 are content with the simple tastes of their forefathers, 
 material or industrial progress is impossible. It is too 
 late in the day to discuss the old theme whether, on 
 the whole, the savage state is not productive of most 
 happiness, for it crumbles away at the touch of civilisa- 
 tion. And it does so not only by war, by disease, by 
 vice in various forms, but by natural economic forces. 
 The savage acquires very readily the desire for money, 
 and for money he is prepared to work. It is only a 
 few years ago since the Zulus threatened to sweep the
 
 A VOYAGE AROUND AFRICA 207 
 
 colony of Natal into the sea, and they came very near 
 the performance of the threat. It is true their 
 military power was broken, but that alone — in the 
 absence of slavery — would not have driven them into 
 industry, and yet to-day you find them providing 
 nearly all the unskilled labour that is required. They 
 load and unload ships, they run in the glorified per- 
 ambulators called rickshaws, they act as servants, and, 
 clad in the helmet and tunic of the British policeman, 
 — a remarkable contrast, I may say, in passing to their 
 bare dark legs — they keep the peace among their 
 fellows. You see everywhere the evidences of the old 
 race hostility ; for example, a native policeman cannot 
 arrest a white man, and most of the rickshaws have 
 painted on them " for Europeans only," and yet the 
 work of the colony is carried on mainly by native 
 labour. And the real reason lies in the attractiveness 
 of money wages. 
 
 It was curious to observe how frequently Europeans 
 who ought to have known better not only failed to see 
 how much they benefited l)y this desire on the part of 
 the natives for money wages, but constantly spoke as 
 if in some way they, the Europeans, were being 
 defrauded, because they considered the w^ages of the 
 natives too high. They maintained that a black man 
 could obtain all that he was used to, could satisfy 
 his natural standard of comfort, on sixpence or a 
 shilling a day, or even a penny in some places, and 
 therefore, they argued, he ought not to receive three or 
 four shillings, as he commonly did in working at a 
 ship's cargo. They overlooked the obvious fact that 
 if a black man only obtained as much for unloading a
 
 2o8 A VOYAGE AROUND AFRICA 
 
 ship as for occasionally tickling the ground in a field 
 of mealies, no black man would work as a dock labourer. 
 
 This minimum subsistence theory as regards native 
 labour could only be carried out under a system of 
 slavery. 
 
 And this leads me to bring forward another illus- 
 tration of a well-established economic principle, 
 namely, that of all labour, slave -labour is the most 
 inefficient and expensive. The opinion of Adam 
 Smith has been abundantly confirmed that only in the 
 very simplest operations can slave -labour be at all 
 profitable. I had the good-fortune to put into Zan- 
 zibar. In the anchorage there were several ships of 
 war — not only British, but German, French, and 
 Italian. One of their principal objects, as I understood, 
 was to suppress the slave-trade between the mainland 
 and the island of Zanzibar. Now Zanzibar, although 
 the Sultan still has some nominal or delegated power, 
 is, to all intents and purposes, as much a part of the 
 British Empire as India. I confess I was amazed 
 when the Consul-General told me that probably nine- 
 teen out of twenty of the black people we saw were 
 slaves. I suppose I ought to have known, but by way 
 of excuse I may say that every one retains some 
 childish beliefs, and we used to be taught at school 
 that a slave cannot exist on British soil, or even on a 
 British ship. And it seemed to me, to say the least, 
 illogical and undignified that we should employ our 
 men-of-war to suppress the trade in slaves, and yet 
 openly permit slavery to exist under a branch of our 
 own Government. It is true that the slavery in 
 question is of the kind called domestic — although,
 
 A VOYAGE AROUND AFRICA 209 
 
 again, that term is so elastic as to cover the labour in 
 plantations, — and it is slavery that has been mitigated 
 by various beneficial laws. Not only are the slaves 
 supposed to be protected against cruelty and ill-treat- 
 ment, but they cannot be sold, not even on the death 
 or bankruptcy of the owner ; they can only descend to 
 the lawful heir in the family, and all children born 
 after a certain date (1890) are ipso facto free. It is, 
 of course, plain that these measures with the strict pre- 
 vention of importation, if that is possible, would in pro- 
 cess of time put an end to slavery, and if the law is 
 enforced the slavery must be of a mild type, but the "^/," 
 as usual, is a large assumption. And I would go so far as 
 to say, from what I was told, that as regards all the 
 essentials of material comfort, many of the Zanzibar 
 slaves are better off than many free labourers in this 
 country, and they certainly look — those who throng the 
 streets — thriving, happy, and contented. And, further, 
 there can be little doubt that the sudden and immediate 
 abolition of slavery would involve serious difiiculties. 
 In the first place, there is the difficulty of compensation 
 to the owners, and compensation must always be adjusted 
 not merely to law, but to expediency. The estates of the 
 Arabs — the principal owners — are heavily mortgaged ; 
 besides, there are curious complications in ownership, e.g. 
 a slave can himself be the owner of other slaves. Then 
 the revenue of the Government under present conditions 
 is really dependent on slavery. But perhaps the strongest 
 argument against sudden abolition is that the slaves 
 would suffer in their material interests by liberation 
 — they would have to do more work for less real 
 reward, and they would be unable to compete with 
 
 14
 
 2IO A VOYAGE AROUND AFRICA 
 
 the free labour that could be cheaply imported from 
 India. It may seem that in expanding this illustra- 
 tion I have lost sight of the point to be illustrated, 
 namely, the inefticiency of slave -labour ; but that is 
 not so. One of the principal British merchants in the 
 island told me that, judging by his own personal ex- 
 perience, he strongly advocated immediate abolition on 
 this very ground. At present, he said, almost the only 
 product was cloves, and, owing to the low price, the island 
 was threatened with ruin. Slave-labour was unfit for 
 a variety of industries, and in reality was most in- 
 efiicient and expensive. He considered, and probably 
 with justice, that abolition would mean cheap labour, 
 and cheap labour more varied industry. He admitted 
 that there might be some trouble and distress in the 
 period of transition, but maintained that the only road 
 to solid industrial prosperity was through the abolition 
 of slavery. 
 
 I cannot leave this topic without adverting to 
 another commonplace of the older economists, namely, 
 that in most essentials the teachings of political 
 economy and of common -sense morality are not 
 opposed, but harmonious. Good economy is good 
 morality. It certainly is so in the matter of slavery. 
 I do not deny that the sudden abolition of slavery 
 may cause difficulties to the Government of Zanzibar 
 for a certain time, and may even give the slaves them- 
 selves no immediate increase of happiness or comfort. 
 But we ought to look not only to the present but to 
 the future, and in national policy even to the traditions 
 of the past ; and we ought to consider not only the 
 effect in the island of Zanzibar, but in every quarter of
 
 A VOYAGE AROUND AFRICA 211 
 
 tlie globe to which British influence extends. And 
 when we take this wider view there can be no question 
 that it is wiser, as it is nobler, for the Government of 
 this country to follow the simple beliefs of its school- 
 children — that under no pretext will slavery be 
 allowed under British dominion — rather than to 
 attempt to save a few thousand pounds and a few 
 years of discomfort by tampering with the principle of 
 freedom in its most obvious form/ 
 
 This case of slavery leads by a natural transition 
 — strange as it may seem — to the case of a certain 
 class of labour employed on British ships. The con- 
 necting link is to be found not, I am glad to say, in 
 the moral but in the physical conditions — that is, 
 there is no question of personal freedom, but simply of 
 personal discomfort and hardship. The case I allude 
 to is that of the firemen employed on steamers in 
 tropical voyages. I think very few people have any 
 idea of the intensity of the labour involved and of the 
 degree of the discomfort. The cause of the whole 
 trouble is, of course, the excessive heat, and the only 
 way to adequately realise its effect is to feel it. Still, 
 indirectly some idea may be formed from other facts. 
 Most passengers, for example, in tropical regions find 
 their cabins so hot that they sleep on deck, and they 
 gasp like fish out of water if there happens to be a 
 following wind. But this heat that seems so burden- 
 some is only the foundation of the heat that must be 
 endured in the stoke-hole and the engine-room, for 
 there there is superadded the heat from the furnaces 
 and the steam. And besides this the firemen have 
 
 ' Cf. infni., Essay XII. on Slavery in Zanzihar.
 
 212 A VOYAGE AROUND AFRICA 
 
 not simply to sit still aud gasp, but they have to do 
 work that might seem hard on a frosty day in this 
 country. I took the opportunity of personally observ- 
 incf the conditions under which this kind of labour is 
 carried on, and one experience I shall never forget. 
 The chief eugineer had invited me to visit the stoke- 
 hole when (as he phrased it) it was really hot. The 
 place we fixed on as most suitable was about the 
 middle of the Eed Sea. The Eed Sea is generally 
 warm, but early in June we had the further advantage 
 of being directly under the sun. We chose mid-day, 
 partly for the natural heat and partly so that I might 
 see and feel the effects of raking out some of the 
 furnaces, which is done on a change of watch. At the 
 time of our descent the temperature on deck in the 
 shade was about 90°, and I may remind you that the 
 heat of the Eed Sea is so notoriously oppressive not so 
 much on account of the absolute temperature, but 
 because of the moisture in the air. In the engine- 
 room there is always greater humidity, and there is 
 no breeze to give relief. You can form some idea — 
 intellectually — of the conditions under which the fire- 
 men and engineers work when I tell you that the 
 temperature recorded at the time of my visit was 136"; 
 but mere figures fail to express the effect on the 
 feelings and on the vital strength. The men work 
 four hours at a time, and then get eight hours oft', 
 thus working, it is true, only an eight hours' day in 
 two pieces. But I doubt if any labour is marked by 
 greater strain and intensity. I know, for my own 
 part, although I had been in tropical or semi-tropical 
 weather for over three months I found this heat, even for
 
 A VOYAGE AROUND AFRICA 213 
 
 a short time, overpowering. And besides the heat there 
 is the unceasing clamour of the machinery and the 
 perplexing rush of wheels ; there is the pitching and 
 rolling of the vessel ; everything that is touched is 
 steeped in grease and coal-dust, and the stifling air is 
 hardly penetrated by the feeble glow of the lamps ; 
 and, in a word, every one of the senses — touch, sight, 
 smell, hearing, the very taste — is offended, jarred upon, 
 nauseated. Such is a faint picture of some of the con- 
 ditions ; and there must be no rest, no slackening ; 
 the men must burn up their energy as fast as the 
 coals, and must toil with the continuity of machines 
 of iron and steel. 
 
 Well, then, it would be only natural to suppose that 
 for work of this kind very high wages would be given, 
 that labour could only be attracted by very high 
 reward. But it is not so. It is true the firemen 
 receive about four pounds a month as well as food and 
 lodging, but, considering the nature of the work, this 
 pay is relatively very low. The life of a sailor is by 
 comparison a life of pleasure, and the sailor receives 
 nearly as much pay. 
 
 The reason is simply the reason assigned by Mill 
 and others for the low wages in other employments 
 when the work is of the most disagreeable and arduous 
 kind. Only those will take to such work who are 
 forced by circumstances — who can do nothing else. 
 In the graphic language of the chief engineer, the fire- 
 men are " lost souls " ; they bring no character, and 
 they require none ; the character of the coals is of much 
 greater importance. In many cases they desert, and 
 sacrifice the wages already earned by weeks of toil, for
 
 214 A VOYAGE AROUND AFRICA 
 
 they are only paid at the end of the voyage ; if they 
 complete the voyage, they probably change their 
 ship. 
 
 The worst of it is that there appears to be no 
 obvious or even practicable remedy. You cannot raise 
 the wages by law, and even as regards the conditions 
 of work, if the law interferes too much or too 
 expensively you drive trade from the British flag. 
 And yet I think there can be no question that if this 
 kind of work were to become really dear — if the 
 reward were made proportionate to the effort and dis- 
 agreeableness, and if cheaper foreign labour could not 
 be obtained as a substitute — then, as in similar cases, a 
 stimulus would be given to invention, the work would 
 be lessened, and the conditions would improve. It 
 certainly seems strange that with all the progress of 
 mechanical science the only way to get coal into a 
 furnace is by pitching it in with a shovel, and that 
 with all the improvements in refined luxury for 
 passengers, the hardest work on the vessel should be 
 done under the worst conditions. 
 
 It would, however, be a great mistake to suppose 
 that unskilled labour is the chief agent in the produc- 
 tion or the transport of wealth. Capital, and those 
 higher forms of labour that are naturally associated 
 with capital, are equally essential, and if a propor- 
 tion could be assigned where two factors are necessary, 
 the proportion of value would be far greater in capital 
 and skill than in mere manual labour. As regards 
 transport the case is perhaps too obvious to need 
 illustration ; every one can see that ships and railroads 
 are forms of capital tliat require in their construction
 
 A VOYAGE AROUND AFRICA 215 
 
 and management the highest forms of skilh It was 
 Adam Smith who pointed out that of all improvements 
 in agriculture improvements in the means of com- 
 munication are the most important. But in this 
 country we are so much accustomed to facilities of 
 transport of all kinds that they seem to us quite 
 natural, and we hardly realise the importance of capital 
 and skill in their origin and preservation. In new 
 countries, however, the evidence is too palpable to be 
 overlooked. Koads — even the w^orst in Africa are 
 better than none, — railways, buildings, machinery, and, 
 indeed, endless varieties of capital are essential to indus- 
 trial development. All the unskilled labour in Africa 
 could not make a railway or send across the sea a ton of 
 produce. Perhaps the most impressive instance of the 
 power of capital in the whole of the voyage is to be 
 found in the construction and management of the Suez 
 Canal. This example of the higher forms of industry 
 is the more striking through the contrast offered by 
 the barren desert that meets the eye on every side.-^ 
 I need not remind you that this work has changed 
 the course of trade to the East, and I will not weary 
 you with statistics of tonnage. I will mention one 
 little fact by way of illustration. The average pass- 
 age through the Canal — as there are no locks, and 
 through the salt lakes a higher speed is attained 
 — is about eighteen hours for ordinary vessels. For 
 this privilege of passage simply — not reckoning any 
 other expenses — the ship I was on paid 30,000 fr., 
 or about £1200. 
 
 1 The gardens at the stations on the banks are very well kept, and 
 make the contrast still more marked.
 
 2i6 A VOYAGE AROUND AFRICA 
 
 I will give one other instance of the importance of 
 capital, and this time an example of the Incus a non 
 lucendo kind — an example of the effect of capital not 
 being forthcoming in the place and at the time when it 
 is needed. I have already mentioned Delagoa Bay as, 
 perhaps, the finest natural harbour and the most fever- 
 stricken port in Africa. N^ow I believe there is no 
 doubt that the fever might be conquered — that the 
 place might at any rate be made as healthy as 
 Natal and other East African ports if only capital 
 were expended in draining the swamps. Capital is 
 also required for the construction of the wharfs and 
 buildings requisite for a first-class port. Delagoa Bay 
 is the nearest and the best access by sea to the central 
 country that is being so rapidly developed under the 
 stimulus of the gold mines. A railway to Johannes- 
 burg has just been opened, and if the occasion were seized, 
 in a few years Delagoa Bay might become one of the 
 most thriving ports in South Africa ; as it is, considering 
 its importance, it is one of the most backward. And 
 the primary and simple reason is that there is not 
 sufficient security and advantage offered to attract the 
 capital (including the skill required in its management). 
 
 If we inquire further why capital — contrary to all 
 expectation and experience — does not flow to a place 
 where it is so obviously required, the explanation is as 
 obvious as the fact. It is due almost entirely to bad 
 government, and with a few illustrations on the 
 influence of government I will conclude the last topic 
 I set myself to illustrate. 
 
 Delagoa Bay is in the hands of the Portuguese, and 
 Portugal is neither able nor willing to develop its
 
 A VOYAGE AROUND AFRICA 217 
 
 resources. As a matter of fact, Portugal cannot keep 
 in order the natives in the district, and it is generally 
 believed that but for the respect the natives bear to 
 the British, the whole settlement would have been 
 swept away. The only concern of the Portuguese is 
 to make as much as they can out of taxes and port 
 dues. The trade is in the hands of the British and 
 Dutch, and the capital, with the exception of a railway 
 the Government seized, is in the same hands. The 
 Portuguese have not even the energy to mark with a 
 few buoys the channel that leads to the river, and 
 they make no observations on the shifting of the sands. 
 When a vessel arrives they send out their officials, and 
 leave on board a soldier with a flag. The soldier can 
 speak no language but Portuguese, and apparently does 
 nothing but occasionally run up his flag and eat the meals 
 the ship provides. The Portuguese Government is, in 
 fact, an anachronism, or perhaps one should say a curious 
 survival. ISTo one can fail to be struck with admiration 
 at the audacity and enterprise of the early Portuguese 
 navigators four or five centuries ago. Even now, with 
 towns scattered at intervals along the coast, and with 
 the worst points lighted and marked, there is something 
 almost appalling in passing hundreds of miles — hundred 
 after hundred — of savage desolation. The coast is 
 in general unapproachable through the surf, and the 
 mouth of nearly every river is protected by dangerous 
 sand-banks. Great indeed must have been the courage 
 and energy of those who in small sailing vessels, with- 
 out chart or sailing directions, not only ventured to 
 explore, but planted settlements that in spite of 
 pestilence and warfare have endured to our own times.
 
 2i8 A VOYAGE AROUND AFRICA 
 
 But our admiration for the past makes the present 
 seem still more miserable and backward. Under 
 present conditions the only thing that preserves the 
 Portuguese power is the jealousy of other governments 
 of one another — on a smaller scale Portugal is the 
 Turkey of South-East Africa. 
 
 There is another economic problem of the greatest 
 importance in every district of Africa that Europeans 
 have taken possession of — viz. the problem of native 
 labour. A policy of extermination — direct or indirect 
 — would not only be immoral, but, as regards industry, 
 suicidal. But if the natives increase and multiply, 
 and gradually become accustomed to European methods 
 and ideas, on what principles is the government to be 
 carried on ? I venture to think — relying not on the 
 casual and imperfect observations I could make at 
 various ports, l3ut relying rather on the results of the 
 history of great colonising nations — I venture to think 
 that the policy of simple repression and of affected 
 racial superiority miist be soon abandoned. 
 
 Europeans have, and must have for a long time, 
 great advantages over the natives, for they possess in 
 most cases nearly all the capital, skill, and training, 
 whilst the natives can only offer unskilled labour. 
 Now the best policy from the economic standpoint is 
 to make this labour as efficient as possible, and the 
 way to make labour efficient is to improve the condi- 
 tions of labour and to raise wages in proportion to the 
 improvement in the work done. I do not say that 
 subject and inferior races ought to be at once, or even 
 ultimately, entrusted with political power, or even 
 with the administration of justice ; my argument is
 
 A VOYAGE AROUND AFRICA 219 
 
 purely economic, and it rests on the broad principle of 
 the exchange of services. The only right now recog- 
 nised by civilised nations of one man over the labour 
 of another is founded on contract, and if Europeans 
 are foolish enough to offer as part payment of black 
 labour vexatious and harassing regulations, open con- 
 tempt, and underhand fraud, they must expect a 
 corresponding discount in the efhciency. The only 
 special interference on the part of Government that 
 seems desirable is of the same kind as that practised 
 in this country in the laws affecting employment in 
 mines and factories, the truck system, and the like — 
 legislation that is conceived in the interests of the 
 workers. Laws that are merely intended to cast a 
 stigma on race are economically unsound ; they cause 
 unnecessary friction, and in the end may destroy the 
 industrial system. 
 
 It is pleasant, in conclusion, to give an example of 
 the good government of subject races, an example 
 that is too well known to require elaboration, but one 
 that can never fail to impress any one who comes in 
 practical contact with it — I allude to the government 
 of India. 
 
 It is impossible to visit any large city or pass 
 through any populous district in India without being 
 struck by the extremely small proportion of the 
 British to the native population, and the comparatively 
 slight display of British military force. This seems 
 all the more wonderful if we remember that the 
 Christian religion has hardly touched the outermost 
 fringe of native society, and that the masses of the 
 people still cleave to the religion and moral notions of
 
 220 A VOYAGE AROUND AFRICA 
 
 their ancestors, aud those notions are of the most 
 varied aud conflicting kinds. How, then, comes it that 
 a mere handful of British can govern with content 
 millions of people altogether so different by race, creed, 
 manners, and customs ? There can be no question that 
 the principal and the sufficient reason is that the 
 British Government in the administration of justice 
 provides that elementary security which is the 
 foundation of the economic prosperity of every nation. 
 British justice commands the respect of the natives 
 because they feel assured that it is free from any taint 
 of corruption. The members of the Indian Civil 
 Service, by simple straightforward honesty of purpose, 
 that fortunately is so common, so universal, that it is 
 never noticed, create a feeling of loyalty to the Crown, 
 of obedience to the laws, of content with their state 
 that could never be engendered by all the regiments 
 of Eussia. In the course of this long voyage there 
 were many things calculated to arouse a feeling of 
 patriotism and admiration for the courage and energy 
 of those who have built up the British Empire. The 
 frowning barren rocks of Aden and Gibraltar that 
 guard the entrance to two great seas must always 
 strike the imagination with a sense of our naval 
 supremacy, but greater still is the effect of observing 
 that British ships cover more than half the tonnage of 
 the world. And to sail round a vast continent and to 
 realise that most of the great lines of development are 
 already, or by the natural growth of wealth and 
 population must eventually come, under the dominion 
 of the British race offers to the mind a gigantic 
 picture of the expansive powers of our industry and
 
 A VOYAGE AROUND AFRICA 221 
 
 commerce ; but more impressive still is the knowledge 
 that by simple justice and personal uprightness a 
 few British magistrates can rule in contentment the 
 millions of the varied races and peoples of the ancient 
 civilisation of India.
 
 XII 
 
 SLAVEKY m ZANZIBAEi 
 
 The short visit I recently made to Zanzibar certainly 
 gives me no claim whatever to express an opinion on 
 the condition of the slaves in the island, and I am 
 ready to admit that such casual visits to foreign places 
 often give rise to wrong impressions. But seeing that 
 Zanzibar is from many points of view — historical, 
 political, ethnical — one of the most interesting places 
 in the world, it is only natural that any one who has 
 the good fortune to go there should give more attention 
 than the man in the street to the official correspond- 
 ence j)resented to Parliament last April. As the 
 action of the Government on the question of the 
 immediate abolition of slavery may be largely guided 
 by this correspondence, it deserves careful examination, 
 and the criticism that follows is based on these 
 documents, and not upon totally insufficient personal 
 observation. In fact, if I were to simply record my 
 own impressions, I should say that I never saw a more 
 happy populace, and in confirmation it is interesting 
 to quote the official statement of Mr. Eodd {Corre- 
 spondence, p. 17): — "As regards the town slaves of 
 
 ^ Written Kovember 1895.
 
 SLAVERY IN ZANZIBAR 223 
 
 Zanzibar, I think no one can fail to be struck with 
 the gaiety and lightness of heart that characterises this 
 population. A gloomy face is the exception, certainly 
 amonsf the women, and no one who has assisted at their 
 dancing and singing clubs would come away with the 
 impression that the yoke of servitude oppressed them." 
 It may be admitted also that, as regards material com- 
 fort and general well-being, the domestic slavery in 
 question, at any rate in many cases, does not involve 
 any of the horror usually associated with slavery. " The 
 work they have to do," continues Mr. Eodd, " is not 
 onerous for the most part, and that done, there is no 
 interference wdth their liberty of action. Those not 
 actually employed in the family circle of the master 
 engage in any employment that offers, many of them 
 going as domestic servants into other families, the 
 only obligation then remaining towards their owners 
 being the payment to them of a certain proportion of 
 the monthly wages. In return for this the master is 
 under the obligation of caring for them when sick, and 
 providing for them when too old to work. There 
 exists, therefore, a tie of mutual self-interest, which 
 long association has frequently moulded into one of 
 affection." From the same evidence it appears also 
 that voluntary emancipations are frequent, and that 
 this tie of affection remains unbroken ; and cases are 
 recorded in which a slave liberated through Europeans 
 has brought back the free paper, saying that he would 
 rather not have it, " for who then," he asks, " will 
 look after me when I am sick, and provide for me 
 when I am old ? " Mr. Hardinge, the present Consul- 
 General, also shows in an elaborate way that slavery
 
 224 SLAVERY IN ZANZIBAR 
 
 in Zanzibar, as in other Moslem countries, rests upon 
 relio'ious law, and enumerates the various customs and 
 regulations by which the slave is protected against 
 cruelty and ill-treatment. Mr. Hardinge further lays 
 great stress on the fact that if the existing decrees can 
 be enforced, slavery must in a few years be completely 
 abolished ; for example, slaves cannot be lawfully im- 
 ported, and any persons born after 1890 in Zanzibar 
 and Pemba are born free. As the average of life does 
 not appear to be long, it is plain that these two regula- 
 tions alone would put a stop to slavery in a compara- 
 tively short period. At the same time he argues very 
 strongly that immediate abolition would involve the 
 island in grave difficulties, both social and economic, 
 and would also seriously embarrass the finances, and 
 thus the powers of the Government. In these argu- 
 ments he relies to a great extent on the opinion of 
 General Sir Lloyd Mathews, who, through his long 
 connection with the Government of the Sultan, knows 
 more about Zanzibar than any other European. Well, 
 then, the question naturally arises : Why should we 
 run the risks pointed out by authorities on the spot 
 for a very doubtful advantage ? If the evil will 
 gradually die away with the present generation with- 
 out social disturbance, why for a mere doctrinaire 
 principle should we upset the greatest happiness of 
 the greatest number ? — for the authorities maintain 
 that the slaves themselves will be the sufferers. Mr. 
 Stanley, for instance, in the debate in the new House 
 of Commons, boldly maintained that we ought to leave 
 the matter to the people on the spot, who understand 
 it in all its bearings.
 
 SLAVERY IN ZANZIBAR 225 
 
 It is precisely against this doctrine that I venture 
 to protest, and, on the evidence of the official corre- 
 spondence itself, to advocate immediate abolition. As 
 regards the opinions of the Zanzibar authorities, they 
 are apt to lose sight of broad principles in a maze of 
 practical difficulties, and through their very familiarity 
 with the evil. General Mathews is, no doubt, an 
 able military administrator, but he was described to 
 me in words which in a sense are highly compli- 
 mentary, as being " more Arab than the Arabs." Mr. 
 Hardinge, again, whose distinguished career entitles his 
 authority to the highest respect, must inevitably lay 
 great stress on the financial difficulties of the Govern- 
 ment. I proceed to notice briefly his arguments 
 against immediate abolition : — 
 
 (1) There is the implication, if not the express 
 assertion, that slavery, being in accordance with the 
 Mohammedan religion, does not seem so grievous to 
 the slaves as to us, and that we ought to tolerate it 
 in the meantime, just as we tolerate other religious 
 customs in India, and await its gradual abolition with 
 an even mind. I reply that the phrase religious 
 toleration will no more cover slavery than it will cover 
 human sacrifices. If we cannot govern Zanzibar 
 except on Mohammedan principles of this kind, it is 
 better to leave it altogether. Europe has had enough 
 of Mohammedan economics in the dominions of the 
 Sultan of Turkey. 
 
 (2) Mr. Hardinge assumes, on the authority of 
 General Mathews, that in the event of immediate and 
 effective abolition, three-fourths of the whole body of 
 slaves would abandon their work, and that after a very 
 
 15
 
 226 SLAVERY IN ZANZIBAR 
 
 few months the great majority of the clove and other 
 plantations would go out of cultivation. But the slaves 
 must do some kind of work to obtain a livelihood, and 
 it is a matter of experience that hired labour is always 
 more efficient than forced labour. 
 
 (3) Mr. Hardinge assumes that if the present 
 decrees are enforced, slavery will disappear in about 
 fifteen years. But it is perfectly plain, from the 
 figures given, that the law against importation has 
 never been adequately enforced, and never will be, so 
 long as slavery is permitted. All slave countries rely 
 on importations, and these importations cannot be pre- 
 vented. 
 
 (4) Mr. Hardinge puts down the loss of revenue, 
 owing to the supposed diminution of the clove cultiva- 
 tion, at £26,000, and the increase of expenditure at 
 £20,000, and altogether estimates the probable deficit 
 at £35,000 a year. In the first place, it may be 
 replied that no country can flourish under slavery, and 
 that with free labour the revenues would increase ; and, 
 secondly, if the British Empire will not spend the 
 paltry sum required for compensation and for en- 
 forcing the law, it is unworthy of its position. We 
 think nothing of spending millions in punitive expedi- 
 tions for an insult to our flag or the occasional murder 
 of a missionary, and shall we grudge a few thousands 
 to take away the reproach of conniving at slavery ?
 
 INDEX 
 
 Abilities, part of fixed capital, 84, 
 97, 108; wages of, 131, 132, 
 148 (see also Skill) 
 
 Abstract character of political ecou- 
 omy, 161 {see also Methods) 
 
 Accumulation of masters' stocks, 
 8, 9, 11 ; of material capital, 38, 
 100, 101, 102, 130, 165 ; taxes 
 teud to check, 144 
 
 Africa, voyage round (1895), Essay 
 XI. , 202 seq. 
 
 Agrarian pauperism, 149 
 
 Agricultural, wages and trade- 
 unionist claims, 11, 12 ; pro- 
 gress, 77, 78 ; labourer — his 
 mediaeval type the slave, 85, 
 86 ; produce consumed by the 
 masses, 128 ; society, 82, 92, 
 130 ; land, skill in its manage- 
 ment, 131 ; depression, 153 
 
 American economists, 100 
 
 Anarchism and British trade unions, 
 21, 29 
 
 Anglo-Saxon, old methods of com- 
 pensation, 103 ; energy, 148 
 
 Annals of Commerce (Anderson and 
 Macpherson), 174 
 
 Arbitration, its possibilities, 7, 8 {see 
 also Conciliation) 
 
 Aristotle, his classification of virtues, 
 40 
 
 Arts, reasons for loss of certain, 80, 
 81 
 
 Assessment for poor relief, 192 
 
 Atkinson, E., 102 
 
 Austrian economists, 176, cf. 201 
 Authority, sphere of, its relative 
 contraction, 137, 138 ; present 
 tendency to extend, 142 ; its 
 danger, 145 ; inferior to in- 
 dustrial libertj', 146-149 ; its 
 insidious encroachment, 143, 
 149, 150, 188, 189; abuse of 
 in economics, 164 
 
 Bacon, Francis, on friendship, 71 
 
 Balfour, Mr. A. J., his views on the 
 currency question, 167 
 
 Banking, 38, 83 ; governmental 
 regulation of note issues, 186 ; 
 need of reform, 187 
 
 Bentham, 183 
 
 Bequest, early limitation of, 123 
 
 Boards of conciliation, 7, 15 (see 
 also Conciliation) 
 
 Bohmert, Prof., 48 
 
 Bonus on wages. Essay III. 2xissim, 
 especially 59, 60 
 
 Booth, Mr. C, old age pension 
 scheme, 93 n., 144, 145 
 
 Bounties, on French shipping, 147 ; 
 on particular species of thrift, 
 198 
 
 Brain-power, as aff'ectiug distribu- 
 tion, 130-133 
 
 Brentano, L., 174 ii. 
 
 Briggs, Messrs., experiment in profit- 
 sharing, 54-58 
 
 British Association, meetings of, 1, 
 2, 196
 
 228 
 
 INDEX 
 
 British, governmental interference, 
 
 147, 187-190; connivance at 
 
 slavery, 208 seq., 226 ; justice 
 
 in India, 219-221 ; shipping, 
 
 147, 220 
 Budget, scope for the trained critic, 
 
 165, 166 
 Burke, Edmund, religion the basis 
 
 of the commonwealth, 169, 
 
 170 
 Burns, Robert, eulogium on Adam 
 
 Smith, 157 
 Bushill, Mr., 50 
 Business, see under Profit-sharing, 
 
 Strikes 
 Business cajjacity, 131 ; underrated 
 
 by CO - operative productive 
 
 societies, 51, 67 
 
 Cabinet, the, working men's leaders 
 compared to, 20 
 
 Cairnes, Prof., 161, 173 
 
 Capital, upkeep during strike, 8 ; 
 not lost, 9 ; living capital, 
 Essay v., 117 seq.; cajjital and 
 labour, their relations misinter- 
 preted, 26-28, 120-122, 126 ; 
 meanings unduly narrowed, 83, 
 84 ; analogy and contrast, 98, 
 cf. 134 ; their relative strength. 
 Essay VI. ; endless disputes, 
 153 ; effect of taxes on, 144 ; 
 as a productive agent in Africa, 
 203, 205 seq. ; importance of, 
 214-216 
 
 Capitalist qua labourer, value of the 
 species, 112 
 
 Carlyle, Thomas, on the "dismal 
 science," 157 
 
 Census returns, their bearing on 
 trade union claims, 11, 12 ; 
 none of possessions, 76 ; occu- 
 pations, 88, 90, 91 ; the "un- 
 occupied" class, 91, 110, 124, 
 125 
 
 Chamberlain, Mr., on old age pen- 
 sions, 199 
 
 Chicago, the great strike at (1894), 
 22, 24 
 
 Children, assistance to parents. 
 
 195-197 ; cost of rearing, 104, 
 117, 118, 200 
 
 Civil service salaries, valid basis of, 
 35, 36 
 
 Civilisation, study of origins, 72 ; 
 its most imjjortant fact, 126 ; 
 and governmental functions, 
 137, 138 
 
 Class interest, unduly intensified in 
 strikes, 6, 7, 25, 26 
 
 Classical jiolitical economy, late re- 
 action against, 29, 30 ; present 
 reaction in favour of. Essay IX. ; 
 applications of its principles, 
 202 seq. (see also Political 
 Economy) 
 
 Cliffe Leslie, 161, 162, 174 n. 
 
 Collectivism, a programme of, 41 ; 
 basis of proposals for, 73 ; v. 
 individualism, 28, 29-37, 142 
 seq. 
 
 Colonus, Roman, 46 
 
 Combinations, laws affecting, 28 ; 
 their cause, 33 ; of labour, 34- 
 37, 42 ; of masters, 37, 42, 63 ; 
 in professions, 35 ; the State sup- 
 posed the greatest, 41 {see also 
 Competition v. Combination) 
 
 Commandment, an old, and old age 
 pensions, Essay X. 
 
 Common ownership, 123 
 
 Communication, means of, 78, 164, 
 214, 215 [see also Transport) 
 
 Comparative method in economic!, 
 its basis, 175-177; in juris- 
 prudence, 186 
 
 Competition v. combination, 28, 29- 
 37 ; the golden mean, 39, 40 ; 
 actual conditions, 42 ; allows 
 survival of the fittest, 125, 126 ; 
 tends to adjust reward to desert, 
 130-133, 148, 149 ; superior to 
 governmental control, Essay 
 VII. ^jffssm, esjiecially 14"6- 
 149 ; and the maximum utility 
 ideal, 185 {see also Contract, 
 freedom of ; Laisser -faire ; 
 Liberty ; Natural Liberty) 
 
 Complexity, of human affairs, 25 ; 
 of society, 138 ; of modern in-
 
 INDEX 
 
 229 
 
 dustry, 149, 199 ; of economic 
 problems, 156, 164, 165, e.g. 
 poverty, 195 
 
 Conciliation, its possibilities, 7 ; and 
 the demand for a living wage, 1 5 ; 
 the effective remedy for strikes, 
 43 ; present interest in, 153 
 
 Conditions of woi'k, see Employment 
 
 Confidence, strikes and decay of, 26 
 
 Consumer, the attempt to raise wages 
 at his expense, 15, 19, 36 ; 
 mediaeval restrictions on, 94, 95 
 
 Consumers' rent, 180 n. 
 
 Consumption, effect of protection 
 and of combinations, 37 ; of 
 commodities by the masses, 88- 
 90, 128, 129 ; of capital, 102 
 
 Continuity, of progress in produc- 
 tion, 79, 80 ; of species of labour, 
 119, 120 ; of economic types, 
 194, 195 
 
 Contract, progress from status to, 
 94, 95, 186, 219; freedom of, the 
 essence of natural liberty. Essay 
 VII. passim 
 
 Contracts, governmental functions 
 as regards, 141, 142, 186, 187 
 
 Contrast, force of, 70, 71, 75 
 
 Co-operation, productive, why a 
 failure, 51, 67 ; complex in 
 modern industry, 199 
 
 Co-operative societies and profit- 
 sharing, 67, 68 
 
 Cossa's Introduction, 174 n. 
 
 Cost of production, of human beings. 
 Essay Y.xMssim, 117, 118, 127 
 
 Cournot, 178 
 
 Craft guilds, trade unions compared 
 to, 19 
 
 Craftsmen, mediaeval, 81, 82, 95 
 
 Credit system, an essential product 
 of mental labour, 38, 83, 134 ; 
 is it wealth ? 97 
 
 Crimean War and governmental 
 inefficiency, 146 
 
 Crisis, commercial, 140 
 
 Cunningham, Dr. W., 177, 182 
 
 Currency, question not a party one, 
 167 ; need of reform, 187 
 
 Custom in Middle Ages, 92, 95 
 
 Darwin, Charles, 74, 75 
 
 Dead capital, 83, 84, Essay V. 
 2>assim, 117 seq., 124 
 
 Deductive aspect of political econ- 
 omy, 177 seq. 
 
 Degradation, of labour, 51 ; of some 
 industrial arts, 80, 82 
 
 Delagoa Bay, 204 ; lacks capital, 
 and why? 216,217 
 
 Demand and supply, and living wage, 
 16, 17 ; in labour market, 31- 
 36, 64 ; price dependent on, 
 
 179 ; marginal increments, 180 
 Democratic Government, its tend- 
 ency to restrict liberty, 142 
 
 Depreciation of French assign ats, 
 168 
 
 Desert, reward according to, 31, 32, 
 92-94, 130-133, 148, 149, cf. 
 125, 126 
 
 Disintegi-ation of family, 196 {see 
 also Family) 
 
 Distribution, its intimate relation 
 to production, 77 ; progi-ess in 
 respect of, 84-94 ; ditficulties 
 of comparison, 85, 86 ; evi- 
 dence of production as to, 87- 
 92, 127-129 ; past and present, 
 92-94 {see also Desert) ; substi- 
 tution of contract for status, 
 94, 95 ; origin of inequalities, 
 130-133, cf. 125, 126; con- 
 flicting ideals, 148, 149, 183- 
 185 {see also Ideals) 
 
 Disutility, 191 {see also Negative 
 Utility) 
 
 Division of labour, 83, 90, 100, 186 
 
 Economic : history, 159, 160, 173- 
 177, cf. 72 seq. ; ideals, see 
 Ideals ; language, 162, 163, 
 201 ; methods, 156, 161, 173- 
 
 180 ; principles, 5 seq., 45, 46, 
 161-163, 201 seq.; problems, 
 their complexity, 156, 164, 
 165 ; not party questions, 166, 
 167 
 
 Edgeworth, Prof. F. Y., 178, 183 
 Education, inadequacy of self- 
 interest, 51 ; more than techui-
 
 230 
 
 INDEX 
 
 cal required, 84 ; a real expense, 
 98, 104, 117 ; a good invest- 
 nieut, 108, 124 ; economic 
 justification of State-aided, 125, 
 126 ; not the chief cause of 
 inequality in distribution, 132 
 
 Edwards, Mr. Clem., 3 n. 
 
 Etlicieucy of labour, eflect of high 
 wages, 14 ; competition and 
 wages, 31, 32 ; stimulus of 
 self-interest, 45-47, 50, 51 ; 
 increase in, the basis of proiit- 
 sharing, 53, 55, 56, 65, 66 ; 
 the chief element in progress, 
 130 ; influence of intellect, 
 132 ; African native, 218, 219 
 (see also Inefficiency) 
 
 Election, General (1895), 188 n. 
 
 Employment, regular, and living 
 wage, 16 ; and restricted out- 
 put, 17 ; the outcome of 
 perfect competition, 32 ; con- 
 ditions of, 59, 63, 122, 211 scq., 
 214, 218, 219 ; uncertainty, 
 64, 121, 122 
 
 England, past and present, 92-95 ; 
 poor laws in, 195, cf. 192 
 
 English political economy, 157- 
 159, 160 seq., 172 seq. 
 
 Eqiiality, see Distribution, Ideals 
 
 Ethics, distinct from economics, 181 
 
 Europeans in Natal, their economic 
 ignorance, 207 ; economic ad- 
 vantages over African native, 
 218, 219 
 
 Evolution, theory of, its influence 
 on idea of progress, 74 ; " the 
 past in the present," 194 ; of 
 society, and distribution of 
 wealth, 127-129, cf. 88-94, 
 125, 126 
 
 Exchange : of services, modern in- 
 dustry rests on, 138, 219 ; real 
 advantage of, 179, 180 
 
 Factory legislation, self-interest 
 and, 50, 51 ; freedom and, 95 
 
 Family, the, as unit of society, 
 123, 124 ; tendency towards 
 disintegration, 196 
 
 Fashion, in medicine and economics, 
 6, 6 ; in politics, 18, 20 
 
 Feudal system, Adam Smith's ac- 
 count of, 175 
 
 Fever in Africa, 203, 204, 216 
 
 Final utility, 163, 179 
 
 Firemen on steamers in tropics, 
 hard life of, 211-214 
 
 Flint, Prof. R., on the economic 
 element in progress, 159 
 
 Fluctuations, see Employment, un- 
 certainty 
 
 Foreign competition and British 
 agriculture, 164 
 
 Formal justice, principle of, 188 
 
 Fox, Head, and Co., their attempt 
 at profit-sharing, 54, 58, 59 
 
 Freedom, Essay VII. jyassvm, re- 
 action against, 29, 30 ; former 
 restriction in England, 86 ; the 
 essence of progress, 94 - 96 ; 
 and value of abilities, 108 ; of 
 the press, 155, 156 ; without 
 knowledge, 171 ; Britain tam- 
 pering with the principle, 208- 
 211, Essay XII. (see also 
 Liberty) 
 
 "Freeland" expedition, the, 206 
 
 Free trade, 143, 153, 164 
 
 French : assignats, depreciation of, 
 168 ; shipping, bounties on, 
 147 ; Revolution, the dream 
 of, 33 ; current theories, 74 
 
 German : historical method, 161 ; 
 view of the scope of political 
 economy, 181-183 
 
 Gift'en, Sir R., on progress of work- 
 ing classes, 81, 93 ;;. ; on growth 
 of material capital, Essay V. 
 jiassim. 
 
 Gilman, Mr. N. P., 49, 54, 57 
 
 Godin, M., 61, 64 
 
 Goethe, 176 
 
 Government : (1) over-interference, 
 15, 33; its evils,143-146; infec- 
 tious, 143, 149, 150, 188, 189 ; 
 outcome of democratic prin- 
 ciples, 142 ; influence of the 
 press, 155 ; British, 147, 187-
 
 INDEX 
 
 231 
 
 190 ; reaction against, 188 w. ; 
 (2) its admitted industrial 
 functions, 95, 137, 138, 141, 
 142, 185, 186 ; the decisive 
 consideration, 191 ; (3) of 
 Zanzibar, a branch of our own, 
 208 ; its revenue dependent 
 on slavery, 209, Essay XII. 
 Greek : references to the golden age, 
 74 ; life as an ideal, 182 
 
 Happinkss, maximum, as an econ- 
 omic ideal, 183-186 
 
 Hardinge, Mr., on slavery in Zanzi- 
 bar, 223 seq., cf. 208 
 
 Hesiod, 74 
 
 Highlands of Scotland, 100 
 
 Historical method, over-rated, 161 ; 
 false and true, 173-177, 186 
 
 History, change in meaning of, 72 ; 
 condemns governmental inter- 
 ference, 146 ; its relation to 
 political economy, 159, 160, 
 173-177 
 
 Homer, 176 
 
 Hours of labour, 33 ; governmental 
 regulation of, 73, 145, 150, 188 n. 
 
 Houses, value of, 106 ; compared 
 ■with value of people, 109, 110, 
 113 
 
 Human nature, constant element in, 
 175-177 
 
 Hypothetical character of political 
 economy, 161, 177 seq. 
 
 Ideals, a living wage, 14 ; com- 
 petition V. combination, 30-34, 
 37, 38 ; liberty, and the wealth 
 to the worker, 94-96, 148, 
 149 ; not within the scope of 
 economic science, 181-183; 
 authority and maximum util- 
 ity, 183-185 
 
 Imperial federation, Adam Smith 
 advocates, 158, 187 
 
 Impressionism, bad science, 177, cf. 
 173, 174 
 
 Income, national, capitalisation of 
 different species. Essay V. 
 
 2Jassim, 118 ; more stal)le 
 under large system of industry 
 than under ^'eii'te culture, 
 123 
 
 India, currency difficulty, 167 ; 
 British justice in, 219, 220 
 
 Individualism, 196 {see also Com- 
 petition, Liberty) 
 
 Indoor relief, 197 
 
 Industrial : sec Competition, Govern- 
 ment, Ideals, Liberty, Partner- 
 ship, Progress, Organisation 
 
 Inefficiency of slave labour, 46, 208 
 210, 226 {see also Efficiency) 
 
 Inequality of wealth, origin of, 130- 
 133 ; influence of liberty, 148, 
 149 {see also Distribution) 
 
 Inheritance, our great, not material 
 wealth but skill, 130 
 
 Insurance, life, principle of, 104, 
 105 
 
 Intensity of labour of firemen on 
 .steamers in trojiics, 211-213 
 
 Interest, rate of, and capitalisation 
 of income, 101, 102; pure, 
 107, 112 
 
 Inventory of national wealth, 106 
 seq. 
 
 Ireland, 82, 123, 188 w., 189 
 
 Irish problem, Petty's solution, 99, 
 100 
 
 Jevoss, W. S., profit-sharing, 49, 
 62, 63 ; influence on theory, 
 161, 179, 180 
 
 Jobbery and governmental control, 
 146, 188 
 
 Johannesburg, 204, 205 
 
 Joint-stock enterprise, 187 
 
 Journalism, political economy and, 
 Essay VIII. 
 
 Judicial rents, 188 »., 189 
 
 Jurisprudence, eff'ect of comparative 
 and historical methods, 186 
 
 Justice, liberty and, 148, 149 ; Brit- 
 ish, in India, 219-221 
 
 Keynes, Dr. J. N., 173 
 Kidd, Mr. B., 169, 170 
 Knies, Karl, 174 n.
 
 232 
 
 INDEX 
 
 Kiiowlerlge is power, 82-84, 95, 
 96, 171, 176 
 
 Labour, conipetitiou r. combination, 
 28 - 37, 39, 40, cf. 13-18; 
 increase in productivity, 77- 
 84 ; as a source of national 
 income, 99, 100, 102, 106, 107 ; 
 its national value (iiia labour, 
 112-114, 120, 129, 130 ; per- 
 manence of species, 119, 120 ; 
 narrow aud broad senses, 120, 
 
 124, 125, 134 ; permutation, 
 
 125, 126 ; to what use devoted, 
 127-129 ; in relation to con- 
 tract aud private property, 
 1 39 ; why dear at Delagoa 
 Bay, 204 ; ineffective without 
 capital, 205, 206 ; of stokers 
 ou steamers, 211-214 ; hired 
 r. forced, 226 ; labour and 
 capital, se.e under Capital (see 
 also EfBcieucT, Inefficiency, 
 Hours, Skill) 
 
 Laisier-faire, 185-187, cf. 95, 137, 
 
 138, 141, 142 
 Land-and-stock lease, 46 
 Laws of political economy, 154 
 Leaders: (1) of the men, their 
 
 respect for public opinion, 8 ; 
 
 their responsibility, 20, 21 ; 
 
 their magnificence, 40 ; (2) of 
 
 public opinion, 40, 41 
 Leclaire, M., 49, 53, 61 
 Legislation, not wanted for strikes, 
 
 7 ; lags behind, 138, 186, 187 ; 
 
 its immediate and remote 
 
 effects, 150, 157, 188-190, e.g. in 
 
 poor relief, 191 ; in interest of 
 
 worker, 219 
 Liberty, perfect, the basis of perfect 
 
 competition, 32, 33 ; sacrificed 
 
 by labour combinations, 34 ; 
 
 natural, 125, Essay VII., 156, 
 
 171, 193 ; pauperism its 
 
 fruit, 160 
 Light, more wanted on strikes, 7 
 List, F., 130 «. 
 Literature of political economy, 
 
 193 
 
 Living capital. Essay V., also Essay 
 
 VI. jMSsim 
 Living wage, 4, 9, 13-18, 23, 33- 
 
 38 
 Lock-outs, 122 
 Locusts at Delagoa Bay, 204 
 London gas-works struggle, 45 
 
 Macaulat, T. B., 92, 93 
 
 Machinery, 78 ; influence on skill, 
 81, 82 
 
 M'Kiuley tariff, reaction against, 
 188 n. 
 
 M'ls eill, Mr., poor relief in Scotland, 
 197 
 
 Magnificence v. prudence, 40, 41 
 
 Maine, Sir H. S., 138, 142 
 
 Malthus, T. E., 157 
 
 Management, labour of under-rated, 
 51, 67 ; earnings of, 59, 101, 
 106, 107, 111-113, c/. 130-133 
 
 Mankind, value of, Essay V., also 
 117 scq. 
 
 Manufactures, progress in, 78 ; for 
 the masses, 128 
 
 Marginal increments, 162, 180, 193 
 
 Market, a perfectly organised, 31, 
 32 ; labour, imperfectly organ- 
 ised, 33 ; relation to scale of 
 ]iroduction, 90, 128 ; Govern- 
 ment should provide an open, 
 141 
 
 Marshall, Prof. A., 178, 180 
 
 Martial sjiirit, Adam Smith on, 
 158 
 
 Masters and men, their relations, 6, 
 8, 9, 25-27, 28, 29, 51, 52, 55, 
 56, 60, 61, 66 
 
 Mathematics in political economy, 
 177-180, 201 
 
 Mathews, General Sir Lloyd, on 
 slavery in Zanzibar, 224 seq. 
 
 Mechanical progress, 78 ; discoveries 
 seldom lost, 79-81 
 
 Metayer system, 46 
 
 Methods of political economy, 156, 
 161,173-180 
 
 IMiddle Ages, industrial conditions, 
 81, 82, 85, 86, 92, 94, 95, 182 
 
 Mill, J. S., profit-sharing, 48, 49 ;
 
 INDEX 
 
 233 
 
 industrial progress, 73, 75 ; is 
 skill wealth ? 97, 98 ; misrepre- 
 sented, 157, 158 ; successors, 
 160 ; critics, 161 ; rent, 162 ; 
 archaic ? 163 ; method, 173 ; 
 excursions into social philo- 
 sophy, 181 ; mobility of dis- 
 tribution, 185 ; importance of 
 new wants, 206 ; wages of de- 
 graded labour, 213 
 
 Miners, their victory (1893) hollow, 
 10, 11 ; their loyalty and cour- 
 age, 20-23 
 
 Minimum wage, see Living wage ; 
 subsistence theory, 207,208, (/. 
 13, 14 
 
 Mining, progi'ess in, 78 
 
 Mohammedan religion and econ- 
 omics, 224, 225 
 
 Monopolj', ruling idea of combina- 
 tion, 33-37 ; in labour, difficult 
 to maintain, 135 ; of brain 
 power the origin of inequality 
 in distribution, 130-133 
 
 Moral : energy, waste of in 
 strikes, 23-25 ; forces, econ- 
 omic value of, 45, 50, 51, 69 ; 
 element in progress, 72 
 
 Morality and political economy, 
 160, 210 
 
 Natal, Zulus in, 206, 207 
 
 Nation, every, an amalgam of 
 nations, 196 
 
 National inventory, see Inventory 
 
 Nationalisation : of everything, 27, 
 41 ; of laud, 188 n., 190 
 
 Nationality, essence of, destroyed 
 by strikes, 27 
 
 Native labour in Africa, 218, 219, 
 cf. 206, 207 
 
 Natural liberty. Essay VII.; and 
 survival of the fittest, 125 ; and 
 the greatest happiness ideal, 
 185 ; reaction in favour of, 
 185 seq., 193 {see also Freedom, 
 Liberty) 
 
 Nature, gro\vth of man's power over, 
 77-84, 176 ; as an agent of 
 production in Africa, 202-205 
 
 Navigation Laws, the, 158 
 Necessaries, 91, 93 
 Negative utility, 184, c/. Disutility 
 New unionists, 135, cf. 21, 27, 41 
 Newspapers, 91 ; their use to the 
 
 economist, 163 
 Norwich Congress of Trade Unions, 
 
 41, cf. 27 
 Nottingham, British Association's 
 
 meeting and great coal strike, 1 
 
 Occupations, their evidence as to 
 distribution of wealth, 88-91, 
 127-129; permanence, 104, 105, 
 119-122, 125, 126 
 
 Old age pensions, 73, 144, 188 /i., 
 190 ; and an old commandment. 
 Essay X. 
 
 Opportunities, competition afibrds, 
 125, 126, 132, 133 
 
 Organisation, industrial, 82-84 ; 
 is it wealth ? 97 ; and living 
 capital, 129, 130 ; comijlexity 
 of modern, 186 (see also 
 ComjDlexity) 
 
 Originality, its first requisite, 160, 
 161 
 
 Out-door relief, 152 ; its effect, 197 
 
 Output, restricted, and living wage, 
 9, 17, 18 
 
 Partnership, industrial, 49, 57 ; 
 profit-sharing not, 59 
 
 Paijperism, agrarian, 149 ; and 
 dependence on Government, 
 152 ; the fruit of liberty, 160 ; 
 and taxation, 165 ; the teach- 
 ing of the classical economists, 
 191, 192, Essay X. passim 
 
 Peasant proprietors, instability of 
 income, 122, 123 ; feed the 
 dead capital on the living, 124 
 
 People of this country, value of the. 
 Essay V., also 117 seq. 
 
 Percy, Mr. C. M., 3 n. 
 
 Permanence of industrial species, 
 104,105,119-122,124-126 ; of 
 the family, 123, 124 
 
 Permutation of individuals, 125, 126
 
 234 
 
 INDEX 
 
 Petty, Sir W., 92-93 n., 99, 100, 
 "102, 103, 105 
 
 Piece-work, 60 ; defects of system, 
 65 
 
 Pilgrims Progress, 38, 39, 70 
 
 Plato, 125, 170, cf. 105 
 
 Political Economy, and strikes, 2 ; 
 reaction against its supposed 
 principles, 29 ; the classical 
 teaching as to the limits of gov- 
 ernmental interference, Essay 
 VII. ; and journalism. Essay 
 VIII.; growth of public interest 
 in practical economic questions, 
 but not in study of the science, 
 153-157; causes: (1) popular 
 misrepresentation, 157-160 ; 
 (2) dissensions of economists, 
 160-162 ; (3) introduction of 
 technical language, 162, 163 ; 
 advantages of an economic 
 training to the journalist, 164- 
 171 ; reaction in favour of the 
 classical. Essay IX. ; its method, 
 173-180 ; .scope, 180-185 ; be- 
 lief in individual liberty, 185- 
 193 ; its relations to practice, 
 201 ; and morality, 160, 210 
 
 Poor relief, teaching of the classical 
 economists in reference to, 191, 
 192 ; in-door and out-door, 197 
 (.see also Pauperism) 
 
 Port Elizabeth, Kaffir village, 206 
 
 Portuguese incapacitv in South-East 
 Africa, 216-218" 
 
 Press, the, power of, 8, 155, 171 ; 
 freedom of, 155, 156 
 
 Price, does it measure utility ? 179, 
 180 /;. 
 
 Prices, higher during strike, 9, 
 11 ; profits and low, 12 ; and 
 living wage, 16, 17, 26 ; how 
 adjusted under competition, 31 ; 
 and combinations, 34-36 ; and 
 profit-sharing, 52, 53, 55, 57-59; 
 fi.\ed by law, 189, cf. 95 
 
 Principles, importance of general, 
 39, 173-177 
 
 Private enterprise, 141, 147 {sec 
 also Freedom, Liberty) 
 
 Production, 14 ; effect of protection 
 and of combinations, 37 ; pro- 
 gress in, 77-84, 96 ; chiefly 
 due to living capital, 130 ; its 
 evidence as to distribution, 77, 
 87-92, cf. 127-129 ; individual 
 liberty better than Government 
 control, 147, 149, 186 
 
 Profit-.shariug, Essay III.; business, 
 not charity, 45, 47, 60, 61, 65- 
 67 ; principle and analogies, 
 45-47, 65, 66 ; liter.ature, 48, 
 49 ; why slowly adopted, 49-52, 
 54, 55, 60-62 ; essential feat- 
 ures, 52, 53, 56, 59, 60 ; 
 experience, 53 seci.; relations 
 to Trade Unionism, 52, 56-59, 
 63 ; the indirect social benefits 
 neither essential nor peculiar to 
 it, 60, 61, 64, 65 ; not a sub- 
 stitute for wages, nor guarantee 
 against fluctuations, 63, 64 ; 
 must .stand or fall on its 
 economic merits, 66-68 
 
 Profits : lost during strike, 8, 9, cf. 
 121 ; relation of wages to, 51- 
 53, 55, 57-59 ; analysis of, 59 ; 
 four-fifths is wages of .skilled 
 labour, 133 ; effect of taxes on, 
 144 
 
 Progress, of labour, factors in, 38 ; 
 reality of industrial. Essay IV. ; 
 its two aspect.s, 76, 77 ; (1) 
 in production — knowledge its 
 basis, 77-84 ; (2) in distri- 
 bution — freedom its essence, 
 84-96, cf. 125, 126, 148 ; due 
 to creative ability, 132 ; not 
 a dismal theme, 159 ; most 
 marked on economic side, 160 ; 
 from status to contract, 94, 95, 
 186 ; towards disintegration of 
 family, 123, 124, 196 ; its 
 necessary condition in back- 
 ward countries, 206 
 
 Property, private, and natural 
 liberty, 139, 140 
 
 Protection and labour combinations, 
 36, 37 ; infectiou.s, 143, 153 
 
 Public, working classes the bulk of,
 
 INDEX 
 
 235 
 
 13 ; opinion, power of, 7, 8, 
 155 ; change in, 28-30, 153 
 seq.; good, trading and working 
 for, 199, 200 
 Pythagoras, 183 
 
 Quality of work, and profit-sharing, 
 47 ; sacrificed to quantity in 
 piece-work, 65 
 
 Railways serve the masses, 129 
 
 Reaction against the classical politi- 
 cal economy, 29 ; in its favour. 
 Essay IX. 
 
 Red Sea, 212 
 
 "Religious toleration" will not 
 cover slavery, 225 
 
 Rent, Ricardian theory of, 161, 162 
 
 Restricted output and living wage, 
 9, 17, 18 
 
 Reviewing, art of, value of economic 
 study, 167-169 
 
 Ricardo, iron law of wages, 157 ; 
 rent, 161, 162 ; complexity, 
 164 ; method, 173 ; rehabilita- 
 tion of, 180 
 
 Rodd, Mr., on slavery in Zanzibar, 
 222, 223 
 
 Rogers, Thorold, 46, 77, 161, 174 n. 
 
 Romans, the, as agriculturists, 46 ; 
 their sense of human kinship, 
 71 
 
 Roscher, 174 n. 
 
 Routine of governmental control, 
 146 
 
 Ruskin, Mr. J., 157 
 
 Russia, famine in, 123 
 
 Saturn, political economy not 
 
 banished to, 173 
 Savage state, causes of its disaji- 
 
 pearance, 206 
 Saving, dependent on contract, 140 ; 
 
 bounties on special forms of, 
 
 198 
 Scarcity-value of certain kinds of 
 
 brain capacity, 132 
 
 Schloss, Mr., 50 n. 
 
 Schmoller, 174 n. 
 
 Scope of political economy, 180-185 
 
 Scotland, herring fisher's "chance," 
 46 ; living capital, 100 ; un- 
 certainty of income under 
 crofting system, 123 ; Govern- 
 ment interference, 188 n., 189 ; 
 poor laws, 124, 195, 197 
 
 Security, strikes give shock to, 12, 
 21, 26, 27 ; how Government 
 can increase, 95, 186 ; an 
 essential element in natural 
 liberty, 140, 141 ; the press 
 can maintain, 171 ; lacking at 
 Delagoa Bay, 216, 217; pro- 
 vided by British Government in 
 India, 219, 220 
 
 Seebohm, F., his English Village 
 Cominunity, 177 
 
 Self-interest, influence on efficiency, 
 45-47, 65; not always in- 
 telligent, 50, 51 ; generally 
 promotes the national interest, 
 92 ; mutual, in the slavery of 
 Zanzibar, 223 
 
 Serfdom, break-up of, 46, 92-94, 
 126, 130, 131, 160 
 
 Services, exchange of, 138, 219 
 
 Shakespeare, 176 
 
 Shipping, British, 147, 220; French, 
 bounties on, 147 
 
 Sidgwick, Prof. H., 161, 162, 183 
 
 Skill, i^rogress in, 79-83 ; import- 
 ance of, 83, 84 ; gradation in, 
 86 ; Is it wealth ? 97, 98 ; 
 its value as capital, 98 scq., 
 129-133 ; demand for, at 
 Johannesburg, 205 ; its import- 
 ance in production, 214, 216, 
 218 
 
 Slavery, its break-up in progressive 
 societies, 86, 126, 130, 131, 
 160 ; the lilot on Greek civilisa- 
 tion, 182 ; in Zanzibar, 208-211, 
 Essay XII. [see also Inefficiency) 
 
 Smith, Adam, combinations of 
 masters, 37 ; skill is fixed 
 capital, 84, 97, 98 ; annual 
 labour and consumption, 102 ;
 
 236 
 
 INDEX 
 
 consumption of the masses, 
 129 n.; division of labour, 139 
 natural liberty, 137, 143, 193 
 smuggling, 145 ; Burns on 
 157 ; his nationalism, 158, 166 
 progress of opulence, 159 
 Jevons's preference for, 161 
 archaic ? 163 ; recognises com- 
 plexity of economic problems, 
 164, 189 ; methods, 173, 175- 
 177 ; advantage of exchange, 
 180 ; his programme not yet 
 accomplished, 187 ; Govern- 
 ment interference, 188, 189 ; 
 trading for the public good, 
 200 ; inefficiency of slave 
 labour, 208 ; improvements in 
 communication, 215 
 
 Smuggling, whence the romance, 
 145 
 
 Social science, political economy 
 as one branch of, 154 ; dis- 
 tinguished from other branches, 
 181 
 
 Socialism, and British Trade Unions, 
 15, 21, 27 - 29 ; v. indi- 
 vidualism, 31, 32, 42 ; its root 
 idea, 73, 205 ; facts bearing 
 on, 116, 127, 128 ; political 
 economy and, 157, 173 ; the 
 outcome of the maximum 
 utility ideal, 183-185, 190 
 [see also Competition v. Com- 
 bination) 
 
 South Africa, 204 seq. 
 
 Standard of comfort, 13, 23, 34, 
 38, 207 
 
 Stanley, Mr., on slavery in Zanzibar, 
 224 
 
 Starvation, world within a year of, 
 102 ; of labour as a species, 
 absurd, 121, 122 
 
 State, the, cannot secure a minimum 
 wage, 38 ; doctrine of its 
 omnipotence, 41 ; and old age 
 pensions, 197 seq. {see also 
 Government) 
 
 Statistics, important principles, 85, 
 118, 119 ; of production and 
 consumption, 88-91 ; attempts 
 
 to reduce political economy to 
 
 a branch of, 173 
 Status, see Contract 
 Stocks, see Accumulation 
 Strikes, and a Living Wage, Essay 
 
 I. ; the great English coal strike 
 (1893), 1 seq. ; the search for 
 facts, 2-5 ; point in dispute, 
 2-4 ; a method of business, 6, 7 ; 
 a bad method, especially for 
 the men, 8, 9, 38 ; men's loss 
 estimated, 9-11 ; not merely 
 business, 13, 23 ; an admitted 
 evil, 18 ; how can they be 
 prevented or settled ? Essay 
 
 II. ; a species of warfare, 23 ; 
 waste of moral energy, 23-25 ; 
 the typical form, 28 ; futility 
 of a universal, 38 ; the effective 
 remedies, 42, 43, cf. 7, 8 ; 
 what Government might do, 
 43 ; more common than lock- 
 outs, 122 ; effect of a general 
 strike in transport services, 135 
 
 Suez Canal, 215 
 
 Suj^erintendence, see Management 
 Supply, see Demand 
 Swift, Jonathan, 169 
 Sympathy in strikes, 24, 25 
 
 Taxation, the principle of gradua- 
 tion in, 73 ; limits of, 144, 
 145, 190, 191 ; advancing, 153 ; 
 and pauperism, 165 ; scope for 
 the trained critic of, 165, 166 ; 
 popular opinion of its evasion, 
 197 {see also Assessment) 
 
 Taylor, Mr, Sedley, 48 n., 49, 55, 
 57 
 
 Technical, language in economics, 
 162, 163, 201 ; skill, 69, 84 
 
 Tennyson, 151, 152 
 
 "Things in themselves," value of 
 people as, 107-111, 113, 114 m., 
 115 
 
 Thornton, W. T., 49 
 
 Thrift, its forms manifold, 198 
 
 Time : wages, 60 ; defects of system, 
 65 ; as a basis of classification, 
 174
 
 INDEX 
 
 237 
 
 Times, the, Cliffe Leslie's advice to 
 read, 163 
 
 Trade, conditions of, and a living 
 wage, 16 
 
 Trade Unions, tlieir power to raise 
 wages very limited, 11, 12 ; 
 possible harmful effect of, 12, 
 18, 19 ; change in law and 
 public opinion regarding, 28, 
 29 ; continental admiration of 
 British, 21, 29 ; useful func- 
 tions, 37 ; change in aims and 
 methods, as shown at Norwich 
 Congress (1894), 27, 41 ; rela- 
 tion to i^rofit-sharing, 45, 51, 
 52, 56-59, 63 
 
 Transport, 91, 135, 164, 186, 214, 
 215 [see also Communication) 
 
 Turkey, Portugal in S. -E. Africa 
 likened to, 218 ; Mohammedan 
 economics in, 225 
 
 Uncertainty of employment [see 
 Employment) 
 
 Unearned increment, 181 
 
 United Kingdom, progress of work- 
 ing classes in, 81 ; statistics of 
 occupations and consumption, 
 89, 90 ; living capital of. 
 Essay V., also Essay VI., 
 passim 
 
 United States, national wealth, 118; 
 economic reaction in, 188 n, 
 
 "Unoccupied class," analysis of, 
 91, 92, 110, 124, 125 
 
 Unskilled labour, 83, 84, 86, 207, 
 214, 215, 218, 219 {see also 
 Skill) 
 
 Utility, theory of, its refinements, 
 162 ; Austrian develojiments, 
 176 ; criticism of the mathe- 
 matical theory, 178-180 ; final 
 and total, 179, cf. 163 ; 
 effect of introducing the ethical 
 concej)tiou into political econ- 
 omy, 183-185 ; applied to 
 taxation, 191 ; negative, 184, 
 191 
 
 Utopia, short cuts to, delusive, 39 
 
 Value, of the people of this country. 
 Essay V., also 117 seq. ; its 
 relation to utility, 179, 180 
 
 Villein, the mediaeval type of our 
 tenant-farmer, 85, 86 
 
 Wage-earning capacity, the British 
 working men first in, 21 ; as a 
 basis for estimating the value 
 of the people, 103, 118, 127 ; 
 the family the unit of, 
 124 
 Wages, proposed reduction of the 
 miners', 4 ; nominal and real, 
 5, 92-93 n. ; strikes in refer- 
 ence to, 7, 11 ; amount lost 
 during coal strike (1893), 9, 
 10 ; rise during last fifty years 
 due to causes other than Trade 
 Unions, 11, 12 ; have Unions 
 raised them at expense of 
 profits ? 12 ; as affecting effi- 
 ciency, 13, 14 ; a fair day's, 14, 
 26, 30 ; and restricted out-jjut, 
 17 ; competitive v. living or 
 minimum, 31-38 [see also 
 Living Wage) ; rate of, v, 
 amount of earnings, 5, 16, 35 ; 
 relation to profits, 51-53, 55, 
 57-59, 63, 64 ; mediaeval at- 
 tempts to fix, 95 ; of skilled 
 labour, 98 ; four-fifths of profits 
 is, 133 ; the result of contract, 
 139, 140 ; taxes on, 144 ; 
 "fund" theory abandoned by 
 J. S. Mill, 161 ; of Zulus in 
 Natal, 207; of "lost souls," 
 213, 214 {see also Management) 
 Walker, Prof. F. A., 24 
 Wants, new, the creation of, 206 
 Wealth of Amotions, 175, 177 {see 
 
 also Smith, Adam) 
 Wealth, the problem of measuring 
 increase in national, 76 ; pro- 
 gress in («) production, 77-84 ; 
 {b) distribution, 84-94 ; the 
 value of the people as im- 
 material, compared with the 
 material wealth of the country,
 
 238 
 
 INDEX 
 
 Essay v., also 117 seq. ; sup- 
 posed coDceutration of, 127- 
 129; the origin of inequalities 
 in distribution, 130-133 
 Webb, Mr. Sydney, 131, 132 
 Working classes, the bulk of the 
 public, 13 ; and their leaders, 
 20 ; efficiency of British, 21 ; 
 
 progress of, 38, 77-96 (especi- 
 ally 81, 82, 84-94) 
 
 Yeomanry, origin of the English 
 46 
 
 Zanzibar, slavery in, 208 - 211, 
 
 Essay XII. 
 Zulu labour in Natal, 206-208 
 
 THE END 
 
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