THE ECONOMIC OUTLOOK
 
 THE 
 ECONOMIC OUTLOOK 
 
 EDWIN CANNAN, M.A., LL.D 
 
 PROFKSSOR OF POLITICAL ECONOMY IN 
 THE UNIVERSITY OF LONDON 
 
 T. FISHER UNWIN 
 
 LONDON : ADELPHI TERRACE 
 
 LEIPSIC: INSELSTRASSE 20 
 
 1912
 
 
 s 
 
 {All rights resei-vcd.)
 
 HS 
 
 " e 
 
 c/a 
 
 PREFACE 
 
 How the various articles comprised in this coUec- 
 fction came to be written is explained in the 
 
 cr. 
 
 Introduction. I have only to say here that they 
 appear now just as they were first written or printed 
 ';; except for a few verbal corrections which might 
 have been made by any intelligent press reader, 
 and the addition of a few footnotes containing 
 references and explanations. I have not thought 
 the articles would gain in interest by being 
 :^ tampered with in the lights, such as they are, 
 
 Of 
 
 ;; of 1912. 
 
 '-' The book includes, of course, but a small 
 
 ^ selection from the flotsam and jetsam of nearly 
 
 a quarter of a century. The subject of the 
 
 growth and distribution of population, on which 
 
 I have often written, is excluded because articles 
 
 on such matters are necessarily ephemeral, being 
 
 constantly superseded by the publication of more 
 
 recent figures. Taxation, too, is excluded, because 
 
 ^ I have recently summarised most of what I have 
 
 f:_ written on it in the chapters added to the second 
 
 edition of my " History of Local Rates in England 
 
 5 
 
 .1i8l, 
 
 O,'.
 
 6 THE ECONOMIC OUTLOOK 
 
 in Relation to the Proper Distribution of the 
 Burdens of Taxation." Though their titles may 
 suggest a wide diversity of subject, the articles 
 will be found, I hope, to possess a certain unity 
 owing to the fact that they all bear in some way 
 or other upon the direction in which we may expect 
 progress in economic organisation to take place. 
 This must be my excuse for the perhaps too 
 grandiloquent title which, in default of a better, 
 I have chosen. 
 
 My thanks are due to the editors or proprietors 
 of the Economic Journal, the Economic Review, 
 the Independent Review, the Quarterly Journal of 
 Economics, and the Clare Market Review for 
 permission to reprint some of the articles. 
 
 EDWIN CANNAN 
 May 27, 191 2
 
 CONTENTS 
 
 PAGE 
 
 INTRODUCTION . . . . . -9 
 
 I. ECONOMICS AND SOCIALISM • • • 53 
 
 II. RICARDO IN PARLIAMENT . . . '87 
 
 III. THE STIGMA OF PAUPERISM . . .138 
 
 IV. OUGHT MUNICIPAL ENTERPRISES TO BE ALLOWED 
 
 TO YIELD A PROFIT? .... 157 
 
 V. THE PRACTICAL UTILITY OF ECONOMIC SCIENCE 1 72 
 
 VI. COLONIAL PREFERENCE . . • IQS 
 VII. THE DIVISION OF INCOME . . . -215 
 
 VIII. MUST A POOR LAW PAUPERISE? . . 254 
 
 IX. THE ECONOMIC IDEAL AND ITS APPLICATION TO 
 
 COUNTRIES OR NATIONS . . .270 
 
 X. THE INCOMPATIBILITY OF SOCIALISM AND NA- 
 
 TIONALISM . . . . .281 
 
 XI. EQUITY AND ECONOMY IN THE REMUNERATION 
 
 OF LABOUR ..... 298
 
 INTRODUCTION 
 
 The first of the essays in this volume owes its 
 origin to the fact that the subject set for the 
 Oxford Cobden Prize Essay of 1886 was " Political 
 Economy and Socialism : what is the teaching 
 of Political Economy as to the effects of private 
 property and free exchange on the one hand, and 
 of State property and regulated contracts on the 
 other hand, on the production and distribution of 
 wealth? " In the Lower Fifth at Clifton I had 
 for two terms in the winter of 1877-8 taken 
 " Political Economy " as what we called " Verse 
 Equivalent "—that is to say, in place of attempting 
 to learn how to translate English into Latin or 
 Greek poetry. Our teacher was the late H. G, 
 Dakyns, whose fiery temper and lovable nature 
 enlivened and delighted many generations of 
 schoolboys, and who was always at his best in his 
 Political Economy "set." I still have the papers 
 which I wrote for him, and it is interesting to 
 see that I knew that " Adam Smith was a great 
 Political Economist and, indeed, the father of 
 Political Economy, who wrote ' The Wealth of 
 Nations ' and flourished at the time of the French 
 Revolution and died at the end of last century."
 
 10 THE ECONOMIC OUTLOOK 
 
 Our text-book was the fourth edition of Mrs. 
 Fawcett's " Political Economy for Beginners," and 
 I well remember the furious mental struggle which 
 I underwent on being asked to accept J. S. Mill's 
 sophism, " Demand for commodities is not a 
 demand for labour." My incipient unorthodoxy 
 was not much encouraged, as may be seen by the 
 remark " Twisted ideas " pencilled at the side of 
 a praiseworthy attempt to make some sense of 
 that doctrine. However, our good teacher admitted 
 that one of the answers in the first paper showed 
 that I had " wits for the subject," and at the end 
 of the second term he gave me the People's Edition 
 of J. S. Mill's *' Principles of Political Economy " 
 as a prize, bound in the familiar whole calf of the 
 prizes of that period. If my memory serves me, 
 I had already read some of that work, having 
 done it as some kind of " extra " for my form 
 master, Mr. W. W. Asquith, an excellent teacher 
 who was always ready to hear — and generally to 
 refute — the arguments of a pupil who felt himself 
 aggrieved. He did not think very highly of my 
 performance on this occasion, and as I have no 
 recollection of arguing the point with him, I prob- 
 ably suspected he was right. J. S. Mill had doubt- 
 less confused my sixteen-year-old intellect. 
 
 Those two terms completed my economic studies 
 so far as Clifton was concerned. At Oxford I 
 underwent in regard to my social philosophy the 
 kind of change which in regard to religion is
 
 INTRODUCTION 11 
 
 described as "conversion." As I listened to Mr. 
 A. L. Smith, the Historical Spirit entered into me, 
 and I became a new man. I not only learnt that 
 the Norman Conquest was something greater than 
 a scuffle of a few archers and men-at-arms in 
 the neighbourhood of Hastings, but took to heart 
 the truth that all important ch,ange is gradual, 
 and that social institutions are not created by the 
 sudden efforts of inspired geniuses but grow " of 
 themselves," usually slower than oak-trees. Driven 
 from the History School by an illness of which 
 the importance was exaggerated, I had to turn 
 to the Pass School, and of course selected Political 
 Economy as one of my subjects. The prescribed 
 books in those days were a portion of the ** Wealth 
 of Nations," as now, and Fawcett's " Manual of 
 Political Economy." Mill's more or less plausible 
 restatement of the ideas of 1820 had only con- 
 fused my very youthful mind in 1877-8 ; Fawcett's 
 exceedingly unplausible boiling-down of Mill awoke 
 in 1883 all my native scepticism, and made me 
 look about for new lights. I must have begun 
 to think, as I remember now the joy with which 
 in the stress of the examination it occurred to 
 me to write that the ideal of credit would be 
 attained when coin was so superseded that there 
 remained but " a single sovereign at the Bank 
 of England, which no one would want, because 
 any one could have." If the examiner — I believe 
 it was York Powell — noticed the epigram, he prob-
 
 12 THE ECONOMIC OUTLOOK 
 
 ably wondered where I got it from, but in viva 
 voce he only bothered me about who lost by the 
 fall in the gold price of silver. 
 
 After this I abandoned economics for a year 
 and a half, during which I first went round the 
 world by the Cape and New Zealand and then 
 wrote a prize essay on the Duke of Saint Simon, 
 the success of which inspired me to compete for 
 the Oxford Cobden prize of 1886. That prize, 
 however, was won by H. LI. Smith, Scholar of 
 Corpus Christi College, now known to every one 
 who knows anything as Sir Hubert Llewellyn Smith 
 of the Board of Trade, with an essay which in 
 several ways is extraordinarily suggestive of his 
 subsequent distinguished career. Mr. L. L. Price 
 was honourably mentioned. My own essay has 
 long been decently buried in a winding-sheet of 
 brown paper in my lumber-room. Exhuming it 
 for a moment, I find that it gives in its closing 
 sentences the following summary of its answer 
 to the question proposed : — 
 
 " The truth which is laid down is simply that 
 Political Economy does not ' take a side ' in the 
 struggle between the principle of private property 
 and the principle of State property. It is possible 
 to form a judgment now as to whether a particu- 
 lar form of private or State property will have 
 good or bad effects now, and it will be possible 
 in A.D. 1986 to form a judgment whether the 
 same thing will have good effects then. But
 
 INTRODUCTION 13 
 
 though Political Economy is indispensable at both 
 periods for the formation of sound judgment, 
 Political Economy does not and cannot say now 
 what the effect of a particular form of property 
 will be if it occur in 1986. Political Economy 
 does not tell us beforehand what lines the evolution 
 of society will follow. Some may suppose that 
 future progress will be in the direction of in- 
 creasing the sphere of private property, and others 
 may suppose that it will be in the direction of in- 
 creasing the sphere of State property, but neither 
 party should be allowed for an instant to claim 
 that Political Economy is on their particular side. 
 The grounds, good or bad, for their beliefs arc 
 to be looked for in the teaching of history or 
 experience, not in the teaching of Political 
 Economy. A knowledge of Political Economy 
 does not lead a man to adopt opposition to com- 
 munism or private property as a ' principle ' of 
 political action." 
 
 It seems clear from this and other passages in 
 the essay that the historical spirit within me was 
 offended by the wording of the " subject." It 
 was repulsive to be asked about the " effects of 
 private property " and requested to distinguish 
 them from the effects of " State property " with- 
 out the least reference to time, place, or circum- 
 stances. I was hampered also by a strong desire 
 to show that much of the teaching on which I 
 had been brought up was wrong, and this led
 
 14 THK ECONOMIC OUTLOOK 
 
 me to introduce a great deal of matter which 
 would probably seem to most readers irrelevant. 
 About half the essay looks more like an attempt 
 to reconstruct general economics than an attempt 
 to deal with the subject proposed. This half I 
 naturally regarded as the more important, and 
 eventually I developed it into the little work pub- 
 lished in the spring of 1888 under the title of 
 " Elementary Political Economy," which in sub- 
 sequent editions has formed a striking example 
 of the justness of the popular instinct which has 
 led to an opprobrious signification being attached 
 to the word " stereotyped." The other part I 
 developed into what I called a " short and simple 
 examination of the question whether Political 
 Economy does or does not support in principle 
 that system which we commonly describe as 
 Private Property or Competition." This, I 
 thought, contained a good deal of what would 
 be considered in some quarters *' dangerous 
 doctrine " : — 
 
 " But the timid," I continued, " may console 
 themselves, for in truth frank acceptance of the 
 ' dangerous doctrine ' here set forth would be far 
 more fatal to wild schemes of Revolutionary Social- 
 ism or Social Revolution than a blind adherence 
 to decaying dogmas. Purge Political Economy 
 entirely of the taint of partiality which still clings 
 to it, and there will be hope of inducing the revo- 
 lutionary Socialist to listen to the reasoning of
 
 INTRODUCTION 15 
 
 the economist and of leading him back to the 
 path of gradual reform— the safest, shortest, and 
 in reality the only road by which the human race 
 can progress." 
 
 The only publisher to whom, so far as I 
 remember, this work was offered, was kindly and 
 encouraging, but not inclined to embark the funds 
 of his firm in the important enterprise of inducing 
 the revolutionary Socialist to listen to the reasoning 
 of the economist. I borrowed from the manuscript 
 matter enough to make up a paper on " Com- 
 munism in relation to Production " which I read 
 on November 27, 1888, to the Oxford Economic 
 Society, a small body which met for discussion 
 twice a term from December, 1886, till October, 
 1 89 1, since which date no meetings have taken 
 place. In February, 1889, I seem to have written 
 to Sidney Webb complaining that the collectivisa- 
 tion of the means of production was no cure for 
 extreme poverty. I still have his answers, in which 
 he endeavoured to convince me that there was no 
 difference between us, and that all Fabians were 
 of one mind. I have no doubt that it was owing 
 to his desire to be rid of a pertinacious corres- 
 pondent and possibly to secure a recruit that I 
 received in March a letter from Sydney Olivier, 
 now K.C.M.G. and Governor of Jamaica, but then 
 in the Colonial Office and Secretary to the Fabian 
 Society, inviting me on behalf of the executive 
 committee of that Society to read a paper at one
 
 16 THE ECONOMIC OUTLOOK 
 
 of its summer meetings. He told me to choose 
 my own subject, but remarked : "Mr Webb showed 
 me your last letter to him : your observations 
 in it suggest to me that you might address us 
 either on ' The Wrong Way towards Communism ' 
 (if that is not a contradiction in terms — being a 
 criticism of the Socialist programme and agitation 
 as a means to the end desired — you may assume 
 that we are most of us Communists in ideal), 
 or * The Right Way towards Communism,' being 
 your own notion thereof." 
 
 Of course I accepted the invitation with joy, 
 and at 8 p.m. on July 5, 1889, I must have been 
 trembling with excitement at the door of Willis's 
 Rooms, King Street, St. James's Square. It is 
 twenty-three years ago, and I cannot now remem- 
 ber what the Fabian Society, then in the heyday 
 of youth, looked like on that summer evening. 
 All that I can recall is that in the middle, one or 
 two rows from the front, there was a very charming 
 lady, whom I discovered, rather to the surprise 
 of my inexperienced mind, to be Mrs. Annie 
 Besant. The Society's minutes record nothing 
 beyond the title of the paper and the name of 
 the reader. My own notes, pencilled on the back 
 of the MS., are short, and the lapse of time has 
 rendered them cryptic. " Interest. Webb thinks 
 he knows : so do I " only reminds me that we 
 and our friends change little with advancing years. 
 I gather from the notes, however, that Sidney
 
 INTRODUCTION 17 
 
 Webb spoke first, Bernard Shaw, not yet famous, 
 second, and " Wallace " — presumably Graham 
 Wallas— third. My recollection is that Sidney 
 Webb declared that I was quite qualified to be a 
 Fabian, and that Bernard Shaw and, I think, other 
 speakers, repudiated me in more or less violent terms. 
 Anyway, I did not become a member of the 
 Society-. I returned to the study of the writers 
 whom, when my generation was young, we used 
 to call " the old economists." The method of 
 direct attack upon what was erroneous seemed 
 likely only to add further sterile and unnecessary 
 controversy to the literature of the subject, and 
 the plan of writing a short textbook ignoring a 
 great part of current doctrine had turned out quite 
 ineffectual. It struck me that the most useful 
 thing to do was to trace the development of general 
 theory, showing it in its early crudeness as well 
 as in the more plausible refinements of later times, 
 and explaining its connection with the circum- 
 stances in which it grew up. The " historical 
 spirit " seemed to me to be urgently required in 
 dealing with economic doctrine. I had been 
 strongly influenced by Adolf Held's " Zwei Biicher 
 zur Socialen Geschichte Englands," in which Adam 
 Smith, Malthus, and Ricardo are treated as mortal 
 men affected by their environment instead of 
 strange, inexplicable phenomena suddenly created 
 by some unknown force in the midst of a world 
 of nothingness. 
 
 2
 
 18 THE ECONOMIC OUTLOOK 
 
 About three years of labour produced my 
 " History of the Theories of Production and Dis- 
 tribution in EngHsh Political Economy from 1776 
 to 1848," which appeared in the spring of 1893. 
 I maintained in it that with the early nineteenth- 
 century economists " practical aims were para- 
 mount and the advancement of science secondary," 
 and in order to show further what practical 
 interests Ricardo possessed, although he is usually 
 treated as a theorist entirely remote from all 
 mundane considerations, I wrote the article on 
 " Ricardo in Parliament," which occupies the 
 second place in the present volume. 
 
 For thirteen years from the foundation of the 
 Economic Review in 1891, I wrote for it the 
 quarterly summaries of " Legislation, Parliamen- 
 tary Inquiries, and Official Returns," and I was 
 led by this work to interest myself in several 
 subjects which I might otherwise have left alone. 
 A Royal Commission was appointed in 1893 "to 
 consider whether any alterations in the system of 
 Poor Law relief are desirable, in the case of persons 
 whose destitution is occasioned by incapacity for 
 work, resulting from old age, or whether assistance 
 could otherwise be afforded in those cases." This 
 horrible and ill-punctuated jargon was, as I 
 remarked in the summary for July, 1895, intended 
 to elicit an answer to two questions which Mr. 
 Charles Booth had set every one asking : "Is 
 the Poor Law too hard upon the old ? Ought we
 
 INTRODUCTION 19 
 
 to establish a national system of old-age pensions?" 
 Perusal of what Lord Salisbury used to call the 
 litter of Reports produced by the Commission 
 moved me to protest in the article headed " The 
 Stigma of Pauperism " against the old Charity 
 Organisation Society belief that there is and 
 ought to be something disgraceful in the receipt 
 of relief from the State which is not and ought 
 not to be found in the receipt of relief from 
 private almsgiving. The stigma of pauperism, 
 where it exists, I argued, is simply the conse- 
 quence of the popular conviction that the receipt 
 of poor-relief indicates previous idleness or mis- 
 conduct on the part of the recipient. Therefore, 
 I concluded, " the proposal that the State should 
 provide an equal pension for all old people irre- 
 spective of destitution, if carried out, would affix 
 no stigma of pauperism to the receivers of the 
 pension, simply because receipt of the pension 
 would not imply destitution." Experience has 
 shown that this conclusion was correct. The 
 scheme of old-age pensions subsequently adopted 
 does not provide an equal pension for all. The 
 sliding scale which takes away all inducement to 
 have a private income of more than 8s. a week 
 unless it is possible to have more than 13s. is 
 idiotic, and introduces many important evils. ' But 
 
 ' Its adoption, too, was quite inexcusable, as New Zealand 
 already had a reasonable scale reducing the pension by only 
 sixpence for every shilling of income over a certain amount.
 
 20 THE ECONOMIC OUTLOOK 
 
 imperfect as the system is, no one alleges that any 
 stigma of pauperism attaches to the old-age 
 pensioner. 
 
 In the eighteen-nineties a very exaggerated im- 
 portance was attached in some quarters to the 
 sphere of Local Government action which we used 
 to call municipal enterprise, and which eventually 
 obtained the name of " municipal trading," 
 although that term was formerly applied to illicit 
 business carried on between local authorities and 
 members of local councils. The mechanical in- 
 ventions of modern times have rendered it con- 
 venient and generally in practice inevitable that 
 certain commodities should be supplied by local 
 monopolies, and as no one proposes that the 
 monopoly should be given unconditionally to the 
 first person who asks for it, or seizes it without 
 asking, some kind of special control by the State 
 or the local authority becomes absolutely necessary. 
 Whether it is better in any particular case to 
 entrust the monopoly to a company working for 
 profit but under regulations intended to protect 
 the consumers, or to entrust it to the local 
 authority is a question of detail, which depends 
 on the character of the commodity supplied, the 
 kind of demand for it, the quality of the local 
 authority, the quality of the company, the com- 
 parative probability of the local authority being 
 debauched by subserviency to its own servants or 
 by veiled bribes from the directors of a powerful
 
 INTRODUCTION 21 
 
 local company, and on a host of other considera- 
 tions which, taken together, quite rightly cause 
 opposite decisions to be arrived at in different 
 places at the same time and at different times 
 in the same place. 
 
 But " Progressives " in municipal affairs fought 
 with " Moderates " as if some great principle was 
 involved. The Progressives seem to have imagined 
 that an immense step towards social regeneration 
 was made when capital was lent by investors to 
 a municipality at a fixed rate of interest instead 
 of being partly lent to a company on debentures 
 at a fixed rate and partly invested in the company's 
 shares bearing a fluctuating dividend. Being, how- 
 ever, rather puzzled to explain the great difference 
 between the two systems, some of them began to 
 point out that the company works for " profit " 
 and the municipality for the " public," of course 
 assuming, with their old-Socialist bias, that work- 
 ing for profit and. serving the public could not 
 possibly be the same thing, as, thanks, not to the 
 direct interposition of Providence, nor to Nature, 
 but to the excellence of human institutions, they 
 so constantly are. They were then very naturally 
 led to look upon profit -taking by the municipality 
 as improper, and demanded that municipal under- 
 takings should provide comrnodities or services at 
 cost price, the interest and sinking-fund require- 
 ments of loans being regarded as part of cost. 
 The opponents of municipal trading, especially, I
 
 22 THE ECONOMIC OUTLOOK 
 
 think, those who were interested in electric com- 
 panies, took up this doctrine with glee. It suited 
 them very well, since if the principle of no profit 
 were adopted, municipal enterprises as a whole 
 would always show a loss, and therefore become 
 discredited among the mass of business people who 
 rightly regard profit as ordinarily a fair test of 
 good management. 
 
 I had no extravagant belief in the virtues of 
 municipal enterprise, but I thought it a pity that 
 a form of organisation which is useful in its proper 
 place should be thrown to the wolves by ill-advised 
 friends. Hence the fourth essay in this volume, 
 " Ought Municipal Enterprises to be allowed to 
 yield a Profit? " was read to the Economics Section 
 of the British Association in 1898. No change in 
 law or practice has taken place since that time, 
 so that the essay is still, like many things four- 
 teen years old, quite up to date. 
 
 A professional economist usually wishes to keep 
 clear of practical controversies in his class-room. 
 If he allows himself to take a side he almost always 
 ends by regretting it. When he tries to show that 
 some course ought to be adopted, it is almost 
 inevitable that he should fail to allow full force 
 to the arguments on the other side, and the heat 
 which is generated by conflict is unfavourable to 
 instruction in general principles, though it must 
 be admitted that it has often stimulated inquiry. 
 But the professor's reluctance to pronounce ex
 
 INTRODUCTION 23 
 
 cathedra upon the practical questions of the 
 moment does not mean that he admits that 
 economics is of no practical use. In the address 
 on " The Practical Utility of Economic Science " 
 which I delivered as President of the Economics 
 and Statistics Section of the British Association 
 at Belfast in 1902, I maintained that general 
 economics threw much useful light on many im- 
 portant matters then under public discussion. The 
 ordinary conception of what economic science is 
 being very hazy, I felt obliged to begin with a 
 short sketch of " the course of instruction which 
 the modern teacher, if unhampered by too close 
 adlierence to traditional standards, puts before 
 those who come to him." I fear this " modern 
 teacher " is an ideal rather than a real one : the 
 sketch describes rather what I thought ought to 
 be than what was in 1902 or even what is now 
 in 1 91 2. There were in 1902 no teachers 
 who were not hampered by traditional standards, 
 and there are none now. This is partly due to 
 the ordinary examination system, which checks 
 progress by making the teachers afraid to teach 
 anything new because the examiners will not 
 examine in it, and makes the examiners afraid 
 to ask anything new because the teachers will 
 not have taught it. But we cannot ascribe the 
 whole difficulty to the examination system. My 
 own position in respect to that system has been 
 a peculiarly happy one. The London School of
 
 24 THE ECONOMIC OUTLOOK 
 
 Economics, at which I have taught for fifteen years, 
 was in its early days entirely free from examina- 
 tions, and was attended by nobody who did not 
 wish merely to learn : later it became subsidiary 
 to a university which adopted for its " Internal " 
 side the principle that examiners should examine 
 on what has been taught, in place of the old 
 principle or practice that teachers should teach 
 what is likely to be " asked." Nevertheless, in 
 spite of this comparative freedom, I had not 
 approached my ideal of the " modern teacher " 
 in 1902, and I am still very far from it in 191 2. 
 Tradition furnishes many less flimsy trammels 
 than examination papers. A real revolution is 
 as impossible in social science as it is in social 
 institutions. 
 
 I was quite right in 1902 in insisting that it 
 was necessary to explain to students that the 
 economic system of the day did do its work, not 
 perfectly no doubt, but at any rate a good deal 
 better than the War Office at that period would 
 have done it. But I can see now, ten years later, 
 that I was still hampered by the traditional belief 
 which found expression in the title of the Oxford 
 Cobden Essay of 1886 that private property and 
 free exchange can be put " on the one hand " 
 and State property and regulated contracts " on 
 the other hand." Like Bastiat and other optimists 
 of the nineteenth century, I saw the general 
 harmony between the pursuit of self-interest and
 
 INTRODUCTION 25 
 
 the common good, but if any one had asked why 
 there was such a harmony, I should, I fear, have 
 been at a loss for an answer. I should not have 
 attributed it to Nature or to an Invisible Hand,' 
 but I should have had no better suggestion 
 to offer. At the present time I should attribute 
 the harmony which exists to the success of society, 
 continued throughout history, in establishing and 
 gradually modifying its institutions so as to make 
 them as suitable as possible to the circumstances 
 of each period of human development. A man's 
 intelligent pursuit of his own interest generally 
 serves others besides himself simply because the 
 institutions of society provide hedges which are 
 generally close enough to keep him on the road. 
 When it is found that institutions fail to make it 
 the interest of each man to serve the rest, society 
 abandons or modifies them. 
 
 The first example which I gave of the practical 
 utility of economics was the effect which the 
 " widespread dissemination " of sound teaching 
 would have in doing away with obstructions to 
 international trade. Like other people, I had no 
 inkling in the summer of 1902 of the great 
 " fiscal " outbreak which was to come within a 
 twelvemonth, or I should doubtless have dealt with 
 
 * " He intends only his own g:iin, and he is in tliis, as in many 
 other cases, led by an invisible hand to promote an end which 
 was no part of his intention " (Adam Smith, " Wealth of Nations." 
 Bk. IV., ch. ii., vol. i., p. 421, Cannan's ed.).
 
 26 THE ECONOMIC OUTLOOK 
 
 this subject at greater length. To that outbreak 
 the sixth essay in this volume, " Colonial Prefer- 
 ence," is due. Little happens in nine years, and 
 the situation is practically the same as it was in 
 1903. Although no Imperial Preferential Tariff 
 has been established to attract them, pioneers of 
 North American agriculture have migrated in large 
 numbers out of the United States into Canada, thus 
 tending to diminish the food exports of the United 
 States and to increase those of Canada. Without 
 being tied by any preferential agreement with the 
 Mother Country, Canada has rejected an arrange- 
 ment with her neighbour wh^ch would have largely 
 diminished the obstruction offered by the inter- 
 national boundary. But the preferentialists are 
 not satisfied. They feel, quite justly, that a senti- 
 ment like that which inspired the old maxim " the 
 Jews have no dealings with the Samaritans " is 
 not likely to be able to maintain in perpetuity 
 a wall of tariffs along a line which would scarcely 
 be rivalled in absurdity by one drawn along the 
 southern boundary of Lincolnshire and Notting- 
 hamshire to the Trent near Trent Junction, thence 
 along the Trent to the municipal boundary of 
 the county-borough of Stoke, and then perfectly 
 straight to the top of Milford Haven. But they 
 still, in defiance of all probability, believe that this 
 pair of small islands, two thousand miles from the 
 nearest and five thousand from the farthest point of 
 Canada, will be able in sccula seciilorum to offer
 
 INTRODUCTION 27 
 
 Canadians something which will make it economic- 
 ally profitable for them to maintain this wall of 
 tariff's between them and the great country to the 
 south of them. For my own part I can imagine 
 nothing more desperate than this, and the greater 
 we suppose the future of Canada to be, the more 
 desperate does it seem. 
 
 The wish to maintain the most palpably absurd 
 commercial barrier that the world has ever seen 
 is not really the result of a mistaken belief in its 
 economic advantage to Canada, the United 
 Kingdom, or the Empire at large, but is begotten 
 of a desire to maintain the political severance 
 between the United States and Canada, which is 
 supposed to be necessary for the continued 
 existence of the British Empire. If the spectre of 
 political union between Canada and the United 
 States were once laid, we should hear little talk 
 of the advantages of commercial separation. But 
 those who are terrified by this possibility of 
 political union might reassure themselves, if they 
 would only reflect on the improbability of its 
 occurrence before the importance of national flags 
 has been removed by the establishment of an inter- 
 national court which will have power enough to 
 make its decisions respected. Political union even 
 of States retaining a very large measure of 
 autonomy is important at present, because the 
 common flag involves war in common : when war 
 is ruled out, political union will mean nothing but
 
 28 THE ECONOMIC OUTLOOK 
 
 a few trifles such as a common currency and pos- 
 sibly a common marriage law, though the first 
 of these is likely to become an international matter 
 before long, and England and Scotland have 
 managed to exist for two hundred years without 
 the second. The present anarchical condition of 
 international relations may possibly continue for 
 a few generations more, but the end will prob- 
 ably come rather suddenly. The removal of the 
 possibility of war would dry up at once the main 
 source of international disputes, since the quarrels 
 of the present are almost always the result of the 
 desire of one or other or both of the parties to put 
 themselves in a better position for a war. Whether 
 the end of barbarism comes soon or late, it will 
 in all probability come before the Canadian 
 provinces are admitted as States of the United 
 States, or before the British Parliament is asked 
 to pass an Act for the admission of the States of 
 the United States as Provinces of the Canadian 
 Dominion. When it has so come, nobody will 
 feel it a question of vital importance whether 
 either or neither of these events take place. 
 
 In the next article, " The Division of Income," 
 written early in 1905, I revert to the less exciting 
 subject of the teaching of general economics. It 
 seemed to me that the old doctrines about wages, 
 profits, and rent were in danger of being super- 
 seded by a very carefully thought-out theory which 
 might not be incorrect in itself, but which answered
 
 INTRODUCTION 29 
 
 no question which was of the least interest to 
 mankind. Just as in the address on the practical 
 utility of economics I set up an ideal modern 
 teacher who taught better than any one has done 
 yet, so here I set up a bogey professor who carried 
 to the most absurd length the tendency to reduce 
 Distribution to a jargon about the value of par- 
 ticular contributions to production instead of treat- 
 ing it as the part of the science of economics which 
 explains why some people are able and willing 
 to make, and actually do make, valuable contribu- 
 tions, while others fail to do so. Several pro- 
 fessors have told me privately that they did not 
 think that my portrait of the professor resembled 
 them, but it was not intended for them, but for 
 others who have given no sign. Since 1905, how- 
 ever, there has been a change for the better, and 
 the attempt to treat Distribution as subordinate 
 to the discussion of Value is gradually being 
 abandoned. 
 
 The eighth essay, which asks the question, 
 " Must a Poor Law pauperise? " follows up, after 
 eleven years' interval, the one in which I tried 
 to explain the " stigma of pauperism," The cause 
 of old -age pensions had been won ; the question 
 now was not what could be done for the aged, 
 but " What can we do for the unemployed? " It 
 was generally agreed that they must not be 
 " pauperised," but there was no attempt to settle 
 what the essence of pauperisation is. The old
 
 30 THE ECONOMIC OUTLOOK 
 
 charity organisation school seemed still to identify 
 the demoralisation which is suggested by the verb 
 " pauperise " and the substantive " pauperisa- 
 tion " with " pauperism " in the usual technical 
 sense of dependence on the particular resources of 
 the State and local authorities which are devoted 
 to poor-relief. Against them I ventured to 
 maintain that a reduction of pauperism may easily 
 mean an increase in pauperisation, and that a 
 Poor Law suliiciently liberal to be an effective 
 check upon private charity is a better preventive 
 of pauperisation than one which is popularly 
 regarded as too hard on the poor, and therefore 
 makes all kinds of cadging more profitable. 
 
 Whether the legislation is called a Poor Law, 
 and whether the funds which the State provides 
 are called poor-relief or insurance money to pro- 
 vide for sickness and unemployment, are purely 
 questions of nomenclature. We may regard the 
 scheme of national insurance passed by Parliament 
 in 191 1 — if it works in spite of its enormous com- 
 plication — as a step towards the required end. 
 It is recommended strongly by the complaint often 
 brought against it, that it is likely to diminish 
 voluntary efforts to relieve the sick and unem- 
 ployed poor. There is not a cadger in the United 
 Kingdom who should not feel that the Insurance 
 Act will cause a slump in the value of his patter. 
 But, however successful in its own field, national 
 insurance is not enough, and I am still inclined to
 
 INTRODUCTION 31 
 
 maintain that what is wanted is a cross between 
 a " labour colony " and an " unemployed camp," 
 where people who cannot " get suited " in the 
 general societary org'anisation should be allowed to 
 try to maintain themselves outside it. 
 
 The fiscal controversy led me to inquire more 
 particularly what the real utility of foreign trade 
 to a nation consists in, and this very naturally led 
 to the deeper question, " What do we mean by the 
 good of the country or the nation? " At the end 
 of " Colonial Preference " I had said that a State's 
 wish for its subjects should be like that of a 
 parent for his children, that they should do the 
 finest and best paid work of the world. But the 
 analogy halts, since the enlightened parent does 
 not think his children must be tied for ever 
 to the parental hearth, but is willing that they 
 should go away to better themselves : they are 
 to find the best work they can wherever it may be. 
 The term " nation," on the other hand, has lost 
 nearly all its original tribal significance, as is 
 shown by the fact that we constantly treat it as 
 interchangeable with " country." More and more 
 we identify the interests of a particular nation with 
 that of the inhabitants of the territory of that 
 nation. The significance of the term has become 
 almost purely territorial. Consequently we are 
 not, for example, prepared to say that Norway 
 would be serving the national interest if she were 
 to maintain a system of technical training which
 
 32 THE ECONOMIC OUTLOOK 
 
 encouraged young Norwegians to emigrate to 
 America, even if they were able to earn much 
 higher salaries there than they could by that or 
 any other system have been enabled to earn at 
 home. Our national ideal evidently differs from 
 our family ideal : what is it? 
 
 I endeavoured to answer this question in the 
 ninth essay, " The Economic Ideal and its Applica- 
 tion to Countries or Nations," which was written 
 on the windy coast of County Clare, after a week 
 spent in travelling from Larne, by the north coast 
 to Londonderry and thence through Connemara 
 and Galway. A journey better calculated to stimu- 
 late the inquiry, " What should be the national 
 economic ideal? " would be difficult to devise. The 
 population of Ireland in 1908 was not much more 
 than half what it was in 1845. Were we to agree 
 with Adam Smith that " the most decisive mark 
 of the prosperity of any country is the increase of 
 the number of its inhabitants," and to conclude 
 that " Ireland " or the Irish nation had moved 
 steadily away from what ought to be the national 
 economic ideal for more than sixty years? We 
 did not go to the Aran Islands, but one of my 
 most vivid impressions is of certain carefully walled 
 enclosures on the shore of the mainland opposite 
 those islands. I call them enclosures and not 
 fields, because the word " field " would convey 
 quite a wrong impression, since inside the walls 
 there was nothing to be seen but large boulders.
 
 INTRODUCTION 33 
 
 Perhaps we were imposed upon : possibly some 
 particularly valuable plant (or seaweed) is 
 sheltered by the boulders ; or conceivably the 
 Nationalists of the neighbourhood put the boulders 
 there when they heard the night before that it 
 was just possible that two cyclists from England 
 might pass that way. But certainly a great part 
 of Ireland is not likely to make a dispassionate 
 observer sigh for a return of a golden age in 
 which " each rood maintained its man." The im- 
 pression conveyed to my mind was that the smaller 
 population was much more likely to maintain itself 
 in tolerable comfort than the greater, so that the 
 people of Ireland, though less numerous, were 
 better off than they were. But what of those 
 who had been " driven out "? In a sense, of 
 course, they are lost ; but if they had not gone 
 (and, of course, if others had not gone or been 
 born in place of them) there would be some ten, 
 twenty, or perhaps thirty million fewer people 
 in the United States and a few other places ; and 
 there is not the least reason to suppose that the 
 added millions are worse off than the Irish of 
 1845, or even than other people in the places in 
 which they are found. 
 
 The paper admits that it asks without answering 
 the question what the national economic ideal 
 should be. I scarcely understood then that what 
 I was really searching for was something which 
 each nation might strive for with full assurance
 
 34 THE ECONOMIC OUTLOOK 
 
 that its efforts would tend to the common good 
 of that mundane society of which the inhabitants 
 of different countries are at any given moment 
 the constituent parts. Since 1908 the study of 
 the principles of local finance has made this clearer 
 to me. It seems obvious that in local finance 
 we ought to try to maintain or establish a system 
 which will induce local authorities to act in the 
 manner which will best promote the interests of 
 the country as a whole. I found that a genuine 
 attempt on the part of each local authority to 
 benefit a fluctuating mobile body called the " in- 
 habitants " of their area is not in the least likely 
 to promote the common interest of the whole 
 country, and that it was better that each local 
 authority should be encouraged to do what tends 
 to utilise best the resources of the locality, regard- 
 less of whether this tended to increase the number 
 of the inhabitants or to attract a rich class of 
 persons to inhabit. ^ The same principle must be 
 applied to countries. In order that the economic 
 interests of the world may be best served, the 
 best use of the " resources " of each part of the 
 earth's surface should be made. The best use 
 coincides roughly at present with the most profit- 
 able use, and the coincidence is likely to become 
 more exact as the grosser imperfections of the 
 distribution of wealth are gradually removed. 
 
 ' See my " History of Local Rates in England," 2nd cd., ch. vii. 
 and viii., especially pp. 176-86.
 
 INTRODUCTION 35 
 
 There is no possibility of denying that these 
 ideas are wholly incompatible with nationalism or 
 patriotism, if that term be preferred, as now con- 
 ceived by bad poets and military enthusiasts. But 
 that kind of nationalism or patriotism has got to 
 go. The lust of conquest, which was probably never 
 highly developed in any age among the common 
 people, is practically extinct. Most nations are 
 still armed to the teeth, but it is not because they 
 wish to attack others, but because they are afraid. 
 In time these terrors will be seen to be as childish 
 as they really are, and anxiety about military 
 power will disappear. Rivalries of races and lan- 
 guage will of course remain, at any rate for 
 some time. But these rivalries do not at present 
 coincide with territorial political divisions, and 
 nobody with any knowledge of history expects 
 them to be decided on the battlefield. 
 
 Reflections such as these led me to call in 
 question the nationalist basis usually assumed for 
 Socialism : when asked to address a " Social 
 Evening " at Ruskin College, in the spring of 
 1909, I chose as my subject " The Incompatibility 
 of Socialism and Nationalism." The address was 
 not delivered on the date fixed for it, because 
 on that very day — I do not think it was more than 
 a coincidence — a section of the students went on 
 strike against the teaching of the college as insufii- 
 ciently socialistic. A postponement for some 
 months took place, but during the interval I made
 
 36 THE ECONOMIC OUTLOOK 
 
 no material changes in the address, so that it may 
 be taken as belonging to the earlier date. The three 
 years which have since elapsed have made some 
 difference. It would seem unnecessary now to 
 insist so strongly on the incompatibility of social- 
 istic progress with a fire-eating nationalism always 
 bent on the diversion of more and more of the 
 forces of mankind into military and naval prepara- 
 tions. The socialists of all countries are more 
 awake to the necessity of fighting this spirit than 
 they were, and the fire-eating nationalists are more 
 convinced of the want of patriotism of the 
 socialists. The possibility of soldiers refusing to 
 shoot begins to dawn upon the mind of the most 
 violent as something which will have at any rate 
 to be thought of. 
 
 But in respect of that side of the address in 
 which the objections to a national basis for 
 socialism are set out, there has been little change. 
 The nationalisation of everything is still clamoured 
 for, and that not merely as a step towards some 
 wider and better organisation, but as if it were 
 the final end. Possibly syndicalism may indicate 
 the coming of a change of opinion. Syndicalism 
 seems to be at present very inarticulate, but the 
 little that can be learned about it suggests an 
 organisation of society based on trades rather than 
 nations, and trades are not national, but spread 
 over many and sometimes over all countries. How 
 distribution between the trades which happen to
 
 INTRODUCTION 37 
 
 require a large quantity of valuable instruments 
 of production, natural and artificial, and trades 
 which do not is to be arranged on a basis satis- 
 factory to those which do not remains to be 
 explained. Little or nothing also seems to be 
 known about the arrangements which must be 
 made for securing the required supply of new 
 instruments of production for the various trades. 
 It would be absurd to regard syndicalism as at 
 present a promising substitute even for so un- 
 workable an ideal as territorial socialism, whatever 
 it may be in forty years' time. 
 
 Forty years may seem to the impatient a long 
 time for the development of a theory of that kind. 
 If any such impatient person, however, has read 
 as far as this point, which is improbable, I would 
 remind him that socialism is nearing its centenary, 
 and yet remains somewhat nebulous, and a subject 
 of dispute among its professed followers. I 
 remember WiUiam Morris coming to Oxford and 
 answering one who asked him how long it would 
 be before socialism was established with the words, 
 " Twenty years." The twenty years have long 
 since elapsed. Of course, " we are all socialists 
 now," but that was said by Sir William Harcourt 
 in 1894, and is now, as then, a metaphor which 
 merely misleads. 
 
 Speculation about the remote future is unprofit- 
 able. Revolutionary change is impossible, so that 
 the only way to secure any ideal in the future is 
 
 f. t 
 
 [\^' fl
 
 38 THE ECONOMIC OUTLOOK 
 
 to make gradual approaches towards it. History 
 seems to teach that approaches are not made by 
 going backwards in order to make the greater 
 jump forwards, and that each improvement of 
 detail fits at length into the general course of 
 improvement, so that we need not think that we 
 have to make things worse before they will be 
 better, but may be confident that each change 
 which is good in its time will also be favourable 
 to progress in the long run. 
 
 Therefore we may turn with relief to the last 
 of the articles in this volume, in which " Equity 
 and Economy in the Remuneration of Labour " 
 under present conditions is discussed. It was 
 written just after the great railway strike of 
 August, 1 9 1 1 . A newspaper had asked me to 
 write something about the course of wages in recent 
 years, and when I declined this task as an un- 
 suitable one for a short summer holiday, and also 
 out of my own line, it occurred to me to put on 
 paper some of the thoughts suggested by the 
 various opinions expressed on the strike and its 
 causes. I began by trying to discredit the popular 
 idea that there is some abstractly " just " or 
 '* equitable " scale of wages for different occupa- 
 tions with which every one ought to be " satisfied." 
 Then I tried to show that our whole organisation 
 is kept going by the usual practice of each person 
 asking for as much as he can get, and refusing to 
 work for those who offer him less, and that refusal
 
 INTRODUCTION 39 
 
 to work, concerted among large numbers of per- 
 sons, is on occasion as necessary as individual 
 refusal. Finally, I contended that well-disposed 
 people ought to sympathise with those changes in 
 the scale of earnings which, without injuriously 
 affecting production, tend to make the distribution 
 of wealth more equal. 
 
 The whole discussion in this article will appear 
 somewhat unreal to many readers, because it is a 
 discussion of the distribution of earnings among 
 earners instead of a discussion of the distribution 
 of the whole of income between owners of pro- 
 perty on the one side and workers on the other. 
 I submit, however, that the really important ques- 
 tions in distribution concern the division of the 
 income derived from property and labour among 
 the individuals or families who receive it. That 
 is to say, it is important how the income derived 
 from property is distributed among the various 
 members of society, and it is important how the 
 income derived from labour is distributed among 
 the various members of society, but it does not 
 matter so much how the whole income is divided 
 between all the owners of property on the one 
 hand and all the workers on the other. A distri- 
 bution between property and labour, extraordinarily 
 favourable to labour, say nine-tenths to labour and 
 only one -tenth to property, might be compatible 
 with a large portion of the people being in the 
 most abject poverty, and a distribution extra-
 
 40 THE ECONOMIC OUTLOOK 
 
 ordinarily favourable to property, such as half 
 to property and half to labour, might be com- 
 patible with an equality of distribution hitherto 
 unknown. When the distribution was favourable 
 to labour, the property might be massed in few 
 hands, and earnings very unequally distributed ; 
 when the distribution was favourable to property, 
 the property might be widely distributed and 
 earnings very equal. The distribution of property 
 depends on a number of circumstances, such as 
 the law and custom of inheritance, social practice 
 regarding the marriage of the rich with the poor, 
 and the numbers of children born to the rich and 
 the poor, which are not dealt with in the article 
 because they are no part of its subject, not because 
 they are not of great importance to the welfare 
 of the world. 
 
 The practice of trying to ignore the distribution 
 of earnings among earners, and pretending that 
 every increase in the cost of labour in any trade 
 comes out of the pockets of the " capitalists " 
 or the " employers," cannot last much longer. It 
 becomes more and more obvious that the working 
 classes work for each other more than for the 
 capitalists and the landlords. Great stoppages of 
 work, like the coal strike of 191 2, are seen to hit 
 the workers generally much more than the owners 
 of property, and it seems inevitable that the object- 
 lessons thus afforded will eventually suggest to 
 the workers that they pay each other for what
 
 INTRODUCTION 41 
 
 they consume more than they pay the owners of 
 property. Of course most increases of earnings 
 are due to greater product, and these cannot be 
 regarded as being at any one's expense, but every 
 rise in the earnings of an occupation which is 
 simply due to more being paid for the same 
 product, takes place partly and in most cases 
 chiefly at the expense of those who are paid for 
 doing other kinds of work. These others always 
 consume some part of the product, and generally the 
 greater part of it. The fact is often unrecognised, 
 because the manual labour class, or perhaps we 
 should say a certain large but very indefinable 
 part of the manual labour class, is commonly 
 treated as if it comprised the whole of the workers, 
 and all other workers are treated, in a very mis- 
 leading manner, as belonging to the capitalist class. 
 When this is done, it is certainly much easier to 
 suppose that increased amounts received by any 
 section of this limited working class may be mostly 
 paid by people outside it. Even this, however, 
 is generally far from true. The working class, 
 even thus limited, form the bulk of the population, 
 and their consumption is, much more largely than 
 that of the richer classes, composed of things of 
 which the price chiefly consists of wages paid to 
 people belonging to this limited working class. 
 
 When the facts are appreciated, there is likely 
 to be much less popular inclination for the sympa- 
 thetic strike than there is now. At present
 
 42 THE ECONOMIC OUTLOOK 
 
 the so-called working class is apt to act as if it 
 worked entirely for something outside itself known 
 in harangues as " the capitalist " and in ordinary 
 conversation as " the public," and as if every 
 increase in the cost of any particular kind of 
 labour must fall entirely on this outside body. It 
 then naturally becomes a point of honour to 
 sympathise with and support every effort of 
 every section to secure a rise. When it is seen 
 that the rise in one section will mean a fall in 
 others, more discrimination will be exercised, and 
 sympathy will only be extended where the re- 
 muneration is regarded as unduly low. 
 
 A reduction of indiscriminate sympathy is likely 
 to be accompanied by a still greater reduction 
 of confidence in the policy of making every strike 
 as big as possible which has recently been adopted. 
 Ten or twelve years ago American financiers were 
 smitten with what the late Lord Salisbury used to 
 call megalomania. They supposed that the com- 
 bination of a number of businesses into one huge 
 whole was certain to pay, even if the businesses 
 when separate had been far from successful. 
 Experience is rapidly modifying the capitalists' 
 belief in the gigantic, but their megalomania was 
 caught by the labour enthusiasts. The maxim 
 " Make a strike big enough and it is sure to 
 succeed " became almost universally received. It 
 .is, no doubt, true that a big strike is more likely 
 than a small one to terrify a weak-kneed
 
 INTRODUCTION 43 
 
 Government, a timid Parliament, and a nation 
 influenced by a sensational press which it only 
 affects to despise. Consequently it may often be 
 good policy at any rate to threaten, if not actually 
 to cause, the most extensive possible strike when 
 it is desired to secure particular action on the 
 part of governments or particular legislation by 
 Parliaments. But when it is merely desired to 
 secure better terms from certain employers, the 
 policy of extension appears altogether a mistake, 
 and absolutely suicidal when carried to its logical 
 conclusion of the general strike. Of course, if all 
 the employers in a trade determine to hang to- 
 gether, there is no choice, but where they act 
 independently, it is contrary to common sense to 
 order a strike against A, B, and C, because D, E, 
 and F are unsatisfactory employers. On the face 
 of it, D, E, and F will be much more likely to 
 give in if they see A, B, and C carrying on their 
 usual business comfortably, and, in addition, filch- 
 ing away a good deal of their own trade, than if 
 they see A, B, and C also reduced to inactivity, 
 and can dispose of their stocks at high prices and 
 look forward to the maintenance of these prices for 
 some time after the conclusion of the strike. The 
 only semblance of a justification of the policy of 
 including A, B, and C is to be found, firstly, in the 
 belief that persons not belonging to the " working 
 classes " who happen to be inconvenienced by the 
 strike, will " bring pressure to bear " upon D, E,
 
 44 THE ECONOMIC OUTLOOK 
 
 and F, and secondly in the belief that the bigger 
 the strike is the more difficult it will be to secure 
 other men, usually called " blacklegs," to take the 
 places of the strikers. 
 
 The first of these beliefs is founded upon " work- 
 ing class " ignorance of the conditions prevailing 
 among the other classes, which is, perhaps, as 
 profound as the ignorance of those classes with 
 regard to the " working classes." These other 
 classes cannot, owing to a multitude of social 
 customs, bring any effective pressure to bear, 
 even if they desired to do so ; they cannot, or 
 think they cannot, use the arts of strikers' pickets, 
 nor treat employers who inconvenience them as 
 the Rileys were treated when they refused to join 
 the union. And, which is perhaps more easy to 
 explain, they do not desire to bring pressure to 
 bear. On the contrary, they sympathise entirely 
 with A, B, and C, who loudly proclaim that they 
 have no quarrel with their employees, and only 
 desire to go on serving the public as heretofore. 
 Their sympathy with A, B, and C naturally turns 
 them against the authors of the strike, and eventu- 
 ally their annoyance with the strikers takes away 
 any feeling against D, E, and F which they may 
 have had. 
 
 The second belief is more specious. It fits in 
 well with the widespread faith in the doctrine that 
 there is always an immense reserve of qualified 
 workers in every trade ready to rush in and take
 
 INTRODUCTION 45 
 
 the places of any who may go out or be put out. 
 This reserve is mostly imaginary ; it consists of 
 persons more or less ready to take the place of 
 the others, but not of qualified workers. To put 
 luggage off a platform into a van does not seem 
 to require a high degree of skill, but I remember 
 seeing at a Dublin terminus bags and boxes indis- 
 criminately strewed all over the floor, and bicycles 
 laid on their sides one on top of the other. When 
 I asked the reason of this lunacy, I was told there 
 had been a strike, not the day before, but some 
 weeks before, and the men at work were the 
 " blacklegs " who had taken the places of the 
 strikers. I believe this to be a fairly typical 
 example : employers seem generally very glad 
 to get strikers back again, and not overcome with 
 grief when the " blacklegs," whom they feel 
 bound to retain as long as they stay and work 
 with a tolerable amount of will, find the employ- 
 ment too exacting. The strike, to be of any use 
 as a strike, must, no doubt, have a certain magni- 
 tude, determined in each case very largely by the 
 magnitude of the employing units or combination 
 of employing units with which it has to deal, but 
 this magnitude is usually not very enormous. 
 
 The uselessness of the policy of extension has 
 been illustrated by the railway strike of 1 9 1 i 
 and the coal strike of 191 2. The men's cause 
 was not in the least helped by the extension of the 
 strike to the North Eastern, which had already
 
 46 THE ECONOMIC OUTLOOK 
 
 agreed to the main demand ; if the North Eastern 
 had been allowed to continue running as usual, 
 every one would have asked why the other lines 
 could not have adopted its policy ; as it was, 
 people only asked what was the good of a con- 
 ciliatory policy when the men were just as ready 
 to strike against those who had adopted it as 
 against those who had not. The excuse that the 
 North Eastern would have helped the other lines 
 was scarcely put forward ; it could not be, in 
 face of the fact that the South Western, which the 
 strike did not touch, did not make any attempt 
 to help, not even by trying to run the through 
 trains over the northern lines. The result of the 
 excessive magnitude was that the strike came into 
 conflict with the public instead of the employers, 
 and though settled on terms accepted by the 
 organisations concerned, is scarcely regarded as 
 the great victory which was expected, and which 
 might have been won by greater concentration. 
 
 The coal strike was similarly extended to fields 
 in which the particular grievance ccumplained of 
 did not exist. Instead of attempting to put large 
 profits into the pockets of the employers who had 
 met their wishes, and causing the others to lose 
 their trade just when prices were extraordinarily 
 high owing to a big stoppage of work, the miners 
 chose to stop good and bad alike. The halfpenny 
 press shrieked, and politicians were gravely appre- 
 hensive about the next election, but the owners
 
 INTRODUCTION 47 
 
 did not collapse in five days, as had been expected. 
 The poorest class of the population suffered from 
 cold and want of cooked food, and a not very well- 
 to-do class suffered considerably through being 
 thrown out of employment. The income-tax 
 paying class had to do without a fire in the dining- 
 room after midday, or perhaps without one in the 
 drawing-room in the evening, and to travel more 
 uncomfortably and slowly ; the super-tax payers 
 were obliged to travel m their own motors instead 
 of in trains, which they found too slow and too 
 crowded, and the mine -owners sold their stocks of 
 coal at enormous prices, and looked forward to the 
 high prices continuing for some time after the 
 conclusion of the strike. It has long been a 
 commonplace of the theory of taxation that a tax 
 on a necessary of life is harder on the poor than 
 on the rich ; people began to observe the obvious 
 truth that a stoppage of the supply of a necessary 
 of life has the same effect as a prohibitive tax upon 
 it. How far the miners themselves have got what 
 they want remains to be seen, but it is tolerably 
 clear that they would not have got less by a well 
 thought out policy of hitting the enemy only, 
 instead of every head they happened to see. 
 
 There are still some enthusiasts who think that 
 mistakes in detail, such as the too long warning 
 given or the too accommodating minds of the 
 union officials, were the cause of the failure to 
 secure everything asked for. They hold it to
 
 48 THE ECONOMIC OUTLOOK 
 
 be obvious that specialists producing a necessary 
 of life can, if they choose to exercise their 
 monopoly powers to the utmost, exact any terms 
 they please from the rest of society short of such 
 as would induce society to turn round and reduce 
 the specialists to slavery. But this is to overlook 
 the fact that while society is dependent upon the 
 specialists (at any rate till others can be trained) 
 for the particular necessary of life, the specialists 
 are themselves dependent on society, not only for 
 one of the necessaries of life but for all. So far the 
 practice has always been for society to go on supply- 
 ing the specialists with all the necessaries of life so 
 long as the specialists have money to pay for them 
 at the same prices as other people. This allows 
 the struggle to continue for some considerable 
 time when there is a large stock of the necessary 
 on hand, or when the " necessary " is not really 
 a necessary, but only something which can be 
 dispensed with at the cost of some inconvenience. 
 But in case of urgency — that is to say, if society 
 found itself really being severely pinched, instead 
 of merely tickled — people would play tit for tat, 
 and refuse to sell to those who refused to supply 
 the necessary of life, and the conflict would very 
 quickly terminate in a complete victory for society. 
 We may dismiss from our minds the somewhat 
 chimerical picture of each small section which 
 happens to produce a so-called necessary of life 
 being able one after the other in succession to 
 " bring society to its knees."
 
 INTRODUCTION 49 
 
 There are other enthusiasts who hanker after a 
 " general strike " of all workers, or perhaps of 
 all manual workers only, which would be much the 
 same thing in practice. Belief in the efficacy 
 of a general strike is even more groundless than 
 belief in the omnipotence of a strike of specialists 
 producing a necessary of life. If every one left 
 off working for money, every one would be incon- 
 venienced at once, most would be hungry in a few 
 hours, and many starving in a few days. The 
 infant mortality would be great the first day and 
 stupendous on the second. On the third day the 
 strikers — who would, of course, comprise nearly 
 the whole population — would be burying their own 
 children, and would not be deterred by the crowds 
 assembled in the streets to boo the mourners, nor 
 by the pickets of undertakers' men and grave- 
 diggers posted at the cemetery gates to turn them 
 back. On the fourth day, or earlier, people would 
 find it convenient to exchange service for service, 
 and soon they would find it simplest to exchange 
 money for service. Before the week was out the 
 general strike would be dissolved in universal 
 blacklegism, and in a fortnight things would have 
 slipped back into their usual train. The bogey 
 of a general strike could never have been believed 
 in if people had tried to exercise their imagination 
 in working out its picture in detail. Instead of 
 " a death blow to capitalism," it would be merely 
 a futile attempt at suicide on the part of the 
 
 4
 
 50 THE ECONOMIC OUTLOOK 
 
 working classes — an attempt which would be 
 farcical except for the deaths of the infants and 
 the sick which even a few hours' duration would 
 cause. 
 
 My conclusion is that the economic outlook is 
 neither alarming nor dismal. Our economic insti- 
 tutions will be changed in the future as they have 
 been changed in the past, gradually and almost 
 insensibly ; they are stronger to resist revolu- 
 tionary change than either those who attack or 
 those who defend them imagine. They will not 
 be replaced by a system of socialist or commu- 
 nist societies based on existing national divisions. 
 On the contrary, aided by other forces, they will 
 crush nationalism, as now understood, and reduce 
 the present independent national governments to 
 a proper dependence, as mere local authorities, 
 on society at large. But this will not prevent the 
 nations, as we know them (or with some small 
 changes), having a great deal to do with the big 
 engineering works suggested by modern science 
 and with the prevention and relief of poverty 
 within their territories. The Elizabethans found 
 the parish a serviceable unit for this purpose ; we 
 have outlived that, but it will be a long time before 
 the present national areas are found too small to 
 play a useful part, though a certain amount of 
 concert is already beginning to be recognised as 
 necessary.
 
 INTRODUCTION 51 
 
 There is no reason to suppose that it will not 
 long remain desirable that men and women should 
 get the best terms they can by individual bargains, 
 and by such combination as intelligent self-interest 
 suggests to them. We need not fear that com- 
 bination, whether intelligent or otherwise, will 
 enable either party to get too much, nor that anti- 
 social combinations will be successful. Instead 
 of rushing wildly after each new quack remedy for 
 industrial disputes, we had far better make up our 
 mind to face them with a stout heart, with a cool 
 head,' and, above all, with unfailing good temper. 
 It is childish to be angry with every one who 
 will not pay you what you ask, and with every one 
 who will not work for what you offer ; and. 
 childish anger ends in tears.
 
 The Economic Outlook 
 
 ECONOMICS AND SOCIALISM ^ 
 
 The historical spirit has made so much way in 
 recent years that no one now expects any par- 
 ticular organisation of industry and society to be 
 described as the best for all times and places. 
 There is not on the one side a party which wishes 
 to introduce complete communism all over the 
 world to-morrow, and on the other side a party 
 which wishes to do the same with complete indi- 
 vidualism. The debate rather lies between those 
 who think that the path of progress leads towards 
 greater and greater communism and those who 
 think that it leads towards greater and greater 
 individualism. 
 
 Both these parties show some inclination to claim 
 Political Economy as an ally. 
 
 The individualists, and others also, very often 
 
 ' Read to the Fabian Society on July 5, 1889, under the title 
 "The Bearing of Recent Economics on Individualism, 
 Collectivism, and Communism." 
 
 53
 
 54 THE ECONOMIC OUTLOOK 
 
 assert or imply that the founders of Political 
 Economy were individualists : the old Pohtical 
 Economy of the end of the eighteenth and 
 first half of the nineteenth century is even 
 called the individualist Political Economy. 
 Now, it seems to me that the individualism 
 of the old economists has been enormously 
 exaggerated. They were for the most part 
 above everything Free Traders: indeed, a great 
 part of their doctrines, including even the boasted 
 Ricardian law of rent, was invented in the course 
 of attempts to support a Free Trade policy, and 
 the want of progress which characterised Political 
 Economy for many years after the triumph of that 
 policy in England was due to the reluctance of 
 economists to abandon weapons which had served 
 well enough against such folly as the Corn Laws, 
 but were good for no other purpose. But it is 
 a mistake to confound Free Trade with individual- 
 ism. Certainly complete individualism necessarily 
 involves Free Trade, but complete Free Trade does 
 not involve individualism. No one imagines that 
 Protection is communism, and it is difficult to see 
 why it should be supposed that Free Trade is 
 individualism. Protection, so far as it is not 
 inspired merely by the selfishness or degraded in- 
 dividualism of particular classes of producers, is 
 merely the outcome of certain very childish 
 economical delusions, such as that the commodities 
 which a country imports are a loss to it, or that
 
 ECONOMICS AND SOCIALISM 55 
 
 they take away what is called " employment." 
 Free Trade is simply the negation of these 
 delusions. It may be urged that the old econo- 
 mists wished to abolish the Poor Law: some of 
 them certainly did so, though one of them was 
 a member of the Commission which brought about 
 its reform.' But the Poor Law was not the only 
 communist institution then existing : the econo- 
 mists attacked the Poor Law because it worked so 
 badly, not because of the principle involved. The 
 greatest communist institution of the nineteenth 
 century — State education — was spoken of rather 
 favourably by Adam Smith himself. ^ 
 
 However this may be, the mere opinion of the 
 old economists is not now of much importance. 
 Let us look at the arguments of the present-day 
 individualist. 
 
 The individualist of the present time says in 
 the first place that progress cannot lead towards 
 communism because Political Economy shows that 
 complete communism must be for ever impossible. 
 Tn proof of this he gives two reasons which were 
 supplied by Malthus, who alone of the old econo- 
 mists may perhaps be classed as a genuine indi- 
 vidualist. The first of these reasons is that 
 communism can never afford any adequate stimulus 
 to industry. The individualist forgets that most 
 
 ' N.W. Senior. 
 
 » "Wealth of Nations," Bk.V., ch, i. Pt.III., Art. 2, vol. ii., pp. 
 267-70, Cannan's ed. See also Adam Smith's " Lectures," p. 256.
 
 56 THE ECONOMIC OUTLOOK 
 
 economists of the last twenty-five years have been 
 great believers in co-operative production as a 
 system which affords a more adequate stimulus 
 to industry than the present. Now, the stimulus 
 to industry in co-operative production is exactly 
 the same as in communism. In both each is 
 expected to work well in order that the product 
 of all and therefore the dividend of each may be 
 large. And it is obvious that in the individualist 
 system it must often be to the interest of the 
 individual that the product of all should be small 
 in order that his own share may be large. 
 
 The other reason given by the individualist 
 for his belief that political economy shows com- 
 munism to be for ever impossible is that either 
 private property or immorality is necessary in order 
 to keep population from increasing beyond the 
 economic limit — that is to say, beyond the size 
 at which the productiveness of industry would be 
 as large as possible in the then existing state of 
 knowledge and means of production. He forgets 
 that there is nothing whatever to show that com- 
 plete individualism would keep population down 
 to that level. All that can be shown is that in- 
 equality of wealth, which is the necessary result 
 of individualism, prevents population from being 
 quite so great as it might conceivably be. It is 
 a check, but not an intelligent check, on the growth 
 of population, and J. S. Mill, who had almost a 
 monomania about the necessity of checking the
 
 ECONOMICS AND SOCIALISM 57 
 
 growth of population, has shown very conclusively 
 that communism would be likely to impose more 
 effectual checks, if needed, without any violation 
 of morality, than individualism.' 
 
 In the second place the individualist asserts that 
 progress must lead towards greater individualism 
 because individualism is necessary in order to 
 maintain the struggle for existence, which is a 
 necessary condition of the development of the 
 human race. The fittest, he says, survive, and 
 if you do away with the struggle for existence 
 the unfit will survive. It sounds very conclusive, 
 but it must be remembered that the statement 
 that the fittest survive is in itself merely a truism. 
 The fittest what for? Simply to survive. If we 
 in this room were to engage in a murderous 
 pugilistic struggle, those of us who are fittest to 
 engage in such a struggle would survive, but it 
 is far from clear that the development of the 
 human race would be assisted by that survival 
 of the fittest. The individualist struggle is sup- 
 posed to assist the development of the race because 
 it is considered to be a continuation of the struggle 
 for existence which takes place among plants and 
 the lower animals. To the economist, however, 
 it is by no means certain that this is the case. 
 There are obviously enormous difTerences between 
 individualist competition and the struggle for 
 
 • " Principles of Political Economy," P)k. I., ch. i., § 3, p. 207, 
 Ashley's ed.
 
 58 THE ECONOMIC OUTLOOK 
 
 existence among the lower animals. The lower 
 animals struggle for existence both with other kinds 
 of animals who want to eat them, and with their 
 own kind who want to eat the same food as they. 
 Civilised man has long ceased seriously to struggle 
 for existence with the animals, or even the insects, 
 who want to eat him ; he has got the upper hand. 
 And his struggle with his own kind for subsistence 
 differs in a very important respect from the 
 struggle of the lower animals with their own kind. 
 The quantity of subsistence for any kind of the 
 lower animals available for them at any period 
 is fixed independently of their wishes or exertions. 
 Man's subsistence, on the other hand, can always 
 be increased by man's industry. Consequently, 
 while the lower animals' struggle is to appropriate 
 a part of a fixed quantity, man's struggle is to 
 obtain a large portion of a quantity which his 
 own struggle (whenever individualism works econo- 
 mically) is actually increasing. The successful 
 efforts of one animal to obtain subsistence make 
 it more difficult for the others to obtain it, and 
 so crush the weakest out of existence, but the 
 successful efforts of one man to obtain wealth 
 as a rule make it easier for the others to obtain 
 it, and have no tendency to crush the weakest out 
 of existence. To suit the individualist theory it 
 ought to be the case that the successful members 
 of society propagate the race more than the un- 
 successful ; whereas as a matter of fact it is
 
 ECONOMICS AND SOCIALISM 59 
 
 known that rich families tend to become extinct 
 far more than poor ones. 
 
 While the Darwinian theory does not appear 
 to have done much for individuahsm, the recent 
 progress of practice and theory seems to have been 
 in favour of progress towards communism. It 
 surely requires a large quantity of credulity to 
 believe that all that has been done in the civi- 
 lised portion of the world during this century in 
 the way of increasing the property and functions 
 of the State is merely the product of a passing 
 craze. Does any one seriously believe that when 
 we become more enlightened we shall abolish our 
 State aid to education, and sell our streets and 
 roads and drains to private persons? 
 
 As for theory, communism has been greatly 
 favoured by the discovery of Jevons' doctrine of 
 value and of Cairnes' doctrine of non-competing 
 groups. 
 
 The gradual adoption of the Jevonian theory of 
 value is perhaps the most important change which 
 has taken place in Political Economy during recent 
 years. The theory is very commonly supposed to 
 be something exceedingly obscure and difficult to 
 understand. In reality it is the simplest thing 
 in the world. It is nothing more than the theory 
 which every one holds, that values depend on 
 supply and demand. What Jevons did was to 
 explain why it is that values depend on supply 
 and demand. By doing so he put the theory on
 
 60 THE ECONOMIC OUTLOOK 
 
 a firm basis. When you know why a thing 
 happens, you are in a very different position from 
 that in which you are when you only know that 
 it does happen. 
 
 Jevons explained that the value of a commodity 
 falls as the supply of it increases because each 
 additional given quantity is less useful, produces 
 less utility or material welfare. " Let us imagine," 
 he says, " the whole quantity of food which a 
 person consumes on an average during twenty-four 
 hours to be divided into ten equal parts. If his 
 food be reduced by the last part, he will suffer 
 but little ; if a second tenth part be deficient, 
 he will feel the want distinctly ; the subtraction 
 of the third tenth part will be decidedly injurious ; 
 with every subsequent subtraction of a tenth part 
 his sufferings will be more and more serious, until 
 at length he will be upon the verge of starvation. 
 Now, if we call each of the tenth parts an incre- 
 ment, the meaning of these facts is that each incre- 
 ment of food is less necessary, or possesses less 
 utility, than the previous one." ' When the whole 
 of the commodity sold has to be sold at one price, 
 the value is settled by the usefulness of the least 
 useful part. 
 
 The connection of this with individualism and 
 communism is not perhaps at the first glance very 
 apparent. It is, however, very intimate and 
 important. 
 
 ' "Theory of Political Economy," ch. iii.
 
 ECONOMICS AND SOCIALISM 61 
 
 If each additional given quantity of any com- 
 modity is less and less useful to a person, it follows 
 very clearly that, so far as individuals have the 
 same powers of enjoyment, inequality of wealth 
 is an economic evil, possibly a necessary evil, but 
 still in itself an evil. To the old economists in- 
 equality was not an economic evil. They declared 
 that Political Economy was only concerned with 
 wealth, and in defiance of the original meaning 
 of that word, which they would have known if 
 they had ever happened to hear the prayer for the 
 King's Majesty read, they insisted that it meant 
 only material objects, such as loaves, tables, and 
 coats, and that its quantity was to be measured 
 by exchange value. Consequently to them £i,ooo 
 a year added to the income of one man who has 
 already £100,000 a year was just the same thing 
 as ten hundreds added to the incomes of ten men 
 who have only £75 a year each. In the light of 
 Jevons' explanation it is easy to see that the ten 
 hundreds will produce far more material welfare 
 than the one thousand : and whether they choose 
 to give absurd definitions of " wealth " or not, 
 there can be no doubt that the world expects 
 economists to make material welfare the subject 
 of their studies. Consequently inequality of wealth 
 is seen to be an economic evil, and every approach 
 to equality, or, strictly speaking, to equality 
 modified by differences of need, when not accom- 
 panied by counteracting evils, is seen to be an
 
 62 THE ECONOMIC OUTLOOK 
 
 economic good. As every one knows, inequality is 
 necessarily inherent in individualism, and equality 
 modified by differences of need is the true and 
 only rational basis of communism. 
 
 Cairnes' doctrine of non-competing groups,^ now 
 generally accepted in the main, is hopelessly in- 
 consistent with those economical harmonies on 
 which individualists rely. Adam Smith believed 
 that legally free competition must make the whole 
 advantageousness of all the different employments of 
 labour equal. " If," he said, " in the same neigh- 
 bourhood there was any employment evidently 
 either more or less advantageous than the rest, 
 so many people would crowd into it in the one 
 case and so many would desert it in the other, 
 that its advantages would soon return to the level 
 of other employments." 2 It is a delightful picture, 
 this. Every employment equally advantageous ! 
 What could be more fair? What more econo- 
 mical? It is difficult to imagine, however, how 
 any one could read the rest of Adam Smith's 
 chapter without discovering something wrong. 
 Under the guise of showing that non-pecuniary 
 advantages often make up for small pecuniary 
 earnings, and non-pecuniary disadvantages often 
 counterbalance large pecuniary earnings, he proves 
 conclusively that free competition does not 
 
 ' "Some Leading Principles of Political Economy," Pt. I., 
 ch. iii. 
 » "Wealth of Nations," Bk. I., ch. x., vol. i., p. loi, Cannan's ed.
 
 ECONOMICS AND SOCIALISM 63 
 
 make the whole of the advantages and dis- 
 advantages of different occupations equal. He 
 says that earnings are higher where trust 
 has to be reposed in the labourer: is it a 
 disadvantage to a man to have trust placed in 
 him? He says, and this is much more important, 
 that the trades for which an expensive education 
 and training are necessary are better paid than 
 those for which little or no education and training 
 are necessary. Now, individuals, except in very 
 rare cases, do not pay for their own education 
 and training, and can it seriously be maintained 
 that it is a disadvantage to a man which has 
 to be counterbalanced by higher pecuniary earnings 
 that some one else has given him an expensive 
 education and training? Yet even after the lapse 
 of three-quarters of a century J. S. Mill was able 
 to say, quite truly, of this chapter of Adam Smith 
 that it contained the best exposition then given 
 of the subject in question, and he added, " I cannot, 
 indeed, think his treatment so complete and exhaus- 
 tive as it has sometimes been considered, but so 
 far as it goes it is tolerably successful." ' Mill's 
 predecessors had mostly swallowed the chapter 
 whole. Ricardo, indeed, does not seem to have 
 done so well as this. He appears to have adopted 
 the view of the uninstructed public, namely, that 
 all employments are not equally advantageous 
 and that there is nothing which requires expla- 
 • " Principles," Bk. II., ch xiv., p. 385, Ashley's ed.
 
 64 THE ECONOMIC OUTLOOK 
 
 nation in the fact.' Ask the man in the omnibus — 
 say a prosperous head clerk — why he is better paid 
 than the omnibus-driver, and he will first stare 
 at you, then gasp, and finally, pulling himself to- 
 gether, say that his work is so much more diffi- 
 cult than that of the omnibus-driver. This, you 
 point out, is merely a question of training and 
 experience. No doubt if the omnibus-driver were 
 now to take the place of the head clerk the business 
 would go to ruin, and the principal's name appear 
 in the London Gazette, but, on the other hand, if 
 the head clerk were suddenly to take the place of 
 the omnibus-driver, the omnibus would be upset, 
 and the names of half a dozen City men would 
 appear in the Times obituary. By this time your 
 head clerk has recovered his faculties. " Oh," 
 he says, " of course the reason I'm better paid 
 is that my work is more valuable." This is the 
 answer with which Ricardo was content, but of 
 course it -is no answer at all. The very thing 
 we want to know is, why is one kind of work 
 more valuable in proportion to the labour bestowed 
 on it than another? 
 
 • "The estimation in which different quaHtics of labour are 
 held comes soon to be adjusted in the market with sufficient 
 precision for all practical purposes, and depends much on the 
 comparative skill of the labourer and intensity of the work 
 to be performed. The scale when once formed is liable to little 
 variation. If a day's labour of a working jeweller be more 
 valuable than a day's labour of a common labourer, it has long 
 ago been adjusted and placed in its proper position in the 
 scale of value " (Works, p. 15).
 
 ECONOMICS AND SOCIALISM 65 
 
 The answer was given by J. S. Mill, but not 
 in a sufficiently clear and emphatic manner to 
 attract much attention. It was repeated in a 
 pompous form by Cairnes, who had an extra- 
 ordinary talent for stating the simplest truths in 
 language so inflated as to impress the great class 
 which most erroneously believes that the only use- 
 ful political economy is that which is difficult to 
 understand. Divested of its cumbrous trappings 
 — ** equations of reciprocal demand " and the like 
 — Cairnes' doctrine of " non-competing groups " is 
 simply that the relative earnings of different 
 employments depend on what we vaguely call com- 
 petition, or supply and demand, which means the 
 relative numbers of individuals who devote them- 
 selves to the several employments. This is an 
 obvious fact : every one knows that a withdrawal 
 of workers from any occupation tends to raise 
 the earnings of those who remain, and that an 
 addition of workers to any occupation tends to 
 decrease the earnings of those already employed. 
 In consequence of this fact if every one could 
 by a mere exercise of will adopt any occupation 
 he pleased, the whole advantageousness of all the 
 different occupations would be equal ; Adam 
 Smith's first proposition would be correct. But 
 it is not the case that every one can by a mere 
 exercise of will adopt whatever occupation he 
 pleases. The choice of most people is limited 
 by many circumstances, the chief of which is 
 
 5
 
 66 THE ECONOMIC OUTLOOK 
 
 the pecuniary and social position of their parents. 
 In all known countries these circumstances have 
 limited individuals' choices of occupations in such 
 a way as to prevent Adam Smith's equality of 
 advantageousness from being realised. Moreover, 
 they have limited choices so much that the excess 
 of advantageousness existing in the occupations for 
 which an expensive training and education is 
 required is greater than what would just coun- 
 terbalance the extra expense with its accrued 
 compound interest. 
 
 Thus there are, so to speak, hereditary castes of 
 labour, whole classes of men who are employed 
 in the overstocked and consequently lower paid 
 occupations simply because their fathers were 
 employed in those occupations before them, and 
 other classes who are employed in the under- 
 stocked and consequently higher paid occupa- 
 tions because their parents were in comfortable 
 circumstances. Of course many individuals 
 rise from the lower classes to the higher, 
 and many fall from the higher to the lower, 
 but these are the exceptional cases. The 
 great bulk remain unmoved. The better paid 
 classes, who are constantly complaining that their 
 occupations are overstocked, whereas in reality 
 they are permanently understocked, are sometimes 
 assured that the scarcity of individuals fit for the 
 better paid occupations is due to Nature, that they 
 themselves, in fact, arc a limited body of Heaven-
 
 ECONOMICS AND SOCIALISM 67 
 
 born geniuses and are more highly paid in con- 
 sequence of their superior merits. " The common 
 sense of men," says Mr. Rae, " everywhere would 
 unhesitatingly pronounce it unjust to requite 
 the manager who contrives, organises, directs with 
 only the same salary as the labourer who executes 
 under his direction, because, while both may spend 
 the same time of labour, the service rendered by 
 the one is much more valuable than the service 
 rendered by the other." i To say it is more valu- 
 able is a truism: to say that the common sense 
 of mankind would pronounce it unjust to remunerate 
 the two kinds of labour at the same rate is pre- 
 posterous. If there were a sufficient glut of skilled 
 managers and directors in the market, the common 
 sense of mankind would engage them at the lowest 
 possible figure, and would not be in the least dis- 
 turbed by their earning less than those who work 
 under their direction. 
 
 With a recognition of the true causes of differ- 
 ences of earnings in different occupations Adam 
 Smith's picture of economy and fairness melts 
 away. 
 
 While the recent development of political 
 economy has been thus rather favourable to 
 gradual progress in a communist direction, it has, 
 I think, been extremely unfavourable to the old- 
 fashioned Socialism. 
 
 The old Socialism was more or less revolutionary, 
 ' " Contemporary Socialism," p. 381.
 
 68 THE ECONOMIC OUTLOOK 
 
 while modem Political Economy has become 
 historical, and consequently does not believe in 
 revolutions. Wliat are called revolutions are not 
 enormous changes suddenly effected, but merely 
 some striking incident in the course of long- 
 continued change. 
 
 The particular revolution advocated by the old 
 Socialism — the abolition of private property in the 
 instruments of production — seems to be only a 
 chimerical imagination fostered by the erroneous 
 doctrines of the old economists. Common or State 
 ownership of the means of production, but not of 
 the means of enjoyment and income, is an utterly 
 chimerical state of things. It is quite impossible 
 and always will be impossible to divide the instru- 
 ments of production from the means of enjoy- 
 ment. Railways are always classed as instruments 
 of production, yet it is obvious that they are used 
 as a means of enjoyment by every one who is 
 travelling for pleasure or health and not for 
 business purposes. Furniture seems to be con- 
 sidered a means of enjoyment and a consumable 
 commodity, though it is obvious that it is often 
 an instrument of production which is a very long 
 time in being consumed. Whether houses are 
 supposed to be instruments of production and con- 
 sequently State property in the old socialistic 
 Utopia I have never been able to discover. The 
 imaginary distinction between instruments of pro- 
 duction and means of enjoyment is simply the
 
 ECONOMICS AND SOCIALISM 09 
 
 old economists' distinction between the capital of 
 a community and the part of its stock of wealth 
 which was not capital, a distinction based on 
 another distinction which lias now been definitely 
 abandoned, the distinction, made by the Physiocrats 
 and amended (or rather altered) by Adam Smith, 
 between productive and unproductive labour. The 
 capital of a community is like the capital of an 
 individual, the whole of the material wealth 
 possessed at a given point of time, and cannot 
 intelligibly be opposed to anything except the 
 income of the community, which is the wealth it 
 can (without decreasing its capital) enjoy in a 
 given space of time. 
 
 No one need feel much regret that common 
 ownerships of instruments of production and not 
 of consumable commodities is impossible, for if 
 it were possible it would simply mean giving public 
 sanction to a disgusting exhibition of luxury and 
 sensuality. What could be more abominable and 
 absurd than to refuse to allow a man to build a 
 toolshed for himself, and yet to allow him to 
 accumulate, and possibly to bequeath, an unlimited 
 number of racehorses, feather-beds, and billiard- 
 tables? 
 
 Why, then, did the old Socialism insist so 
 strongly on the nationalisation of the instruments 
 of production? Chiefly, I think, in consequence of 
 the pessimism of the old economists as to the earn- 
 ings of labour in general. The old economists
 
 70 THE ECONOMIC OUTLOOK 
 
 after Malthus' time continually spoke as if it 
 were the inevitable destiny of mankind to be for 
 ever engaged in reproducing and increasing a mass 
 of capital, the increase of which was never going 
 to make ninety-nine hundredths of the human race 
 a bit better off. And in their gloomier moments 
 they even doubted the continuance of this peculiar 
 kind of " progress." Malthus, in his " Political 
 Economy," observes : " Mr. Ricardo has very 
 clearly shown that the rate of profits must diminish 
 and the progress of accumulation be finally 
 stopped, under the most favourable circumstances, 
 by the increasing difficulty of procuring the food 
 of the labourer. I in like manner endeavoured to 
 show in my ' Essay on the Principle of Population ' 
 that under circumstances the most favourable 
 to cultivation which could possibly be supposed to 
 operate in the actual state of the earth, the 
 wages of the labourer would become more scanty 
 and the progress of population be finally stopped 
 by the increasing difficulty of procuring the means 
 of subsistence." ' Truly this was a dismal science. 
 Men's minds naturally revolted against it. 
 
 The old Socialists made use of this pessimism 
 as the basis for an attack on the existing industrial 
 system by representing it as the true attitude of 
 mind if that system was maintained, but as untrue 
 if certain fundamental changes were made. But 
 the pessimism was really altogether unreasonable 
 
 " " Principles of Political Economy," 1820, pp. 370-71.
 
 ECONOMICS AND SOCIALISM 71 
 
 in any case. The Physiocrats were not pessimists, 
 nor was Adam Smith. Pessimism was introduced 
 into Political Economy by Malthus in the gloomy 
 time of the great war and the reaction after the 
 French Revolution, three years after the Speen- 
 hamland "Act of Parliament." Now, Malthus, 
 though his book was very successful, and probably 
 on the whole a great benefit to this country, was 
 a most confused thinker, and discovered nothing 
 which had not been just as well explained long 
 before. He did not, as is often supposed, discover 
 " the law of diminishing returns," and he certainly 
 was not, as some recent philosophers have 
 imagined, an anticipator of Darwin in the dis- 
 covery of the principle of survival of the fittest, 
 though his theory of a tendency of population to 
 increase beyond the means of subsistence suggested 
 the idea to Darwin. What Malthus did was simply 
 this : he considered first the fecundity of a part 
 of the human race and found that, fully exerted, 
 it was capable of doubling a population in twenty 
 years. Then he considered the land of England, 
 and concluded that its produce could not go on 
 being doubled every twenty years. So little head 
 had he for Political Economy that he did not 
 bring into account the extra labour which would 
 be expended on the land if the population doubled. 
 He did not say, " Forty years hence four times 
 the present labour will not produce four times 
 the present produce," but simply looked at the
 
 72 THE ECONOMIC OUTLOOK 
 
 land and said, without regarding the labour at 
 all, " It will not produce four times the present 
 produce." Thus the law on which Malthus' pessi- 
 mism was based was a law of absolutely limited, 
 not of diminishing, returns. The law of diminish- 
 ing returns, on which most of the Ricardian 
 pessimism was based, was, I believe, first 
 promulgated ' in 1 8 1 5 by Sir Edward West, in 
 the " Essay on the Application of Capital to Land," 
 referred to by Ricardo in the Preface to his 
 " Principles." " Each equal additional quantity of 
 work bestowed on agriculture," West says, " yields 
 an actually diminished return. , . . Consider the 
 case of a new colony ; the first occupiers have 
 their choice of the land, and of course cultivate 
 the richest spots in the country ; the next comers 
 must take the second in quality, which will return 
 less to their labour, and so each successive addi- 
 tional set of cultivators must necessarily produce 
 less than their predecessors." The law of 
 diminishing returns was to him an actual historical 
 truth. He thought that as time goes on and 
 population increases the productiveness of agri- 
 cultural industry does actually, as a general rule, 
 decrease, in spite of all agricultural improvements. 
 
 ' In fact, Malthus, West, and Ricardo all rushed into the field 
 at the same time. West, with his use of the word " diminishing" 
 and the phrase " diminished return," may be considered, at any 
 rate, the author who gave a name to the doctrine. See my 
 " History of the Theories of Production and Distribution," pp.
 
 ECONOMICS AND SOCIALISM 73 
 
 Ricardo was of the same opinion, and so also, 
 generally speaking, was J. S. Mill. Mill, how- 
 ever, sometimes explains the law of diminishing 
 returns as if it meant merely that the returns would 
 diminish // there were no improvements, or if 
 population increased as fast as human fecundity 
 would allow it — two suppositions which arc very 
 seldom, if ever, realised. This is the view which 
 has now been generally adopted. No one now 
 holds that the productiveness of agricultural in- 
 dustry has actually been on the decline throughout 
 the course of history, and is still declining, and 
 likely to decline still further. Every one knows 
 that it has increased, is increasing, and is likely 
 to increase still further. The economist of to-day 
 fears no " stationary state " ; he sees no reason 
 why the productiveness of industry should not go 
 on increasing indefinitely. 
 
 So far, then, as the pessimism of the old Political 
 Economy depended on the idea that the productive- 
 ness of industry is as a general rule decreasing, 
 it must be pronounced entirely baseless, and can 
 afTord no ground for a demand for change in the 
 constitution of society. 
 
 And it seems to me that the pessimism of the old 
 Political Economy did depend almost entirely on 
 this belief in the decrease of the productiveness 
 of industry. At first sight the supposed perpetual 
 smallness of the earnings of labour appears some- 
 times to be attributed to a different cause — namely,
 
 74 THE ECONOMIC OUTLOOK 
 
 a tendency on the part of capital (which was 
 wrongly supposed to be the source of wages) to 
 increase more slowly than population. But this 
 is not really a different cause, for the old 
 economists imagined, quite wrongly, that the 
 rapidity with which capital is accumulated is regu- 
 lated by the rate of interest, and, still more 
 wrongly, that the rate of interest is regulated by 
 the productiveness of industry. Consequently, the 
 supposed tendency of capital to increase more 
 slowly than population was only an effect of the 
 supposed tendency of the productiveness of industry 
 to decrease. 
 
 If the old pessimism has any other foundation, it 
 must be looked for in the theory propounded at 
 the beginning of Ricardo's chapter on wages. 
 " Labour," he says, " like all other things which 
 are purchased and sold, and which may be 
 increased or diminished in quantity, has its natural 
 and its market price. The natural price of labour 
 is that price which is necessary to enable the 
 labourers one with another to subsist and to per- 
 petuate their race without cither increase or 
 diminution. . . . The market price of labour is 
 the price which is really paid for it from the 
 natural operation of the proportion of the supply 
 to the demand ; labour is dear when it is scarce 
 and cheap when it is plentiful. However much 
 the market price of labour may deviate from its 
 natural price, it has, like commodities, a tendency
 
 ECONOMICS AND SOCIALISM 75 
 
 to conform to it." ' Here bare-subsistence wages 
 are represented as the natural wages of labour 
 simply because Ricardo believed that the value of 
 " things which are purchased and sold, and which 
 may be increased or diminished in quantity," is 
 regulated by cost of production, and chose to 
 consider labour to be " like commodities." 
 
 Now, labour is not a commodity, and is not like 
 commodities. There is no such thing as a demand 
 for labour. Labour has not only no natural price, 
 but also no market price, no price at all. It is 
 not purchased and sold ; no one buys it, no one 
 sells it, no one would take it as a gift. What is 
 bought and sold is not the labour, but the com- 
 modities and services produced by the labour ; not 
 the labour, but the work done by the labour. 
 
 It is extraordinarily difficult to convince some 
 people of this, especially if they happen to have 
 been taught to believe in the sophistical proposi- 
 tion that " demand for commodities is not demand 
 for labour." 2 They admit that when a man works 
 on his own account, what he gets paid for is the 
 produce of his labour ; but they think that if he 
 works under a contract for some one else, then he 
 sells his labour. Yet surely it is plain enough that 
 no one will undertake to pay a man wages without 
 the expectation of getting in return something! 
 which is not labour but the produce of labour. 
 
 ' Works, pp. 50, 51. 
 
 ' J. S. Mill, " Principles of Political Economy," Bk. T., ch. v., §9.
 
 76 THE ECONOMIC OUTLOOK 
 
 If these people who think that labour is bought 
 hired a stone-breaker at so much a day, would 
 they be satisfied with his labouring most earnestly, 
 so that he streamed with sweat all day long, if 
 he broke no stones? Say, for instance, if he 
 belaboured the stones with the handle end of the 
 hammer? Of course they would not be satisfied ; 
 they would find that they did not want labour, but 
 to have the stones broken. 
 
 A demand for some particular kind of labour, 
 though not a strictly accurate expression, is in- 
 telligible enough. It means an offering of other 
 commodities and services in exchange for the com- 
 modities or services produced by that kind of 
 labour. But a demand for labour in general is 
 an expression which conveys no meaning to the 
 economic mind. How can there be conceived a 
 greater or less ofifcring of commodities and services 
 in exchange for the commodities and services 
 produced by alt kinds of labour? The total 
 amount of commodities and services there are 
 to ofifer depends on the total amount of labour 
 which is undergone. The more labour under- 
 gone the more commodities and services there are, 
 so that to suppose that (apart from the law of 
 diminishing returns) there can be so many 
 labourers as to reduce earnings is simply the 
 fallacy of general over-production. 
 
 It is scarcely just to father the doctrine that 
 competition wages naturally amount to a bare sub-
 
 ECONOMICS AND SOCIALISM 77 
 
 sistence upon the early nineteenth-century political 
 economists. It was not they who invented it. 
 Nor was it invented by Turgot, as is sometimes 
 alleged. When Turgot said " the wages of the 
 workman are limited by the competition between 
 workmen to his subsistence," ' he was merely 
 repeating an eighteenth-century commonplace. 
 Writers on taxation continually used it to prove that 
 no taxes could by any possibility fall on the poor. 
 Political Economy in these days knows no iron 
 or brazen law of wages. Assuming that the 
 number of non-workers is so small in proportion 
 to that of the workers that some increase or 
 decrease in its size will make no appreciable 
 difference, it teaches, what is obviously the fact, 
 that the earnings of labour depend on the amount 
 of income produced per capita, and the way in 
 which it is divided between Labour and Property. 
 It says that average earnings {i.e., earnings per 
 capita) cannot decrease unless there is either a 
 decrease in the income produced per capita or 
 an increase in the proportion of the income pro- 
 duced which falls to the owners of property. 
 There is thus no opening left for pessimism about 
 average earnings, unless it be maintained either 
 that the income produced per capita is on the 
 decline or that Property takes an increasing pro- 
 portion of the whole income. 
 
 ' " Reflexions sur la formation et la distribution des richesses," 
 § vi.
 
 78 THE ECONOMIC OUTLOOK 
 
 The income produced per capita, let us say 
 the average income, cannot decrease unless either 
 a smaller amount of labour is undergone per 
 capita or the productiveness of industry decreases. 
 But it will be generally admitted that if the average 
 amount of labour has undergone any diminution 
 (which is improbable), the diminution of the 
 average income resulting from this cause has been 
 more than counterbalanced by the increase which 
 has resulted from the growing productiveness of 
 industry. 
 
 Then it is left to those who despond about 
 average earnings — those who quote with approval 
 Caimes' dictum that the earnings of labour can 
 never rise much above their present level ' — to 
 maintain that property takes a larger and larger 
 proportion of the whole income of Society, and not 
 only a larger proportion but a proportion so much 
 larger as to counterbalance the effect of the 
 increase of average income. For instance, if when 
 the average income is twenty Property takes a 
 quarter, then if it is to keep earnings down at 
 the old level when the average income has risen 
 to thirty it must take a half. 
 
 But does any one maintain that the proportion 
 which goes to Property increases in this way? 
 Does any one maintain that it increases at all? 
 I do not know of any one who does so. 
 
 Economic theory can give no answer to the 
 ■ " Some Leading Principles," Pt. II., ch. v, § 7.
 
 ECONOMICS AND SOCIALISM 79 
 
 question whether it does or not. The old 
 economists thought that theory showed that the 
 rent of land as a rule rises. No doubt this is 
 the case, but it does not prove that a larger pro- 
 portion of the whole income of the community 
 goes to rent. They said that as a rule the rate 
 of interest falls, and this, too, is true, though not 
 in the least on account of the reasons given ; but 
 a fall in the rate of interest does not show that 
 capital receives a less proportion of the whole 
 income. As regards land and capital or rent and 
 interest taken together, the old economists did not 
 profess to have a theory. 
 
 The question can only be answered by history 
 or statistics, and it is of no use to attempt to 
 answer it by giving statistics of earnings in several 
 " typical " trades at different times and general- 
 ising from these. The changes in the relative 
 remuneration of different occupations, the changes 
 in the occupations themselves, and the changes in the 
 relative numbers of persons employed in them are 
 far too many and too great to allow this method to 
 lead to any useful result. We have got beyond 
 the stage at which acceptance can be found for 
 such crude notions as Ricardo's opinion that " the 
 scale " of remuneration in different employments 
 " when once formed is liable to little variation." ' 
 
 The only efficient way of arriving at an answer 
 to the question would be to form estimates of the 
 ' Above, p. 64, note.
 
 80 THE ECONOMIC OUTLOOK 
 
 total income of Labour and the total income of 
 Property at different times. Whether this can be 
 done with sufficient accuracy and certainty to be 
 of much use I do not feel sure. 
 
 I used to think that in countries like this at 
 the present time Property must have a larger pro- 
 portion of the whole income than in countries with 
 small amounts of capital such as Russia or Greece, 
 and one day (long before I began to write this 
 paper or had ever heard of the Fabian Society) 
 I took Table H in Mulhall's article on " Wealth " 
 and endeavoured to find out if it bore out this 
 view, fully expecting it to do so. I assumed that 
 the rate of interest in this country was 3 per cent., 
 in France 33, in Germany 3*, in the United 
 States, Australia, and Russia 5, in Greece 6. Then 
 I calculated Property's proportion. It came out 
 thus : Greece 54 per cent, of the whole income. 
 United States ;^;^ per cent., France 29, Russia 28, 
 Australia 22, United Kingdom 21. This surprised 
 me greatly. 
 
 I do not mean to say that conjectural figures 
 like these arc in themselves worth anything. I 
 only give them because they seem to me to suggest 
 at any rate that the pessimists' case is not to be 
 taken as founded on notorious facts. If the pessi- 
 mists really believe that Property takes a con- 
 tinually increasing proportion of the whole income 
 and a proportion increasing so much as to reduce 
 average earnings in spite of the increase in the
 
 ECONOMICS AND SOCIALISM 81 
 
 productiveness of industry, let them say so 
 definitely and endeavour to prove it in an intellig- 
 ible and comprehensive manner.' 
 
 If Socialism is to be transplanted from the land 
 of metaphor and mysticism and to flourish in the 
 soil of British common sense in agreement with 
 modern Political Economy, its adherents should 
 take the advice which Jcvons gave to economists to 
 " fling aside once and for ever the mazy and pre- 
 posterous assumptions of the Ricardian school." 2 
 They will not have done this till they cease to 
 complain of an imaginary " subjection of labour 
 to capital," cease to represent the existence of 
 private property in the means of production as 
 the cause of extreme poverty, and cease to expect 
 a national regeneration from the extension of 
 mercantile institutions worked by the State. 
 
 The phrase " subjection of labour to capital " 
 is obviously not to be taken literally, for it would 
 be unintelligible to say that a species of human 
 action is subject to a mass of mute, and for the 
 most part inanimate, material objects. It must 
 be supposed, then, that " subjection of labour 
 to capital " means " subjection of labourers to 
 owners of capital." Now, if an assertion that 
 labourers are subject to owners of capital were 
 only intended to indicate that a large portion of 
 
 • This subject recurs in the essay on the " Division of Income, 
 No. VII. in this volume. 
 ' " Theory of Political Economy," Preface. 
 
 6
 
 82 THE ECONOMIC OUTLOOK 
 
 the income of society as now constituted goes to 
 the oxATiers of the capital, all that could be said 
 would be that the language used is singularly ill- 
 chosen. If it were intended to indicate that in 
 many cases the owners of capital take the risks 
 involved in industrial enterprises, all that could 
 be said would be that this is a very good thihg 
 for labourers. Doubtless it is intended to convey 
 far more than this, but what it is intended to 
 convey is by no means clear. Possibly it means 
 that owners of capital " exploit " labourers. A 
 person who says that labourers are exploited 
 cannot very well be contradicted unless he is rash 
 enough to give an explanation of the word, which 
 he very seldom is. If exploit means anything*, 
 I suppose it means to employ at competition wages. 
 How this involves subjection it is not very easy 
 to see, as the will of the owners of capital has 
 nothing to do with fixing competition wages ; if 
 it had, I am afraid every class of workers would 
 be on a bare subsistence wage. Moreover, there 
 is a very large class of wage -earners, chiefly con- 
 sisting of domestic servants, which is not sup- 
 posed to be employed by capital. It is a curious 
 commentary on the subjection of labour to capital 
 that it is in this class and not in the class sup- 
 posed to be employed by capital that the old- 
 fashioned servility is most flourishing. 
 
 That the existence of private property in the 
 means of production is not the cause of extreme
 
 ECONOMICS AND SOCIALISM 83 
 
 poverty may be very easily shown. Of course the 
 fact that Property has a large share of the income 
 of Society accounts for the greater part of the 
 inequality of wealth which prevails, but it does 
 not account for the whole of the inequality. The 
 very large incomes are entirely due to the posses- 
 sion of property ; I do not suppose any one ever 
 earned £30,000 a year for ten years together, while 
 incomes greater than this derived from property 
 are common enough. But besides inequality of 
 property there is such a thing as inequality of 
 earnings, and it is to inequality of earnings that the 
 extremity of poverty is due. Property (according 
 to the estimate adopted in the Fabian pamphlet 
 " Facts for Socialists ") receives nine twenty-fifths, 
 or a little more than one-third, of the whole income 
 of this country, and it will be admitted that there 
 would not be any great amount of acute poverty 
 if every worker had an equal share of two-thirds 
 of the present total income, as would be the case 
 if earnings were equal. Doubtless the share of 
 each worker would be a rather small sum, but 
 given a moderate amount of providence, it would be 
 sufficient for the healthy and happy existence both 
 of the workers and the non -workers dependent 
 on them. 
 
 People often talk, however, as if the inequality 
 of earnings was somehow a direct result of 
 Property's having a share of the total income — as 
 if one man earned little because Property deducted
 
 84 THE ECONOMIC OUTLOOK 
 
 a large portion of the produce of his labour, and 
 another man earned much because Property 
 deducted a small portion of the produce of his 
 labour. According to this view the millionaires 
 are supported entirely by those who are on the 
 borders of pauperism. In reality the income of 
 Society is a joint product divided into shares in 
 the course of production, and you cannot say that 
 one set of individuals pay this, that, or the other 
 share of it. So far from its being the case that 
 Property benefits more largely from the exist- 
 ence of the ill-paid than from the well-paid 
 worker, the truth is that the poorest class does 
 not completely maintain itself, but is a burden 
 on the rest of the community, including the owners 
 of property. 
 
 Institutions like the Post Office and State rail- 
 ways, which are the subject of what appears to 
 me extravagant admiration on the part of present- 
 day Socialists, are of extremely little use in com- 
 bating poverty. In working them the State acts, 
 and must act, on the whole very much in the same 
 way as private owners would work. The institu- 
 tions are not communistic as regards the consumers 
 of the commodity sold. If they were, the com- 
 modity would be sold cheaper to the poor than to 
 the rich. Nor are these institutions communistic 
 as regards the workers employed in producing the 
 commodity sold. Different kinds of work are paid 
 for at different rates, which correspond in the main
 
 ECONOMICS AND SOCIALISM 85 
 
 to those paid for similar kinds of work in the out- 
 side market, and it is impossible to see on what 
 other principle the remuneration could be settled. 
 I read in one of your pamphlets that great things 
 are expected if railway servants are raised to the 
 lofty level of postmen by being employed by the 
 State, but the proposition that postmen have so 
 much more social spirit than other people seems 
 to me as extravagant as the opinion which I heard 
 lately expressed in a tramcar : " Well, you see, 
 when you make a man a Government official, you 
 make a rascal of him." 
 
 The chief causes of extreme poverty are not the 
 " subjection of labour to capital " nor yet " the 
 tribute of industry to idleness," but ignorance, vice, 
 and weakness of mind and body. Certainly 
 extreme poverty is a cause as well as an effect 
 of these evils ; it is maintained by them and in 
 its turn reproduces and maintains them. But we 
 do not wish to get rid of these evils merely because 
 they maintain poverty, but because they are great 
 evils in themselves. Poverty, on the other hand, 
 in itself is one of the petty evils of life ; if a man 
 were guaranteed knowledge and health of body 
 and mind, he would be a very contemptible creature 
 if he shrank from poverty. Poverty may be dim- 
 inished, at any rate for the moment, by measures 
 which do not have the effect of diminishing these 
 evils. Consequently it is far better to attack the 
 evils directly than through merely economic or
 
 86 THE ECONOMIC OUTLOOK 
 
 pounds -shillings -and-pencc measures. Every nlan 
 and woman in the community can do this in fifty 
 different ways every day of their lives without 
 invoking the aid of the State. 
 
 Nevertheless the aid of the State is necessary, 
 and it is admitted to be so by all except a very 
 small knot of pure individualists who have no 
 influence whatever. The aid of the State is already 
 freely given in innumerable ways, and every year 
 it is given more freely and in more different ways. 
 Most of these ways involve a taking from the rich 
 to give to the poor, which is communism, how- 
 ever much the proposers of each particular change 
 may insist that it is not communistic. But they 
 do not involve a premature attempt to abolish 
 free exchange of commodities and services as the 
 basis of industrial organisation, nor a belated 
 attempt to make the community into one vast 
 manufactory, with the State as a beneficent but 
 unmistakably eighteenth-century capitalist at the 
 head of it.
 
 II 
 
 RICARDO IN PARLIAMENT' 
 
 After his retirement from business, Ricardo, as 
 McCulloch's Preface to his collected Works tells 
 us, " determined to extend the sphere of his use- 
 fulness by entering the House of Commons." That 
 an economist and retired stockjobber worth three- 
 quarters of a million should have any difficulty 
 in carrying out this plan probably never occurred 
 to any one at that time, and McCuUoch continues 
 without a break, "In 1819 he took his seat as 
 member for Portarlington." The electors of Port-- 
 arlington are said to have been about twelve in 
 number. Probably Ricardo never saw them.2 All 
 
 ' Reprinted from the Economic Journal for June and Sep- 
 tember, 1894. 
 
 ' The member for Galway said in the House of Commons on 
 April 24, 1823: "The hon. member for Portarhngton had 
 talked gravely about the influence of tlie aristocracy. Now, he 
 did not think the hon. gentleman could name one of the con- 
 stituents by whom he was returned. They were about twelve 
 in number, and he did not recollect that he had ever set foot in 
 Ireland. The hon. gentleman had, therefore, he presumed, been 
 indebted to that influence, or to some equivalent one, for his seat 
 for Portarlington " (Hansard, viii., 1285). " He is understood 
 
 87
 
 88 THE ECONOMIC OUTLOOK 
 
 that we know is that he was elected on February 
 20, 18 1 9, in place of Richard Sharpe, Esq., of 
 Mark Lane, who had accepted the Chiltern 
 Hundreds, and that on the dissolution of Parlia- 
 ment at the death of George HL he was re-elected 
 for the same constituency, and continued to repre- 
 sent it till his death on September 11, 1823. 
 
 For his time Ricardo was a very active member. 
 His speeches number 126, and though many of 
 them are merely brief, casual remarks, they occupy 
 together 177 columns of Hansard. The Hansard 
 of that period seldom gives the list of the majority 
 in parliamentary divisions, but from February 21, 
 18 1 9, to September 10, 1823, there are 237 lists 
 of minorities, and Ricardo's name occurs in 166 
 of them. It also occurs in eight out of the nine 
 lists of majorities. That he voted in many of 
 the majorities of which the names are not recorded 
 is improbable, but even if he voted in none of 
 them it is clear that he must have attended 
 divisions most conscientiously. 
 
 As regards the miscellaneous questions of 
 general politics which concern an economist no 
 
 to have lent ;^20,ooo to the proprietor of the borough, free of 
 interest, on condition that the latter returned him free of expense. 
 He never, indeed, saw the borough of which he was the 
 representative, and could speak and vote as he thought proper, 
 without being influenced in any degree by the opinions of his 
 constituents. He was in every sense a truly independent 
 member" (McCulloch, "Treatises and Essays," 2nd ed., 1859, p. 
 555. "ote).
 
 RICARDO IN PARLIAMENT 89 
 
 more than any other citizen, Ricardo invariably 
 acted with the most liberal section of the House. 
 The very first vote which he cast (March 2, 18 19) 
 was in favour of Sir James Mackintosh's motion 
 for a committee to inquire into the criminal law 
 with a view to reducing its excessive severity. 
 He voted for the Forgery Punishment Mitigation 
 Bill in 1821, and for the Abolition of Punishment 
 by Whipping Bill, and also for Mackintosh's 
 resolutions in favour of the abolition of capital 
 punishment for a number of offences, in 1823. 
 In the autumn session of 1 8 1 9 he voted steadily 
 against the repressive measures which became 
 known as the Six Acts. Against one of them, that 
 for the Prevention of Seditious Meetings, he made 
 a speech in which he maintained that the people's 
 right of public meeting " was a right of meeting 
 in such numbers and showing such a front to 
 ministers as would afford a hope that bad measures 
 would be abandoned, and that public opinion would 
 be respected." Such meetings were inconvenient, 
 he admitted, and were not " the sort of check 
 which ought to exist in a well-administered Govern- 
 ment," but till Parliament was reformed they were 
 necessary. 
 
 " He had read with surprise the abhorrence of 
 radical reform expressed by several members of 
 that House. He believed there were among the 
 advocates of that measure wicked and designing 
 men. But he also knew that there was a great
 
 90 THE ECONOMIC OUTLOOK 
 
 number of very honest men who believed universal 
 suffrage and annual Parliaments were the only 
 means of protecting the rights of the people and 
 establishing an adequate check upon government. 
 He had the same object as they professed to have 
 in view ; but he thought that suffrage far from 
 universal would effect that object, and form 
 a sufficient check. He therefore thought it 
 would be madness to attempt a reform to 
 that extent, when a less extensive reform would 
 be sufficient." ' 
 
 He always voted for Reform whenever the 
 subject came up, which was not very frequently. 
 Speaking briefly in favour of Mr. Lambton's motion 
 for Reform in 1821, he "regretted that his hon. 
 friend did not propose the introduction of voting 
 by ballot, which he thought would be a greater 
 security for the full and fair representation of 
 the people than any extension of the elective 
 franchise. It might be supposed that if they were 
 able to vote freely the effect would be that in 
 time the people would get rid of the lords." 
 But *' The people would never, when left to their 
 own free and unbiassed choice, be anxious to get 
 rid of that which they considered the instrument 
 of their good government ; and unless gentlemen 
 were prepared to assert that the lords were an 
 instrument of bad government, which he believed 
 nobody would assert, they could not entertain any 
 ' December 6, iSiq-
 
 RICARDO IN PARLIAMENT 91 
 
 rational fear that the people would be anxious to 
 get rid of them." ' 
 
 In a longer speech delivered on Lord John 
 Russell's motion in 1823, he divided the subject 
 into three parts : ( i ) the extension of the suffrage, 
 (2) the mode of election, and (3) the duration of 
 Parliaments. 2 The suffrage, he said, ought to be 
 extended, but " the other two points appeared to 
 him to be of deeper interest." He inquired, " Of 
 what use was it that the power of choosing its 
 representatives should be given to the people, 
 unless the free exercise of that right were also 
 secured to them? " The only way to give them 
 this free exercise was to introduce the ballot. 
 " Unless the system of ballot were resorted to, it 
 would be in vain to attempt any reform at all of 
 Parliament." The wisdom of our ancestors' 
 argument he brushed away with scorn. " He 
 thought the present generation possessed not only 
 
 ' April 18, 1821. 
 
 = April 24, 1823. In reprinting the "speech on the plan of 
 voting by ballot," which appears at the end of his edition of 
 Ricardo's Works, McCulloch calls it a " report of one of Mr. 
 Ricardo's speeches in Parliament— most probably the one he 
 delivered on the 24th April, 1823, in the debate on Lord John 
 Russell's motion — written in his own hand." That McCulloch had 
 not taken the most ordinary pains to verify a haphazard conjecture 
 by referring to Hansard is shown by his use of the words " most 
 probably " ; that he had not taken the trouble to read the speech 
 which he was reprinting is shown by the fact that it talks of " the 
 Bill," and is particularly addressed to criticism of two "clauses" 
 in the Bill. If Hansard is to be trusted, it was never delivered.
 
 92 THE ECONOMIC OUTLOOK 
 
 as much wisdom as any of those which had 
 preceded it, but a great deal more." 
 
 On questions of foreign poHcy he did not speak, 
 except once on March i8, 1823, when he rose to 
 protest against the inference that those who, like 
 himself, had attended a dinner given to the 
 Spanish minister, were in favour of war. " He 
 felt a deep sympathy with the Spanish people," but 
 " had no hesitation in declaring his opinion that it 
 would be wise in this country to keep out of the 
 war." He voted consistently against the Foreign 
 Enlistment and Alien Bills. 
 
 As to the Queen, he voted against the Govern- 
 ment but did not speak. 
 
 A subject on which he seems to have expended 
 some study, and to have felt very keenly, was the 
 policy of prosecutions for blasphemy. He was 
 in favour of the most unrestricted liberty of 
 expression, as well as of opinion. Speaking on 
 March 26, 1823, in favour of the prayer of Mary 
 Ann Carlile for the remission of the exorbitant 
 fine non-payment of which was detaining her in 
 gaol after the expiration of her sentence of im- 
 prisonment, he protested against the Attorney- 
 General's demand that the woman must first 
 express contrition for her offence, or, as he pre- 
 ferred to put it, " must comtnit an act of the most 
 shameless duplicity, in order to become a proper 
 subject for the mercy of the Crown." This led 
 liirn to denounce the practice of asking a witness
 
 RICARDO IN PARLIAMENT 93 
 
 in court whether he believed in a future state, 
 and declining to take his evidence if he said he 
 did not. 
 
 "Blasphemy," he said, "was an offence which 
 it was quite impossible to define. Nobody, in 
 committing it, was aware of what he was offend- 
 ing against. It was one thing in this country 
 and another in France. . . . He must now inform 
 the House that after a long and attentive con- 
 sideration of the question, he had made up his 
 mind that prosecutions ought never to be 
 instituted for religious opinions. All religious 
 opinions, however absurd and extravagant, might 
 be conscientiously believed by some individuals. 
 Why, then, was one man to set up his ideas on 
 the subject as the criterion from which no other 
 was to be allowed to differ with impunity? Why 
 was one man to be considered infallible, and all 
 his fellow-men as frail and erring creatures ? 
 Such a doctrine ought not to be tolerated ; it 
 savoured too much of the Inquisition to be 
 received as genuine in a free country like England. 
 A fair and free discussion ought to be allowed 
 on all religious topics. If the arguments advanced 
 upon them were iricorrect and blasphemous, surely 
 they might be put down by sound argument 
 and good reasoning, without the intervention of 
 force and punishment." 
 
 Wilberforce was scandalised by this speech, and 
 complained that " the hon. member for Portarling-
 
 94 THE ECONOMIC OUTLOOK 
 
 ton seemed to carry into more weighty matters 
 those principles of Free Trade which he had so 
 successfully expounded." He appealed to Paley's 
 teaching that ridicule, invective, and mockery on 
 religious subjects might be suppressed without 
 violating religious liberty. 
 
 On July I, 1823, a petition was presented from 
 certain ministers of religion and their congrega- 
 tions deprecating the prosecutions for blasphemy. 
 Joseph Hume delivered a long speech and pro- 
 posed a resolution to the effect that " Free discus- 
 sion has been attended with more benefit than 
 injury to the community, and it is unjust and 
 inexpedient to expose any person to legal penalties 
 on account of the expression of opinions on matters 
 of religion." Wilberforce opposed, objecting to 
 " ribaldry and indecency," and again quoting 
 Paley. Ricardo followed in support of the motion. 
 Paley, he thought, was more liberal than Wilber- 
 force, and " he, as well as the other chief orna- 
 ments of the Church, for instance, Dr. Tillotson 
 and Dr. Porteous, had asserted, in the largest 
 sense, the right of unfettered opinion." As in 
 his speech of March 26th, he drifted into an 
 attack on the plan of asking a witness whether 
 he believed in a future state. He read a 
 long passage from Tillotson, " for the purpose 
 of showing, and from a great authority in 
 the Church, that the obligation of religion 
 was not alone considered as the influential test
 
 RICARDO IN PARLIAMENT 95 
 
 of moral truth, and that a man might be very 
 sceptical upon doctrinal points, and yet very 
 positive in the control of moral impressions distinct 
 from religious faith. For instance, there was Mr. 
 Owen of Lanark, a great benefactor to society, 
 and yet a rrtan not believing (judging from some 
 opinions of his) in a future state. Would any 
 man, with the demonstrating experience of the 
 contrary before his eyes, say that Mr. Owen was 
 less susceptible of moral feeling because he was 
 incredulous upon matters of religion? Would any 
 man pretending to honour or candour say that 
 Mr. Owen, after a life spent in improving the 
 condition of others, had a mind less pure, a heart 
 less sincere, or a less conviction of the restraint 
 and control of moral rectitude than if he were 
 more imbued with the precepts of religious obliga- 
 tion? Why, then, was such a man (for so by the 
 law he was) to be excluded from the pale of 
 legal credibility? Why was he, if he promulgated 
 his opinions, to be liable to spend his days immured 
 in a prison? " 
 
 As for making the reservation that attacks on 
 religion must not be made with " levity and 
 ribaldry," he asked: — 
 
 " What was it but to say: * You may discuss, if 
 you please, in the most solemn, most serious, and 
 therefore most influential manner, any topic of 
 religion you please ; but the moment you discuss 
 it with levity or ribaldry — that is, in such a manner
 
 96 THE ECONOMIC OUTLOOK 
 
 as to be sure to offend the common sense of man- 
 kind, and therefore deprive you of really acquir- 
 ing any serious proselytes — then the law takes 
 cognisance of your conduct and makes your 
 imbecility penal.' " 
 
 Later in the debate a member protested against 
 the allegation that Owen disbelieved in a future 
 state. Ricardo was ready to apologise if he had 
 misrepresented Owen, and explained that it was 
 a matter of inference : — 
 
 " It was one of the doctrines of Mr. Owen that 
 a man could not form his own character, but that it 
 was formed by the circumstances which surrounded 
 him — that when a man committed an act which 
 the world called vice it ought to be considered 
 his misfortune merely, and that therefore no 
 man could be a proper object for punishment. 
 This doctrine was interwoven in his system ; and 
 he who held it could not impute to the Omnipotent 
 Being a desire to punish those who, in this view, 
 could not be considered responsible for their 
 actions." 
 
 Ricardo's name appears in neither of the two 
 lists of votes on the Roman Catholic question 
 which are given in Hansard during the period 
 covered by his parliamentary career. As one of 
 these lists ' gives the names both of the majority 
 
 ' That of February 28, 1821. The other Hst (April 30, 1822) 
 gives the names only of those who voted against the Roman 
 Catholic claims.
 
 RICARDO IN PARLIAMENT 97 
 
 and minority, we must conjecture that he remained 
 neutral. This is curious. Can it have been due 
 to some compact with the power which gave him 
 his seat for Portarlington? 
 
 One of his earliest speeches (May 4, 18 19) was 
 in favour of a motion for abolishing State lotteries. 
 It is unfortunately reported in a very brief form: — 
 
 " Mr. Ricardo supported the motion and 
 pointed out the evils which arose from the draw- 
 ings of the lottery so often in the year. He quoted 
 the resolutions of a Society to which many of the 
 ministers belonged, deprecating the lottery ; and 
 observed that they were thus condemning, as 
 individuals, the law which they came to support 
 by their votes." 
 
 No one had a word to say against the motion 
 except Canning, who delivered a shamefully 
 cynical speech, Castlereagh, Vansittart, and 
 Huskisson, but it was lost by 133 to 84. 
 
 Coming now to economic subjects proper, we 
 may put in the first place that great currency 
 question which had first exercised Ricardo's 
 powers of economic exposition. Here the Govern- 
 ment had adopted his views, so that he was of 
 course one of their strongest supporters. When he 
 took his seat in Parliament the Bank was appar- 
 ently drifting into difficulties in consequence of 
 an undertaking into which it had rashly entered to 
 pay in specie all notes dated earlier than 
 January 1,1817. A committee of secrecy reported 
 
 7
 
 98 THE ECONOMIC OUTLOOK 
 
 that a stop should be put to its proceedings, and 
 Peel brought in a bill for the purpose on April 5, 
 18 19. Ricardo spoke shortly in favour of this 
 bill, urging that before the Bank could safely 
 give cash for notes it should bring the notes to 
 par value by reducing their number. When Peel 
 proposed his resolutions for the definitive resump- 
 tion of cash .payments (May 24, 18 19), Ricardo, 
 as McCulloch tells us, did not rise till he was 
 called on loudly from all sides of the House. 
 Hansard sprinkles his speech with an unusual 
 number of cheers, and records that *' the hon. 
 member sat down lamidst loud and general 
 cheering from all sides of the House." There is, 
 however, nothing remarkable in the speech, which 
 merely recapitulates the views which Ricardo had 
 been advocating for many years. It expresses 
 without much reserve his extremely poor opinion 
 of the capacity of the Bank directors. " The 
 House," he remarked, " did not withdraw its con- 
 fidence from the Bank from any doubt of its wealth 
 or integrity, but from a conviction of its total 
 ignorance of the principles of political economy." 
 When the resumption had once been decided on, 
 Ricardo's task was to defend the measure against 
 the attacks of those who attributed the depression 
 of trade and agriculture to it. He had frequently 
 to urge that the appreciation of the currency 
 caused by it was much less than it was represented 
 to be, to show that the fundholders had not been
 
 RICARDO IN PARLIAMENT 99 
 
 benefited by it to any very great extent, to argue that 
 the depression was due to the Corn Laws and the 
 National Debt, and to bring forward objections to 
 bimetallic ' and other proposals for producing a 
 depreciation. The most interesting of the speeches 
 which he delivered on the subject is that of 
 June 12, 1822, against "Squire" Western's 
 motion for a committee. In it he went thoroughly 
 into the distinction between " depreciation " and 
 " diminution of value," quoted the pamphlet of 
 1 8 16, and declared in italics that ''quantity 
 regulated the value of everything " This was 
 true, he added, of every commodity, but " more 
 perhaps of currency than of anything else." This 
 speech occupies fifteen columns of Hansard and 
 is Ricardo's longest. Nothing daunted by a 
 defeat in a division of 194 against 30, Western 
 reopened the question on July loth with eighteen 
 lengthy resolutions. Ricardo was the first speaker 
 against them, and in the end they were negatived. 
 On June 11, 1823, the indefatigable Squire 
 again returned to the charge, and Ricardo was 
 again his first opponent. In his speech on this 
 occasion there are traces of the discussion between 
 him and the Squire becoming slightly personal. 
 In a pamphlet the Squire had referred to him 
 somewhat unpleasantly : — 
 
 " Without naming him, the hon. gentleman 
 
 ' " If there were two standards there would be greater chance 
 of variation" (De cember 24, 1819).
 
 100 THE ECONOMIC OUTLOOK 
 
 alluded to him and his opinion in a way that no 
 one could mistake the person meant, and said that 
 it required the utmost extent of charity to believe 
 that in the advice he had given he was not influ- 
 enced by interested motives. The hon. gentleman 
 would have acted a more manly part if he had 
 explicitly and boldly made his charge, and openly 
 mentioned his name. He did not pretend to be 
 more exempted from the weaknesses of human 
 nature than other men, but he could assure the 
 House and the hon. member for Essex that it would 
 puzzle a good accountant to make out on which 
 side his interest predominated. He (Mr. Ricardo) 
 would find it difficult himself, from the different 
 kinds of property which he possessed (no part 
 funded property), to determine the question. But 
 by whom was this effort of charity found so diffi- 
 cult? By the hon. gentleman whose interest in 
 this measure could not for one moment be doubted 
 — whose whole property consisted of land — and who 
 would greatly benefit by any measure which should 
 lessen the value of money. He imputed no bad 
 motive to the hon. gentleman. He believed he 
 would perform his duty as well as most men, even 
 when it was opposed to his interest ; but he asked 
 the hon. gentleman to state on what grounds he 
 inferred that he (Mr. Ricardo) should, under 
 similar circumstances, be wanting in his." 
 
 He concluded by declaring that " it was too 
 late to make any alteration in the currency. The
 
 RICARDO IN PARLIAMENT 101 
 
 difficulties of the measure of 1 8 1 9 were now 
 got over. The people were reconciled to it." If 
 agriculture were not flourishing before long, " it 
 would only be on account of the mischievous Corn 
 Law, which would always be a bar to its 
 prosperity." 
 
 Next to the currency among Ricardo's interests 
 comes the question of the Corn Laws. His first 
 attack on them in the House was made on 
 December 16, 1 8 1 9, in the course of a speech 
 on Sir W. de Crespigny's motion for a committee 
 to consider Owen's scheme, " The proportion of 
 the capital to population," he agreed with 
 Brougham in believing, " regulated the amount 
 of wages, and to augment them it was important 
 to increase the capital of the country." Low 
 profits led to the emigration of capital to countries 
 where the rate was higher. Profits were naturally 
 smaller in England than on the Continent, but 
 " the capital continued in this kingdom, not only 
 because persons felt a solicitude to keep their 
 property under their own eye, but because the 
 same confidence was not reposed in the security 
 of others : the moment, however, other kingdoms 
 by their laws and institutions inspired greater con- 
 fidence, the capitalist would be induced to remove 
 his property from Great Britain to a situation 
 where his profits would be more considerable: 
 this arose from no fault in the Government, but 
 the effect of it was to produce a deficiency of
 
 102 THE ECONOMIC OUTLOOK 
 
 employment and consequent distress. Then came 
 the question, had we taken the proper steps to 
 prevent the profits upon capital from being lower 
 here than in other countries ? On the contrary, had 
 we not done everything to augment and aggravate 
 the evil? Had we not added to the natural 
 artificial causes for the abduction of capital? We 
 had passed Corn Laws that made the price of that 
 necessary of life, grain, higher than in other and 
 neighbouring countries, and thus interfered with 
 the article which was considered the chief regulator 
 of wages. Where grain was dear, wages must 
 be high, and the effect of high wages was neces- 
 sarily to make the profits on capital low." 
 
 Immediate repeal of the Corn Laws, he thought, 
 was impossible, but notice should be given that 
 " after a certain number of years such an in- 
 jurious system of legislation must terminate." A 
 fortnight later (December 24, 18 19) he repeated 
 this argument when speaking on a petition of the 
 merchants of London respecting commercial dis- 
 tress. On May 12th of the next year he declared 
 that " there was not a more important question 
 than that of the Corn Laws. Nothing, in his mind, 
 was better calculated to afford general relief than 
 the lowering of the price of corn. It was the first 
 step to that great remedy, the making labour 
 productive." On May 30th he exposed the 
 absurdity of endeavouring to fix " a remunerating 
 price " for grain. " You might," he said, " have
 
 RICARDO IN PARLIAMENT 103 
 
 fifty remunerating prices according as your capital 
 was employed on productive or unproductive 
 lands." Endeavouring to prove the doctrine of 
 his " Essay on the Influence of a Low Price of 
 Corn," and of his speech of December i6, 1819, 
 he said: — 
 
 " The high price of subsistence diminished the 
 profits of capital in the following manner: The 
 price of manufactured articles — of a piece of cloth, 
 for instance — was made up of the wages of the 
 manufacturer, the charges of management, and 
 the interest of capital. The wages of the 
 labourer were principally made up of what 
 was necessary for subsistence ; if grain was 
 high, therefore, the price of labour, which might 
 be before at 50 per cent, on the manufactured 
 article, might rise to 60, and being sold to 
 the consumer at the same rate, the 10 per cent, 
 (difference) would necessarily be a reduction from 
 the profits of stock. If food was high here and 
 cheap abroad, stock would thus have a tendency 
 to leave the country and to settle where higher 
 profits could be realised." 
 
 He would grant that the country could grow 
 enough to support a considerably increased 
 population, but he questioned the expediency 
 of attempting to do so: — 
 
 " All general principles were against it. They 
 might as well urge that, as in France, they could 
 grow beetroot for the purpose of producing sugar,
 
 104 THE ECONOMIC OUTLOOK 
 
 as grow grain sufficient for home consumption 
 merely because it could be done. The right hon. 
 gentleman opposite had ridiculed that absurd 
 scheme of Buonaparte in the most pointed 
 language, but all his ridicule applied equally to 
 the growing of corn in this country when we could 
 get it cheaper elsewhere." 
 
 Of the notion that because commerce and manu- 
 facture were protected, agriculture should be pro- 
 tected also, he made short work. " The argument 
 of the agriculturist was," he said, " that the legis- 
 lature having enabled the shipowner and cotton 
 manufacturer to injure the community, they should 
 give him a privilege to do the same." 
 
 In 1 82 1 Ricardo dealt with the Corn Laws in 
 a speech on Mr. Gooch's motion for a committee 
 on agricultural distress (March 7th). After re- 
 pudiating the suggestion which had been made 
 to the effect that he had a personal interest to 
 serve, by asserting that " he was not a mercantile 
 man — that he was not a man of funded property, 
 but that he was a landed proprietor," he " begged 
 that he might not be understood as advocating 
 an unlimited free trade in corn ; for there were 
 circumstances attending that question which 
 rendered it imperative upon the legislature to 
 impose some shackles upon a trade which, more 
 than any other, being once without restraint, 
 speedily required them." If British agriculturists 
 could show that they had to cope with any
 
 RICARDO IN PARLIAMENT 105 
 
 particular taxes which foreigners had not, then 
 he would allow a countervailing duty to that 
 amount. " The great principle upon which they 
 should go was this — to make the price of their 
 corn approximate, as nearly as possible, to the 
 price which it bore in other countries." The 
 existing system produced a glut of corn when- 
 ever the price rose above 80s. : — 
 
 " The system which had been proposed by the 
 hon. member for Bridgenorth, of duties that 
 should rise as the price of corn fell, and fall as 
 the price of corn rose, he could not consider a very 
 wise one. What would be the situation of the 
 grower, if such a system were put in practice ? 
 Supposing he had to contend with the deficiencies 
 of a short crop in one season, he naturally ex- 
 pected to make up for them in the next season. 
 But the adoption of these duties would leave him 
 no such remedy for his misfortunes." 
 
 The depression of agriculture was not, he felt 
 sure, due to taxation, for taxation raised the price 
 of products instead of lowering them. " Take," 
 he said, " the commonest article of trade — a hat, 
 for instance. If the hat were taxed, the price of 
 the hat rose, of course." 
 
 " The hon. member for Cumberland had asked: 
 ' Can we grow corn in England on the same 
 terms as the foreign grower ? ' To this he would 
 answer, * No ' ; and for that very reason he would 
 import it. But what was the proposed end of all
 
 106 THE ECONOMIC OUTLOOK 
 
 capital if it was not this — that the possessor should 
 procure a great abundance of produce with it ? 
 Now, if he could prove that by getting rid of all 
 that capital which is employed in land he could 
 make a more profitable use of it, then he con- 
 tended that was in effect so much capital gained 
 by him. But here again an erroneous idea pre- 
 vailed. The House was told of the capital which 
 was employed in land, and told in a manner as 
 if it was absolutely and entirely vested in it. Let 
 them just consider, however, the wages of labour, 
 the price of improvements, the charges of manure, 
 and they would find that the total cost of all these 
 items would be a capital saved." 
 
 Speaking on Brougham's motion for reduction 
 of the taxation of the agricultural and other classes 
 on February 1 1, 1822, he acknowledged boldly 
 that he wished to see a diminution in the quantity 
 of land under tillage: — 
 
 " His hon. and learned friend had stated that, 
 unless something were done to relieve the farmer, 
 much of the land would be thrown out of tillage. 
 He said so too ; and it was to that very circum- 
 stance that he looked forward as a remedy." 
 
 On April 3rd he made another attack on the 
 doctrine of fixing a remunerating price. A 
 committee on agriculture had spoken of the 
 imposition of duties to " countervail," not only 
 the taxes on agricultural produce, but also the 
 whole additional expense of growing corn in this
 
 RICARDO IN PARLIAMENT 107 
 
 country as compared with other countries. But 
 to such duties there could be no limit, since as 
 population increased poorer and poorer lands 
 would be taken into cultivation, and the expense 
 of production would keep on rising. Moreover, 
 effective duties on this principle applied to all 
 commodities would simply put an end to all 
 foreign commerce. " If," he said, " on this plan 
 they attempted to give a monopoly to grapes 
 reared in hothouses, countervailing duties might 
 be imposed on wine, to make it as dear as the 
 produce of the hothouses." 
 
 Since 1815, it will be remembered, the sale of 
 foreign corn in England was absolutely prohibited 
 except when the price had risen above a certain 
 limit — in the case of wheat 80s. per quarter. The 
 price had been below this level since February, 
 1 8 1 9, but the agriculturists were haunted by a 
 fear that when, as they hoped would soon happen, 
 the price rose again to the limit, there would be 
 such an immense importation that they would profit 
 nothing. The Government proposed, therefore, 
 that even when the import price was reached the 
 foreign corn should be liable to a heavy duty. 
 Numerous amendments were brought forward, and 
 Ricardo proposed (April 29, 1822) that as soon as 
 the price of wheat had once exceeded 70s., importa- 
 tion should be allowed, whatever the price might 
 be, on payment of a duty of 20s., which should 
 be reduced one shilling per annum till it was
 
 108 THE ECONOMIC OUTLOOK 
 
 only I OS. He also proposed a bounty of 7s. on 
 exportation. The debate was enlivened by a long 
 and vigorous attack upon Ricardo from Matthias 
 Attwood. One passage in Attwood's speech puts 
 forward an objection to Ricardo's theory which 
 those who take their history of economic theory 
 exclusively from J. S. Mill imagine to have been 
 discovered by H. C. Carey. Quoting Ricardo's 
 proposition that " in the progress of society, when 
 no importation takes place we are obliged con- 
 stantly to have recourse to worse soils to feed an 
 augmenting population," Attwood said: — 
 
 " He believed that the fact thus assumed was 
 directly the reverse of that which did in reality 
 exist ; that so far from the average quality of 
 land becoming poorer as population and wealth 
 advanced, it became richer ; and he had no doubt, 
 but the average quality of the land under cultiva- 
 tion in this country at the period of its highest 
 prices, and of the greatest prosperity of agriculture, 
 at the period prior to the close of the last war — 
 that the average quality of land was then more 
 fertile : that it produced more corn on an average 
 by the acre, and with less positive labour : that it 
 yielded a greater surplus produce than at any 
 former period. It was not true that the cultiva- 
 tion of any country proceeded in the manner and 
 according to the calculation here assumed. It 
 was not the best land which was first cultivated, 
 nor the worst land which was last cultivated. This
 
 RICARDO IN PARLIAMENT 109 
 
 was determined in a great measure by other cir- 
 cumstances : by the rights of proprietorship, by 
 locality, by enterprise, by the peculiarities of 
 feudal tenure, its remains still existing : by roads, 
 canals, the erection of towns, of manufactories : 
 all those and other obstacles of a similar nature 
 interfered with the calculations of the hon. 
 member ; and bad land, when it was once brought 
 into cultivation and subjected to the operations 
 of agriculture by draining, by watering, by the 
 application of various substances, frequently be- 
 came the best land, and was afterwards cultivated 
 at the least expense." ' 
 
 " The price of corn," he proceeded to show, 
 " had never risen in the way the hon. gentleman 
 had supposed." Ricardo's answer to this portion 
 of the speech was feeble in the extreme: — 
 
 " The hon. gentleman talked of the impossibility 
 of the cultivators of the soil having recourse to 
 land of an inferior quality, but the hon. gentle- 
 man did not correctly state the argument. It 
 was not that cultivators were always driven by the 
 increase of population to lands of inferior quality, 
 but that from the additional demand for grain, 
 they might be driven to employ on land previously 
 cultivated a second portion of capital which did 
 [not] produce so much as the first. On a still 
 further demand a third portion might be employed 
 which did not produce so much as the second: it 
 * May 7, 1822.
 
 110 THE ECONOMIC OUTLOOK 
 
 was manifestly by the return on the last portion 
 of capital applied that the cost of production was 
 determined. It was impossible, therefore, that the 
 country should go on increasing its demand for 
 grain without the cost of producing it being 
 increased and causing an increased price." 
 
 These remarks are almost pointless, since 
 Attwood obviously intended to argue not only that 
 there was " in the progress of society " no diminu- 
 tion in the productiveness of land (produce per 
 acre), but also that there was no diminution in 
 the productiveness of labour (produce per man). 
 Ricardo spoke four times in the course of 
 the debate, but his resolutions were rejected by 
 218 to 25 (May 9). 
 
 To protecting duties and bounties on manu- 
 factured articles Ricardo was no less hostile than 
 to the Com Laws, and no consideration of self- 
 interest had any influence upon him. He 
 objected equally to taxes on England for the 
 benefit of Irish industry ' and to commercial re- 
 strictions on the colonies for the benefit of 
 England. 2 That his own constituency was in 
 Ireland was a fact which never moved him in the 
 least. His speeches against all kinds of com- 
 mercial restrictions other than the Corn Laws were 
 invariably short and pithy. Here, for example, 
 is the whole of his reply to the doctrine often 
 
 ' May 30, 1823, on the Irish Tithes Bill. 
 " March 13, 1822.
 
 RICARDO IN PARLIAMENT 111 
 
 heard even in these days, that the Government 
 ought to buy nothing of foreign manufacture : — 
 
 ** Mr. Ricardo thought that if the various articles 
 likely to be consumed at the coronation could be 
 bought cheaper in the foreign than the home 
 market, there could be no objection to their not 
 being home manufacture, seeing that they must 
 be purchased by the produce of our own 
 industry." ' 
 
 To the argument that the government of 
 England must interfere with commerce because 
 other governments were doing so, he had a sharp 
 retort : — 
 
 " The hon. mover had stated that foreign 
 monarchs were embarking in the corn trade, that 
 they were becoming merchants, and that the King 
 of Sweden was importing oats into this country. 
 Now if this were the fact, he for one should rather 
 rejoice at it, because he should expect to make 
 much better bargains with kings and princes than 
 with their subjects. The hon. gentleman, how- 
 ever, need not be under any alarm ; for if, as he 
 represented, these trading potentates would not 
 take back our hardware and pottery in exchange, 
 there was a sufficient security for our continuing 
 to grow our own corn." 2 
 
 Speaking on the question of the timber duties, 
 he said that by purchasing timber from Canada 
 instead of from the North of Europe the country 
 ' July 3, 1820. " April 5, 1821.
 
 112 THE ECONOMIC OUTLOOK 
 
 was losing £400,000 a year, and he would 
 much rather make a direct grant of that 
 amount to the shipowners ; " for in that case 
 the capital thus given to them would be 
 more usefully employed. At present it was 
 a total sacrifice of £400,000 a year, as much 
 so as if the ships engaged in the coasting trade 
 should be obliged to sail round the island in 
 order to give employment to a greater number. 
 He was of opinion that according to the true 
 principles of commerce it ought to form no part 
 of the consumer's consideration to enter into the 
 distribution by the seller of the money or labour 
 which he (the consumer) exchanged for any com- 
 modity which he wanted. All the consumer had 
 to consider was where he could get the article he 
 wanted cheapest ; whether the payments were to 
 be made in money or in manufactures was matter 
 quite of minor importance." ' 
 
 Repeating this doctrine in more general terms 
 a week or two later, he said : — 
 
 " It was contended that the interest of the pro- 
 ducer ought to be looked to as well as that of the 
 consumer, in legislative principles. But the fact 
 was that in attending to the interest of the con- 
 sumer, protection was at the same time extended to 
 all other classes. The true way of encouraging 
 production was to discover and open facilities to 
 consumption." 2 
 
 ' April 5, 1821. = April i6, 1821.
 
 RICARDO IN PARLIAMENT 113 
 
 In a speech on the Colonial Trade Bill on 
 May 17, 1822, he made quite a lively attack on 
 the system by which " vexatious and unnecessary 
 burdens were cast upon one class, and that class 
 was allowed to relieve itself by preying upon 
 some other." Some one had asked what became 
 of the million and a half which was said to be 
 taken from England for the sake of the West 
 Indies : — 
 
 " No one got it. That was what he (Mr. 
 Ricardo) complained of. The people of England 
 paid grievously for their sugar, without a corre- 
 sponding benefit to any persons. The sum which 
 they paid was swallowed up in the fruitless waste 
 of human labour." 
 
 For internal restrictions on freedom of trade 
 he had as little mercy as for Protection. Of the 
 Usury Laws he spoke with contempt: — 
 
 " He had had great experience in the money 
 market, and could state the usury laws to have 
 always been felt as a dead weight on those wish- 
 ing to raise money. With respect to those con- 
 cerned in the money market itself the laws had 
 always been inoperative, and during the war 
 indirect means had been found of obtaining 
 7, 8, 10, and 15 per cent, interest. The laws 
 therefore occasioned inconvenience, but did no 
 good." « 
 
 Lender and borrower, he explained on another 
 
 ' April 12, 1821. 
 
 8
 
 114 THE ECONOMIC OUTLOOK 
 
 occasion, " conspired to evade the law. These laws 
 operated in precisely the same way as the laws 
 against exporting the coin of the realm. Now, not- 
 withstanding those laws, did not the exportation 
 of that coin take place ? The only effect of the 
 statutes in that case was to place the traffic in the 
 hands of characters who had no scruples against 
 taking a false oath. They were encouraged to 
 evade the law, and made a great profit by so 
 doing." I 
 
 In 1823 Huskisson proposed to repeal the 
 Acts 13 Geo. III. ch. 68, 32 Geo. III. ch. 44, 
 and 51 Geo. III. ch. 7, commonly called the 
 Spitalfields Acts, which empowered the magistrates 
 of London, Westminster, Middlesex, and the 
 Tower to fix the wages of journeymen silk weavers 
 within their jurisdiction, and also prohibited 
 masters residing within those limits from employ- 
 ing weavers in other parts of the country at a 
 different rate of wages from that so fixed. When 
 an ably drawn petition was presented on May 9th 
 in favour of the repeal, Ricardo immediately rose. 
 He " could not help expressing his astonishment 
 that in the year 1823 those Acts should be existing 
 and in force. They were not merely an interfer- 
 ence with the freedom of trade, but they cramped 
 the freedom of labour itself." On May 21st 
 petitions came in from the journeymen silk weavers 
 of London and Sudbury. On the reception of the 
 ' June 17, 1823.
 
 RICARDO IN PARLIAMENT 115 
 
 London petition Ricardo, in a speech of some 
 length, said: — 
 
 " The hon. member for Weymouth [Fowell 
 Buxton] had observed that the petitioners knew 
 nothing about political economy, the principles of 
 which seemed to change every two or three years. 
 Now, the principles of true political economy never 
 changed ; and those who did not understand that 
 science had better say nothing about it, but 
 endeavour to give good reasons, if they could 
 find any, for supporting the existing Act. He 
 most assuredly would not utter a word that could 
 be injurious to the working classes ; all his 
 sympathies were in their favour: he considered 
 them as a most valuable part of the population, 
 and what he said was intended for their benefit. 
 But why should this particular trade come under 
 the cognisance of the magistrate more than any 
 other?" 
 
 On the Report stage of Huskisson's bill 
 (June 9th) he argued that if the acts were bene- 
 ficial they ought to be extended to the whole 
 country and to all manufactures: — 
 
 " But the question was whether labour should or 
 should not be free. The quantity of work must 
 depend on the extent of demand, and if the demand 
 was great the number of persons employed would 
 be in proportion. If these acts were repealed, no 
 doubt the number of weavers employed in London 
 would be greater than at present. They might
 
 116 THE ECONOMIC OUTLOOK 
 
 not, indeed, receive such high wages ; but it was 
 improper that tliose wages should be artificially 
 kept up by the interference of a magistrate. If 
 a manufacturer was obliged to use a certain 
 quantity of labour, he ought to obtain it at a fair 
 price. . . . An hon. member for Bristol had 
 talked about political economy ; but the words 
 ' political economy ' had of late become terms of 
 ridicule and reproach. They were used as a 
 substitute for an argument." 
 
 Before the third reading debate on June i ith 
 he had collected or been provided with information 
 on the subject. He was " in possession of a number 
 of cases " showing the inconvenience caused by 
 the acts, and changed his ground, contending now 
 that the repeal would not reduce the weavers' 
 earnings : — 
 
 " Mr. Ricardo contended that the effect of the 
 existing law was to diminish the quantity of 
 labour, and that though the rate of wages was 
 high the workmen had so little to do that their 
 wages were in point of fact lower than they would 
 be under the proposed alteration of the law. He 
 could not bear to hear it said that they were 
 legislating to the injury of the working classes. 
 He would not stand up in support of the measure 
 if he thought for one moment that it had any 
 such tendency. . . . He was perfectly satisfied 
 that if the present bill should pass there would be 
 a much greater quantity of work for the weavers
 
 RICARDO IN PARLIAMENT 117 
 
 in London than there was at present. With respect 
 to wages, he was persuaded that in all the common 
 branches of the manufacture they would not fall ; 
 for at the present moment they were as high in 
 the country, with reference to those branches, as 
 they were in London." 
 
 The bill passed by 53 to 40, but was 
 amended out of recognition by Lord Eldon in the 
 Lords, and did not become law. The repeal was 
 not affected till the next year by 5 Geo. IV. ch. 95. 
 
 The prohibition of the truck system fared no 
 better with Ricardo than the Spitalfields Acts. In 
 1822, certain "miners, iron-makers, and coal 
 masters " of Dudley prayed the House of Commons 
 to enjoin a more strict observance of the law : — 
 
 " Mr. Ricardo," Hansard reports, " thought it 
 impossible to renew so obnoxious an act. Mr. 
 Owen prided himself upon having introduced the 
 provision system. He had opened a shop at 
 New Lanark in which he sold the best com- 
 modities to his workmen cheaper than they could 
 be obtained elsewhere ; and he was persuaded 
 that the practice was a beneficial one.*^ ' 
 
 On June 29, 1820, there was some debate on 
 the motion for a select committee " to inquire into 
 the means of relieving the cotton weavers which 
 may be attempted without injury to the com- 
 munity." The proposer, Mr. Maxwell, suggested 
 that power looms ought to be taxed because the 
 ' June 17, 1822,
 
 118 THE ECONOMIC OUTLOOK 
 
 " articles on which the weaver was compelled to 
 exist " were taxed. If the machine paid no taxes, 
 he thought its competition with the hand worker 
 was unfair. He also urged that the State should 
 expend some money in providing land for cultiva- 
 tion by weavers unable to find employment, and 
 asked, " Was it consistent with the harmony of 
 the universe that one class of men should want 
 the necessaries of life, while another abounded in 
 every luxury and superfluity ? " Ricardo's reply 
 was short. 
 
 " Mr. Ricardo said that he conceived the duty 
 of Government to be to give the greatest possible 
 development to industry. This they could do only 
 by removing the obstacles which had been 
 created. He complained, therefore, of government 
 on very different grounds from the hon. mover, 
 for his complaint was against the restrictions on 
 trade, and other obstacles of that description, which 
 opposed the development of industry. The re- 
 commendations of the hon. mover were inconsistent 
 with the contrast between one class and another. 
 H government interfered, they would do mischief 
 and no good. They had already interfered 
 and done mischief by the Poor Laws. The 
 principles of the hon. mover would likewise 
 violate the sacredness of property, which con- 
 stituted the great security of society." 
 
 Immediately after his election in 1 8 i 9, Ricardo 
 was added to a select committee on the Poor Laws
 
 RICARDO IN PARLIAMENT 119 
 
 which was then sitting. The " proceedings " of 
 committees were not published at that time, and 
 in " minutes of evidence " the names of ques- 
 tioners were not given, so that it is impossible to 
 distinguish the part played by any individual. The 
 Report of the Committee does not show any par- 
 ticular signs of Ricardian influence, and on the 
 general question contents itself with referring the 
 House to the Report of the Committee of 1817. 
 The evidence which it took was very little and not 
 of a general character, so that Ricardo was not 
 compelled to make himself acquainted with the 
 subject. When he spoke on it in the House he 
 was quite vague and general. His maiden speech, 
 delivered on March 25, 18 19, was on Sturges 
 Bourne's Poor Rates Misapplication Bill. Under 
 this Bill it was proposed to give free board, in- 
 dustrial training, and education to the third, fourth, 
 and all subsequent children of poor fathers, and 
 to prohibit all relief to the able-bodied labourer 
 in employment — " a provision which," Mr. Bourne 
 hoped, " would point out the necessity of granting 
 him more adequate wages." 
 
 " Mr. Ricardo thought that the two great evils 
 for which it was desirable to provide a remedy 
 were the tendency towards a redundant popula- 
 tion, and the inadequacy of the wages to the 
 support of the labouring classes ; and he appre- 
 hended that the measure now proposed would not 
 afford any security against the continuance of
 
 120 THE ECONOMIC OUTLOOK 
 
 these evils. On the contrary, he thought that if 
 a provision were made for all the children of the 
 poor, it would only increase the evil ; for if 
 parents felt assured that an asylum would be 
 provided for their children in which they would be 
 treated with humanity and tenderness, there would 
 then be no check to that increase of population 
 which was so apt to take place among the labour- 
 ing classes. With regard to the other evil, the 
 inadequacy of the wages, it ought to be remem- 
 bered that if this measure should have the effect 
 of raising them, they would still be no more than 
 the wages of a single man, and would never 
 rise so high as to afford a provision for a man with 
 a family." 
 
 On May 17th, at the second reading stage, 
 " Mr. Ricardo opposed the bill, principally on 
 the ground that it tended to increase the popula- 
 tion. If at present there existed a difficulty in 
 supporting the poor, in what situation would the 
 country be placed in twenty years hence, when 
 these children so educated grew up to man- 
 hood? The Bill was only the plan of Mr. Owen 
 in a worse shape and carried to a greater extent." 
 
 The second reading was carried by 47 to 22, 
 and, strange to say, the Bill was eventually sent 
 up to the Lords, where, however, it met its fate 
 without the compliment of a division. 
 
 In 1 82 1 a Bill was brought in by Mr. Scarlett 
 which proposed to establish a maximum beyond
 
 RICARDO IN PARLIAMENT 121 
 
 which the poor rate could not be raised, to abolish 
 inability to obtain work as a claim for relief, and 
 to do away with removals to the place of settle- 
 ment. Ricardo supported it (May 8th) on the 
 ground that it " proposed to have the labourer 
 paid in just wages by his employer instead of 
 having him transferred to the poor rates " ; the 
 effect of the measure " would be to regulate the 
 price of labour by the demand, and that was 
 the end peculiarly desired." 
 
 " With respect to the pressure of the taxes and 
 the National Debt upon the poor, that pressure 
 could not be disputed, especially as it took away 
 from the rich the means of employing the poor ; 
 but he had no doubt, if the supply of labour were 
 reduced below the demand, which was the purpose 
 of his hon. and learned friend's measure, that 
 the public debt and taxes would bear exclusively 
 upon the rich, and the poor would be most 
 materially benefited." 
 
 In this age of pension schemes, it is interesting 
 to find that Ricardo advocated a plan for providing 
 pensions. On June i, 1821, when the Budget 
 was under discussion, he remarked: — 
 
 " He should offer but a word or two relative to 
 saving banks. He highly approved of them ; 
 but a plan had been suggested by a gentleman in 
 the country, to which he thought the House would 
 do well to pay some attention. The name of this 
 gentleman, he believed, was Wood row, and his
 
 122 THE ECONOMIC OUTLOOK 
 
 plan was one by which a Hfe-annuity income might 
 be obtained in these banks. The plan was that 
 persons at an early age might be willing to make 
 a trifling sacrifice, which, by the operation of com- 
 pound interest, would in the course, say of thirty 
 or forty years, increase to a considerable sum. 
 At the birth of a child, a father might be disposed 
 to put by a small sum of money for the purpose 
 of procuring to the child an annuity hereafter ; a 
 plan of this kind would be productive of great 
 benefits," 
 
 The person referred to evidently read or heard 
 of this speech, and determined to avail himself 
 of the services of his new ally, for on 
 February i8, 1822 — 
 
 *' Mr. Ricardo presented a petition from Mr. 
 John Woodson, who, he observed, had taken a 
 great deal of pains in examining into the best 
 mode of relieving the poor, and who was of opinion 
 that the principle on which the savings banks 
 were at present conducted was not the most bene- 
 ficial that could be devised. He conceived it 
 would be much better if those who vested their 
 money in these banks were paid by way of annuity, 
 but at a less rate of interest than was now given. 
 Their money might be allowed to accumulate, and 
 thus a comfortable provision would be insured to 
 them when they arrived at an advanced age. He 
 (Mr. Ricardo) thought the plan deserved the 
 attention of the legislature,"
 
 RICARDO IN PARLIAMENT 123 
 
 Of Owen's ambitious plans, which played in 
 1819 almost exactly the same part as General 
 Booth's in 1890, it may be said that the more 
 Ricardo examined them the less he liked them. 
 At a meeting held in Freemasons' Hall on 
 June 26, 18 1 9, he had been nominated to serve 
 on a committee which was appointed to inquire 
 into Owen's " plan." In accepting the nomina- 
 tion he had thought it necessary to let fall a word 
 of caution. 
 
 " Mr. Ricardo begged to trouble the meeting 
 with a few observations. As his name was placed 
 on the committee he should state shortly those 
 circumstances in which he agreed and in which 
 he differed from the preceding speakers. ... In 
 a limited degree he thought the scheme likely to 
 succeed, and to produce, where it did succeed, 
 considerable happiness, comfort, and morality by 
 giving employment and instruction to the lower 
 classes. No person could admire more than he 
 did, or appreciate more highly, the benevolence 
 that led his friend (Mr. Owen) to prosecute his 
 plan with so much zeal and at the expense of so 
 much time and trouble. He could not, however, 
 go along with him in the hope of ameliorating the 
 condition of the lower classes to such a degree as 
 he seemed to expect ; nor should he wish it to go 
 forth to the public that he thought the plan would 
 produce all the good anticipated from it by his 
 sanguine friend. As a member of the committee
 
 124 THE ECONOMIC OUTLOOK 
 
 he should do ev^erything in his power to forward 
 the objects for which it was appointed." ' 
 
 This committee eventually recommended the 
 establishment of a kind of experimental Owenite 
 village with the communism left out, which was 
 much like proposing the adoption of General 
 Booth's plans excluding religion and conversion. 
 On December 1 6th Sir W. de Crespigny moved 
 in the House of Commons " that a select committee 
 be appointed to inquire into the nature of the plan 
 proposed by Robert Owen, Esq., and to report 
 thereon ; and how far the same, or any part 
 thereof, may be rendered available for ameliorating 
 the condition of the labouring classes of the com- 
 munity, or for affording beneficial employment of 
 the poor, by an improved application of the sums 
 raised for their relief." Lord Archibald Hamilton 
 seconded, relying chiefly on the good effects of 
 Owen's government of New Lanark. Brougham 
 spoke in favour of the motion on educational 
 grounds. Vansittart opposed because Owen 
 " looked to the adoption of a plan subversive of 
 the religion and government of the country." Mr. 
 John Smith " eulogised the character of Mr. 
 Owen," and drew attention to the fact that no man 
 employed by him at New Lanark had been con- 
 victed of crime in a period of fourteen years. 
 Then — 
 
 "Mr. Ricardo observed that he was completely 
 • The Times, Monday, Junci28, 1819,
 
 RICARDO IN PARLIAMENT 125 
 
 at war with the system of Mr. Owen, which was 
 built upon a theory inconsistent with the principles 
 of political economy, and in his opinion was calcu- 
 lated to produce infinite mischief tQ the community. 
 Something had fallen from an hon. member on a 
 former night on the subject of machinery. It 
 could not be denied, on the whole view of the 
 subject, that machinery did not lessen the demand 
 for labour ; while, on the other hand,- it did not 
 consume the produce of the soil, nor employ any 
 of our manufactures. It might also be misapplied 
 by occasioning the production of too much cotton 
 or too much cloth ; but the moment those articles 
 ceased in consequence to pay the manufacturer, 
 he would devote his time and capital to some other 
 purpose. Mr. Owen's plan proceeded upon this — 
 he who was such an enemy to machinery, only 
 proposed machinery of a different kind ; he would 
 bring into operation a most active portion of 
 machinery — namely, human arms. He would dis- 
 pense with ploughs and horses in the increase of 
 the productions of the country, although the 
 expense as to them must be much less when 
 compared with the support of men. He confessed 
 he did not agree in the general principles of the 
 plan under consideration, but he was disposed 
 to accede to the proposition of a committee. Spade 
 husbandry Mr. Owen recommended as more bene- 
 ficial to production. He was not informed enough 
 on the interests of agriculture to give an opinion.
 
 126 THE ECONOMIC OUTLOOK 
 
 but that was a reason for sending the subject to 
 a committee. For what did the country want at 
 the present moment ? A demand for labour. If 
 the facts stated of spade husbandry were true, 
 it was a beneficial course, as affording that 
 demand. And though government or the legisla- 
 ture would not be wisely employed in engaging 
 in any commercial experiment, it would be 
 advantageous that it should, under present circum- 
 stances, circulate useful information and correct 
 prejudices. They should separate such considera- 
 tions from a division of the country into parallelo- 
 grams, or the establishment of a community of 
 goods, and similar visionary schemes." 
 
 Ricardo's name is constantly to be found in the 
 short lists of the tiny bands which Joseph Hume 
 carried with him into the lobby after inflicting 
 his dreary collections of figures upon the House. 
 On one at least of these occasions, in spite of 
 the mildness of his manners, Ricardo took part 
 in grossly obstructive proceedings. At an early 
 period of the evening of March 12, 1821, the 
 House went into committee on the Army esti- 
 mates. At 12.30 the first division was taken, 
 and strangers were excluded till 3.20 a.m. During 
 this period five divisions were taken, " each of 
 which was preceded by warm discussions." When 
 the reporters were readmitted, " ministers were 
 at that time sitting on the Opposition benches, 
 their places being occupied by their opponents."
 
 RICARDO IN PARLIAMENT 127 
 
 Then there were three more divisions on frivolous 
 pretexts, and " at 4 o'clock fresh candles having 
 been brought in, Mr. Lambton moved that they 
 should be excluded." This was defeated by 146 
 to 38, but Lord Castlereagh had to give way 
 and allow the House to adjourn. Ricardo was 
 among the thirty-eight who voted against the fresh 
 candles. 
 
 He was, of course, opposed to the absurd 
 arrangements with regard to the Sinking Fund 
 which prevailed at the time. When the excess 
 of income over expenditure was about £1,600,000, 
 the nation through one agent sold new stock to the 
 value of £13,400,000, and through another set 
 of agents bought £15,000,000 worth of old stock 
 for cancellation. The sole result of the opera- 
 tion was, of course, to present the Stock Exchange 
 with the brokerage and jobbers' profit on the sale 
 and purchase of the £13,400,000 worth of stock. 
 Mr. Pascoe Grenfell moved on May 13, 18 19, that 
 the House should go into committee to consider the 
 act on which these proceedings were based. In 
 the course of his speech he remarked that " loan 
 contractors were not in his judgment exactly that 
 description of persons by whose advice in these 
 matters a Chancellor of the Exchequer ought to be 
 governed. In 18 14 the right hon. gentleman 
 (Vansittart) had stated in his place, that, having 
 conferred with a number of gentlemen contracting 
 for the loan with regard to acting on his (Mr.
 
 128 THE ECONOMIC OUTLOOK 
 
 Grenfell's) suggestion, they all, with one excep- 
 tion only, signified their disapprobation of it, and 
 recommended a loan of £24,000,000 instead of 
 £12,000,000. The exception to which he alluded 
 was that of his hon. friend (Mr. Ricardo), who, 
 greatly to his credit, observed to the Chancellor 
 of the Exchequer that if he considered his own 
 interest merely, he must agree with his brother 
 contractors, but if he were to consult the ad- 
 vantage of the country he should advise the 
 application of the Sinking Fund, and a loan of 
 £12,000,000 only." 
 
 Vansittart, of course, undertook to support the 
 existing system, but had nothing to say in its 
 favour except that it was supposed to make a 
 market for the funds. " Were it not for the 
 regular purchases made by the commissioners, 
 there would be few real buyers, and persons under 
 the necessity of selling would be at the mercy of 
 stock jobbers." After Lord Althorp and another 
 member had spoken, Ricardo rose, evidently a 
 little indignant with Vansittart. After explain- 
 ing that the loss involved consisted of " that 
 regular premium which the contractors obtained 
 independently of the events of peace or war, which 
 they were entitled to for undertaking the risk of 
 such extensive undertakings," he said : — 
 
 " Any gentleman who supposed that if [the] pro- 
 cess did not go on, it would be in the power of the 
 jobbers to make hard terms with the sellers of
 
 RICARDO IN PARLIAMENT 129 
 
 stock, must have been perfectly ignorant of the 
 stock market (hear, hear) for competition was 
 nowhere carried to such an extent, and nowhere 
 operated with more benefit to the public. His 
 hon. friend had alluded to the opinion which he 
 (Mr. Ricardo) had given before the Chancellor of 
 the Exchequer in 1814. He had certainly then 
 given the opinion which he had long entertained. 
 He should have shrunk into the earth before those 
 who had long known his sentiments if he had given 
 any other ; but he knew that those gentlemen who 
 gave a contrary opinion had given it just as con- 
 scientiously ; for great and sincere differences of 
 judgment on this subject existed in the City." 
 
 He thought the Chancellor of the Exchequer 
 might just as well attempt to improve the corn 
 market " by sending a commissioner to buy a 
 quarter of wheat, while he sent a contractor to 
 sell the same quantity." Common sense was 
 heavily beaten in the division, the numbers being, 
 for the resolution 39, against 117. 
 
 Ricardo was opposed to any attempt to keep 
 the revenue above the current expenditure with a 
 view of redeeming debt, because he was firmly 
 convinced that the current expenditure would 
 always rise to the amount of the current revenue.' 
 Except for the weakness of human and especially 
 ministerial flesh, he thought Pitt's plan of providing 
 
 • See speeches of June 18, 1819, March 6, April 5, 1821, 
 February 18, 1822. 
 
 9
 
 130 THE ECONOMIC OUTLOOK 
 
 for the interest of every new loan and in addition 
 I per cent, for the redemption of the capital was 
 an excellent one. As a matter of fact, some Chan- 
 cellor of the Exchequer would always, like his 
 predecessors, come down to the House and inform 
 them that some deficiency had been discovered 
 or some emergency had arisen which rendered it 
 necessary to appropriate the whole of the i per 
 cent. Sinking Funds. In reply to one of his 
 speeches to this effect, Baring observed : — 
 
 " His hon. friend said he was not opposed to 
 the principle of Mr. Pitt's Sinking Fund ; but he 
 objected to the preservation of any surplus at all, 
 because he was sure that somebody would take it 
 away ; he was afraid that some minister or other 
 would take it away, and, therefore, he was resolved 
 to take it away himself. This reminded him of a 
 Frenchman in some play, who upon being appealed 
 to for his advice as to the best mode of resisting the 
 advances of her admirer, replied that the best way 
 of resisting temptation was to yield to it at once." ' 
 
 This criticism would have been more properly 
 applicable to the policy of a Chancellor of the 
 Exchequer who argued that he must remit taxes 
 and reduce the Sinking Fund because if he did not 
 his successor would, and Ricardo was able to retort 
 with unusual wit that " his hon. friend the member 
 for Taunton had facetiously observed that because 
 he (Mr. Ricardo) thought ministers were going 
 ' February 28, 1823.
 
 RICARDO IN PARLIAMENT 131 
 
 to rob the Sinking Fund, he would wilHngly take 
 it away himself. It was, he thought, good policy, 
 when his purse was in danger, rather to spend the 
 money himself than allow it to be taken from him. 
 He did not, he confessed, think the national purse 
 safe in the hands of ministers. It was too great a 
 temptation to entrust them with." ' 
 
 Holding these views, he followed the simple rule 
 of voting against all increases and in favour of all 
 remissions of taxation by whomsoever proposed. 
 On April 3, 1822, he was able to declare that he 
 had voted for every reduction of taxes that had 
 been proposed during the session. He could even 
 make common cause with Squire Western and the 
 country gentlemen against the taxes on malt and 
 agricultural horses. 2 He did not, he explained, 
 believe that either of them was " in itself a bad 
 tax or pressed with peculiar hardship on the landed 
 interest," but he voted for their repeal " with a 
 view of compelling the observance of strict 
 economy in the administration of government." 3 
 He only drew the line at voting for such a reduc- 
 tion as would have caused an actual deficit. 
 " Enemy as he was to all taxation " 4 — he thus 
 describes himself more than once — he was not 
 much troubled by distinctions between good and 
 
 ' March 6, 1823, cf. July i, 1822. 
 
 = Divisions on March 21 and April 3, 1821. 
 
 3 April 5, 1821. 
 
 * March 7, 1821.
 
 132 THE ECONOMIC OUTLOOK 
 
 bad taxes. In one debate on new taxes he actually 
 declared that " as to the particular taxes, it was 
 unnecessary for him to state his sentiments, seeing 
 he was an enemy to taxation altogether." ' Speak- 
 ing after him in this debate, Mr. Lyttelton 
 mentioned " the argument which had fallen from 
 one of the highest authorities on questions of 
 political economy in this kingdom (Mr. Ricardo) 
 — namely, that a tax upon the necessaries of life 
 did not fall heaviest on the poor," and said that 
 although he might be disposed to admit the truth 
 of that principle, the malt tax did fall heaviest 
 on them, as it was on "an article the very last, 
 as it might be said, before those necessaries." 
 Hereupon " Mr. Ricardo explained. He said that 
 he hoped the House and his hon. friend would 
 understand that he was not contending that the 
 taxing of necessaries was not injurious to labourers, 
 but that it was no more injurious to them than any 
 other mode of taxation. In fact, all taxation had 
 a tendency to injure the labouring classes, because 
 it either diminished the fund employed in the main- 
 tenance of labour or checked its accumulation. 
 In the argument which he had used he had 
 supposed that it was necessary to raise a certain 
 sum by taxes, and then the question was whether 
 by taxing necessaries the burden would be par- 
 ticularly borne by the labouring classes. He 
 thought not ; he was of opinion that they would 
 
 ' June i8, 1819.
 
 RICARDO IN PARLIAMENT 133 
 
 ultimately fall on the employers of labour, and 
 would be only prejudicial to the labourers in the 
 same way as most other taxes would be, inasmuch 
 as they would diminish the fund employed in the 
 support of labour." 
 
 Once, indeed, we do find him moved from his 
 customary attitude of indiscriminate hostility to all 
 taxes. Though the tax on salt, he said, " was 
 undoubtedly very burdensome, it did not appear 
 to him to be that which most demanded reduction. 
 The taxes on law proceedings seemed to him the 
 most abominable that existed in the country, by 
 subjecting the poor man and the man of middling 
 fortune who applied for justice to the most ruinous 
 expense. Every gentleman had his favourite plan 
 for repealing a particular tax, and this tax upon 
 justice was that which he should most desire to 
 see reduced." ' 
 
 His own scheme of finance was to reduce the 
 taxes at one blow by paying off the National Debt 
 immediately by means of an assessment on all the 
 property in the kingdom, including the funds them- 
 selves. He referred to this plan first on June 9, 
 1 8 19. After objecting to a new tax suggested by 
 a private member, he said : — 
 
 " He would, however, be satisfied to make a 
 sacrifice ; the sacrifice would be a temporary one, 
 and with that view he would be willing to give 
 up as large a share of property as any other 
 
 ' Marcli 20, 1822.
 
 134 THE ECONOMIC OUTLOOK 
 
 individual. By such means ought the evil of the 
 National Debt to be met. It was an evil which 
 almost any sacrifice would not be too great to get 
 rid of. It destroyed the equilibrium of prices, 
 occasioned many persons to emigrate to other 
 countries in order to avoid the burden of taxation 
 which it entailed, and hung like a millstone round 
 the exertion and industry of the country." 
 
 In the discursive speech of December i6, 1819, 
 already mentioned, he was a little more explicit 
 as to his plan, and makes it clear that it 
 involved repudiation of a large proportion of 
 the debt: — 
 
 " With respect to the National Debt, he felt that 
 he entertained opinions on that point which by 
 many would be considered extravagant. He was 
 one of those who thought it could be paid off, 
 and that the country was at this moment perfectly 
 competent to pay it off. He did not mean that 
 It should be redeemed at par ; the public creditor 
 possessed no such claim — were he paid at the 
 market price, the public faith would be fulfilled." 
 
 No one seems to have thought it worth while to 
 protest against this astonishing view of the nature 
 of the contract between the nation and the fund- 
 holder. On December 24th he again broached 
 the subject. The debt, like the Corn Laws, he 
 averred, raised the price of food and consequently 
 the price of labour, and therefore reduced profits 
 and tended to drive capital abroad, leaving that
 
 RICARDO IN PARLIAMENT 135 
 
 which remahied to pay more than its fair propor- 
 tion : — 
 
 " To guard against this evil, which was pro- 
 ductive at once of individual injustice and national 
 injury, the whole capital of the country ought to 
 be assessed for the discharge of the public debt, so 
 that no more capital should be allowed to go out 
 of the country without paying its fair proportion 
 of that debt. The execution of this plan might 
 be attended with difficulty, but then the importance 
 of the object was worthy of an experiment to 
 overcome every, possible difficulty. The whole of 
 the plan through which he proposed the payment 
 of the public debt might in his view be carried 
 into effect within four or five years. For the 
 discharge of the public debt he proposed that 
 checks should be issued upon the Government to 
 each purchaser, which checks should be kept 
 distinct from the ordinary circulating medium of 
 the country, but should be received by the Govern- 
 ment in payment of taxes. Thus the debt might 
 be gradually liquidated while the Government con- 
 tinued gradually receiving the assessments upon 
 capital to provide for that liquidation. He would 
 not, however, dwell further upon this chimerical 
 project, as he understood it was considered by 
 every one except himself." 
 
 Brougham's unsympathetic remark that " the 
 effect of such a measure would be to place 
 the property for five years at the mercy of all the
 
 136 THE ECONOMIC OUTLOOK 
 
 solicitors, conveyancers, and money-hunters in the 
 country " did not destroy his faith in his project. 
 On May 30, 1820, he waxed quite enthusiastic 
 over it. 
 
 " This," he said, " would be the happiest country 
 in the world, and its progress in prosperity would 
 be beyond the power of imagination to conceive, 
 if we got rid of two great evils — the National Debt 
 and the Corn Laws. When he spoke of getting rid 
 of the National Debt, he did not mean by wiping 
 it away with a sponge, but by honestly discharging 
 it. His ideas on the subject were known, and he 
 had heard no argument to show that the measure 
 he would recommend was not the best policy. 
 If this evil were removed, the course of trade 
 and the prices of articles would become natural 
 and right ; and if corn were exported or imported, 
 as in other countr'ies, without restraint, this country, 
 possessing the greatest skill, the greatest industry, 
 the best machinery, and every other advantage in 
 the highest degree, its prosperity and happiness 
 would be incomparably and almost inconceivably 
 great." 
 
 Three years later he was still enamoured of 
 " what an hon. friend had been pleased to call 
 his ' crotchet,' " and had come to think that the 
 whole business might be accomplished within 
 twelve months.' Replying on March 6, 1823, 
 to criticism which had apparently been rather of 
 ■ March 11, 1823.
 
 RICARDO IN PARLIAMENT 137 
 
 the " Jupiter and Saturn " order, he waxed eloquent 
 over the advantages of getting rid of the expense 
 and heart-burnings arising from taxation, of the 
 cost and immorality of smuggling, and of minis- 
 terial patronage and artificial conditions of trade. 
 " Was this," he inquired rhetorically, " legislating 
 for men or for stocks and stones? " 
 
 Few more drastic " democratic " financial pro- 
 posals have ever been made than this one of laying 
 an immediate tax of six or seven hundred millions 
 upon property in order to get rid of about thirty 
 millions of annual taxes on consumable articles. 
 That Ricardo could propose it seriously may 
 perhaps be looked upon as confirming the common 
 view that he was an unpractical theorist. But will 
 any one venture to say positively now that the 
 increase in the material welfare of the nation in the 
 next seventy years would not have been more rapid 
 than it was, if the National Debt had been re- 
 deemed I by one heroic effort in 1823? 
 
 » The word "redeemed" scarcely covers Ricardo's proposal 
 to pay off the fund-holders compulsorily at the market price ; 
 the fund-holder certainly had a right to demand either the 
 continuance of his annuity or ^loo. Whether it was justifiable to 
 demand that the fund-holders should contribute their proportion 
 of the tax necessary to pay them off is more doubtful. McCuUoch 
 in 1816, it may be remembered, wrote an essay (not mentioned 
 in his " Literature ") recommending a compulsory reduction of 
 the interest on the debt.
 
 Ill 
 
 THE STIGMA OF PAUPERISM ' 
 
 " Yes, it will be a good thing to do. It won't be 
 remunerative, of course, but I can spend my old 
 age in the workhouse." 
 
 " What a gloomy prospect I " exclaimed the 
 Poor Law Guardian. 
 
 ** Not at all. What can be more pleasing and 
 honourable than to be supported in our infirmity 
 by the great State of which we are members? I'm 
 not afraid of the stigma of pauperism." 
 
 The Guardian was amazed and scandalised. But 
 the economist was neither surprised nor shocked. 
 Since the historical method came in economists 
 have attained to a philosophic calm. While the 
 pursy householder murmurs " confiscation," " rob- 
 bery," in his sleep, and sees visions of blood 
 running down the gutters, and the Lord Mayor 
 suspended from a lamp -post, those who he thinks 
 ought to guide opinion aright are merely regard- 
 ing the new ideas with interest, and tracing their 
 affiliation to the old. So, in this case, the 
 
 ' Reprinted from the Economic Review iov July, 1895. 
 138
 
 THE STIGMA OF PAUPERISM 139 
 
 economist only began to wonder what the stigma 
 of pauperism is, and why it should seem so strange 
 and horrible to the Poor Law Guardian that a 
 person not in rags nor addicted to drink should 
 profess, whether truly or not, to have no fear of it. 
 
 As he liked, in such an inquiry, to begin at the 
 beginning, he looked out the word " stigma " in 
 his Liddell and Scott, and found it interpreted as 
 " a prick or mark of a pointed instrument, a spot, 
 mark, esp. a mark burnt in, a brand, esp. of a 
 runaway slave." In this sense of the word, the 
 branded marks of " V " for Vagabond, and " S " 
 for Slave, which certain Tudor Poor Law legisla- 
 tion ordered to be set on the persons of incorrigible 
 idlers, might very well have been called the 
 stigma of psfuperism. To be marked on the bare 
 skin with a red-hot iron, no anaesthetic being used, 
 is decidedly painful, and reluctance to incur such 
 a stigma would need no explanation. There- are 
 still here and there some outward and visible marks 
 of pauperism, such as the old-fashioned clothes 
 commonly worn by the inmates of workhouses ; but 
 these are not the stigma of pauperism in the sense 
 in which the term is used. It appears to mean 
 a certain disgrace which is incurred by becoming 
 a pauper. 
 
 Many of the witnesses examined before the Com- 
 mission on the Aged Poor,' evidently imagine that 
 
 ■ The Minutes of Evidence of this Commission arc numbered 
 C. 7684 i, and ii. ; the Report is C. 7684.
 
 140 THE ECONOMIC OUTLOOK 
 
 the disgrace is somehow the product of the appel- 
 lation " pauper/' which they appear to regard as 
 a term of abuse. Mr. Pitkin said : — 
 
 " I do not know what the meaning of a pauper 
 is, I am sure. I have been told that it is not an 
 English word at all. I do not know, I do not 
 study the dictionary much, but I have been 
 informed so ; I know it is a word very much 
 disliked." ' 
 
 Mr. Pitkin was a Buckinghamshire agricultural 
 labourer, aged sixty-seven, from whom a know- 
 ledge of Latin could scarcely be expected ; but 
 others seem to share his feelings, if not his ignor- 
 ance, with regard to the word " pauper." The 
 Rev. Canon Hinds Howell remarked in a paren- 
 thesis that " pauper " was a word which he detested 
 and hated — he wished there was no such word in 
 the world ; 2 and a Cardiff town councillor, who 
 wished to divide persons receiving assistance from 
 the rates into three classes, said of the first class : — 
 
 " They ought not to lose their citizenship because 
 of any help, Avhich I would not call relief, that they 
 may get in this way. I should like that they 
 should not be called " paupers," or by any desig- 
 nation which would carry the stigma of pauperism 
 at all. . . . Some other designation should be 
 found rather than anything which would carry the 
 idea of parochial relief." 3 
 
 This last witness appears to think a stigma 
 
 • Quest. 14,178. ' Quest. 7,953. Quest. 5,399.
 
 THE STIGMA OF PAUPERISM 141 
 
 attaches to the term " relief," as well as to the 
 term " pauper." Now, the term " pauper " is very 
 modern,, but it was coming into use before the nine- 
 teenth century opened,' and there is no evidence 
 to show that it had at first any evil significance. 
 It was then, as it is now, simply a convenient name 
 for a person in receipt of relief from the parish. 
 To attribute a degrading effect to the name of 
 " pauper " is as ridiculous as to suppose that a man 
 sentenced to penal servitude is injured by being 
 called a " convict." If it is disgraceful to be a 
 pauper, it can only be because it is disgraceful to 
 receive relief, or, as the Cardiff town councillor 
 prefers to say, " help," from the Poor Law. 
 
 A good deal of light is thrown upon the official 
 diagnosis of the stigma of pauperism by the well- 
 known circular to local authorities issued by the 
 Local Government Board in the spring of 1886, 
 and re-issued since, as some authorities have 
 observed, whenever the weather rendered it impos- 
 sible to carry out the recommendations made 
 in it : — 
 
 " The Local Government Board," says the ver- 
 sion of 1892, "are convinced that in the ranks 
 of those who do not ordinarily seek parish relief 
 there is evidence of much and increased privation, 
 and if the depression in trade continues, it is to be 
 
 ' The Oxford English Dictionary gives examples back to 
 1775. The word occurs even in the title of an Act of Parliament 
 as early as 1808 (48 Geo. Ill c. 96.)
 
 142 THE ECONOMIC OUTLOOK 
 
 feared that large numbers of persons usually in 
 regular employment will be reduced to the greatest 
 straits. 
 
 " The spirit of independence which leads so 
 many of the working classes to make great personal 
 sacrifices rather than incur the stigma of pauperism 
 is one which deserves the greatest sympathy and 
 respect^ and which it is the duty and interest of the 
 community to maintain by all the means at its 
 disposal. 
 
 " Any relaxation of the general rule at present 
 obtaining, which requires, as a condition of relief 
 to able-bodied male persons, on the ground of 
 their being out of employment, the acceptance of 
 an order for admission to the workhouse, or the 
 performance of an adequate task of work as a 
 labour test, would be most disastrous, as tending 
 directly to restore the condition of things which, 
 before the reform of the Poor Laws, destroyed the 
 independence of the labouring classes, and in- 
 creased the poor-rate till it became an almost 
 insupportable burden. 
 
 " It is not desirable that the working classes 
 should be familiarised with Poor Law relief, and 
 if once the honourable sentiment which now leads 
 them to avoid it is broken down, it is probable 
 that recourse will be had to this provision on the 
 slightest occasion." ' 
 
 ' The circular is given in full in the Labour Department's 
 Report on the I Unemployed, 1893, pp. 185-7.
 
 THE STIGMA OF PAUPERISM 143 
 
 Here the reluctance of a destitute man to become 
 a pauper is elevated into the rank of an honourable 
 sentiment, a product of a spirit of independence 
 deserving of the greatest sympathy and respect. 
 Curiously enough, however, this noble feeling 
 appears to be largely dependent on the fact that 
 the workhouse or the labour test is insisted on. iVVe 
 are positively asked to sympathise with and respect 
 the feelings of a man who only dislikes Poor Law 
 relief because he is required to perform " an 
 adequate task of work as a labour test." Our 
 sympathy is not to be alienated by the fact that, 
 if he performs the work, and finds his hands are 
 not blistered, or if the test is dispensed with, he 
 will probably ever afterwards have recourse to 
 this provision on the slightest occasion. When the 
 independence of the labouring classes was 
 destroyed, according to the circular, by the condi- 
 tion of things which existed before the reform of 
 the Poor Laws, the feeling which induced an " in- 
 dependent " labourer not to apply for relief was a 
 much more robust " spirit of independence " than 
 that now held up to admiration. 
 
 Determined that the honourable sentiment 
 described shall not be violated, and also desirous 
 that no cases of " death by starvation " shall 
 appear in the newspapers, the Local Government 
 Board proceeds to suggest that, in order to relieve 
 artisans and others who have hitherto avoided 
 Poor Law assistance, and who are temporarily de-
 
 144 THE ECONOMIC OUTLOOK 
 
 prived of employment, the sanitary authorities 
 (now the town and district councils, and in London 
 the vestries and boards of works) should provide, 
 for men recommended by the Guardians, " work 
 which will not involve the stigma of pauperism." 
 
 So, in the opinion of the Local Government 
 Board, the stigma of pauperism which is incurred 
 by breaking stones for the Guardians in the work- 
 house yard is not incurred by laying the same 
 stones on the road for the District Council. If the 
 Guardians give a man relief after he has satisfied 
 the labour test, he incurs the stigma, is familiarised 
 with Poor Law relief, and ever afterwards will have 
 recourse to it on the slightest occasion. If they 
 recommend that he be admitted to relief works 
 instituted by the District Council, none of these 
 disastrous results ensue. Yet in some rural 
 districts the Board of Guardians and the District 
 Council consist of exactly the same persons, and 
 meet in the same room on the same day, and some 
 good authorities look forward to a time when 
 the Poor Law will be administered by County and 
 District Councils, and Boards of Guardians will dis- 
 appear. If this should happen, will the stigma 
 of pauperism go along with them? 
 
 It will perhaps be suggested that the distinction 
 between relief work performed for a District 
 Council, and a labour test performed for a Board 
 of Guardians, lies not merely in the fact that the 
 authority is different, but also in the fact that the
 
 THE STIGMA OF PAUPERISM 145 
 
 District Council pays wages while the Guardians 
 only give alms. The work which the applicant 
 is called on to perform before he receives relief, it 
 will be said, is of little or no value ; it is required 
 merely as a test. But this is also the case, to a 
 large extent, with regard to the relief works of 
 the sanitary authorities. These authorities are not 
 directed or recommended to carry out useful 
 works at the most convenient time, nor to employ 
 upon them only such men as can be profitably 
 employed. They are told to carry out works which 
 can be executed by unskilled labour at a very 
 inconvenient time, and to employ upon them 
 persons recommended by the Guardians on grounds 
 quite other than capacity to perform manual labour 
 of an unskilled character. The wages are not to 
 be what the work is worth, but " something less 
 than the wages ordinarily paid for similar work " 
 (which probably means that the men are to be paid 
 nearly as much as ordinary labourers performing 
 work to which they are accustomed), " in order to 
 prevent imposture, and to leave the strongest 
 possible temptation to those who avail themselves 
 of this opportunity to return as soon as possible 
 to their previous occupations." This is, of course, 
 the guiding principle of the Report of 1834, that 
 the situation of the individual relieved " on the 
 whole shall not be made really or apparently so 
 eligible as the situation of the independent 
 labourer of the lowest class." It is really impos- 
 
 10
 
 146 THE ECONOMIC OUTLOOK 
 
 sible to deny that the works recommended are 
 relief works or labour tests, administered through 
 the sanitary authorities. 
 
 Like Mr. Pitkin, then, the Local Government 
 Board lays itself open to the accusation of treating 
 the stigma of pauperism as if it were a mere 
 matter of words. Mr. Pitkin thinks the lot of the 
 aged paupers will be improved if they are called 
 '* aged poor " instead of " aged paupers " ; ' and the 
 Local Government Board thinks that able-bodied 
 men will not, and should not, feel degraded by 
 accepting relief from a number of persons sitting 
 at a workhouse as a District Council, although they 
 would and should feel degraded if they accepted 
 the same relief from the same persons, drawing 
 upon the same funds, and sitting at the same work- 
 house, on the same day, with the same clerk and 
 the same doorkeeper. 
 
 If we wish to go beneath mere names and 
 technical distinctions of local authorities, we shall 
 find the inquiry why it is considered disgraceful 
 to receive poor-relief much facilitated by a con- 
 sideration of the different degrees of disgrace 
 which appear to be attached to the receipt of relief 
 undej* different conditions. Lunatics and children 
 incur no appreciable disgrace by the receipt of 
 poor-relief. When we are told that a man has 
 been in a lunatic asylum, few of us trouble to 
 inquire whether he was a paying or a pauper 
 ' Aged Poor Commission, quests. 14,177,14,178.
 
 THE STIGMA OF PAUPERISM 147 
 
 patient. The boys and girls of a country work- 
 house, returning from the National or Board School 
 in their uniform of glengarry caps and black straw 
 hats, seem, to an outsider, as they play in the street 
 on their slow way " home," to get on with their 
 fellows at least as well as the average Board or 
 Grammar School boy who has been promoted to 
 a school which considers itself to be entitled to 
 the appellation of " public." After the lunatics 
 and children come the sick. More than one 
 witness before the Commission on the Aged Poor 
 declared that little or no disgrace was incurred by 
 being an inmate of a workhouse infirmary, ^ and 
 a guardian described (without a blush) the childish 
 expedients to which his Board considered them- 
 selves obliged to resort to make it appear that a 
 person admitted to the infirmary was admitted to 
 the workhouse. 2 Next come the old people and 
 able-bodied widows with children ; and, last of 
 all, able-bodied men and single women. 
 
 The inference from this classification must 
 be perfectly obvious to the most casual and least 
 clear-sighted observer. It is that the destitution 
 which necessitates dependence on poor-relief is 
 more or less disgraceful according as the pauper 
 is presumably more or less able to support him- 
 self by labour if he chooses to do so. That this 
 is the case scarcely any one will be found to deny 
 
 ' Quests, 2,337, 14,511, 14.752-3- 
 - Quests. 2,337, 2,404-10. cf. 14,617.
 
 148 THE ECONOMIC OUTLOOK 
 
 What it does not explain, however, is why depend- 
 ence on poor-relief is looked upon as more dis- 
 graceful or " degrading " than dependence on 
 haphazard alms contributed by individuals in pro- 
 portions determined by their comparative liberality, 
 instead of by their comparative ability as conceived 
 by the Poor Law. If an inhabitant of Jupiter 
 or Saturn, to use a famous though often misapplied 
 phrase,! were to visit us, he would surely rather 
 expect the opposite of this. He would think 
 it obvious that a person dependent on a fixed pro- 
 vision, carefully defined and limited by the 
 collective wisdom of the community, must feel far 
 less degraded than one who has to curry favour 
 with certain amiable, but often exceedingly foolish, 
 individuals, who may refuse or withdraw their gifts 
 whenever they please. The f^ivourite explanation 
 given by the official expositors of orthodox Poor 
 Law principles is that a man feels more degraded 
 by relief from the rates than by relief from alms, 
 because a part of the rates comes, or may possibly 
 come, from unwilling payers. Mr. Knollys, Chief 
 General Inspector and Assistant Secretary under 
 the Local Government Board, gave evidence before 
 the Aged Poor Commission as follows: — 
 
 " 1 128. Chairman. — I suppose you are strongly 
 
 ' Gladstone is usually said to have " banished Political Economy 
 to Jupiter and Saturn," but this is only an audacious inference 
 from his remark that Bonamy Price proposed to treat the Irish as 
 if they were inhabitants of those planets.
 
 THE STIGMA OF PAUPERISM 149 
 
 of opinion that, for some reason or another, people 
 feel themselves much less degraded by accepting 
 money from a charity than they do by accepting 
 help from the public funds ? 
 
 " Witness. — Yes, I think so. It seems to me 
 that there is a great difference in a person being 
 relieved from a fund raised from voluntary sources 
 and a fund that is raised by compulsory contribu- 
 tion. 
 
 " 1 129. Chairman. — Yet they may be said to 
 have some claim upon the poor-law, w^hereas they 
 can have none upon the charitable funds ? 
 
 " Witness. — Yes ; but I think that a man should 
 feel that there is some degradation in living upon 
 funds that have been raised, to a certain extent, 
 at any rate, by compulsion from his neighbours, 
 who are very little better off than himself. 
 
 Mr. Phelps, an active Guardian, and chairman 
 of an excellent charity organisation committee, was 
 interrogated on this subject by Mr. Chamberlain: — 
 
 " 4034. Mr. Chamberlain. — You said that you 
 thought that outdoor relief was much more 
 demoralising than charity in the case of old 
 people. 
 
 " Witness. — Yes. 
 
 " 4035. Mr. Chamberlain. — Why is it less de- 
 moralising to accept as a favour from private 
 persons a certain amount per week than to accept 
 the same thing as a right from the State ? 
 
 " Witness. — One can only speak there from
 
 150 THE ECONOMIC OUTLOOK 
 
 one's own feelings. I think I should feel that 
 my self-respect was more wounded if I received 
 a grant which I compelled my neighbours, often 
 as poor as myself, to contribute, whether they 
 would or not, than if I received a free gift from 
 a friend." 
 
 The feelings of Mr. Knollys and Mr. Phelps 
 seem a good deal more highly toned than those 
 of 9,999 out of every 10,000 persons likely to want 
 relief. It is really absurd to suppose that the 
 ordinary pauper troubles himself about the in- 
 finitesimal fraction of a farthing in his 3s. 6d. a 
 week which may possibly be collected (indirectly 
 in the rent) from some compound householder who 
 is very little better off, as Mr. Knollys says, or no 
 better off, as Mr. Phelps says, than himself. As 
 for well-to-do curmudgeons who would like to 
 deduct his 3s. 6d. from their poor-rate, if he knows 
 of any such persons in his union he is likely to 
 regard their sufferings with equanimity if not com- 
 placency. As a matter of fact, he seldom does 
 know of any. In spite of Mr. Pell's curious 
 belief that " no relief through the Poor Law can 
 be regarded in any sense as charitable," ' the 
 poor-rate is universally regarded as part of the 
 machinery of charity, and there are very few rate- 
 payers who wish to reduce their payments at the 
 expense of the paupers. The ratepayer's complaint 
 generally is, that some class is not paying enough, 
 ' Aged Poor Commission, quest. 4,416.
 
 THE STIGMA OF PAUPERISM 151 
 
 so that he is paying too much, not that the whole 
 amount which reaches the poor is too great. " It 
 isn't the poor-rate: it's that general district rate 
 that I look at," he also often cries. He will more 
 gladly suffer impure water, insufficient drains, and 
 dirty streets than cut down the number of outdoor 
 paupers. 
 
 The real reason why it is considered more 
 disgraceful to receive relief from the Poor Law 
 Guardians than from private almsgivers is to be 
 looked for in the facts that, as a rule, the applicant 
 for poor-relief is obliged to make a more public 
 confession of destitution, and that the destitution 
 which he has to confess is of a more extreme 
 character. The humiliation of receiving alms is 
 felt very much in proportion to the publicity with 
 which they are given, and the most public of all 
 methods of soliciting alms — wayside begging — is 
 scarcely regarded as less disgraceful than applica- 
 tion to the Guardians. A destitute person, there- 
 fore, begins by private application to his friends, 
 and so if, in the end, he is driven to the Poor Law, 
 he practically confesses that he has not only no 
 funds but also no friends who are both able and 
 willing to assist him ; and this, of course, suggests 
 misconduct or bad character. 
 
 But why, it may still be asked, is it considered, at 
 any rate by the poor as a body, more disgraceful 
 to receive indoor than outdoor relief? This 
 question is too comprehensive. Where it is obvious
 
 152 THE ECONOMIC OUTLOOK 
 
 that the relief is given indoors simply because the 
 applicant for relief is sick or disabled through no 
 fault of his own, and can be better treated in the 
 workhouse than at home, indoor relief is not con- 
 sidered more disgraceful than outdoor. When these 
 purely hospital cases are properly left out of the 
 question, the answer to it is, that indoor relief is 
 considered more disgraceful than outdoor simply 
 because, whether the Guardians are " lax " or 
 moderately " strict," the indoor paupers as a class 
 are much more incapable and disreputable than 
 the outdoor. There is consequently much greater 
 reluctance to become an indoor than an outdoor 
 pauper, and when this reluctance is overcome it 
 argues greater misconduct or more abject desti- 
 tution. 
 
 It appears, then, from this consideration of the 
 comparative disgrace attached to various kinds of 
 dependence, that the stigma of pauperism arises 
 purely from the fact that pauperism necessarily 
 implies destitution, and that destitution, in the 
 absence of information to the contrary, is attributed 
 to culpable incapacity or misconduct. 
 
 From this follow two important consequences, 
 which have some bearing on practical matters now 
 under discussion. The first is, that the stigma of 
 pauperism may be removed from any person re- 
 ceiving poor-relief (by whatever name it be 
 called and by whatever authority it be adminis- 
 tered), given only to the destitute, if by any means
 
 THE STIGMA OF PAUPERISM 153 
 
 public opinion is satisfied that, as a matter of fact, 
 that person's destitution was not owing to mis- 
 conduct or culpable incapacity. There is, there- 
 fore, a perfectly sound theoretical basis for the 
 proposal to remove the stigma of pauperism, or 
 disgrace attached to pauperism, from " deserv- 
 ing " aged paupers and able-bodied paupers out 
 of work through no fault of their own. If it were 
 possible for an omniscient tribunal to divide aged 
 paupers simply into deserving and undeserving, 
 and paupers out of work into those out of work 
 owing to their own fault and others, and if an 
 omniscient and immaculate tribunal were found, 
 and if the public had complete confidence in its 
 decisions, the paupers might perfectly well be 
 divided into two classes, only one of which would 
 incur disgrace in consequence of the receipt of 
 relief. The difficulty is, that there is no such 
 tribunal, and, if there were, the public would have no 
 confidence in it. No dozen farmers or shopkeepers 
 round a table on market-day are competent to sit 
 in judgment on the course of conduct pursued by 
 some palsied old man forty or fifty years ago, when 
 they themselves were toddling children. In 
 practice they will always decline the task marked 
 out for them by the Majority Report of the Aged 
 Poor Commission, and things will remain much as 
 before. Still less is any conceivable local or 
 central authority likely to give satisfaction by its 
 answer to the question whether a man is out of
 
 154 THE ECONOMIC OUTLOOK 
 
 work owing to no fault of his own or otherwise. 
 But these objections, if (as certainly appears to be 
 the case) they are fatal, only show that the pro 
 posal for non-stigmatising poor-relief to the de- 
 serving cannot be carried out owing to insuperable 
 practical difficulties, not that there is anything 
 fallacious or self-contradictory in the proposal 
 itself. 
 
 The second important consequence which follows 
 from the fact that the stigma of pauperism is due 
 to the public censure of destitution, is that grants 
 from taxes or rates may be given to the destitute 
 without affixing any stigma, if they are also given 
 widely and avowedly to those who are not destitute. 
 No poor person finds that he incurs any stigma by 
 using a public park or a free library, though he is 
 then distinctly receiving aid from the rates. No 
 poor person ever seems to have found himself 
 stigmatised because the State and the local rate- 
 payers, or the State and private almsgivers, were 
 paying almost the whole cost of the education of 
 his children. When, in order to get the small 
 remaining fraction of the cost paid by the rate- 
 payers, the parent had to plead destitution, there 
 were loud and just complaints that he was 
 pauperised, although, in deference to opinions like 
 those of Mr. Pitkin and Canon Hinds Howell, 
 the grants were described as " non-pauper " school 
 fees. Now, in those parts of the country where 
 free schools are open to all we hear nothing of 
 
 I
 
 THE STIGMA OF PAUPERISM 155 
 
 consequent pauperisation. And so, likewise, the 
 proposal, which Mr. Booth by his earnest and able 
 advocacy has made his own, that the State should 
 provide an equal pension for all old people irre- 
 spective of destitution, if carried out, would affix 
 no stigma of pauperism to the receivers of the 
 pension, simply because receipt of the pension 
 would not imply destitution. A very bold attempt 
 has been made to suggest that the well-to-do 
 would not claim their pensions, and that, therefore, 
 those who took them would still be considered 
 more or less destitute, and would therefore incur 
 a stigma. It seems to be forgotten that the class 
 of people who can afford to despise £13 per annum 
 is so small, that it is much more likely that those 
 who did not take the pension would be stigmatised 
 as millionaires than that the millions who accepted 
 it would be stigmatised as paupers. After all, 
 a much more considerable minority of the popula- 
 tion does not avail itself of the State schools 
 without the smallest pauperising effect on the re- 
 mainder. The Aged Poor Majority Report 
 views with alarm the possibility of future exten- 
 sion of the principle. It is quite true that the 
 principle is capable of considerable extension. 
 Without " pauperising " any one, the State might, 
 if the State doctors and hospitals were really 
 popular, undertake the whole charge of the sick, 
 either curing or burying the people free of expense 
 to themselves or their relations. It might, too.
 
 156 THE ECONOMIC OUTLOOK 
 
 without pauperising any one, undertake, as France 
 may have to do before another century passes, most 
 of the expense of rearing children, as well as of 
 teaching them book-learning. It might even, if 
 it could afford it, without pauperising any one, 
 give a fixed equal pension to every able-bodied 
 adult. All these proposals have merits and de- 
 merits which require careful consideration. They 
 cannot be profitably dismissed with the assertion 
 that they " would make paupers of us all," since 
 in one sense that assertion is a truism and in 
 another a falsehood.
 
 IV 
 
 OUGHT MUNICIPAL ENTERPRISES TO BE 
 ALLOWED TO YIELD A PROFIT?' 
 
 Whatever views he may hold as to the remote 
 future, I do not suppose any one will be inclined to 
 deny that just at present in this country the 
 economic work — the purely and obviously economic 
 work — of municipalities and similar local govern- 
 ments is increasing in importance, not only abso- 
 lutely, but also in proportion to the whole of human 
 economic activity. So if an English economist 
 holds that economics ought to be useful to the 
 population of this particular planet, not merely 
 as an intellectual exercise affording food for 
 thought and speculation, as Adam Smith says of 
 religion,- but also as affording some guidance in 
 practical affairs, he is bound to endeavour to give 
 some general answers to the important questions to 
 which the extension of municipal economic activity 
 gives rise. One of the most important of these 
 questions is : Should municipal enterprises pay, or 
 
 ' Read before Section F of the British Association, 1898, and 
 printed in the Economic -Journal, March, 1899. 
 ' Lectures, p. 256.
 
 158 THE ECONOMIC OUTLOOK 
 
 should they be worked at cost price ? Should they 
 bring in where possible something in aid of the 
 general rates of the locality, or should all such aid 
 be foregone by the general body of ratepayers ? 
 
 Recently a Minister of the Crown, who had con- 
 siderable municipal experience many years ago, 
 likened a municipality to a joint-stock company. 
 If the parallel were exact, there would be an end 
 to the question which I have propounded, for no 
 one supposes that joint-stock company enterprise 
 could be carried on if dividends were disallowed. 
 But the parallel is not at all exact. It is a useful 
 comparison, however, and we cannot do better 
 than approach the question with a brief review of 
 the points of resemblance and difference between 
 a municipality or other local government, and a 
 public joint-stock company. 
 
 Probably the first thing to strike the casual 
 observer will be the similarity of the government 
 of the two institutions. Just as the government of 
 the joint-stock company is entrusted to certain 
 elected representatives called the Directors, so the 
 government of the locality is entrusted to certain 
 elected representatives called the Town or District 
 Council. Neither the electors of the directors nor 
 the electors of the council often interfere directly 
 in the management, and both in the company and 
 the locality their powers of direct interference are 
 almost entirely limited to placing a veto on the 
 raising of new capital. There is, of course, nothing
 
 MUNICIPAL TRADING AND PROFIT 159 
 
 surprising in the similarity, for the municipal 
 corporation and the joint-stock company are only 
 two kinds of corporation, and in America, indeed, 
 every company is called a " corporation " at this 
 very moment. So far as their government is con- 
 cerned, the chief difference between the municipal 
 corporation and the business corporation lies in the 
 fact that in the municipal corporation the electors 
 exercise their rights of election, at any rate to the 
 extent of taking their choice between the nominees 
 of two political caucuses, whereas in the other 
 corporation the electors seldom do more than 
 acquiesce in the election of directors nominated by 
 the directors themselves. The shareholders of an 
 ordinary public company are a widely scattered 
 body, knowing nothing at first hand either about 
 each other or about the business of the company ; 
 whereas the electors in ai locality are each other's 
 neighbours and have the results of the working of 
 the municipality immediately before their eyes 
 every day of their lives. Consequently the electors 
 in a locality are able and willing to exercise far 
 more influence than the shareholders in a company. 
 Secondly, it will be observed that the municipal 
 corporation and the business corporation resemble 
 each other in the fact that the bond of union 
 between the members of the corporation is not a 
 directly personal one, but one founded on the con- 
 nection between persons and certain property. 
 Just as you become a proprietor or shareholder in
 
 160 THE ECONOMIC OUTLOOK 
 
 a public company by purchasing certain stock or 
 shares, so you become a citizen, burgess, or 
 parochial elector in a place by owning or occupying 
 in a certain way for a certain period a particular 
 kind of fixed property within the area of the city, 
 borough, or district. In neither case is there any 
 power to reject a new member or expel an old one. 
 Neither the proprietors of the Great Western Rail- 
 way nor the citizens of Bristol can refuse you 
 admittance to their register because you have 
 cheated at cards or married your deceased wife's 
 sister, or even because you are bald and have a 
 glass eye. 
 
 But there is an important difference in the nature 
 of the property which confers membership of the 
 two different kinds of corporations. In the com- 
 pany each share or each £i of stock is like every 
 other, and merely represents a certain fraction of 
 the whole property of the company: in the city 
 or district each share consists of certain definite 
 things, and these things are not in the actual 
 possession of the local organisation. They are 
 in the possession of the citizens or electors in- 
 dividually, and the organisation has merely certain 
 claims in respect to them. To make the Great 
 Western Railway something like the City of Bristol, 
 you would have to divide up the stations and 
 rolling stock into 40,000 or 50,000 portions of 
 different value, and give each shareholder his own 
 particular bit to make as much out of as he could,
 
 MUNICIPAL TRADING AND PROFIT 161 
 
 subject to payments to the Company for main- 
 taining the line. These payments would be levied 
 from the various shareholders in proportion to the 
 value of their particular bits, which would be 
 revalued from time to time. 
 
 Thirdly, we notice a great similarity in the work 
 of the two kinds of corporations. The municipal 
 corporation resembles the company in being a 
 business organisation created and carried on for 
 the benefit of its members. It is true that here 
 and there in the multifarious duties imposed on 
 local authorities you may find that they are com- 
 pelled to do something which, however desirable 
 from an altruistic or even from a national point of 
 view, cannot be said to be for the immediate 
 material advantage of the particular local organisa- 
 tion performing them. But, after all, similar 
 obligations have been imposed on many public 
 companies, private firms, and individuals carrying 
 on different kinds of businesses. Are local 
 authorities required to do so very much more in 
 this direction than the owners of railways and 
 factories ? Whatever answer be given to this ques- 
 tion, no one not blinded by enthusiasm can have 
 any doubt that in the main the local government 
 organisation is one for business purposes. In its 
 sober moments every Town Council recognises the 
 fact. In these days of easy communication and 
 locomotion from place to place efi"ective philan- 
 thropy requires to be at least national in its scope, 
 
 11
 
 162 THE ECONOMIC OUTLOOK 
 
 and so, as time goes on, local authorities are 
 gradually abandoning to the State duties like that 
 of seeing that the poor do not suffer more from 
 their poverty than is necessary to maintain the 
 stimulus to industry and good conduct, and that 
 of seeing that every child shall have the small 
 modicum of literary education which satisfies the 
 public conscience. 
 
 But though the work done in both cases is busi- 
 ness done for the benefit of the members, there 
 is a vast difference in its character and the way in 
 which the benefit accrues to the members. The 
 company performs services in which the share- 
 holders have no direct interest, and about which 
 they frequently know nothing, for other persons, 
 receives money pa)anent for them, and distributes 
 the net profit among the shareholders in money 
 dividends. The local organisation or municipality, 
 on the other hand, does not in its ordinary and 
 principal work perform services for outsiders. It 
 performs services which are directly for the more 
 or less common benefit of its members. It does 
 not attempt to charge each member exactly for 
 what he receives, but assumes that the common and 
 general benefits conferred will be, taken altogether, 
 approximately in proportion to the value of fixed 
 property occupied in the locality, so that the cost 
 of them may be fairly and economically raised by 
 rates in the pound on the annual value of the 
 property.
 
 MUNICIPAL TRADING AND PROFIT 163 
 
 In regard to the ordinary and principal work of 
 the municipal corporation, then, no question 
 whether a profit should be made can possibly arise. 
 The business is what is called a *' mutual " one, 
 and to charge more to the members than the cost 
 of the services rendered would be absurd, as the 
 extra amount would only be held in trust for the 
 members in exactly the same proportions as those 
 in which it was collected from them, and would 
 have to be returned to them by deduction from 
 the next rate levied. But with regard to the 
 special department of local government work 
 known as " municipal enterprise " the case is 
 altogether different. What is a municipal enter- 
 prise ? If we only consider the derivation of the 
 words, it would appear that every undertaking of 
 a municipality should be a municipal enterprise ; 
 but the term has acquired a technical meaning. 
 The distinction between municipal enterprises and 
 municipal undertakings which are not enterprises 
 corresponds with the Local Government Board's 
 division of municipal work into " reproductive " or 
 " self-supporting," and " non-reproductive " ; but 
 this division involves a very unsatisfactory use of 
 the words " reproductive " and " self-supporting." 
 It is obviously confusing to call the expenditure on 
 a road reproductive as long as there is a toll and 
 non-reproductive when the toll is abolished. It 
 would be better to say that a municipal under- 
 taking is a municipal enterprise when it is expected
 
 164 THE ECONOMIC OUTLOOK 
 
 and intended that its cost should be defrayed by 
 free sales of the commodity produced or service 
 rendered, and not by taxes which must be paid 
 whether much, little, or none of the commodity or 
 service is taken. 
 
 The removal of dirty water from houses within 
 the local authority's area is not a municipal enter- 
 prise, because every one has to pay in the general 
 rate for the service whether he requires dirty water 
 removed or not. The provision of clean water to 
 the houses, on the other hand, is usually a 
 municipal enterprise, because a person's payments 
 are calculated on the basis of some rough estimate 
 of the amount he is likely to use, and if he does 
 not have the water at all he does not pay at all. 
 The difference between providing a particular 
 service as part of the ordinary work of the muni- 
 cipality and providing it by means of municipal 
 enterprise is thus one of principle, but in practice 
 its importance is a question of degree, inasmuch 
 as it becomes greater and greater the more widely 
 the payments exacted differ from the ordinary 
 rates. Compare, for example, two things which 
 are often coupled together — water and gas. There 
 are several substitutes for gas, but none for water, 
 so that whether any one will have gas or not is a 
 matter of choice, but whether he will have public 
 water or not is a matter as to which he can exercise 
 no free-will when he has no good well.' Moreover, 
 
 ' In the Economic y^oiinial this 'was misprinted "good-will.'
 
 MUNICIPAL TRADING AND PROFIT 165 
 
 when people have got a supply of gas and water, 
 their consumption of water will come out much 
 more nearly in proportion to the rateable value 
 of their houses than their consumption of gas. 
 A recognition of this fact may be discerned in the 
 usual practice of basing water payments to a large 
 extent on rateable value, while gas is invariably 
 supplied by meter. The conclusion obviously is 
 that the fact of domestic water supply being 3. 
 municipal enterprise and not ordinary work of the 
 municipality is of comparatively little importance. 
 It could be undertaken as part of the ordinary 
 work of the municipality with advantage, and in 
 some places it actually is so. 
 
 The distinction between municipal enterprise and 
 ordinary municipal work being thus founded on 
 the fact that payments for the services rendered 
 by municipal enterprise differ from those made 
 for other municipal services and are not in propor- 
 tion to the shares of the members of the local 
 organisation as indicated by rateable value, nor 
 even made by all ratepayers, it is clear that in 
 municipal enterprise the municipality's business is 
 no longer a merely mutual one. It is no longer 
 absurd to charge more for the services than what 
 would precisely defray their cost, since the extra 
 amount will not be redistributed exactly as it 
 was collected. The municipality is now really in 
 the position of the joint-stock company: it is true 
 that so long as its operations are confined to its
 
 166 THE ECONOMIC OUTLOOK 
 
 own district it will do business only with its own 
 members, but this does not seem to be of much 
 importance: the ordinary joint-stock company 
 frequently deals with its own shareholders, and 
 seldom finds it convenient or desirable to give 
 them any preference as customers. 
 
 The company analogy is entirely in favour of 
 allowing the municipality to make a profit in aid 
 of rates out of the enterprise. If companies in 
 similar enterprises were not allowed to make 
 anything beyond 2| per cent., or whatever other 
 rate of interest can be got without any risk of 
 loss, it is tolerably clear that no companies would 
 be formed to undertake such enterprises. 
 Similarly, if municipalities are precluded from 
 making any gain for the general body of rate- 
 payers by municipal enterprise, while they are 
 not precluded or protected from making a loss 
 which that general body will have to make up, 
 it is tolerably clear that the ratepayer qua rate- 
 payer will always (as he very often is at present) 
 be opposed to the undertaking of any municipal 
 enterprise. He cannot qua ratepayer gain by it, 
 and he may (indeed must, unless great reserves 
 are formed to make good years balance bad) lose 
 by it. New municipal enterprises may still be 
 undertaken, but when they arc it will always be by 
 the triumph of an interest — the interest of the gas 
 consumers or the electric light consumers, or of 
 the people who happen to ride in tramcars, or to
 
 MUNICIPAL TRADING AND PROFIT 167 
 
 own property which is increased in value by cheap 
 locomotion. How such a state of things can be 
 considered desirable by any friends of municipal 
 enterprise passes my comprehension. That the 
 principle of no-profit should have been laid down 
 by its enemies is not surprising. 
 
 Next, supposing the interest of the consumer to 
 be powerful enough to start and extend the enter- 
 prise, and supposing the prices fixed at first bring 
 in a profit, it is easy to see that the rule that the 
 profit must be promptly got rid of is likely to lead 
 to extravagant mismanagement. According to the 
 principle, it ought to be given away in reduction 
 of the prices charged. But will it ? Some of 
 it, perhaps ; but a considerable share is likely to 
 go to unnecessarily and unfairly increased working 
 expenses. The besetting sin of Town Councils and 
 similar bodies is to make too easy bargains, and 
 the temptation to do so is much greater where it 
 does not affect the rates before the next election. 
 
 Lastly, it is undesirable for the community to 
 use its credit to cheapen just the particular things 
 which happen to come conveniently within the 
 domain of municipal enterprise. These things — 
 with the exception of water, which is likely to leave 
 the domain of municipal enterprise and enter that 
 of the ordinary work of the municipality — these 
 things are neither things of first necessity nor 
 things consumed only by virtuous persons. What 
 particular claim have the consumers of gas or
 
 168 THE ECONOMIC OUTLOOK 
 
 electric light, or, it may be, the users of telephones, 
 to have their pockets relieved at the risk always, 
 and every novi^ and then at the actual cost, of the 
 whole body of ratepayers ? The consumers of oil 
 may be both a more necessitous and a more 
 deserving body of persons. The demand that the 
 risk of loss should be taken in the production 
 of certain commodities, while all gain should be 
 foregone, obviously amounts to a bounty on the 
 production of those particular commodities, and 
 bounties, we have very properly been taught to 
 believe, are uneconomic in their operation. 
 
 To overthrow these arguments in favour of 
 profit-making, strong reasons ought to be brought 
 forward. But where are they? The opponents of 
 profit-making are usually content to be dogmatic : 
 they say that profit should not be made, but give 
 no reasons. Some of them are antiquated 
 socialists, who hold that all profit is wicked and 
 that the local authority ought not to touch the 
 unclean thing. They forget that the kind of profit 
 they ought to object to is the interest paid to the 
 public creditor who supplies the capital, and not 
 any profit beyond this acquired by the local 
 authority ; and they do not know that it is now 
 very well understood that even interest on capital 
 would have to appear in the book-keeping of a 
 purely communistic State. Others may have re- 
 garded municipal enterprise as akin to distributive 
 co-operation, where the profits are divided among
 
 MUNICIPAL TRADING AND PROFIT 169 
 
 the consumers. But this, too, is a false analogy, 
 for it is the ratepayers in general, and not the 
 consumers of the commodity or service provided 
 by the municipal enterprise, who arc banding 
 themselves together to work the enterprise. In 
 more than one case (that of Liverpool docks, of 
 course, being by far the most important) harbours 
 or docks which were once municipal enterprises 
 have been turned into that kind of co-operative 
 institution which is called a harbour or dock trust. 
 But here the municipality is relieved of all liability 
 to loss, as well as all prospect of gain. It is one 
 thing to ask the municipality to give up an enter- 
 prise altogether, and another to ask it to take all 
 the risk of loss and none of the chance of gain. 
 Finally, a considerable number of the opponents 
 of profit-making have assumed that municipal 
 enterprises should be confined to works of general 
 utility, and have then inferred that it was to 
 the general advantage that the services rendered 
 should be as cheap as possible. But there does not 
 appear to be any ground whatever for the cool 
 assumption that municipal enterprises should be 
 confined to works of general utility. As we have 
 seen, the very thing that makes an undertaking 
 rank as a municipal enterprise is that the service 
 rendered is not of sufficiently general utility to be 
 paid for out of the general rates. The reason for 
 any particular service being rendered by the muni- 
 cipality surely is that it can be best rendered by the
 
 170 THE ECONOMIC OUTLOOK 
 
 municipality, not that it is of general utility. The 
 question of its being or not being of general utility 
 arises only when we have to consider whether it 
 shall be a municipal enterprise or part of the 
 ordinary work of the municipality paid for by the 
 general rates. 
 
 I think, then, that we ought to deny unhesitat- 
 ingly and uncompromisingly the doctrine that 
 municipal enterprise ought not, where possible, to 
 yield a profit in aid of rates. 
 
 This leaves us, of course, still to face the 
 question. What limits, if any, are there to the 
 profits which may be made? Where there is no 
 monopoly there is clearly no reason why the profit 
 should be restricted by anything except com- 
 petition or the fear of competition. In these 
 days we are always exaggerating the mono- 
 polistic character of particular enterprises. We 
 must not forget that the different monopolies 
 compete with each other, and that even if the gas 
 or the electric light supply are in one hand they 
 have to compete with the Standard Oil Trust, and 
 very likely before long they will have to compete 
 with new illuminants. The tramway monopoly is 
 a good deal tempered by the competition, not only 
 of the antiquated 'bus, but also by that of the 
 bicycle and the motor-car and the railway: even 
 the telephone has to drive out the messenger. 
 Moreover, the competition need not be within the 
 place, but may be between place and place. No-
 
 MUNICIPAL TRADING AND PROFIT 171 
 
 where have the anti-profit doctrinaires, aided by 
 strong private interest, been stronger than in rela- 
 tion to docks and harbours, but in view of the 
 enormous subsidies to docks which have been given 
 by the general ratepayers in Preston, Manchester, 
 and Bristol, the only important places where the 
 docks are in municipal ownership, what can be 
 more absurd than the taking away of the Mersey 
 docks from the Liverpool Corporation for fear 
 the town should batten on the trade of Lancashire 
 and England generally ? ' It will usually be 
 found that a cheap price to the consumer is also 
 the price which brings in the biggest aggregate 
 net profit to the municipality. If we examine the 
 accounts of English corporations, we shall find that 
 there is no connection between high prices and 
 large profits. 
 
 On the whole, I conclude that all restrictions 
 placed by government departments and Parlia- 
 ment on the profits of municipal enterprise should 
 be removed. It is possible that here and there a 
 local authority may charge more than is economi- 
 cally desirable, but the damage must be much 
 greater to the locality than to the nation at large ; 
 so the locality should be allowed to find out its own 
 mistake and take the consequences. 
 
 ' Tliis happened in 1857. About thirty 3'ears later tlie Board 
 of Trade actually compelled Bournemouth to alter the pier tolls 
 on passengers by the excursion steamers because it was making 
 a profit out of " navigation."
 
 V 
 
 THE PRACTICAL UTILITY OF ECONOMIC 
 SCIENCE.^ 
 
 If it happened every year that the President of 
 this section undertook to justify his own existence, 
 I am afraid the section would become weary. But 
 my four distinguished predecessors have all been 
 drawn from the Civil Service, and though each of 
 us may have doubts about particular branches of 
 the Civil Service, we are mostly willing to allow 
 that as a whole it is at least a necessary evil, so 
 that we do not get apologies from the presidents 
 who, so to speak, represent the practice of political 
 economy. I hope, therefore, that you will bear 
 with me if I offer some reasons for thinking that 
 the teaching and study of the theory of economics 
 is not, as many people seem to suppose, a wholly 
 unnecessary evil, but, on the contrary, a thing of 
 very great practical utility. 
 
 I do not mean to argue that a knowledge of 
 
 ' Presidential Address to the British Association (Section F), 
 Belfast, 1902, printed in the Economic Journal for December, 
 1902. 
 
 172
 
 THE UTILITY OF ECONOMIC SCIENCE 173 
 
 economic theory will enable a man to conduct his 
 private business with success. Doubtless many 
 of the particular subjects of study which come 
 under the head of economics are useful in the 
 conduct of business, but I doubt if economic theory 
 itself is. It does not, indeed, in any way disable 
 a man from successful conduct of business ; I 
 have never met a decent economist who was in a 
 position of pecuniary embarrassment, and many 
 good economists have died wealthy. But economic 
 theory does not tell a man the exact moment to 
 leave off the production of one thing and begin 
 that of another ; it does not tell him the precise 
 moment when prices have reached the bottom or 
 the top. It is, perhaps, rather likely to make him 
 expect the inevitable to arrive far sooner than it 
 actually does, and to make him underrate, not the 
 foresight but the want of foresight of the rest of 
 the world. 
 
 The practical usefulness of economic theory is 
 not in private business but in politics, and I for 
 one regret the disappearance of the old name 
 " political economy," in which that truth was 
 recognised. 
 
 One of the commonest complaints of the time 
 is that there is no textbook of economics which 
 commands any really wide approval, and you may 
 therefore, I think, fairly ask me to explain what 
 I mean by the teaching and study of economic 
 theory before I undertake to prove its practical
 
 174 THE ECONOMIC OUTLOOK 
 
 usefulness in the discussion of legislative and 
 administrative measures. I will, therefore, en- 
 deavour to sketch as shortly as possible the course 
 of instruction which the modern teacher of 
 economic theory, if unhampered by too close 
 adherence to traditional standards, puts before 
 those who come to him for instruction. 
 
 The first, or almost the first, thing he will do is 
 to try to open the eyes of his pupils to the wonder- 
 ful way in which the people of the whole civilised 
 world now co-operate in the production of wealth. 
 He may perhaps read them Adam Smith's famous 
 description of the making of the labourer's coat, a 
 description which required three generations and 
 three great writers to elaborate in the form in 
 which we know it. Or he will ask them to consider 
 the daily feeding of London. There are, he will 
 point out, six millions of people in and about 
 London, so closely packed together that they cannot 
 grow anything for their own consumption, and yet 
 every morning their food arrives with unfailing 
 regularity, so that all but an infinitesimal fraction 
 of them would be extremely surprised if they did 
 not find their breakfast ready to hand. To prepare 
 it they use coal which has been dug from great 
 depths hundreds of miles away in the Midlands or 
 Durham ; in consuming it they eat and drink pro- 
 ducts which have come from Wiltshire, Jamaica, 
 Dakota, or China, with no more thought than an 
 infant consuming its mother's milk. It is clear
 
 THE UTILITY OF ECONOMIC SCIENCE 175 
 
 that there is in existence some machinery, some 
 organisation for production, which, in spite of 
 occasional failures here and there, does its work 
 on the whole with extraordinary success. It is 
 easy to be pessimistic, especially when the weather 
 is damp, and we are apt to concentrate our atten- 
 tion, and to endeavour to make others concentrate 
 their attention, on this or that defect, and to forget 
 that the system is not made up of defects, but on 
 the whole works very well. Imagine the report 
 of a really outside observer. In all civilised 
 planets, I have no doubt, there must be an institu- 
 tion more or less resembling the British Associa- 
 tion. An economist in Mars, let us say, has been 
 favoured with a glimpse of this island through a 
 new mammoth telescope of sufficient power to let 
 him see us walking about, and he is reporting to 
 Section F what he saw. Will he say that he saw 
 a confused scramble for the scanty natural products 
 of the earth? That most people were obviously 
 in a state of starvation? That few had clothes? 
 And that scarcely any were housed? No, truly ; 
 he will be much more likely to report that he saw 
 a wonderfully orderly population, going to and 
 from its work with amazing regularity, without 
 a sign of compulsion or unwillingness ; that it 
 appeared to be fed and clothed and housed in a 
 way extraordinarily creditable on the whole to some 
 mysterious organisation, the nature of which he 
 could only guess at.
 
 ]76 THE ECONOMIC OUTLOOK 
 
 Having endeavoured to make his pupils recognise 
 that we are organised, and that the organisation 
 works, the teacher will go on to show how it 
 works : why things that are wanted are produced 
 in the places where they can be easiest produced 
 and taken to the places where it is most convenient 
 to consume them ; why people go to live in large 
 numbers in spots where it is desirable they should 
 work, and leave great areas sparsely inhabited ; 
 why more people are brought up to follow an 
 occupation when the desire for its products in- 
 creases, and fewer when it decreases ; why if the 
 harvest is short the consumption is economised so 
 as to spread it over the year ; and so on. The 
 answer to all these questions is, of course, " self- 
 interest," or " the hope of gain." Durham coal, 
 Wiltshire milk, Danish butter, Jamaica sugar, 
 Dakota wheat, and China tea go to London because 
 it pays to send them there. People congregate 
 in London or Belfast because it pays them to 
 work there. More do not come because it would 
 not pay them. Young people leave agriculture 
 and go to towns to make agricultural implements 
 or bicycles because it pays. The consumption 
 of grain is economised and spread over the year 
 because it pays to hold the stock. If people Avith 
 one accord left off doing what paid we should all 
 be dead in two months. 
 
 The reasons why it pays to do the right thing — 
 to do nearly what an omniscient and omnipotent
 
 THE UTILITY OF ECONOMIC SCIENCE 177 
 
 benevolent Inca would order to be done — are to 
 be looked for in the laws of value. This used 
 to be regarded as a somewhat arid subject, but 
 the discussions of recent years, especially the con- 
 tribution made by Jevons and the Austrian school, 
 have fertilised it. Long ago economists pointed 
 out how the much-abused corn-dealer who held out 
 for a higher price saved the people from starva- 
 tion ; and we now, thanks to the theory of final 
 utility, not only know that it is a fact, but also 
 why it is a fact, that value rises with the extent 
 and urgency of demand, so that, when a thing is 
 much wanted, much is offered to those who produce 
 it, or are ready to part with it, and consequently 
 its production is stimulated or its consumption 
 economised as need be. 
 
 This will naturally lead to the question of disv 
 tribution — the question, that is, why much of the 
 produce falls to the share of one individual and 
 little to that of another ; why, in a word, some 
 are rich and others poor. The teacher will here 
 explain that the share of each person depends on 
 the amount and value of his contribution to pro- 
 duction, whether that contribution be labour or 
 the use of property. He will show how this system 
 of distribution is essential to the existing system 
 of production, where no man is compelled to work 
 or to allow his property to be used by others, and 
 where every man has legal freedom to choose his 
 own occupation and the uses to which he will put 
 
 12
 
 178 THE ECONOMIC OUTLOOK 
 
 his property. He will beware of claiming for 
 it that it is just in the sense in which justice is 
 understood in the nurseries where jam is given 
 when the children are good. There is, he will 
 explain, no claim on behalf of the system that it 
 rewards moral excellence, but only that it rewards 
 economic service. There is no claim that economic 
 service is meritorious. Whether a man can and 
 does perform valuable economic service does not 
 by any means depend entirely on his own volition. 
 His valuable property may have come to him by 
 bequest or inheritance ; his incapacity to do any 
 but the least valuable work may be the result of 
 conditions over which he has had no control. The 
 system exists, not because it is just, or to reward 
 merit, but because it is inextricably mixed up with 
 the system of production. It has one great evil — 
 its inequality. Moralists and statesmen have long 
 seen the evils of great inequality of wealth, and 
 now, thanks to modern discoveries in economic 
 theory, the economist is able to explain that it is 
 wasteful, that it makes a given amount of produce 
 less useful, because each successive increment of 
 expenditure yields, as a rule, less enjoyment to 
 the spender. The teacher will go on to show how 
 this organisation of production and distribution 
 is made possible by the order enforced by govern- 
 ment, and how, in various ways, government 
 supplements it or modifies it ; but I shall not 
 enlarge upon this part of the teaching of economics,
 
 THE UTILITY OF ECONOMIC SCIENCE 179 
 
 as its usefulness is obvious. My theme is the use- 
 fulness of the other part, the explanation of the 
 organisation of production and distribution in so 
 far as it depends on separate property, free labour, 
 and the consequent action of self-interest. 
 
 In the first place, I maintain that the widespread 
 dissemination of such teaching would help to do 
 away with a vast amount of most disastrous 
 obstruction of necessary and desirable changes. 
 Take, for example, the obstruction offered to 
 changes in international trade. Of course every 
 conceivable argument has been used by different 
 writers in wholly different circumstances for 
 obstructing the co-operation of mankind in produc- 
 tion, as soon as it oversteps a national boundary. 
 But what is the real support of this kind of obstruc- 
 tion? Obviously the fact that certain producers, or 
 owners of certain means of production, are 
 damaged by an increase in the importation of a 
 particular article. Their loss, their suffering, if 
 their loss is severe enough to deserve that name, 
 appeals to popular compassion, and their request 
 for " protection " is easily granted, the new trade 
 is nipped in the bud, and things are forced to 
 remain in their accustomed channels. The same 
 principle is not applied as between county and 
 county or between province and province, simply 
 because there is then visible to every one an 
 opposing interest, the interest of the new producers, 
 within the hallowed pale of the national boundary.
 
 180 THE ECONOMIC OUTLOOK 
 
 Adam Smith tells us that when the great roads 
 into London were improved, some of the landlords 
 in the home counties protested on the ground that 
 the competition of the more distant counties would 
 reduce their rent. The home counties did not get 
 the protection they wanted, because it was 
 obviously to the interest of the more distant 
 counties that they should not have it. These two 
 interests being balanced, the interest of the con- 
 sumer, London, turned the scale. So it usually 
 happens that beneficial changes in internal trade 
 are allowed to take their course without obstruc- 
 tion, because the votes of two sets of producers 
 counteract each other, and the consumers' interest 
 settles the question. But in international trade one 
 of the two sets of producers is outside the country : 
 it consists of hated foreigners ; the fact that it 
 will benefit is an argument against rather than for 
 the threatened change in trade, and the consumers 
 therefore feel it patriotic to sacrifice their own 
 interest and vote for protection. But if they were 
 properly instructed in economic theory they would 
 see at once that such magnanimity is entirely mis- 
 placed. They would see that it would cut away 
 all international trade, since, if there were no 
 fallacy involved in it, the stoppage of each import 
 taken separately would benefit home producers and 
 damage foreign producers ; even if some of the 
 imported commodities could not be produced at 
 all at home, substitutes, more or less sufficient,
 
 THE UTILITY OF ECONOMIC SCIENCE 181 
 
 could be produced and give all the more employ- 
 ment. Having acquired some notion of the advan- 
 tages of co-operation and the territorial division 
 of labour, the consumers would regard this as a 
 reductio ad absurdum, and after thinking a little 
 further they would soon see that, after all, there is 
 another set of producers, actual or potential, within 
 the country who will gain — namely, the producers, 
 present or future, who will supply the articles which 
 are to go abroad in exchange for the new import. 
 They would see that what they are asked to do 
 is not to maintain the amount of national produc- 
 tion, but merely to prevent a change in its character 
 which would be accompanied by an increase in its 
 amount. 
 
 Take another example of Chinese obstructiveness 
 to desirable change. As great cities grow, it 
 becomes convenient that their centres should be 
 devoted to offices, warehouses, and shops, and that 
 people who work in these places, and still more 
 their families, should live in the outskirts. I do 
 not know that any one has denied this. Certainly 
 the great majority are willing to admit it. At one 
 time, it is believed, a quarter of a million of 
 people lived in the square mile comprised within 
 the City of London ; no one supposes that would 
 be convenient now. There is no reason to suppose 
 that further change in the same direction will not 
 be desirable in the future. Yet, incredible as it 
 will appear to future generations, public opinion,
 
 182 THE ECONOMIC OUTLOOK 
 
 the House of Commons, the London County 
 Council, and some town councils think, or at any 
 rate act as if they thought, that the process has 
 now gone far enough, and ought to be stopped — 
 as if the state of things reached about the year 
 1 89 1 was to be permanent, to last for ever and 
 ever. Private owners are, indeed, still allowed to 
 pull down dwelling-houses and erect shops and 
 offices, but they are abused for doing so, and their 
 liberty is at least threatened. But if a new railway 
 or a new street is made — in all probability with 
 the intention of increasing the accessibility of the 
 centre from the suburbs — if even a new London 
 Board School is built, and houses inhabited by 
 persons who have less than a certain income are 
 pulled down in any of these processes, it is required 
 by law or parliamentary resolution that other 
 houses for these people must be built in the neigh- 
 bourhood. So it comes about that there are, in quar- 
 ters of London most unsuitable for the purpose, 
 enormous and repulsive barrack dwellings, the sites 
 of which are devoted in secula seculorum to the 
 housing of the working classes ; while the immense 
 cost of devoting them to this instead of to their 
 proper purpose is debited to the cost of improving 
 the facilities for locomotion or to education, and 
 is defrayed principally by the rates on London 
 property (which chiefly consists of houses) and to 
 some extent by the higher charges on the railways 
 consequent on the restriction of facilities for exten-
 
 THE UTILITY OF ECONOMIC SCIENCE 183 
 
 sion. Fifty pounds a head is the average loss 
 involved to the rates of London on every man, 
 woman, and child for whom the dwellings are 
 provided. Such is the wisdom of practical men 
 uninformed by instruction in economic theory. 
 
 This palpable absurdity could never have been 
 perpetrated if the general working of the economic 
 organisation had been understood. In that case 
 it would have been seen at once that the extrusion 
 of over 200,000 inhabitants from the City of 
 London in the past, which is admitted to have been 
 desirable, was effected by the quiet operation of 
 the laws of value. It would have been seen that, 
 as it became desirable to turn the City to other 
 purposes, the ground in the City became too valu- 
 able to use as bedrooms and as living-rooms for 
 mothers and children, and this increase of value 
 drove out the 200,000 inhabitants. It would have 
 been seen that the change had not come to an end, 
 and no responsible body would have dreamed of 
 putting themselves in opposition to it by buying 
 sites and writing them do^vn to 2 per cent, of 
 their actual value in order that they might be tied 
 up for ever and ever to be the homes of a certain 
 number of persons with less than a certain income. 
 If some unusually dense individual who had failed 
 after many attempts to pass his examination in 
 economic theory had proposed the policy which has 
 been adopted, he would have been asked two ques- 
 tions : first, " What peculiar sanctity is there about
 
 184 THE ECONOMIC OUTLOOK 
 
 the position occupied in the closing years of the 
 nineteenth century? Why should this be stereo- 
 typed for all time? Why should not the position 
 at the end of the seventeenth century have been 
 maintained? Why should we not endeavour to 
 restore the working classes to their old home in the 
 City, and remove the Bank of England to 
 Tooting? " Secondly, " Whom do you imagine 
 you will benefit by the policy you propose? " 
 
 It is difficult to conceive of any answer to 
 the first question. To the second the reply of the 
 dunce would, of course, be that he thought the 
 policy proposed would benefit the people housed 
 on these expensive sites. This answer would 
 at once be condemned as unsatisfactory. To build 
 houses on land worth £100,000, and let them to 
 the first-comers of respectable antecedents at rents 
 which would pay if the land were worth £2,000, 
 would be a very stupid sort of almsgiving even if 
 these respectable first -comers actually got the 
 difference between the interest on the £100,000 and 
 the £2,000. But no one supposes that they do get 
 this difference, or any considerable part of it. The 
 difference is almost entirely pure loss to the com- 
 munity. The chief immediate effects of the policy 
 are, first, to retain in the centre the men, women, 
 and children who inhabit the dwellings ; secondly, 
 to retain other workers who perform various offices 
 for these inhabitants ; and thirdly, to ensure a 
 supply of labour for factories which would other-
 
 THE UTILITY OF ECONOMIC SCIENCE 185 
 
 wise (to the advantage of every one concerned) 
 be driven into the country by the pressure of the 
 high wages necessary to bring workmen to the 
 centre or to pay their house rent if they lived 
 there. 
 
 So mtich for the utility of economic theory in 
 preventing obstruction of desirable changes. My 
 second claim on its behalf is that it serves to hinder 
 the adoption of specious but illusory projects. 
 This, I think, may be illustrated by examples 
 closely connected with those which we have already 
 considered under the head of obstruction. 
 
 The people who are most anxious to obstruct 
 changes in the channels of trade which are coming 
 about of themselves because they are profitable, 
 are often extremely anxious to promote changes 
 which will not come about of themselves because 
 they are not profitable. For this end one of their 
 most favourite devices at present is a State or 
 municipal subsidy to locomotion or transport 
 between particular points. So we have shipping 
 subsidies, free grants to light railways, the con- 
 struction of unprofitable telegraph-lines by the 
 Post Office, and the advocacy, at any rate, of the 
 construction of unprofitable tramways by munici- 
 palities. The practical man, uninstructed in 
 economic theory, feels uneasy about such projects 
 because he does not see where he is to stop, and 
 he feels obscurely that a universal subsidisation 
 would mean ruin. But he does not see why he
 
 186 THE ECONOMIC OUTLOOK 
 
 should not go a little way, and he goes sufficiently 
 far to involve a loss quite worth considering. 
 A knowledge of economic theory would come to 
 his assistance by showing him that, as a rule, the 
 most profitable enterprises are those which it is 
 most desirable to undertake first, and that the 
 subsidisation of the less profitable does not create 
 new enterprises, but merely changes the order from 
 the more desirable to the less desirable. I suppose 
 that if in 1830 Parliament had offered a sufficient 
 subsidy a railway might have been at once made 
 and worked from Fort William to Fort Augustus, 
 to the great satisfaction of the inhabitants of Fort 
 Augustus and the intermediate places. But it is 
 obvious that it was more desirable, in the interests 
 of the whole community, that the railway from Fort 
 William to Fort Augustus should wait for seventy 
 years, and that the railway from Manchester to 
 Liverpool, and many others, should be made first. 
 Then, too, we find people who are not quite 
 so stupid as to think the working classes should 
 always remain in the places where they were at 
 the end of the nineteenth century, alleging that the 
 way to cure overcrowding is for local authorities 
 to enter the building trade in a general way, and 
 build houses inside or outside their districts, 
 wherever it seems most convenient. To the mind 
 uninstructed in economic theory it seems obvious 
 that the larger amount of housing there is the less 
 overcrowding there will be, and that the more
 
 THE UTILITY OF ECONOMIC SCIENCE 187 
 
 housing local authorities provide the more housing 
 there will be. Economic theory, with its explana- 
 tion of the general working of the organisation of 
 production, suggests two objections. First, an 
 addition to the housing in any locality will not be 
 effectual in diminishing overcrowding, in so far 
 as it attracts new inhabitants to the spot ; a policy 
 which assumes that the comparative plentifulness of 
 houses is not a factor in the determination of the 
 enormous and perpetual migration of people from 
 place to place which is indicated in the tables of 
 birthplaces and births and deaths in the census, 
 is doomed to failure. Secondly, economic theory 
 suggests the reflection that the mere fact of a 
 local authority building some houses will not cause 
 the whole number to be greater, if for every house 
 built by the local authority one less is built by 
 private enterprise, and that this is very likely to 
 happen. Houses have been built by private enter- 
 prise in the past, and in these houses nearly the 
 whole population is at present housed. I have 
 seen an enthusiast for municipal housing stand in 
 the empty streets of a town late at night, when 
 every soul in the town was evidently housed, and 
 say in a tone of conviction, " Private enterprise 
 has failed." In that town four small houses had 
 been built by municipal enterprise and more than 
 ten thousand by private enterprise, and private 
 enterprise was adding hundreds every year, while 
 the housing committee of the corporation was
 
 188 THE ECONOMIC OUTLOOK 
 
 meeting once a year to re-elect its chairman. Is 
 it likely that private enterprise will build as much 
 when it is competed with or supplemented by — 
 the term does not matter — municipal enterprise? 
 Why should it? If the municipality turned baker, 
 would the private bakers continue to bake as much 
 bread? Is not the attempt to stop overcrowding 
 by inducing local authorities to build houses 
 exactly the same thing, and just as absurd as it 
 would be to attempt to cure under-feeding by open- 
 ing municipal butchers' and bakers' shops? 
 
 In the long run, I admit, experience teaches. 
 Protection has fallen once in this country, and I 
 have little doubt that it will fall again if it becomes 
 considerable.! The policy of obstructing the 
 removal of dwellings from the centre of a great 
 city already excites opposition in the London 
 County Council, though unanimity still reigns in 
 those last homes of extinct superstitions, the Houses 
 of Parliament. Chancellors of the Exchequer and 
 finance committees may be trusted to offer a stout 
 resistance, on what they call financial grounds, to 
 any really great development of the system of 
 subsidies. There is hope even that the municipal 
 building policy may be checked by the laborious 
 inquiries which show by statistics what every one 
 knows, that the poor are ill-fed and ill-clothed as 
 well as ill-housed, and therefore lead people to 
 
 ' When this address was delivered the grain duty imposed 
 during the South African War was in force, and its early 
 removal was scarcely expected.
 
 THE UTILITY OF ECONOMIC SCIENCE 189 
 
 consider how the poor may be made more able to 
 pay for houses, among other things, instead of 
 simply how houses may be built in the absence 
 of an effective demand for them. But I claim 
 that, in matters such as these, a more widespread 
 appreciation of economic theory, and the quickened 
 intelligence which that would produce, would 
 save us much painful experience, many costly 
 experiments, and an enormous mass of tedious 
 investigation. 
 
 Lastly, I claim that the teaching and study 
 of economic theory has great practical utility in 
 promoting peace and goodwill between classes and 
 nations. 
 
 Between classes within the same nation the 
 peacemaking influence of economic theory lies 
 chiefly in the fact that it tends to get rid of that 
 stupid cry for " rights " and " justice " which 
 causes and exacerbates industrial and commercial 
 quarrels. When demand for some commodity falls, 
 or supply from some new quarter arises, and profits 
 and wages shrink, the workers cry out that they are 
 being unjustly treated, because they have the un- 
 founded belief that reward is or ought to be pro- 
 portional to moral merit, and they are not conscious 
 of any diminution of their moral merit. They 
 demand a living wage, or a minimum wage and 
 employment for all who happen to have been 
 hitherto employed in the trade, rend the air with 
 complaints, and get subscriptions from a com- 
 passionate but ill-informed public. We cannot,
 
 190 THE ECONOMIC OUTLOOK 
 
 of course, expect people who suffer by them to 
 regard even the most beneficial operations of the 
 economic organisation with enthusiasm or even 
 satisfaction. It would be absurd to do so. But 
 all the same, it is true that a wider apprehension 
 of the fact that it is only by raising and lowering 
 the advantages offered by different employments 
 that production is at present regulated so as to 
 meet demand would not only diminish the dissatis- 
 faction, but also, which is more important, diminish 
 the actual suffering by causing transitions to be 
 less obstinately resisted. The present fashion of 
 deploring rapid changes of trade and dwelling- 
 place is a most unfortunate one ; the ordinary 
 forms of labour do not, as a matter of fact, require 
 such specialised ability that there should be much 
 difficulty in changing from one to another ; and 
 surely it is much better for a man to work at 
 several different things at different places in the 
 course of his life than to stick for ever in the same 
 place, surrounded by the same objects, going 
 through the same monotonous round of duties. 
 Anything which will weaken the present obstructive 
 sentiment and lead people to regard the necessity 
 of a change of employment or residence as a 
 temporary inconvenience rather than a cruel 
 injustice is to be warmly welcomed. 
 
 It is not, however, only the poor and the in- 
 dustrious who would be taught by a greater know- 
 ledge of economic theory not to kick against very
 
 THE UTILITY OF ECONOMIC SCIENCE 191 
 
 necessary pricks. The rich, both industrious and 
 idle, would be taught to be far more tolerant 
 than they are of attempts to diminish inequality of 
 wealth by reducing the wealth of the rich as well 
 as mcreasing that of the poor. The economist 
 may be a little annoyed with the workman who 
 insists that he ought to have thirty shillings a week 
 for producing something worth fifteen shillings, or 
 five shillings, or nothing at all, but he can only 
 have hearty contempt for the millionaire Avho holds 
 up his hands in holy horror and murmurs " con- 
 fiscation," " robbery," " eighth commandment," 
 when it is proposed to relieve him of a fraction of 
 a farthing in the pound in order to bring up 
 destitute orphans to an occupation in which they 
 may earn twenty-five shillings a week. The 
 sanguine teacher of economic theory has hopes of 
 making even such a man see that he has his wealth, 
 not because Moses brought it down from Sinai, 
 or because of his own super-eminent virtue, but 
 simply because it happens to be convenient, at 
 any rate for the present, for society to allow him 
 to hold it, whether he obtained it by inheritance or 
 otherwise — in other words, that private property 
 exists for the sake of production, not for the sake of 
 the particular kind of distribution which it causes. 
 Some, I know, say that the rich are so few that it 
 does not much matter whether they acquiesce in the 
 measure meted to them or not ; but that is not 
 the teaching of history ; and I think you will
 
 192 THE ECONOMIC OUTLOOK 
 
 agree with me that for the progress of the whole 
 community it is, in practice, quite as important to 
 secure the acquiescence of the rich as of the poor. 
 
 In regard to international relations, the first 
 business of the teacher of economic theory is to 
 tear to pieces and trample upon the misleading 
 military metaphors which have been applied by 
 sciolists to the peaceful exchange of commodities. 
 We hear much, for example, in these days of 
 " England's commercial supremacy," and of other 
 nations " challenging " it, and how it is our duty 
 to " repel the attack," and so on. The economist 
 asks " What is commercial supremacy," and there 
 is no answer. No one knows what it means, 
 least of all those who talk most about it. Is it 
 selling goods dear? Is it selling them cheap? 
 Is it selling a large quantity of goods in pro- 
 portion to the area of the country ? or in proportion 
 to its population ? or absolutely, without any refer- 
 ence to its area or population ? It seems to be 
 a wonderful muddle of all these various and often 
 contradictory ideas rolled into one. Yet what a 
 pile of international jealousy and ill-feeling rests 
 on that and equally meaningless phrases I The 
 teacher of economic theory analyses or attempts 
 to analyse these phrases, and they disappear, and 
 with them go the jealousies suggested by them. 
 
 When misleading metaphors and fallacies are 
 dismissed, we are left with the facts that foreign 
 trade— the trade of an area under one govern-
 
 THE UTILITY OF ECONOMIC SCIENCE 193 
 
 ment with areas under other governments — is 
 merely an incident of the division of labour, and 
 that its magnitude and increase are no measures of 
 the wealth and prosperity of the country, but 
 merely of the extent to which the country finds it 
 convenient to exchange commodities of its own 
 growth or manufacture for commodities produced 
 elsewhere. If the city of York were made inde- 
 pendent, and registered its imports and exports, 
 they would come out far larger per head of popula- 
 tion than those of the United Kingdom or any 
 other great country. Should we be justified in 
 concluding York to be far richer than any great 
 country? If means were discovered of doubling 
 the present produce of arable land with no increase 
 of labour, much less corn would be imported into 
 Great Britain and less of other goods would be 
 exported to pay for it ; the foreign trade of the 
 country would consequently be diminished, but 
 would the people be any less prosperous ? What 
 jealousies, heart-burnings, and unfounded terrors 
 leading to hatred would be extinguished if only 
 these elementary facts were generally understood I 
 To any one who has once grasped the main 
 drift of economic theory, it will be plain that the 
 economic ideal is not for the nation any more than 
 for the family that it should buy and sell the 
 largest possible quantity of goods. The true 
 statesman desires for his countrymen, just as the 
 sensible parent desires for his children, that they 
 
 13
 
 194 THE ECONOMIC OUTLOOK 
 
 should do the best paid work of the world. This 
 ideal is not to be obtained by wars of tariffs, still 
 less by that much greater abomination, real war, 
 with all its degrading accompaniments, but by 
 health, strength, and skill, honesty, energy, and 
 intelligence.
 
 VI 
 
 COLONIAL PREFERENCE ' 
 
 The first question in the notorious " fiscal in- 
 quiry " ought to be, " What is the use of foreign 
 trade ? " In the course of discussion when this 
 question has not been asked, it is extremely 
 common to find one or even both of the dis- 
 putants assuming that the use of foreign trade is 
 to provide employment for persons who by some 
 inscrutable dispensation of Providence find them- 
 selves engaged in producing commodities which 
 are exported. But every one admits, when the 
 proposition is once clearly stated, that employment, 
 or in other words labour, is not a good in itself, 
 and is only desired and undertaken as an end to 
 the attainment of those necessaries and con- 
 veniences of life which form the real income 
 enjoyed by mankind. There is no difficulty in 
 providing or finding employment: the difficulty 
 is to find employment which shall be as remunera- 
 tive as we are accustomed to expect it to be. The 
 employment of persons in producing exports would 
 
 ' Reprinted from the Independent Revieiv for October, 1903. 
 
 195
 
 196 THE ECONOMIC OUTLOOK 
 
 be practised by; a communistic as well as by an 
 individualistic nation, and in both cases the objects 
 would be the same, namely, the acquirement of 
 goods in exchange for the exports. In ordinary] 
 cases the goods obtained in exchange are the 
 imports, though, of course, they need not come 
 immediately, inasmuch as exports are often made 
 by way of loan, and are paid for by an annual 
 percentage of interest. The object of foreign 
 trade is, then, to obtain imports, but this scarcely 
 answers the question, " What is the use of foreign 
 trade ? " since the questioner will probably go 
 on to inquire, *' What is the use of obtaining 
 imports ? Why not produce the required goods 
 at home ? " The answer to this question is the 
 same as the answer to the question why any in- 
 dividual does not produce everything for himself. 
 Some things he could not get at all by his direct 
 exertions, and some things he could not get so 
 easily by his direct exertions as he can by the 
 indirect process of making something which he 
 himself does not want but which other people do 
 want. The question is slightly complicated by 
 the fact that the goods which it is desirable to 
 import belong to three classes. First, there are 
 goods which it is absolutely impossible to produce 
 at home. Secondly, there are goods which can 
 be produced at home, but of which the whole 
 required supply can be obtained more easily in 
 exchange for goods exported. Thirdly, there is
 
 COLONIAL PREFERENCE 197 
 
 the class of goods of which a part only of the 
 whole supply can be obtained more easily in 
 exchange for goods exported than by direct home 
 production. In the United Kingdom diamonds are 
 an example of the first class, tea and wine of the 
 second, wheat and iron ore of the third. It is 
 difficult to devise a succinct form of words which 
 will cover all three classes satisfactorily, but 
 perhaps we may be content to say that we desire 
 imports because we can make our real income — the 
 necessaries and conveniences of life which we 
 enjoy, together with the additions to our capital — 
 greater by obtaining some things from abroad by 
 way of exchange than if we confined ourselves to 
 home produce. 
 
 Foreign trade should be just great enough to 
 maxim.ise income in this way, and there is no 
 object in making it greater. Hence indiscriminate 
 exultation and indiscriminate lamentation over 
 every increase of foreign trade are equally to be 
 condemned. It may even happen that a decrease 
 of foreign trade is the result of a beneficial in- 
 vention which diminishes the difficulty of home 
 production and thereby makes the direct method of 
 obtaining the goods the most advantageous. More- 
 over, it must be remembered that considerable 
 fluctuations in the magnitude of imports and 
 exports are very often due to changes in the 
 direction of the investment or repayment of capital. 
 When a country borrows freely its imports rise:
 
 198 THE ECONOMIC OUTLOOK 
 
 when it repays loans or invests capital abroad its 
 exports rise. Hence a diminution of exports, for 
 example, may be either on the one hand the result 
 of diminished ability to pay off old debts or to 
 make new investments abroad or, on the other 
 hand, the result of the discovery of new profitable 
 openings for capital at home. Probably both 
 diminished ability to make investments abroad in 
 consequence of the vast expenditure of the State 
 in the last few years and the discovery of new 
 openings for capital at home have a good deal 
 more to do with keeping down British exports 
 than most of the reasons which are commonly 
 alleged. 
 
 So far free traders and also protectionists, if 
 gifted with ordinary intelligence, will go together; 
 but at this point they separate. The free trader 
 believes that it is best to let the self-interest of 
 individuals decide what goods and how much of 
 them shall be imported, while the protectionist 
 believes that national (but not local) governments 
 should prohibit or discourage by the imposition of 
 fines or taxes the importation of particular com- 
 modities which he thinks ought to be produced 
 entirely or more largely at home although they 
 can be obtained more easily by purchase from 
 abroad. 
 
 For, believing that the action of self-interest 
 should be left untrammelled in this particular case, 
 free traders have recently been derided as fetish-
 
 COLONIAL PREFERENCE 199 
 
 worshippers and adherents of antiquated shib- 
 boleths. They are told that laisser-jaire is an 
 effete doctrine which may have done a useful work 
 in the earlier part of the nineteenth century, but 
 which has long ago been abandoned as inapplicable 
 to modern conditions. Free traders who have 
 socialist leanings are taunted with inconsistency in 
 supporting laisser-jaire in relation to foreign trade 
 while they are in favour of State action in 
 innumerable other directions. 
 
 It is, of course, often open to the free traders 
 to reply with a tu quo que. The person who sneers 
 at their inconsistency in supporting laisser-faire 
 in foreign trade is often himself a vigorous, not 
 to say bigoted, adherent of laisser-faire in every 
 other direction. So little is consistency expected 
 here, that I have actually heard one of the most 
 intelligent and well-informed protectionists of my 
 acquaintance hazard in perfect good faith the 
 suggestion that the Times' contributor, " An 
 Economist," was identical with the contributor of 
 the articles on Municipal Socialism which appeared 
 some time before in that journal. The sugges- 
 tion was, of course, erroneous, but it is none the 
 less instructive. 
 
 However, the tu quo que does not take us very 
 far, and it is more to the point to observe that 
 there need as a matter of fact be no inconsistency 
 in the free trader's position, even if he happens 
 to believe in government action in a good many
 
 200 THE ECONOMIC OUTLOOK 
 
 other matters. The truth is that no intelligent 
 person, socialist or other, really doubts that as 
 things are, non-interference with the action of 
 self-interest in the regulation of exchange and 
 division of labour is the general rule which is to 
 be observed in the absence of good reasons to the 
 contrary. The socialist may doubtless believe 
 (whether rightly or wi^pngly it is no part of our 
 present business to inquire) that an entire re- 
 organisation of property and government could 
 yield better results than the present arrangements, 
 but that is no reason whatever for his approving 
 indiscriminately every measure which interferes 
 with a free play of self-interest. Every socialist 
 knows that there have been innumerable evil 
 interferences in the past, and that he may expect 
 many more in the future. The fact that a man 
 may believe that sound reasons can be given in 
 favour of factory legislation or municipal enter- 
 prise does not in any way debar him from believ- 
 ing that good reasons have not been given in 
 favour of interference with foreign trade ; and 
 this is the true free trade position. The free 
 trader may suspect that no good reasons can be 
 given in favour of interference with foreign trade, 
 but all that he need attempt to prove is that such 
 reasons have not actually been given. 
 
 So far as the past is concerned, history is 
 not very encouraging to the seeker after sound 
 reasons in favour of government interference with
 
 COLONIAL PREFERENCE 201 
 
 foreign trade. There was a time when such inter- 
 ference was advocated on the ground that without 
 it a country could not keep or obtain an adequate 
 stock of the precious metals. At first prohibition 
 of the export of gold and silver was resorted to, 
 but it was afterwards seen in countries which had 
 no mines that this expedient was insufficient, and 
 resort was had to the plan of checking imports and 
 encouraging exports, in the hope that this would 
 lead to the receipt of a balance in gold and silver. 
 Both plans are now admitted to have been absurd, 
 and every one knows that no country with a sound 
 currency will be in want of metal for as much 
 coin as it requires. The regulation of foreign 
 commerce with a view to the securing of sufficient 
 currency having been abandoned, the various 
 nations entered on a system of protecting various 
 industries on the most different and often con- 
 tradictory grounds. One country would protect 
 manufactures because they were more profitable 
 than agriculture to the producers ; other countries, 
 or the same country a generation later, would 
 protect agriculture on the ground that it was more 
 productive than other industries and yielded a 
 rent or surplus. In general it is perfectly clear 
 that protection was given to whatever interests 
 were threatened by importation, and had sufficient 
 influence to secure the ear of the corrupt and 
 inefficient Governments of the time. The attempt 
 of certain members of the last generation of the
 
 202 THE ECONOMIC OUTLOOK 
 
 historical school to represent this mass of absurd 
 and conflicting enactments as the cause of 
 European and American progress is one of 
 the wildest and most desperate undertakings 
 which it ever entered into the mind of man to, 
 conceive. 
 
 The new protectionism, however, we are told, 
 is of a much superior brand — so superior, in fact, 
 that it should really be rather regarded as an 
 extension of freedom of trade. W^e are to put a 
 moderate, but hitherto unspecified, duty upon food 
 imported from foreign countries, but not upon 
 food imported from our colonies and possessions : 
 in exchange for this preference in their favour 
 the colonies and possessions will, it is said, give a 
 preference in their customs tariffs to imports from 
 the United Kingdom (and presumably from each 
 other). The curious result will follow that the 
 agriculture of the Empire will be protected against 
 foreign competition, and that the manufactures of 
 each protectionist colony will be protected against 
 foreign and, in a somewhat less degree, British 
 competition. The question is whether this state 
 of things would be an improvement on the present, 
 first, in the United Kingdom, second, in the 
 colonies, and third, in both taken together. 
 
 There is no denying that it is sometimes advan- 
 tageous for one area, even if it has been pursuing 
 a free trade policy, to surrender its fiscal inde- 
 pendence and become absolutely united for customs
 
 COLONIAL PREFERENCE 203 
 
 purposes with a protectionist neighbour. No one 
 doubts, for example, that almost any West Indian 
 island would gain by being admitted inside the 
 customs barrier of the United States. Absolutely 
 unhampered trade with the immense neighbouring 
 market thus provided would more than compensate 
 for the additional hindrances to trade with distant 
 Europe. On the other hand, it certainly would 
 not be well for a free trade United Kingdom to 
 enter into a protectionist union with, say. New 
 Zealand alone. The magnitude and nearness of 
 the market opened up and the magnitude and 
 nearness of the market cut off must obviously be 
 considered in every case. 
 
 Hence, in considering whether it would be well 
 for the United Kingdom to submit to additional 
 hindrances to trade with foreign countries in order 
 to secure the removal of hindrances to trade with 
 the colonies it is necessary to carefully weigh the 
 probable gain against the probable loss. When 
 this is done, it seems tolerably clear that not even 
 absolute freedom of importation from the United 
 Kingdom into the present protectionist colonies 
 would compensate the United Kingdom for the 
 loss involved in a moderate measure of protection 
 to agriculture as between herself and foreign 
 countries. There is little reason for supposing 
 that the entire removal of the colonial duties on 
 imports from the United Kingdom would lead to 
 the colonial market offering much higher prices
 
 204 THE ECONOMIC OUTLOOK 
 
 than at present for these hnports. In many cases 
 the duties are levied in commodities which are 
 not produced at all in the colonies in question, or 
 on commodities which are only produced there in 
 such small quantities that their protective effect 
 is practically unimportant. Consequently their 
 abolition would not have, at any rate in any 
 important degree, the good effect which follows 
 the abolition of a very strongly protective duty, 
 the effect of setting free a large amount of the 
 labour power of the community to be employed 
 in a more productive direction. Instead of this 
 it would only have the effect of the removal of 
 an ordinary revenue duty, the effect of freeing 
 a certain portion of the consumers' money-in- 
 comes, which, however, in this case would 
 necessarily be promptly seized by the colonial 
 governments by means of some other kind of 
 taxation, so that the consumers would have little 
 or nothing more to spend than before. Of course, 
 if the imposition of duties on foreign agricultural 
 produce imported into the United Kingdom were 
 effective in causing a great increase in the agri- 
 culture of the colonies, there would doubtless 
 be a great increase in the quantity of im- 
 ports from the United Kingdom into the colonies. 
 But this increase of quantity would not involve 
 any improvement in the conditions of the trade 
 of the United Kingdom, as it would simply have 
 been transferred from foreign countries. If we
 
 COLONIAL PREFERENCE 205 
 
 cease to take food from Argentina we shall cease 
 to export goods to Argentina to pay for it. 
 
 It would appear, therefore, that there is very 
 little probability of any considerable advantage 
 to the United Kingdom arising from the entire 
 disappearance of colonial duties on British goods. 
 It is not, however, even suggested that anything 
 like so much as this is likely to be obtained. The 
 most that is hoped for is a reduction of existing 
 duties by 25 or ;^2 P^i" cent., and there is good 
 reason to suppose that not even that could be 
 obtained, but that the preference would be given 
 simply by raising the existing tariffs against goods 
 from foreign countries, and leaving the tariffs 
 against goods from the United Kingdom just where 
 they are. The advantage to the United Kingdom 
 would thus be infinitesimal. 
 
 This is so obvious that no serious attempt has 
 been made to prove that the United Kingdom would 
 gain any considerable advantage from the proposed 
 colonial preference. Mr. Chamberlain can only 
 have been playing with the question when he 
 suggested that £10 a head exported to 10,000,000 
 people was a great deal more important than " a 
 few shillings a head " to 300,000,000, since after 
 all 6s. 8d. a head to 300,000,000 persons is equal 
 to £10 a head to 10,000,000 persons, and, one 
 would imagine, more capable of increase. The 
 calculation would thus not have been very con- 
 vincing even if it had been correct, instead of
 
 206 THE ECONOMIC OUTLOOK 
 
 involving, as it did, the somewhat important error 
 of including exports to India and omitting the 
 population of India. 
 
 Instead of insisting on the advantage of the pro- 
 jected colonial preference, the advocates of the 
 scheme prefer to attempt to prove that the duties 
 on foreign imports of food into the United King- 
 dom could do little or no harm, and might even be 
 directly, beneficial. 
 
 We must, of course, admit that duties on food 
 imports from foreign countries only would not be 
 as harmful to the United Kingdom as duties on 
 food imports from the colonies as well as from 
 foreign countries. The loss of the productiveness 
 of industry caused by growing an additional 
 quantity of food within the Empire as a whole 
 would not be nearly so great as the loss caused by 
 growing the same quantity in the United Kingdom 
 alone. But that there would be a loss, varying 
 with the magnitude of the additional quantity of 
 food raised, is undeniable. The very fact that a 
 duty is necessary in order to force the increased 
 production shows that a higher price must be 
 offered for the food, and this higher price simply 
 registers the increased difficulty of production. It 
 is said that this increased difficulty would be only 
 temporary, that when once a start was made the 
 colonies alone would supply the required quantity 
 of agricultural produce as easily and consequently 
 as cheaply as they and foreign countries together
 
 COLONIAL PREFERENCE 207 
 
 supply it at present. This, however, it should 
 be noticed, is not quite the question. The true 
 question is whether the colonies alone could supply 
 the required quantity in the future as cheaply as 
 they and foreign countries together would supply it 
 in the absence of such a duty. The answer to this 
 question is a decided negative. The colonies them- 
 selves do not believe in the possibility suggested, 
 or some of them would long ago have attempted to 
 bring it about by bounties on agricultural exports. 
 To reconcile us to the discomfort involved in 
 quarrelling with our bread and butter because it 
 comes from foreign countries, the Times " Econo- 
 mist "and others have alleged that whether we like 
 it or not we shall soon have to be content with 
 supplies from the colonies, because the territory 
 of the United States is filling up and will soon cease 
 to export food in consequence of the increasing 
 requirements of its own population. It seems to 
 be forgotten that the United States is by no means 
 the only foreign country which either supplies or is 
 capable of supplying the British market ; but even 
 if it were so, and even if the anticipations of its 
 soon ceasing to export food were correct instead 
 of absurd, an intelligent anticipation of future 
 events would scarcely be displayed by refusing its 
 wheat immediately. Such an anticipation of future 
 events, far from being intelligent, would resemble 
 that of the man who committed suicide at fifty 
 because his doctor told him he would not live
 
 208 THE ECONOMIC OUTLOOK 
 
 beyond sixty. When the United States does 
 become fully occupied and requires all its own 
 agricultural produce, this will not happen all at 
 once, or at four months' notice like Mr, Chamber- 
 lain's campaign, but will come to pass gradually, 
 giving plenty of time for the introduction of new 
 fields of supply. 
 
 So far, then, as the United Kingdom alone is 
 concerned, the scheme offers an infinitesimal 
 advantage far more than counterbalanced by a 
 direct substantial disadvantage. There would, of 
 course, be, in addition to this direct disadvantage, 
 a further indirect disadvantage in the still greater 
 obstacles which would be raised by foreign 
 countries to trade with the United Kingdom' in 
 consequence of her abandonment of her free 
 trade policy, which at present secures her 
 unusually favpurable terms from them. 
 
 What, we mquire next, does the scheme offer to 
 the colonies? This would depend a good deal 
 upon the way in which the colonial preference to 
 imports from the United Kingdom were given. If 
 it were given by way of a real reduction of duties, 
 the colonies would certainly benefit by this relaxa- 
 tion of protection where there is any competing 
 colonial industry actually protected. In such cases 
 colonial industry would be released in favour of 
 more productive employment. But where no 
 colonial industry is actually protected, the diminu- 
 tion of duties, as has already been pointed out,
 
 COLONIAL PREFERENCE 209 
 
 would merely deprive the colonial Government of 
 a source of revenue which would have to be 
 replaced by another and very probably less con- 
 venient one. As it is not in the least probable 
 that any really considerable reduction of duties 
 will be made where the protection afforded is 
 actually important, it would appear that the advan- 
 tage to be gained by the colonies in this respect is 
 extremely trifling. They would undoubtedly for the 
 most part gain considerably by the preference given 
 to their agricultural produce by the United King- 
 dom. But they could not possibly gain as much 
 as the United Kingdom would lose, since the extra 
 cost of the whole supply, which would be clear 
 loss to the United Kingdom, would not be clear 
 gain to them, but would for the most part con- 
 sist of additional labour in production and 
 transport. 
 
 There seems to be, therefore, not the least 
 doubt that the scheme suggested could not fail 
 to be disadvantageous to the Empire as a 
 whole, when considered purely from an economical 
 point of view. The interference with the produc- 
 tive arrangements involved in the protection to 
 agriculture would be far more damaging than the 
 advantage gained by the removal of hindrances 
 created by colonial tariffs. 
 
 But, it will be asked, would the admittedly un- 
 satisfactory economic result conduce to the unity 
 and military safety of the Empire? If so, in the 
 
 U
 
 210 THE ECONOMIC OUTLOOK 
 
 opinion of many people a considerable economic 
 loss might be endured without complaint. There 
 is no reason to suppose that the scheme would 
 conduce to the unity or safety of the Empire. It 
 is childish to suppose that a feeling of solidarity 
 can be produced by the sale of corn. Does the 
 Western American farmer love the British con- 
 sumer of his wheat? Does the British consumer 
 include the Western American farmer in his 
 thoughts when he says grace or prays for his daily 
 bread? The history of the world bears witness 
 that the closest trade relations are no guarantee 
 of mutual affection. What towns are in closer 
 trade relations than Liverpool and Manchester? 
 Are they particularly remarkable for their friend- 
 ship? It is far more probable that the bargain- 
 ing and haggling over tariffs between the mother 
 country and the colonies would produce irritation 
 and disunity. As for military safety, it is doubt- 
 less true that a self-sufficient Empire is safer pro- 
 vided its parts are contiguous and it can keep out 
 the invader. But that is not the case of the British 
 Empire. Its parts are scattered widely over the 
 globe, and there appears to be every reason to 
 believe that in case of war commerce between the 
 United Kingdom and the colonies could be far 
 more easily interrupted than commerce with neutral 
 nations. Some advocates of the scheme have not 
 scrupled to drag in the horrid supposition of a 
 war with the United States as if it helped their
 
 COLONIAL PREFERENCE 211 
 
 case. The idea that corn from Canada could be 
 depended upon in the event of that appalhng 
 calamity is simply ridiculous to any one who 
 possesses a very moderate acquaintance with the 
 geography of North America. 
 
 What, then, is the advice that should be given 
 to the nation? The best and most urgently 
 required advice seems to me, Do not believe in 
 bogeys. A century and a quarter has elapsed 
 since Adam Smith pointed out that for generations 
 alarmists had never ceased from crying out that 
 England was on the decline and would shortly be 
 ruined. The stream of gloomy vaticinations has 
 continued without interruption ever since, and the 
 people of England have continued to grow in 
 number, wealth, and comfort. Fluctuations in 
 prosperity we must, of course, expect, and we 
 must not be alarmed if a very considerable 
 temporary depression should follow the prosperity 
 of the last few years, which seems to have been 
 almost too great to be regarded as part of the 
 permanent improvement in material welfare which 
 is observed over long periods of time. 
 
 Do not let us believe that the nation is going fast 
 to ruin because a few staple trades decline in 
 importance when compared with industry in 
 general. These staple trades furnish material for 
 satisfying certain elementary wants which do not 
 grow with increasing wealth like the more refined 
 wants. The capacity of the human stomach to
 
 212 THE ECONOMIC OUTLOOK 
 
 consume bread and the capacity of the human back 
 to carry shirts is strictly limited, and we cannot 
 expect unlimited growth in the trades which supply 
 bread and shirts. The tendency of civilisation is 
 to reduce the proportion of persons employed in 
 producing coarse and rudimentary materials and 
 commodities, and to increase the proportion em- 
 ployed in supplying the more delicate wants. 
 Fortunately, it is in these days possible for the 
 proportion and even the absolute numbers of 
 persons employed in a great industry to diminish 
 without the terrible hardships which sometimes 
 accompanied such a change in the past. The 
 Times " Economist," when he talks of a future 
 Armageddon, in which Lancashire cotton manu- 
 facturers will die fighting rather than transfer 
 Lancashire industry to niachine -making, overlooks 
 the fact that the transference has been long quietly 
 taking place, and never more rapidly than at 
 present, when American enterprise has sought a 
 new home on the banks of the Manchester Ship 
 Canal, outside the tariff wall of the United States 
 in free trade England. When he grumbles 
 vaguely over the absolute decline of British agri- 
 culture, and asserts that the old free traders never 
 foresaw it, he forgets that, according to his own 
 account, which is doubtless correct, the agricultural 
 population is better off than before this wonderful 
 '* decline " took place. 
 
 The gratification which every patriot ought to
 
 COLONIAL PREFERENCE 213 
 
 feel at the fact that the comparatively well-paid 
 "miscellaneous "occupations ' are growing rapidly, 
 and the comparatively ill-paid staple trades are 
 increasing slowly, or even diminishing, will not be 
 seriously damped by the Times " Economist's " 
 apparent belief that a City policeman is a poor 
 thing compared with an Essex labourer or a South 
 Staffordshire ironworker — a belief which he sup- 
 ports only by an obscure reference to an economic 
 doctrine which was quite successfully exploded by 
 McCulloch early in the second quarter of last 
 century. Nor should we be unduly depressed when 
 the same writer's admiration for the staple indus- 
 tries induces him to assert that energy and intelli- 
 gence will die out if the production of clothing for 
 live Europeans takes the place of the manufacture 
 of heavily-sized winding sheets for dead Chinamen. 
 These ideas are merely the morbid imaginings of 
 one whose ideal of industry and statesmanship is 
 in the eighteenth century, and who thinks great 
 things might be accomplished by a Committee of 
 the Privy Council on Trade. If we retain our 
 freedom to buy and sell where we choose without 
 being fined for our preference, there is no fear of 
 ill-paid trades taking the place of well-paid trades, 
 and so long as the substitution is in the opposite 
 direction, we must not regret too much the 
 
 • Nor necessarily manual labour occupations. The proportion 
 of manual labour to all labour declines with the progress of 
 civilisation.
 
 214 THE ECONOMIC OUTLOOK 
 
 disappearance of some picturesque hewers of 
 wood and drawers of water. Not only fathers 
 but States also should desire that their children 
 should do the finest and best paid work of the 
 world.
 
 VII 
 
 THE DIVISION OF INCOME* 
 
 The two greatest ends of economic inquiry seem 
 to me to be the furnishing of general answers to 
 the two questions, first, why whole communities 
 are rich or poor, and secondly, why inside each 
 community some individuals and families are 
 above and others below the average in wealth. 
 Assuming that the communities are isolated, or, at 
 any rate, that they neither receive nor pay tribute, 
 the first question is answered by a theory of pro- 
 duction and the second by a theory of distribution. 
 The riches or poverty of the whole community 
 depend, as Adam Smith declared at the very outset 
 of his Inquiry_, upon the annual produce per head 
 of population. The comparative wealth of indi- 
 viduals and families within any given community 
 depends upon the proportions in which the total 
 produce or income (the expressions are synony- 
 mous in a self-contained community) is distributed 
 or divided among them. 
 
 I do not think the theory of production has by 
 
 ' Reprinted from the Quarterly journal of Economics for 
 May, 1905. 
 
 316
 
 216 THE ECONOMIC OUTLOOK 
 
 any means reached perfection. There is a want 
 of unity and simplicity in current expositions of 
 it which is largely responsible for its entire failure 
 to penetrate the public mind, and consequently for 
 the widespread prevalence of those ridiculous 
 delusions which disfigure the writings of journalists 
 and the speeches of politicians all the world over. 
 But the theory of distribution, as now generally 
 taught, has still more fundamental defects ; and it 
 is to these that I propose to draw attention, in the 
 hope that others may be more successful in 
 amending them than I have hitherto been. 
 
 To the ordinary, person who has not been 
 infected by the study of economic textbooks, the 
 term " the distribution of wealth " has a very 
 definite, intelligible, and useful meaning. 
 " Wealth " means income, and ** distribution " 
 means division. An " equal distribution " means 
 an equal division: a "change in distribution" 
 means a change in the proportions in which the 
 total is divided. The total income of the United 
 Kingdom is valued at £1,750,000,000: it is dis- 
 tributed between the 43,000,000 inhabitants in 
 certain proportions. It is also distributed between 
 the two different categories, " property," or land 
 and capital, on the one hand, and *' labour," on the 
 other, a certain proportion coming in to its 
 receivers because they own property, and another 
 proportion to its receivers because they perform 
 labour. Neither as to the distribution between 
 
 i
 
 THE DIVISION OF INCOME 217 
 
 individuals nor as to that between categories are 
 the available statistics at all complete or accurate, 
 but they arc sufficient for purposes of illustration. 
 We know that incomes vary from something over 
 one five-thousandth of the whole down to nothing 
 at all. We know that the whole of the property 
 is valued at £15,000,000,000, and that the 
 average rate of interest is somewhere not very 
 far removed from 3^ per cent., which will make 
 the share of the total income derived from 
 property about £525,000,000, or 30 per cent. 
 of the whole, leaving 70 per cent, for labour. 
 
 There is, of course, no reason to suppose that 
 the distribution is the same at all times or in the 
 different countries at the same time. It has doubt- 
 less been in the past either more or less unequal 
 than at present, and its inequality has doubtless 
 been of a somewhat different character. It is 
 doubtless not the same in the United States and 
 in Switzerland. Has theoretic economics nothing 
 to say on the subject, no generalisations or " laws " 
 to lay down ? Can it not tell us in a general way 
 what are the causes of greater or less inequality, 
 what are the causes of the existence of a larger 
 or smaller middle (near the average) class, what 
 are the causes of the existence of a small very rich 
 class or of a very large extremely poor class ? 
 Can it say nothing as to the reasons why property 
 gets 30 per cent, of the income now and, say, 
 only got 25 per cent, in the reign of Elizabeth?
 
 218 THE ECONOMIC OUTLOOK 
 
 Economists sometimes vaguely wonder why 
 economic theory is so unpopular that books upon it 
 have very small sale, and in the greatest centres 
 of population lectures on it by the best professors 
 will attract at the most an audience of forty or 
 fifty, and usually much fewer than that. Is there 
 anything in this to exercise surprise, if we reflect 
 for a moment on the inadequacy of the answer 
 furnished by the theory of distribution, as at 
 present taught, to the questions in which the 
 ordinary person is interested ? 
 
 A young man passing through a fashionable 
 street or square in one of our great modern 
 capitals at the proper time of day may see a 
 woman, feeble in body and mind frotn never having 
 done a stroke of honest work in her life, being 
 drawn along in a handsome carriage by a pair of 
 magnificent horses, with two noble-looking men 
 on the box. The carriage stops at a door, one of 
 the men gets down, the door opens and displays 
 two flunkeys in gorgeous array, they receive a 
 small piece of pasteboard, and an important social 
 function is over. The observer proceeds on his 
 way, and soon passes down a mean street inhabited 
 by a hundred families whose united possessions 
 would not equal in value the carriage and horses, 
 and whose average income might perhaps be 
 equal to a third or a fourth of the cost of clothing 
 the lady for a single ball. Struck by the contrast, 
 he begins to wonder why it is so, and whether it
 
 THE DIVISION OF INCOME 219 
 
 must always be so, and whether it may not be 
 necessary to take steps towards altering it. He 
 has probably heard that some people say such 
 contrasts are due to the existence of private pro- 
 perty in land or in the instruments of production. 
 He has heard vaguely, too, that economics deals 
 with this kind of topic, and he therefore resolves 
 to attend some lectures given by a professor of 
 economics. 
 
 The professor tells him that the produce of the 
 community is distributed into three or four great 
 shares — rent, interest, wages, and perhaps profits. 
 Rent, he will teach, is determined by the quality 
 and situation of the land, and this he will be sure 
 to illustrate by a diagram on his blackboard. 
 Putting together a number of rectangles of equal 
 breadth, but gradually diminishing height, he will 
 tell his class that each rectangle represents the 
 return to an equal unit or ^' dose " (the class 
 laughs politely) of capital and labour, the taller 
 rectangles being the return on the earlier, and the 
 smaller the return on the later units of capital. 
 Taking his chalk in his hand, he then draws a 
 horizontal line from the top of the shortest rect- 
 angle to the outside of the tallest, and observes 
 triumphantly, *' The amount above that line con- 
 stitutes rent." Of course there is no amount there, 
 nothing but a certain space on the blackboard. 
 " At least," he explains, recollecting himself, " it 
 represents rent." If a student ventures to ask,
 
 220 THE ECONOMIC OUTLOOK 
 
 "The rent of what?" he will explain: "Not 
 the rent of all the different acres of land, but the 
 return to all the units of labour and capital. On 
 some acres it will be found possible to apply a 
 great many units yielding a return higher than that 
 of the marginal unit, on others few, and the rents 
 will differ accordingly. The rent of any particular 
 acre will be the surplus return from all the doses 
 which can be applied to that particular acre. How 
 many doses it will be possible to apply to all the 
 land, and, therefore, what the rent of the whole will 
 be, will depend upon a number of different cir- 
 cumstances." Asked what a " dose of labour and 
 capital " means, he will probably explain that it 
 means a definite amount of expenditure in wages 
 of labour and interest of capital. He may possibly 
 conclude his " theory of rent " with a few rather 
 hesitating words as to the effect of " progress " 
 on the total rent. The impression left on the 
 intelligent student's mind is that he has been 
 treated to an interesting intellectual exercise, but 
 that he does not know any more than he did before 
 about distribution. He knew before he went that 
 people who possess land will not usually let it 
 for less than it is worth, and that people who rent 
 land will not usually pay more ; and he knew, too, 
 that some land is worth a great deal and some 
 little or nothing. He has not now been told at 
 all clearly what makes some land worth more 
 than other land, and, what is more important, that
 
 THE DIVISION OF INCOME 221 
 
 was not what he came to find out. What he came 
 to find out was whether rent is becoming a larger 
 and ever larger proportion of the whole income 
 of the community, and why some people have so 
 much rent and others none at all. He very prob- 
 ably even wanted to know whether he ought to 
 vote for candidates who promised to abolish rent 
 altogether. He would be much less inclined to 
 do so if the professor had given him reason to 
 believe that rent is a decreasing proportion of the 
 whole income, and is likely to be more equally 
 distributed in the future. He wanted bread, and 
 the professor has given him a stone. Button- 
 holing the professor after the lecture, he places his 
 difficulties before him. The professor has some 
 trouble before he can understand, and then he 
 says: "Ah I I see. But those are historical and 
 statistical questions with which I have nothing 
 to do." 
 
 Proceeding in his next lecture to the problem of 
 interest, the professor talks of the differences 
 in the rates of interest obtainable in different 
 kinds of businesses, and then explains the causes 
 of the general highness or lowness of the rate. 
 If an admirer of every new thing, he will give 
 his class the impression that the rate is determined 
 by the comparative estimation in which people 
 hold present and future goods. If more careful, 
 he will show them how at any given time an 
 almost infinite number of means of utilising capital
 
 222 THE ECONOMIC OUTLOOK 
 
 are known, but that these vary in productiveness ; 
 that the capital is never large enough to occupy 
 them all, so that the most productive known, or 
 generally known, are the only ones occupied, and 
 the rate of interest is determined by the return 
 of the marginal one — that is to say, the lowest- 
 yielding one which must be occupied in order 
 to find employment for the whole mass of the 
 capital. Then he will show how increase of 
 population tends to raise the returns, and how 
 increase of capital tends to necessitate the pushing 
 of the marginal investment lower down. He will 
 endeavour to explain how some inventions raise 
 the rate by disclosing new and highly productive 
 means of utilising considerable amounts of capital, 
 thus raising the margin, while other inventions 
 reduce the rate by disclosing easy direct ways of 
 doing something hitherto accomplished in difficult 
 roundabout ways, thus setting free a portion of 
 the capital and leading to a lowering of the 
 margin. All this is interesting and more instruc- 
 tive than the " theory of rent," but again our 
 inquirer is dissatisfied. He does not much care 
 about the trifling differences which may exist 
 between the average interest obtainable in different 
 businesses or investments ; he does not even care 
 very much about the rate of interest in general. 
 He may be acute enough to perceive that, though 
 a high rate of interest looks unfavourable to the 
 worker at first sight, it has, at any rate, the advant-
 
 THE DIVISION OF INCOME 223 
 
 age of making it easy for the worker who can 
 save anything to accumulate a considerable capital 
 himself. What our inquirer is in search of is 
 rather some light on the question why some people 
 get so much interest and others none at all, and 
 whether the proportion of the whole income of the 
 community falling to interest is likely to increase in 
 the future. If he is satisfied that the proportion 
 falling to interest is likely to increase, or that the 
 inequality of the present distribution of interest is 
 likely to increase largely in the future, he may be 
 determined to join a socialist organisation. Again 
 he catches the departing professor, and lays his 
 troubles before him. The professor has greater 
 difficulty than before in comprehending. He is 
 so used to regarding interest as something calcu- 
 lated as a ratio on the principal that he cannot at 
 first see or understand any one wanting to know 
 its ratio to the produce. Moreover, the old books 
 among which he was brought up always confused 
 the two. However, at last he is made to compre- 
 hend. " That again," he will say, " is a statistical 
 question. I cannot say I have thought of the 
 subject at all." The other question, as to the in- 
 equality of the distribution of interest, would not 
 trouble him in the least. " It depends," he would 
 say, " on the distribution of the capital, and we are 
 not concerned with that." 
 
 So far our inquirer into distribution has been 
 told something about the rent of dift'erent qualities
 
 224 THE ECONOMIC OUTLOOK 
 
 of land, or, at all events, the returns to different 
 "doses of labour and capital" on different qualities 
 of land, and something about the rate of interest, 
 or ratio between interest and capital. He is dis- 
 appointed ; but there is still wages to come, and 
 he may get some light on distribution from the 
 professor's golden words on that subject. 
 " Surely," he will think, " the professor will not 
 be able to consider wages in relation to distribu- 
 tion without telling us something of the causes 
 which determine how the whole produce is divided 
 between the workers and the owners of property 
 in land and capital." 
 
 But he is wrong. The professor, if up to date, 
 teaches that wages are settled by demand and 
 supply, and equal the product of the marginal 
 labourer, the man who may be taken on or put off 
 without making any appreciable difference to his 
 employer. It is impossible to select one out of 
 a number of equal labourers as the marginal one. 
 They are all paid the same, and what they are paid 
 is, or is equal in value to, their true contribution 
 to production. The position of the margin may be 
 either raised or lowered (according to circum- 
 stances connected with the law of diminishing 
 returns) when the number of men offering to 
 labour increases. Consequently, the supply of 
 labour affects its remuneration. The supply is 
 regulated by the standard of life. And so on, 
 a somewhat difficult theory, interesting enough in
 
 THE DIVISION OF INCOME 225 
 
 itself, but not enlightening, so far as distribution 
 is concerned. The earnings of the marginal 
 worker and of all workers, measured as they are 
 by their absolute amount, may vary widely without 
 affecting the distribution of the total income be- 
 tween the workers and the owners of property. 
 Our inquirer goes home in a rage, and will attend 
 the professor's lectures no more. Can we wonder? 
 If, however, he had had a little more patience, 
 he would at last have heard something about 
 distribution. The professor would have dealt with 
 differences of wages in different occupations, and 
 here he would really have considered the distribu- 
 tion of wages as between persons employed in 
 different employments. He would have asked his 
 class to begin with assuming as a working hypo- 
 thesis that they would expect free competition to 
 make wages in all occupations equal, or, in other 
 words, that they would expect wages to be equally 
 divided, at any rate between wage-earners of equal 
 industry and ability. He would then explain why 
 this is not actually the case. He would say, for 
 example, that the occupations for which expensive 
 training is necessary get more than the average, 
 because, so far, their number has been kept down 
 by the lack of sufficient well-to-do and self-denying 
 parents or benefactors (including the State). He 
 would say that the lowest kinds of labour are 
 paid less than the average, because they are the 
 kinds in which the all-round incompetent can best 
 
 15
 
 226 THE ECONOMIC OUTLOOK 
 
 be employed, and because the number of all-round 
 incompetents is large enough to fill them to over- 
 flowing, so that the value of that kind of work is 
 so reduced that, if an able and competent person 
 were employed (even at piece-work) in such an 
 occupation, he would not get wages as high as 
 the average for all occupations. He would say 
 that the persons employed in some occupations get 
 less than the average because of the tendency of 
 mankind to miscalculate chances all in the same 
 direction, so that the mistake of one man is not 
 compensated by the opposite mistake of another. 
 
 The fact that the whole subject of " Distribu- 
 tion " is not treated in the textbooks in the same 
 logical and useful manner as the distribution of 
 wages between persons following different occupa- 
 tions seems to be due merely to certain almost 
 accidental circumstances and a somewhat blind 
 following of a traditional arrangement of subjects. 
 There are no such blind followers of tradition 
 as those theorists who neglect the study of the 
 previous history of the theories which they are 
 endeavouring to develop ; and the most hardened 
 apologist must admit that the economists of the 
 first half or three-quarters of the nineteenth 
 century were apt to regard the work of their 
 predecessors in a somewhat unhistorical spirit. 
 
 The term " distribution " in economics seems 
 to have originated with the Physiocrats, What 
 they meant by it is not very easy to explain, inas-
 
 THE DIVISION OF INCOME 227 
 
 much as the explanation involves an understanding 
 of the Tableau Economique. But there seems 
 to be little doubt that neither the Physiocrats 
 proper nor Turgot took it to mean the same as 
 repartition, or division. They were thinking rather 
 of the machinery for conveying the produce from 
 the producers to the consumers than of the propor- 
 tions in which it was to be divided among them. 
 When Adam Smith wrote the title of the First 
 Book of the " Wealth of Nations," in which he 
 speaks of the " order " according to which the 
 produce of labour " is naturally distributed among 
 the different ranks of the people," he was probably 
 using the verb " distributed " in the corresponding 
 sense. When he comes to the subject in the 
 body of the work, he uses " parcelled out " as 
 a synonym for " distributed." He says that just 
 as the price of any particular commodity resolves 
 itself into wages, profit, and rent, so all the com- 
 modities together are parcelled out or distributed 
 between the various members of the society as 
 wages, profit, and rent. Then he goes on to 
 consider wages, profit, and rent far more as com- 
 ponent parts of price than as portions of revenue. 
 So much is this the case that there seems little 
 doubt that the parcelling out or distribution was 
 an afterthought, and that the chapters on wages, 
 interest, profit, and rent would not have been 
 materially different from what they are if Adam 
 Smith had never come across the idea.
 
 228 THE ECONOMIC OUTLOOK 
 
 The temi might, of course, have continued to 
 be used in the sense of parcelling out. It might 
 have continued to refer to the processes and 
 mechanism of the division rather than to the terms 
 of the division. However, it did not. The be- 
 ginning of the change is visible in the first edition 
 of J. B. Say's " Traite " (1803). Say distinctly 
 undertakes to inquire, not only into the different 
 ways in which values spread themselves throughout 
 {se repandent dans) the society, but also into the 
 proportions according to which they are distributed 
 {les proportions suivant lesquelles elles se dis- 
 tribaent). He does not, however, carry out his 
 undertaking, but treats of the various kinds of 
 incomes and of the rise and fall of wages per 
 man, profits per cent., and rent per acre, very 
 much in the same way as Adam Smith. It seems 
 probable that he was talking loosely when he men- 
 tioned proportions, and that it did not occur to 
 him that the three things just mentioned were 
 not reckoned by proportions. In the " Epitome," 
 or vocabulary of economic terms, which he affixed 
 to the second edition, he merely describes how dis- 
 tribution operates through the buying by the entre- 
 preneur of productive services, and says nothing 
 about the terms of division. Ricardo went much 
 farther than Say. In the Preface to his " Prin- 
 ciples " he says that the produce is divided between 
 the usual three classes, that at different times 
 " the proportions of the whole produce of the earth
 
 THE DIVISION OF INCOME 229 
 
 which will be allotted to each of these classes under 
 the names of rent, profit, and wages will be essen- 
 tially different," and that " to determine the laws 
 which regulate this distribution is the principal 
 problem in political economy." Though, it must 
 be admitted, without much success, he continually 
 endeavours to keep this problem before him. From 
 this time forward the old sense of distribution as 
 the process of parcelling out may be regarded as 
 superseded. " Distribution " was ordinarily de- 
 fined as the determination of the proportions in 
 which the produce is divided, and the part of 
 economic treatises headed " Distribution " was 
 commonly devoted to a discussion of any points 
 which happened to occur to the writer in connec- 
 tion with rent, interest, wages, and any other 
 share of produce which he might think it desirable 
 to create. The question of proportions so 
 definitely raised by Ricardo and so plainly 
 expressed in the definitions of " distribution " was 
 lost sight of, partly because it was supposed by 
 many that rent might somehow be excluded 
 altogether, and that the rate of interest or profit 
 showed how the remainder was divided between 
 labour and capital, and partly because of the 
 continued influence of the Smithian tradition. 
 
 ■Whether this be the exact explanation of the 
 present state of things or not, I do not think any 
 one will have the hardihood to assert that the 
 exclusion from expositions of economic theory of
 
 230 THE ECONOMIC OUTLOOK 
 
 any consideration of the causes which determine 
 the division of the whole income between labour 
 and property and the division of property's share 
 between individual proprietors has been deliberate. 
 I know of no economist who has asserted that a 
 consideration of these matters is not a proper 
 part of the theory of distribution, though no 
 doubt there are many who, like my typical pro- 
 fessor, would say so when blamed for omitting it. 
 Put upon his defence, the exclusionist would, I 
 suppose, allege : ( i ) that the doctrines at present 
 taught as to wages, interest, and rent tell us what 
 settles the proportions in which the whole income 
 is divided between labour, land, and capital ; 
 (2) that no general theory on the questions 
 suggested can be constructed ; (3) that the ques- 
 tions are unimportant and not worth answering. I 
 will deal with these allegations in order. 
 
 The first of them is easily dealt with. No in- 
 telligent person who has considered the subject 
 for a moment can imagine that any investigation 
 of the causes which determine wages per head, 
 interest per cent., and rent per acre can provide 
 directly an answer to the question. What regulates 
 the proportions in which the produce is divided 
 between wages, interest, and rent ? A rise of wages 
 per head is often coincident with a decrease in 
 labour's proportion of the whole income. In our 
 previous example, if the number of workers be 
 put at 30,000,000, the average earnings would
 
 THE DIVISION OF INCOME 231 
 
 be £40 1 6s. 8d. If the total income were in- 
 creased to £2,000,000,000, and the average earn- 
 ings to £50, the number of workers remaining 
 the same, then the total earnings would be 
 £1,500,000, which is 75 per cent, of the whole 
 — a larger proportion than the original 70 per 
 cent. But, if the increase of earnings were only 
 to an average of £45, or £1,350,000 in all, then 
 labour's proportion would have sunk from 70 per 
 cent, to 67^ per cent. 
 
 So, too, a fall in the rate of interest does not 
 necessarily indicate a fall in the proportion of 
 the whole income obtained by capital, no matter 
 where we draw the line or whether we draw any 
 line at all between land and capital. The rate of 
 interest is only the rate, ratio, or proportion 
 between the principal and the interest. What pro- 
 portion the interest bears tio the total income cannot 
 be discovered till we know two other things, the 
 amount of the capital and the amount of the total 
 income. To return to our example, if we suppose 
 the £15,000,000,000 worth of property to consist 
 of £10,000,000,000 of capital and £5,000,000,000 
 of land, then in the state of things at first supposed, 
 with interest at 3^ per cent., capital will be getting 
 £350,000,000, or 20 per cent, of the total income. 
 Now, if the capital increases to £13,500,000,000, 
 while the total income increases to £2,000,000,000, 
 a fall of interest from 3^ to 3.^ will be coincident 
 with a rise in capital's income from £350,000,000
 
 232 THE ECONOMIC OUTLOOK 
 
 to £450,000,000 — that is, from 20 per cent, of 
 the whole to 22^ per cent. 
 
 And, finally, it surely needs no elaborate demon- 
 stration to prove that a rise in the absolute amount 
 of rent paid for a given quantity of land does not 
 necessarily indicate any rise in the proportion of 
 the whole income of the community falling to the 
 landlords. 
 
 The second defence is alternative to the first. 
 It admits that the two problems we are discussing 
 are not really dealt with in the ordinary expositions 
 of the theory of distribution, but alleges that there 
 is little or nothing to be said about them which 
 can properly be regarded as worthy of the naraie 
 of theory. " What," I shall perhaps be asked, 
 " have you to say about them? " Little enough, 
 I admit, but if the subject had been discussed as 
 it ought to have been for the last century, there 
 would probably have been by this time quite a 
 large body of doctrine relating to it. I will en- 
 deavour to suggest briefly the main outlines of 
 the theory which seems to me to be required. 
 
 The division of the whole income between labour 
 and property will be determined by the compara- 
 tive total values of two great collections of contri- 
 butions to the income : on the one hand all the 
 services of all the workers, on the other all the 
 assistance, or whatever the reader may prefer to 
 call it, afforded by the property. If all the 
 services of the workers are worth 1,225 millions 
 
 |i
 
 THE DIVISION OF INCOME 233 
 
 and all the assistance afforded by the property is 
 worth 525 millions, it is obvious that the workers 
 are getting 1,225 millions out of 1,750, and there- 
 fore 70 per cent, of the whole. 
 
 In considering what settles the comparative 
 values of the two contributions, let us first suppose 
 that the quantities of labour and capital remain 
 fixed, or in the same relation to one another. Here 
 we have the problem in its simplest form, since any 
 alteration in the value of units will necessarily be 
 accompanied by a corresponding alteration in the 
 aggregate value of all the units. If one set of 
 persons have a given number of oranges and 
 another a given number of apples, any alteration 
 in the value of one apple in oranges, or, which is 
 the same thing, of one orange in apples, will result 
 in a similar movement in the aggregate values. 
 Suppose that there are 2,625 apples and 1,225 
 oranges, and that the value of an apple is one- 
 fifth of an orange. Then the aggregate value of 
 the apples is 525 oranges, and the oranges are to 
 the apples as 1,225 to 525. I^j now, the value of 
 an apple falls to one -seventh of an orange, the 
 aggregate value of all the oranges will be to the 
 aggregate value of all the apples as 1,225 to 
 375. In the case of apples and oranges it is 
 easily apprehended that changes of fashion or 
 changes in the knowledge of how best to use apples 
 and oranges may change their relative value. If 
 it becomes the fashion to drink orangeade and to
 
 234 THE ECONOMIC OUTLOOK 
 
 despise cider, the value of oranges measured in 
 apples will be enhanced, and if somebody discovers 
 a way of easily making a delightful jam out of 
 apples, the value of apples measured in oranges 
 will be enhanced. 
 
 So with the contributions of labour and property. 
 Fashion is, perhaps, unimportant in practice, but 
 we can imagine changes of fashion which would 
 seriously affect the comparative values of the con- 
 tributions. If it became the fashion to despise 
 house -shelter, a vast mass of existing capital would 
 be depreciated, and if we allow it to be gradually 
 replaced by an equal amount of other capital, 
 there is reason to believe that the remuneration of 
 the services of this new capital would be less than 
 that of the services of the houses, since the fact 
 that this investment was not adopted before shows 
 it to have been less profitable than those which had 
 been adopted. 
 
 Whatever may be said of changes of fashion, 
 there can be no doubt as to the importance of new 
 inventions in affecting the comparative values of 
 the two contributions. A discovery which shows 
 how things now done by the aid of elaborate 
 machinery could be done easily by unassisted 
 labour will raise the value of the given quantity 
 of labour as compared with that of the given 
 land and capital. If land or anything else that is 
 of a permanent character is concerned, the problem 
 is fairly simple, and has, in a way, been recognised
 
 THE DIVISION OF INCOME 235 
 
 in the traditional discussion about the effect of 
 " improvements " on agricultural rents. When 
 renewable things are concerned, it is often very 
 difficult to decide whether a particular invention 
 is likely to be favourable or unfavourable to an 
 increase in the proportion falling to property. 
 What shall we say, for example, of the invention 
 of the bicycle? If there were a million horses and 
 a million riders and no more, and all that had 
 happened was merely a substitution of a million 
 bicycles for a million horses, then, given that a 
 bicycle may be taken as containing half the capital 
 there is in a horse, a capital equal to 500,000 
 horses would be driven into less profitable em- 
 ployment, and the annual value of property's 
 contribution would clearly fall in comparison with 
 that of labour. But if after the invention it was 
 found profitable to establish a capital of three 
 million bicycles, then a portion of capital equal 
 to half a million horses hitherto in less profitable 
 employments would be withdrawn from them into 
 what would by hypothesis be a more paying invest- 
 ment. Thus both the given quantity of labour 
 and the given quantity of property would get a 
 larger absolute amount, and there seems no reason 
 to doubt that the increase falling to property may 
 sometimes be large enough and sometimes not 
 large enough to give it an increased proportion 
 of the whole income. 
 
 Of course, the supposition of fixed amounts of
 
 236 THE ECONOMIC OUTLOOK 
 
 labour and property is a very unreal one. The 
 amounts of both are constantly changing, and not 
 always changing in the same direction at the same 
 rate. Let us return for a moment to our world of 
 oranges and apples. Instead of dealing with fixed 
 amounts, let us allow the number of oranges and 
 apples to vary, but still inquire into the comparative 
 total value of all the oranges taken together, on 
 the one hand, and all the apples taken together, 
 on the other. We want to compare the value of 
 the apple-harvest with that of the orange -harvest. 
 We are at once confronted with what von Wieser 
 calls the " paradox of value." i An increase in 
 the number of apples tends to reduce the value 
 of each apple, so that it may happen that an 
 increase in the number of apples will reduce the 
 aggregate value of the apple -harvest as compared 
 with that of the orange-harvest. Suppose, again, 
 that the apples number 2,625 niillions and the 
 oranges 1,225 millions, and that i orange is worth 
 5 apples, so that the aggregate value of the apples 
 will be 525 oranges, or 30 per cent, of the 
 aggregate value of the apples and oranges taken 
 together. Suppose, further, that m the next year 
 the number of apples is increased to 3,600 millions, 
 while the oranges remain at 1,225, then the value 
 of an apple measured in oranges will be less than 
 before. If it only falls to one -sixth of an orange, 
 
 ' " Natural Value," Bk. I., ch. x., pp. 27-32 (Malloch's 
 translation).
 
 THE DIVISION OF INCOME 287 
 
 the aggregate value of the apples will be to that 
 of the oranges as 600 to 1,225, and be nearly 
 2,3 per cent, of the aggregate value of apples and 
 oranges taken together. But if the value of an 
 apple falls to one-eighth of an orange, then the 
 aggregate value of the apples will be to that of 
 the oranges only as 450 to 1,225, '^^^ ^^^^ conse- 
 quently have fallen from 30 per cent, of the aggre- 
 gate value of apples and oranges taken together 
 to a little under 27 per cent. 
 
 As with the aggregate value of the apples and 
 oranges in this example, so with the aggregate 
 value of the contributions of labour and property. 
 If the quantity of either could be increased in pro- 
 portion to that of the other without any diminution 
 in the value of each unit, then every such increase 
 would increase the proportion which the aggregate 
 value of that contribution would bear to the aggre- 
 gate value of the contribution of the other factor, 
 and consequently would increase the proportion of 
 the whole income received by that factor. But 
 increase of quantity tends to diminish the value 
 of each unit, and may diminish it so much that the 
 larger quantity is of less proportionate value. 
 For example, let us suppose that at first the number 
 of workers is 30 millions, and the value of their 
 work is 1,225 millions, while the value of the 
 use of the property is 525 millions. Then suppose 
 the workers increased to 35 millions. We may 
 be sure the arrival of the new workers will not
 
 238 THE ECONOMIC OUTLOOK 
 
 simply increase the value of the contribution of 
 labour by one -sixth to 1,429 millions, leaving 
 property's share at the old figure of 525. The new 
 5 million workers will cause some depreciation of a 
 man's work as compared with the use of an acre 
 of land or a house or any particular machine. This 
 depreciation may or may not be great enough to 
 counterbalance the immediately favourable effect 
 of an increase of quantity. For example, the com- 
 bined effect of the two influences may be to raise 
 labour's contribution to the value of 1,400 millions 
 and property's to 550, thus giving labour nearly 
 72 per cent, of the whole income, or the effect may 
 be to raise labour's contribution only to 1,325 
 millions and property's to as much as 625, thus 
 reducing labour's proportion to less than 68 per 
 cent. 
 
 The very, inadequacy of these remarks, and 
 possibly their incorrectness, will, I think, convince 
 the reader that theory on the subject of the division 
 of income between property and labour would be 
 a very interesting and useful addition to the 
 ordinary presentation of economic principles. It 
 would be so especially if well illustrated by actual 
 historical examples. I am not aiware that economic 
 historians have as yet devoted any attention to the 
 question. I should be inclined to suppose that the 
 proportion falling to property has increased and is 
 still increasing. The increase in the quantity of 
 capital has been much greater than tlie increase
 
 THE DIVISION OF INCOME 239 
 
 of population, and, in consequence of the tendency 
 of invention to open new wide fields for capital, 
 the depreciation of units has not been very large. 
 Nor do I see any reason for doubting that the 
 increase of property's proportion will go on in the 
 future. All that seems certain is that, if it does 
 go on, it cannot go on indefinitely at the same rate. 
 After a certain point it must increase slower and 
 slower, so as never to reach one hundred per cent. 
 But where is that .point? A long way off, very 
 probably. 
 
 Coming now to the second question, the distri- 
 bution of property's share among the various 
 individual owners of property, we might perhaps 
 be expected to begin by dividing the owners into 
 landowners and capitalists. It appears, however, 
 that this distinction is of little or no use for our 
 present purpose. The distinction between rent, 
 the income of landowners, and interest, the income 
 of owners of capital, is a difficult one to deal, 
 with when quantitative statements are to be made, 
 since land and capital are divided from each other 
 by no plain and obvious natural boundary-line, 
 and there is little agreement as to where to place 
 an arbitrary or imaginary boundary. The diffi- 
 culties involved in an attempt to estimate 
 " prairie " and " site " values are enormous, and 
 far greater than is imagined by the surveyors 
 who quite truly say they are constantly employed 
 in estimating the value of sites apart from the
 
 240 THE ECONOMIC OUTLOOK 
 
 buildings upon them.' But, on the whole, it is 
 probably safe to say that, if a narrow sense be 
 given to " land " when it is taken to mean land in 
 or near its unimproved state, then rent is receiving 
 a smaller proportion of the whole income of 
 property than of old. If, however, we take 
 " land " in a wide sense, as including all the great 
 engineering works which are sometimes said to 
 " become incorporated with the land," such as 
 railways, canals, drains, and pipe-lines^ to say 
 nothing of buildings, the conclusion will probably 
 be the other way. If these things are included, 
 then rent will be a growing proportion of the 
 income of property. The reason is not far to seek. 
 It is simply that the increase in the quantity of 
 movable and immovable accumulated products of 
 labour is greater than enough to counterbalance 
 the increase in the value of land, of which the 
 quantity is fixed. But all this has little to do with 
 the distribution of income between individuals. 
 No matter where the line be drawn between land 
 and capital, any landowner can turn himself into 
 a capitalist by selling his land, and any capitalist 
 can turn himself into a landowner by buying land, 
 so that it is impossible there can be any question 
 of distribution between landowners and capitalists 
 
 ' Each site may easily be valued apart from the buildings upon 
 it, but it can seldom, if ever, be valued apart from the buildings 
 on the surrounding sites, and the streets, roads, railroads which 
 serve it.
 
 THE DIVISION OF INCOME 241 
 
 of equal wealth. To understand the distribution 
 of property's share of income among proprietors, 
 we must treat property as one, and begin by 
 observing what ought to be obvious to every one, 
 that the distribution of the income is directly 
 dependent on the distribution of property. So 
 that we have here simply to explain and classify 
 the causes which govern the distribution of the 
 property. Perhaps the simplest way of making a 
 start will be to assume that we should expect, in 
 the absence of reasons to the contrary, to find 
 property equally distributed. Then wc can make 
 the inquiry why, as a matter of fact, some indi- 
 viduals have much, others little, and many scarcely 
 any at all. 
 
 The reason which seems to come first in logical 
 order is that all people are not equally provident. 
 As old-fashioned opponents of equalitarian schemes 
 used to say, if we all started with equal amounts, 
 inequality would soon appear, since some of us 
 have more thrifty dispositions, greater desire to 
 provide for the future, than others. Some of us 
 would consequently save considerable amounts 
 from income, while others would save little, and 
 some nothing. Writers exist who speak as if there 
 were no other reason than this for the actual 
 inequality. Mr. Carnegie and the Duke of 
 Westminster, they think, are the thriftiest men 
 alive. 
 
 The second reason is that we are not all equally 
 
 16
 
 242 THE ECONOMIC OUTLOOK 
 
 judicious in the selection of investments. Even 
 if we all started on equal terms and saved the same 
 amount, inequalities would soon arise, since the 
 wise men would make better investments than the 
 fools. Some people think these two reasons are 
 sufficient to account for the existing inequality. 
 Mr. Carnegie and the Duke of Westminster, they 
 think, are not only very thrifty but also very 
 wise. 
 
 The third reason is that men of equal wi,sdom 
 are not equally lucky in their choice of investments. 
 Only fools invest in lottery tickets, but a few of 
 them do make a thousand or more per cent, and 
 win fortunes. Take a million men of equal 
 wisdom, and you will find their investments better 
 than those of another million men of slightly less 
 wisdom. But that is only because among such 
 large numbers the average luck will be equal. As 
 between single individuals, every one knows that 
 luck plays a great part. 
 
 The fourth reason is that earnings are unequal, 
 and it is easier to save out of a large than out of 
 a small income. If, of two men with exactly 
 the same disposition as regards thrift, the one 
 has £5,000 a year and the other £50, the first 
 will save much more than the second, and conse- 
 quently eventually become possessed of much more 
 property. 
 
 The fifth reason is that persons receive different 
 amounts of property by way of gift, bequest, and
 
 THE DIVISION OF INCOME 243 
 
 inheritance. It is curious to notice how often this 
 reason is overlooked, in spite of its extremely 
 obvious nature. Its effect is cumulative, since, 
 when once a man has acquired large property in 
 this way, it is easier for him to save and acquire 
 still more. 
 
 On each of these reasons much might be written. 
 For example, on the last, a great investigation 
 might take place into the different effects of 
 different laws as to inheritance and bequest, into 
 the effect of the customs observed in regard to 
 dowries, the effect of large and small families in 
 different classes, and many other similar subjects 
 which are just as fitted for discussion in works on 
 economic theory as the matters at present usually 
 discussed — for example, in relation to the causes 
 of differences of wages in different occupations. 
 
 Dislodged from his first and second lines of 
 defence, the apologist for the common failure of 
 writers on distribution to deal with the division 
 of all income between labour and property and 
 with the distribution of property's share among 
 proprietors may fall back on the third line, and 
 say that these questions are of no importance. 
 
 No doubt the importance of the division between 
 property and labour is often exaggerated in the 
 discussions of the market-place and the street. 
 It is often assumed in these discussions that the 
 mere taking away of property's share and giving 
 the whole income to labour would put an end to
 
 241 THE ECONOMIC OUTLOOK 
 
 poverty. To those who believe this it should be 
 pointed out that the allotting of the whole of 
 property's present share to labour as a pro rata 
 addition to present earnings would do little to 
 relieve the extreme of poverty. It would cer- 
 tainly abolish the very rich, since the very largest 
 incomes are all chiefly drawn from property ; but 
 the addition made to the income of the poorest 
 people would not be sufficient to redeem them from 
 poverty. If property is receiving 30 per cent, 
 of the whole income, the pro rata addition to earn- 
 ings would be about 43 per cent. — a handsome 
 increase, no doubt, to the majority of workers, but 
 one which would be wholly inadequate in the case 
 of the poorest independent earners, and nil in the 
 case of the invalid and incapable. Incomes would 
 still range from millions of pounds do^vn to nothing 
 at all. " The whole produce to the labourer " is 
 no panacea. Poverty is a question of persons 
 rather than of categories. 
 
 But the fact that a large and active social or 
 political party spread throughout the civilised 
 world do, as a matter of fact, rightly or wrongly 
 regard " the whole produce to the labourer " as 
 an unimpeachable maxim, must certainly give the 
 question, " What regulates the proportion of the 
 produce or income received by labour under 
 existing institutions? " a considerable practical im- 
 portance. If I understand Professor Clark aright, 
 he would meet the demand made on behalf of
 
 THE DIVISION OF INCOME 245 
 
 the labourer by the proposition that the labourer 
 gets the whole produce of his labour at present. 
 The (say) 30 per cent, of the whole income which 
 the labourers do not get is no part of their produce, 
 but is the produce or part of income attributable 
 to land and capital.' This may be a good answer 
 to the exploitation theory of wages, but that theory 
 is mere froth on the surface of the waves. How- 
 ever the socialists may phrase their demand, and 
 whatever obscure arguments they may use in its 
 favour, what they really want is that the labourer 
 should have all the income. They ask for the 
 " whole produce of labour," because Adam Smith 
 and his successors till quite recent times taught 
 that the whole income was produced by labour, so 
 that the income and the produce of labour were 
 synonymous. Now, if Professor Clark and his 
 followers convince them that this is an inaccurate 
 use of language, and that only what labour actually 
 does get, the 70 per cent., for example, is correctly 
 to be spoken of as " the produce of labour," they 
 will promptly say : " Never mind what the other 
 30 per cent, ought to be called. You can call 
 it what you like, provided you hand it over." To 
 regard the widespread popular sentiment that 
 people should not be able to obtain incomes without 
 working for them as the result instead of the cause 
 of the recondite doctrines promulgated by Marx 
 and others as to the exploitation of labour would 
 • " Distribution of Wealtli," ch. i.
 
 246 THE ECONOMIC OUTLOOK 
 
 indicate a remarkable simplicity of mind. The 
 formal pleas of social and political parties can 
 be amended easily enough when they are found to 
 need it. If it is shown that the term " whole 
 produce of labour" is not properly used of the 
 whole income, the term '* whole income " can 
 easily be substituted for it. Socialism will not be 
 exorcised by the marginal productivity theory of 
 wages. But the strength of socialist effort may 
 be greatly affected by an investigation into the 
 causes which regulate the division between labour 
 and property. If, for example, it can be shown 
 that labour's proportion is likely to grow in the 
 future under existing institutions, many people will 
 be satisfied to let things take their course, and will 
 not care to try to accelerate the change, much 
 less to try to carry it to its final and logical 
 conclusion by any violent revolution. If, on the 
 other hand, it appears that labour's proportion is 
 likely to diminish, it is impossible to doubt that 
 the feeling in favour of letting things alone will 
 be much weakened. Moreover, in addition to 
 definitely socialistic proposals, there are many 
 plans for action on the part of the State which 
 cannot be properly understood and appreciated 
 without a knowledge of the causes which regulate 
 the division of income between labour and 
 property. Particular taxes, for example, are often 
 recommended on the ground that they fall on 
 labour or capital, as the case rnay be. Surely a
 
 THE DIVISION OF INCOME 247 
 
 thorough knowledge of the theory of the division 
 is necessary before a judgment as to the correct- 
 ness of the claims made on behalf of particular 
 taxes or systems of taxation can be arrived at. 
 
 Finally, it may be reasonably suggested that 
 the introduction of a theory as to the division 
 between property and labour is necessary for the 
 construction of a theory of wages which will be 
 fairly intelligible to the popular comprehension. 
 He must be a sanguine man who expects to see 
 the marginal productivity theory find a place in 
 the leading articles of newspapers and the speeches 
 of candidates for legislative assemblies. Some- 
 thing rather simpler is required, and something 
 which will fix attention earlier on the most impor- 
 tant factor in practice. This, it seems to me, 
 we get, if we point out that the total amount 
 of earnings at any time depends upon the total 
 produce and the way in which it is divided between 
 labour and property, and that the earnings per 
 worker depend in consequence upon the produce 
 per worker and the way in which the total is 
 divided between labour and property. For the 
 causes of high and low produce per worker we 
 refer to the theory of production, which is wholly 
 or chiefly devoted to an investigation into that 
 question ; for the causes of variation in the divi- 
 sion we look to the theory of distribution. It 
 is quite possible that the theory of the causes 
 of variation in the division cannot be made any
 
 248 THE ECONOMIC OUTLOOK 
 
 easier than the theory of the marginal produc- 
 tivity of wages. But it can scarcely be more 
 difficult, and at any rate the method I advocate 
 has the great advantage of putting the produce 
 first. This is in practice by far the most important 
 factor. The actual differences of earnings between 
 different countries and different times are evi- 
 dently far more due to differences of produce per 
 head than to differences in the proportion of the 
 whole taken by property. How ludicrous it would 
 be to propose to bring the earnings of the average 
 inhabitant of India up to those of the average 
 American by a change in the proportion of income 
 allotted to property I The fact is evident to every 
 economist, but is far, as yet, from being an article 
 of common knowledge, as it should be. If we 
 could once get the populace to understand the 
 importance of produce per worker in the deter- 
 mination of wages, we might, I think, feel that 
 we had done the most valuable part of our work, 
 and sleep at night with a fairly good conscience, 
 even if we had not succeeded in making the causes 
 of variation in the division perfectly plain to 
 every one. 
 
 It is difficult to imagine any one seriously deny- 
 ing the importance of an inquiry into the nature 
 and comparative influence of the different causes 
 of the inequality of the distribution of property 
 and property incomes. To imagine that the only, 
 or only considerable, causes are differences of
 
 THE DIVISION OF INCOME 249 
 
 thrift and of judgment in the selection of invest- 
 ments is dangerous as well as absurd. If wc are. 
 to offer successful criticism of wild schemes, we 
 must keep our eyes open to facts, even of the 
 most obvious character. Every one knows that 
 in all, except the newest " countries," the inequality 
 in the amounts of property which individuals have 
 received by way of bequest and inheritance is by 
 far the most potent cause of inequality in the 
 actual distribution of property. Reflection further 
 suggests that the comparative potency of this cause 
 is likely to grow, rather than to diminish, in the 
 future. As time goes on, the savings of each 
 generation of men must come to bear a smaller 
 and smaller proportion to the property which has 
 come down to them from previous generations. If 
 this were not so, we should be confronted with 
 the prospect of what Malthus called a " geo- 
 metrical increase " of capital, and should be 
 obliged to consider the necessity of " checks," 
 lest the whole earth should become choked with 
 the accumulations.' 
 
 ' In Professor Seager's " Introduction to Economics," a work 
 which is happily distinguished by the attention it gives to actual 
 phenomena, I find the following (p. 546) : — 
 
 " So long as a fair degree of equality of economic opportunity is 
 preserved, the influences which make for the disintegration of 
 large accumulations of wealth are likely to predominate, and the 
 very rich men of each generation are likely to be those who 
 have acquired the greater part of their fortunes during their own 
 lifetimes. This has been the case in the United States up to 
 the present time, and there is nothing in the practice of paying
 
 250 THE ECONOMIC OUTLOOK 
 
 Now, popular sentiment has rightly — or, as I 
 think, wrongly — a good deal of respect for the 
 idea that, apart altogether from considerations of 
 expediency, some more or less obscure ethical 
 reasons demand that thrift and judicious selection 
 of investments should be rewarded ; but it cannot 
 in these days be said to have any belief in the 
 ethical propriety of extending the reward to the 
 remotest descendants of the thrifty persons, even 
 if these descendajits are judicious enough not to 
 get rid of the property bequeathed them. It has 
 not yet succeeded in clearly distinguishing between 
 what it regards as hereditary and what it regards 
 as not hereditary, but it is undoubtedly not now 
 favourable to heredity, considered as an ethical 
 principle of distribution. I cannot imagine that 
 it will become more favourable in the future ; and, 
 therefore, it seems to me that attempts to support 
 the existing inequality on ethical grounds must 
 fail. 
 
 The argument sometimes put forward by certain 
 religious people, that inequalities are necessary in 
 
 interest and rent for the use of property fairly acquired that 
 threatens to make it less the case in the future." 
 
 I venture to suggest that the reason why great fortunes are 
 less often inherited fortunes in America than in Europe is to be 
 found in the fact that America is young and Europe old. Are not 
 hereditary fortunes already obviously growing in comparative 
 importance in America ? If existing institutions continued 
 unchanged for five hundred years more. I cannot doubt that the 
 hereditary principle would be as powerful in America then as 
 it is in Europe now.
 
 THE DIVISION OF INCOME 251 
 
 order that some may exercise the Christian virtue 
 of benevolence, and others that of patience and 
 resignation under suffering, appeals rather to those 
 who are to exercise the benevolence than to those 
 who are to be patient. It is the creed of a trifling 
 minority, and is not likely to exert any considerable 
 influence. 
 
 The true defence of the inequalities of the dis- 
 tribution of property is the relative and partial 
 defence afforded by purely economical considera- 
 tions. It is no part of the economist's business 
 to play the part of the old-fashioned nursery 
 governess who dispensed jam and pudding to her 
 charges in proportions determined by her opinion 
 of each child's comparative merit. The purely 
 economical principle of distribution is that which 
 even she adopted with regard to what she supposed 
 to be the more substantial viands — the principle 
 of equality modified by differences of need. This 
 is the ideal of distribution, and is aimed at every- 
 where when production has not to be taken into 
 account. The economist regards the existing 
 inequality of distribution as in itself extremely 
 wasteful, but sees that it must in the main be 
 retained for the present, because it provides both 
 the motive force and the regulator for the existing 
 system of production ; and, even if it were prac- 
 ticable, it would not be worth while to make and 
 introduce the ideal of distribution if it led to a 
 considerable fall in produce per head. The exist-
 
 252 THE ECONOMIC OUTLOOK 
 
 ing inequality, regarded broadly, is, in fact, a 
 necessary evil. But there are many good reasons 
 to suppose that it is greater than is necessary, and 
 for hope, at any rate, that it may in the course of 
 time be largely reduced, if not altogether abolished, 
 without any appreciable injury (and perhaps even 
 with advantage) to production. In order to be 
 able to judge correctly whether particular plans 
 for reducing the inequality are desirable or not, 
 we must have a theory as to the causes of the 
 inequality. At present, in considering any par- 
 ticular measures which have a bearing on the 
 subject — say, for example, the French and British 
 graduated death-duties or laws of inheritance and 
 bequest — we have to make up our theory specially 
 for the purpose in hand. It would be much better 
 if the groundwork, at any rate, of a theory of 
 distribution were to be found in the ordinary 
 economic textbooks. 
 
 If the inquiries into the distribution between 
 labour and property and into the distribution of 
 proprietors' income among individual proprietors 
 were to take their proper place in economic theory, 
 "Distribution " as a department of economic theory 
 would, of course, be remodelled. It would consist 
 of those two inquiries and of the usual inquiry into 
 differences of earnings. The inquiries into general 
 wages, the rate of interest, and rent would 
 be excluded. A great part of these inquiries 
 properly belongs to production and the rest to the
 
 THE DIVISION OF INCOME 253 
 
 theory of value, but for the present it would prob- 
 ably be found convenient to place the inquiry into 
 wages, at any rate, and possibly the other two 
 inquiries also, after the discussion of Distribution. 
 Their actual position does not make much differ- 
 ence, provided only that it be made perfectly clear 
 that variations in general wages, in the rate of 
 interest, and in absolute amount of rent, do not 
 necessarily coincide or correspond with changes 
 in the distribution of income between those three 
 categories.
 
 VIII 
 
 MUST A POOR LAW PAUPERISE ? ^ 
 
 Not even the Editor of the Clare Market Review 
 
 ought to ask even worms like lecturers to write 
 
 articles in August, and I am not going to write 
 
 one. I am merely going to fill up the blank 
 
 space which I am told would otherwise be the 
 
 consequence of my neglect to answer the letter of 
 
 the editor which conveyed that very improper 
 
 request.' So I shall not verify my references, 
 
 and I shall make just as many misstatements about 
 
 matters of fact as I happen to find convenient. 
 
 The other day I was reading Mr. Loch's paper 
 
 in the Statistical Journal.'^ Now I have the 
 
 highest respect for Mr. Loch's school as practical 
 
 administrators of poor-relief, and I always vote 
 
 for them when I have the chance. But their 
 
 writings usually move me to fury, and this paper 
 
 of Mr. Loch's was no exception. Mr. Loch, or 
 
 anybody else, has, of course, a perfect right to 
 
 use the word *' pauperism " in its technical sense 
 
 of the condition of receiving relief under the Poor 
 
 ' Reprinted from the Clare Market Rex'iew for October, 1906. 
 = June, 1906. 
 
 S5i
 
 MUST A POOR LAW PAUPERISE? 255 
 
 Law, but in that case he has no right to assume 
 that less pauperism is necessarily something to be 
 rejoiced over. 
 
 Let us examine for a moment the ordinary uses 
 of the word " pauper " and its derivatives. 
 " Pauper " originally, of course, meant simply poor, 
 and we still use the word in that sense when we 
 say of a man below the standard of wealth usual 
 in our particular rank of life, "he is a perfect 
 pauper." In that proposition there is no sugges- 
 tion that the person in question is in receipt of Poor 
 Law relief, and no reflection upon his industry or 
 other capacity for self-support. All that is meant 
 is that he is poor, judged by the standard adopted. 
 Within the last hundred and fifty years, I think, the 
 word has been applied to the recipients of legal 
 poor-relief, perhaps in consequence of a litigant 
 who has no funds pleading in forma pauperis. 
 Here the word is purely technical, and suggests 
 no blame to the person to whom it is applied. 
 True, before one of the Old Age Pensions Com- 
 missions or Committees, some years ago, an 
 ignorant witness declared that he disliked it,' and 
 wished there was no such word, and in the recent 
 Poplar Workhouse inquiry one of the witnesses 
 was asked not to call the inmates paupers, so that 
 there are apparently some people who regard the 
 term as one of opprobrium, but this is obviously 
 childish, and only arises from the fact that many 
 
 • Above, p. 140.
 
 256 THE ECONOMIC OUTLOOK 
 
 persons in receipt of poor-relief are not very 
 reputable. Obviously a most estimable person who 
 has never been guilty of the smallest crime or 
 misconduct may be a pauper ; the fact that mis- 
 conduct often leads to the receipt of poor-relief 
 cannot and does not of itself give any opprobrious 
 signification to the term. But " pauperise " is 
 seldom used of the action of making a person into 
 a recipient of legal poor-relief. It almost always 
 has a " bad " meaning: to pauperise a person 
 is to offer him something in such a way as to 
 make him no longer care about earning an income 
 by labour or husbanding his resources in property. 
 " Pauperism," if we look merely at etymology, 
 should be the state of being pauperised, and should 
 have an exclusively bad sense. It is, however, 
 commonly used of the state of receiving legal 
 poor-relief, as if derived directly from " pauper " 
 in the technical sense. 
 
 Now, the pauperism' which is to be deplored is 
 obviously pauperism in the " bad " sense, the state 
 of being pauperised. This is very far from being 
 in practice synonymous with pauperism in the 
 technical sense. Indeed, most of the history of the 
 Poor Law is the history of the attempt to stop 
 the pauperisation of the people, and I think it may 
 be truly said that the Poor Law is the strongest 
 defence against pauperisation which we possess, 
 and thus tends to reduce pauperism in the bad 
 sense, though all pauperism in the technical sense
 
 MUST A POOR LAW TAUPERISE ? 257 
 
 is created by it. Pauperism in the technical sense 
 is the antidote, homoeopathic if you will, but still 
 the antidote, against pauperism in the bad sense. 
 To rejoice over a decrease of legal poor-relief 
 without considering the magnitude of pauperism 
 in the bad sense is wrong, and it is annoying to 
 find Mr. Loch speaking as if the transference of 
 population from the country, where poor-relief is 
 large, to the towns, where it is less so, necessarily 
 meant an increase in all the virtues. Are there no 
 pauperising agencies in the towns? What of the 
 " religious influences " of London described by 
 Charles Booth? What of the perpetual distress 
 funds ? I do not know whether any one will 
 have the assurance to say that the pauperising 
 influences of the country are equally bad. They 
 certainly are not. The bounties of the squire's 
 lady and the parsoness are not always wise, but 
 they are neither so irregular nor so much the 
 reward of misconduct as the gifts of the West 
 End to the East. Misconduct in the country and 
 the village cannot be concealed with the same ease 
 as in the town, and leads far more surely to desti- 
 tution and the workhouse. The misconducted who 
 wish to retain their freedom must fly to the town 
 or take to the road. Every one who has an eye 
 in his head can see this is so. In the country 
 every one is engaged in honest labour except a 
 few idlers who have " means," whereas when you 
 enter the " industrial centres," as towns are 
 
 17
 
 258 THE ECONOMIC OUTLOOK 
 
 absurdly called, you always see plenty of more 
 or less misconducted persons obviously maintained 
 by the various processes of cadging. 
 
 So far as the lunatics, the aged, the sick, and 
 children are concerned, the pauperising effects of 
 poor-relief are not likely to be very considerable 
 in practice. No one goes mad because he will 
 be maintained in an asylum free of expense to his 
 friends, and very few people would be either more 
 industrious or more thrifty if relatives had always 
 to pay the expenses of lunatics. From conversa- 
 tions I have had with the young and middle-aged, 
 I doubt very much whether the possibility of resort 
 to the old people's quarter of the workhouse makes 
 any considerable number of persons conduct their 
 afifairs less prudently than they otherwise would. 
 Adam Smith (an author whose works I once 
 knew fairly well, but have largely forgotten 
 since the publication of a certain edition) says, 
 I think, that nobody is likely to break his leg 
 in order to get into a hospital : this perhaps puts 
 the matter unfairly, as provision against illness 
 and accident is sometimes the foundation of 
 further provision, but on the whole it may be said 
 that workhouse infirmaries do not detract at all 
 seriously from the ordinary motives to industry and 
 thrift, or, at any rate, that the direct benefit they 
 provide by restorations to health outweigh the 
 evil. Finally, as to the children, it is clear that all 
 children must start in a state of dependence, and
 
 MUST A POOR LAW PAUPERISE? 259 
 
 whether that dependence is on one institulion or 
 another — the family, or the nation, or some body of 
 kindly persons, or an ancient endowment — cannot 
 make much difference to the boy's or girl's desire 
 to do well when put in his or her first place. The 
 difficulties of bringing up children satisfactorily 
 in institutions are difficulties of detail rather than 
 of principle, and in modern times are being sur- 
 mounted. If a fair comparison could be made, 
 it would probably be found that the children of 
 the State do quite as well as others of the same 
 origin. Nor can we admit that the fact that 
 children will be taken care of by others if the 
 parents are dead or incapable has any serious 
 effect in diminishing the industry and thrift of 
 parents, actual or potential. Certainly many 
 people work hard and save painfully for the sake 
 of their children, but this is to advance them in 
 the world, not merely to prevent their becoming 
 the recipients of State or other charity. 
 
 So far as these classes are concerned, then, the 
 best possible can be done for the individuals who 
 actually come under the care of the State, and we 
 need not be in perpetual terror that good treat- 
 ment will lead to great increase of numbers. It 
 is not necessary to keep the inmates of county 
 lunatic asylums in chains to discourage pauper 
 lunacy, nor to flog the Poor Law children daily 
 in order to prevent the increase of pauper orphans. 
 The great maxim of 1834, that the condition of
 
 260 THE ECONOMIC OUTLOOK 
 
 the pauper must be made " less eligible " than 
 that of the poorest independent labourer, is in- 
 applicable : deterrent conditions are not needed. 
 
 But for adults who are neither sick nor aged 
 deterrent conditions are necessary, and the prin- 
 ciple of less eligibility is applicable. Relief with- 
 out deterrent conditions is destructive of industry 
 and thrift in those who receive it, and tends to the 
 rapid multiplication of applicants. The Eliza- 
 bethan Poor Law was intended to set the poor on 
 work, and its failure to do so was the occasion 
 of many a scheme for employing the unemployed 
 in the next two centuries. At length the Poor Law, 
 with the aid of the various expedients described and 
 denounced in the Report of 1834, succeeded in 
 employing, or partially and jointly employing, quite 
 a considerable number of people without seriously 
 deterrent conditions. The results were so unsatis- 
 factory that the reformers of 1834 cast aside the 
 whole idea. Their belief was that people ought 
 to find work for themselves, and that if they can't 
 or won't, or at any rate don't, the best plan is for 
 the community to do nothing more than maintain 
 them in an economical fashion, much as it main- 
 tains criminals, giving them work rather to occupy 
 their time than to diminish expense. 
 
 For Jupiter or Saturn, as Gladstone said in a 
 rash moment, this decision might have been right. 
 The people who suffer distress from want of em- 
 ployment arc more incompetent, unwilling, uneasy-
 
 MUST A POOR LAW PAUPERISE? 261 
 
 tempered or misconducted than those who, as a 
 rule, keep their places and can tide over accidental 
 or periodical interruptions of work. Under no 
 conceivable circumstances could they be got to 
 produce as much as workmen considerably below 
 the average of industrial merit. Taking this into 
 account, along with the fact that they form a 
 most trifling percentage of the adult population, 
 it is clear that no scheme for employing them, 
 however perfect, could directly add enough to the 
 annual produce of labour to counterbalance even 
 a small diminution of industrial merit among those 
 who are at present habitually employed. Con- 
 sequently it is better to think chiefly of the 
 influence of the treatment of the unemployed upon 
 the employed, and not to trouble much about its 
 effect on the unemployed themselves. The plan 
 of 1834 was undoubtedly the best if it had been 
 put in force in Jupiter and Saturn — that is, without 
 disturbing forces to interfere with it. 
 
 But this was not so, and the plan has never 
 had a fair trial. The public in its corporate 
 capacity has adopted it through the Legislature, 
 but the individuals of whom the public is com- 
 posed, acting separately, will not allow it to work. 
 If it were allowed to work, the choice before 
 every man not possessed of property would be 
 to satisfy an employer or go to the workhouse. As 
 a matter of fact the choice is between work 
 and cadging ; only a small percentage of the
 
 262 THE ECONOMIC OUTLOOK 
 
 persons whose industrial merits arc insufficient to 
 satisfy any employer are driven into the workhouse. 
 The great mass manages to subsist outside, either 
 entirely on the proceeds of cadging, or partly 
 by cadging and partly by the occasional earnings 
 necessary to give a colour to many forms of 
 cadging. All sorts of encouragement are given 
 to these people. They are praised for their re- 
 luctance to incur the stigma of pauperism when 
 they are parading the streets asking for alms. 
 
 What is wanted in order to do away with these 
 pauperising influences obviously is the entire 
 removal of public sympathy with the unemployed. 
 
 This removal will never be effected by ill- 
 natured letters to the Times, nor even by attempts 
 to fill up blank spaces in the Clare Market Review. 
 It can only be effected by taking away all reasons 
 or excuses for sympathy. What, then, are these 
 reasons or excuses? The chief of them seem to 
 be: — 
 
 I. The system of 1834 provides no reasonable 
 facility for repentance. If the sinner goes into 
 the workhouse he is industrially dead. If he 
 starves outside he will be physically incapable by 
 the time his repentance takes place. A man suffer- 
 ing the peine forte et dure could have the weights 
 taken off at any moment by simply consenting to 
 plead, but a mere expression of readiness to work 
 will not restore to the active industrial army one 
 who is broken down by privation.
 
 MUST A POOR LAW PAUPERISE? 2G3 
 
 2. The man may be a good-for-nothing, and 
 his wife may be tactless and incapable of keeping 
 him in order, but that is no reason for either 
 killing his children or causing them to be stunted 
 for want of proper nourishment. 
 
 3. The man is able and quite willing to work, 
 but can't get any. 
 
 The removal of the first of these excuses for 
 s>Tnpathy is a matter of detail rather than prin- 
 ciple. The regime of the workliouse, and especially 
 the great urban workhouse, is scarcely the best 
 conceivable for the purpose of facilitating the 
 restoration of the able-bodied to the condition of 
 mind and body in which they are likely to commend 
 themselves to an employer. The workhouse is 
 hell rather than purgatory. But there seems to 
 be no fundamental objection to the establishment 
 of industrial purgatories where the repentant may 
 be restored to health and vigour. It may be said 
 that such places have already been established by 
 voluntary agencies, such as the Salvation Army, 
 and that the results are not very encouraging. 
 That, no doubt, is true, but it entirely misses the 
 point of the present argument. What I am saying 
 is that it is desirable that these purgatories should 
 be available to every outcast, not because they will, 
 as a matter of fact, save 5 or even 10 per cent. 
 of those who resort to them, but because they will 
 take away the sympathy of the charitable public 
 from the distressed who do not resort to them or
 
 26i THE ECONOMIC OUTLOOK 
 
 are not regenerated by them. It is no use saying 
 to the tramp or broken-down unemployed, " I can't 
 assist you because I hear that 95 per cent, of the 
 
 people received at are hopeless cases." He 
 
 would immediately reply that he would be one of 
 the other five. But the case is quite different if 
 we can say, " Why don't you go to the office in 
 
 street and get sent to the Labour Home till 
 
 you're tidied up and made presentable?" If the 
 public were persuaded that purgatories of this 
 kind were really open to all, a mass of ill- 
 considered pauperising assistance would be cut off, 
 far outweighing the directly pauperising influence 
 of the institutions themselves, which would be very 
 inconsiderable if they were reasonably conducted. 
 The second excuse presents much greater diffi- 
 culty. I suppose it is true that a considerable 
 number of workers are kept straight by the 
 reflection that if they lose their places they will 
 see their families suffer and possibly bear the 
 reproaches of the mother for the sufferings of the 
 children. Provide in some way that no man's 
 family shall suffer because he is out of work, and 
 you certainly take away this deterrent from 
 idleness and misconduct, and it seems impossible 
 to devise anything which can be put in its 
 place. But if we reflect a moment we see 
 that this deterrent has got to go. The peoples 
 of whom we read in the Old Testament no 
 doubt thought it an excellent deterrent to crime
 
 MUST A POOR LAW PAUPERISE? 265 
 
 that a man should know that in certain circum- 
 stances his family, as well as himself, would be 
 punished. Modern civilisation has changed all 
 that, and modem ideas of justice will not long 
 tolerate the retention of this kind of vicarious 
 punishment for the venial offence of losing one's 
 job and finding difficulty in getting another. 
 Moreover, the value of the principle as a deterrent 
 to adults is probably quite outweighed by its evil 
 efi'ects upon the next generation. If the sufi'ering 
 of the children is really considerable, their physique 
 is unfavourably affected ; if it is inconsiderable, 
 or not great enough to be obvious to an ignorant 
 observer, the value of the deterrent must be small. 
 It seems, therefore, both inevitable and desirable 
 that the second excuse for sympathy with the 
 distressed unemployed should be taken away by a 
 strict enforcement of what is, I believe, already the 
 law, namely, that a parent must maintain his child, 
 and, if he cannot, must apply to the Poor Law. 
 
 Lastly, we come to the third excuse, " The man 
 is able and willing to work, but can't get any." 
 Before we can destroy the efficacy of this excuse 
 for public sympathy, we must make the philan- 
 thropic public believe that no man willing to work 
 need either starve or go through any really serious 
 suffering. Here the curious fact to notice is that 
 the public already knows that no man need starve 
 if he is willing to submit to the discipline 
 and work of the workhouse. Why is not this
 
 2G6 THE ECONOMIC OUTLOOK 
 
 sufficient to alienate public sympathy ? Not, I 
 think, because the workhouse discipline is cruel 
 or the task of work hard, but partly because 
 somehow or other the entry into the workhouse is 
 regarded as a final renunciation of the attempt at 
 self-support, and partly because of the purely senti- 
 mental objection to the receipt of poor-relief which 
 has been fostered by Mr. Loch's school — the 
 curious idea that it is more disgraceful to accept 
 relief from the community in general than from in- 
 dividuals. However this may be, it is clear that 
 the existence of a workhouse is no sufficient 
 answer to the excuse we are dealing with. Some 
 more popular institution must be substituted. 
 
 The more thoughtless adherents of a selfish 
 class movement cry out for unlimited employment 
 by the State at standard rates of wages. This 
 is obviously wholly incompatible with the main- 
 tenance of the present organisation of industry. 
 Paying standard rates, but unable to dismiss those 
 who did not earn the standard, the State would 
 be the most eligible employer, and would attach 
 the whole mass of labour to itself. " So much 
 the better," says the Socialist, but any way of 
 starting State Socialism less likely to succeed than 
 this can scarcely be conceived. Not only would 
 the State become universal employer too rapidly 
 for it to get ready any organisation for the pur- 
 pose, but, as it would begin with the worst labour 
 avaikiblc, the standard of industry would be
 
 MUST A POOR LAW TAUPERISE V 207 
 
 seriously lowered at the very outset. The better 
 workers, coming in to a system where a low 
 standard was already established, would conform 
 to it. 
 
 Clearly the terms offered by the State must be 
 less " eligible " than those offered by the ordinary 
 employer. Yet they must be good enough to 
 take away the syrripathy of the public from those 
 who decline to accept them. How can we 
 reconcile these requirements ? Time and experi- 
 ment are probably both needed to answer this 
 question, but I will hazard the suggestion that its 
 solution is to be looked for in a combination of 
 " labour colony " and " unemployed camp." I 
 do not believe that labour colonies, as commonly 
 conceived, will alienate public sympathy from the 
 cadger: they are too penal in character, and the 
 cadger who protests he would rather go to prison 
 than the workhouse will say the same of the semi- 
 penal labour colony, and get his copper just as 
 he does at present. But the unemployed who 
 seized land in Manchester and West Ham, and 
 started growing lettuces on it, seem to me to 
 have pointed out a safety-valve, and I was sorry 
 when the ovmers of the land sat on it by evicting 
 them. If they had remained, there would have 
 been valuable ocular demonstration of the fact 
 that it is not want of " access to the land " 
 (ridiculous phrase !) which prevents the unem- 
 ployed from being well-off. The public would
 
 268 THE ECONOMIC OUTLOOK 
 
 have tired of contributing, and the resuhant 
 collapse would have been instructive. In the 
 Manchester case, I believe, the owner of the land 
 offered to allow the experiment to be tried under 
 reasonable conditions, but the leader of the 
 movement was too astute to accept the invitation. 
 The principle of such institutions would be that 
 a bare subsistence would be guaranteed by the 
 State and furnished in kind. This is absolutely 
 necessary, as there is no doubt that every unem- 
 ployed colony or camp would starve if left entirely 
 to its own resources. But beyond this, each 
 institution would be self-supporting, and the 
 inmates would get their own products. This plan 
 would, of course, pay them twice over: once in 
 bare subsistence furnished by the State, and once 
 in the products of their own labour ; but I do 
 not think that the two would furnish a very 
 attractive income, nor that such attractions 
 as the income afforded would not be far out- 
 weighed by the necessary restrictions on the 
 liberty of the inmates. One of the most essential 
 requirements is that nothing in the nature of wages 
 should be set up : if people want wages, that is to 
 say payments for labour irrespective of the precise 
 actual product of the labour, they must commend 
 themselves to employers who retain the right of 
 dismissal. For the State to undertake to pay 
 wages is only to court misunderstanding and con- 
 fusion : those who come to it must be content
 
 MUST A POOR LAW PAUPERISE? 269 
 
 with the value of the actual product, and so far 
 as possible with the actual product itself. 
 
 Only a few lines of the blank space remain to 
 be filled: so to sum up I say that to diminish 
 pauperising influences and the total number of 
 those who are maintained in idleness or misconduct 
 by others, what is required is a more popular 
 Poor Law, even if it involves some considerable 
 extension of pauperism in the narrow technical 
 sense of Mr. Loch. And why not? The Poor 
 Law is, after all, nothing but the largest possible 
 charity organisation.
 
 IX 
 
 THE ECONOMIC IDEAL AND ITS APPLICATION 
 TO COUNTRIES OR NATIONS^ 
 
 A GREAT want in the teaching of economics at 
 the present time seems to be a clearer conception 
 of the economic ideaL I suppose some one may 
 object that economics is a science, and that sciences 
 have no ideals, " What/' some one may ask, 
 " is the mathematic ideal ? If there is no mathe- 
 matic ideal, why should there be an economic 
 ideal? " But there is nothing in this objection. The 
 adjective " economic " is not analogous to the 
 adjective " mathematic," if, indeed, that term exists. 
 That we all think there is an economic ideal is 
 sufficiently proved by the fact that we are always 
 disputing whether this or that particular course 
 of action is good or bad " from an economic point 
 of view." If there is a good or bad from an 
 economic point of view, there must be a best — an 
 ideal towards which we should strive, if striving 
 is any use, and for the attainment of which we 
 should hope, whether striving is any use or not. 
 
 ' Read before Section F of the British Association, 
 Dublin, 1908. 
 
 270
 
 THE NATIONAL IDEAL 271 
 
 I propose, therefore, this morning to ask in 
 the first place what that ideal is and how far, if 
 at all, it can be applied to countries or nations. 
 I say I propose to ask : I do not promise to 
 answer my own question ; and I rather hope that 
 you will doubt your own ability to answer it before 
 I finish. 
 
 I suppose that not so very long ago many 
 dabblers in economics would have been quite satis- 
 fied to answer that the economic ideal for the 
 world at large and each country is " the greatest 
 possible wealth." But that would not take us 
 very far if we accepted the definitions of wealth 
 which those same people put forward. They used 
 to say that wealth was things which had exchange 
 value, or something like that, which gave no real 
 information. We must proceed a little more care- 
 fully. The ultimate object of the science of 
 economics seems to be the more material side of 
 human welfare. I am not prepared to lay down 
 any rules for determining exactly where 
 " material " ends and non-material begins, and 
 I do not believe any one else can do so. The 
 fact that the material and the non-material slide 
 into each other by imperceptible gradations is 
 fatal to some too lofty claims which have been 
 put forward on behalf of economics, but it is by 
 no means fatal to the practical usefulness of 
 economic study. To refuse to investigate the 
 causes on which the material side of human welfare
 
 272 THE ECONOMIC OUTLOOK 
 
 depends because it is not always possible to dis- 
 tinguish between material and non-material would 
 be like refusing to eat because contemplation is 
 satisfying, or refusing to put on clothes in frosty 
 weather because the Librarian of the British 
 Museum thinks sixty-five degrees is temperate and 
 Professor Edgeworth says it is hot. 
 
 I do not, therefore, expect much dissent from 
 my proposition that the subject of economics is 
 human material welfare, and from that I should 
 infer directly that the economic ideal for the 
 world at large is the greatest possible human 
 material welfare. Our difficulties begin when we 
 ask for information about the manner in which 
 we are to conceive amounts of hunian material 
 welfare. Can we conceive amounts of it apart 
 from the number of persons enjoying them ? For 
 example, if the population of the world were multi- 
 plied by two, so that every one now existing was 
 provided with a double exactly as well-off as him- 
 self, should we consider human material welfare 
 as doubled, or exactly the same as before? All 
 tradition, at any rate since 1776, is in favour of 
 the second view — the view that we must, so to 
 speak, divide by the population. No doubt this 
 is the only reasonable view. If the mere multi- 
 plication of the human species is a good, it is a 
 good of a non -material character. When we want 
 to be clear and exact, then, we should say that the 
 economic ideal for the world at large is the greatest
 
 THE NATIONAL IDEAL 273 
 
 possible material welfare per head of human 
 beings. 
 
 The acceptance of this view involves the rejec- 
 tion of several others. It involves, of course, the 
 rejection of the absurd view seldom put forward 
 explicitly, but sometimes implied in doctrines of 
 early writers, and often attributed to them by 
 critics — the view that the economic idea,l is the 
 maximum " wealth " in the sense of capital. 
 Obviously material welfare does not depend only 
 on land and accumulated produce of past labour. 
 But it also involves the rejection of the more in- 
 telligent doctrine, that the economic ideal is the 
 maximum possible "income" per person. All sorts 
 of conditions result in a given income, however 
 measured, " going farther," that is, producing 
 more material welfare to one individual than to 
 another, and it is a commonplace now — an accepted 
 commonplace which forms the justification of 
 progressive taxation — that material welfare does 
 not increase pari passu with increasing income. 
 
 So far this is elementary and easy enough. We 
 have thought of individuals and of the world at 
 large — " the community " of the theoretic econo- 
 mist in its widest sense. But most of the current 
 statements about good and evil in economic matters 
 relate not to the world at large but to certain 
 entities, rather difficult to define or even to con- 
 ceive, called " countries " or " nations." What 
 are we to say if any one asks whether we can 
 
 18
 
 274 THE ECONOMIC OUTLOOK 
 
 apply our general ideal of the greatest possible 
 material welfare without modification to countries 
 or nations ; and if not, what modifications must 
 we make in it ? 
 
 At first sight it appears easy enough to apply 
 the ideal. If the ideal for the world at large is 
 that it should be inhabited by persons with the 
 greatest possible material welfare, why should not 
 the ideal for each part of it be the same? Why 
 should not the ideal for France be that France 
 should be inhabited by people with the greatest 
 possible material welfare, and so on for Germany 
 and the rest ? 
 
 There are several difiiculties. In the first place 
 we have to face the fact that this ideal will often 
 conflict with the political ideal which is commonly 
 held in relation, at any rate, to sovereign States. 
 What people generally desire for the sovereign 
 State to which they belong is power — power to 
 defeat the other States in battle if a quarrel should 
 occur, and sometimes, it is to be feared, power to 
 make it possible to quarrel with safety. It is 
 true that munitions of war become more and more 
 expensive, but in these days it is impossible to 
 carry on war successfully with alien mercenaries, 
 so that a large population as well as great wealth 
 becomes an object of desire to every sovereign 
 State. The nervous politician who is afraid of 
 being attacked, and the aggressive politician who 
 wants to attack some other State alike desire a
 
 THE NATIONAL IDEAL 275 
 
 population rich enough to pay for guns and ships, 
 but also numerous enough to supply the big 
 battalions necessary for victory. Now, there is 
 no ground whatever for assuming that the two 
 ideals will coincide. Most particular areas of the 
 earth's surface are capable of maintaining far more 
 people than could be as well off as possible on 
 them. At every single stage of progress every 
 area has what may be called an economic |X)pula- 
 tion: if it is inhabited by either a greater or a 
 smaller number than this, the condition of the 
 inhabitants will not be so good as it might be : 
 the area will be over-populated or under-populated. 
 A high degree of over-population which led to 
 semi-starvation and discontent would, no doubt, be 
 undesirable even from the military standpoint, but 
 it is obvious that a quite considerable over- 
 population would often be more desirable for 
 military purposes than the exactly economic 
 population. 
 
 We might perhaps dismiss this difficulty by the 
 reflection that economists are not bound to deal 
 with it. The whole business of fighting may very 
 reasonably be placed outside of economics. 
 People sometimes imagine they are fighting for 
 economic goods, but only because racial prejudices 
 and absurd misapprehensions have misled them. 
 But even from the purely economic point of view 
 there is considerable difficulty about applying the 
 general ideal to particular areas.
 
 276 THE ECONOMIC OUTLOOK 
 
 If we supposed the areas endowed with sense 
 and feeling, we might direct our attention to them 
 and suppose them to be gratified by having a 
 well-to-do population. But as things are we must 
 think of persons: our ideal is intended for human 
 beings, not for acres of land. The question imme- 
 diately arises, " For whom is it desirable that 
 the inhabitants of a particular area should enjoy 
 the maximum material welfare? " It is easy to 
 reply, " The inhabitants, of course," but who are 
 the inhabitants ? One set of people to-day and 
 another set, very probably not even identical in 
 number, to-morrow. A hundred or two hundred 
 years ago it may perhaps have been legitimate 
 to regard each country as a little world by itself. 
 Migration was difficult, foreign trade, though 
 regarded as of overwhelming importance, was 
 really trifling, the practice of living in one 
 country while drawing revenue from property in 
 another scarcely existed, and there was little of 
 that centralisation of commercial services which 
 results in persons who live in one country organ- 
 ising and directing industry and trade in other 
 countries. Under these circumstances it may have 
 been justifiable for convenience of treatment to 
 regard each country as " the community," and 
 talk as if what could be recommended for the 
 economic good of the world at large could always 
 be recommended also for the good of " the 
 country," It could be assumed that if the in-
 
 THE NATIONAL IDEAL 277 
 
 habitants of a particular area were particularly 
 well-off this must be because the conditions of 
 production within that area were particularly 
 favourable. Now, it is easy to see that this is not 
 true of small localities within any particular 
 country. If you want to know why the people 
 living in a particular district of London or Dublin 
 are rich, you don't expect to be told because the 
 natural advantages of that district are great, or 
 because the people living there belong to a very 
 fine race or work longer hours or harder than 
 those living in the other districts. You expect to 
 be told that it is because people of particularly 
 well paid professions happen to live there for con- 
 venience in getting to their work, or that such 
 people, and people who have a great deal of 
 property, live there because it is a pleasant place 
 and not too inconvenient for getting to their work 
 or looking after their property. The same thing 
 is rapidly becoming true in larger and larger 
 measure of those areas which we call countries. 
 It has, of course, long been noticed as between 
 Ireland and England. The average in Ireland was 
 pulled down by the fact that persons in receipt 
 of Irish rents thought England a more agreeable 
 place of residence. It is noticed now as between 
 countries like the United Kingdom and France 
 on the one side and what are called " new " 
 countries on the other. The *' old " countries lend 
 capital, as it is said, to the new, which really means
 
 278 THE ECONOMIC OUTLOOK 
 
 that certain persons with possessions in new 
 countries prefer to reside in the old centres of 
 civiUsation, either for the sake of their amenities 
 or because it is easier to oversee the management 
 of the whole of their property from thence. 
 
 No one can doubt that this arrangement of 
 population will become more and more prevalent 
 — that the wealthy will become more and more 
 concentrated in particular countries, whether their 
 wealth comes from possessions or services. The 
 matter cannot therefore be dismissed as unim- 
 portant. If not so already, it is soon destined to 
 become the determining factor in comparisons of 
 material welfare between different countries in- 
 habited by white peoples. France is a rich country 
 largely because people living in France own nearly 
 everything in France and a great deal outside it. 
 England is a rich country partly for the same 
 reason, and because London is a convenient centre 
 from which to direct commercial operations in 
 the rest of the world. The Transvaal is a poor 
 country because its mines belong to people who 
 don't live there. Differences arising from superior 
 capability of the persons who happen to be born 
 in the particular countries inhabited by white races 
 seem to be in the way of diminution. The par- 
 ticular varieties of the race get more and more 
 confounded and assimilated till there is not 
 much difference, if any. Incomes derived from 
 the same kind of labour, therefore, become more
 
 THE NATIONAL IDEAL 279 
 
 and more equalised, and it follows that national 
 differences in inaterial welfare are coming to de- 
 pend almost entirely upon differences in property 
 and in the kind of occupation followed by the 
 inhabitants. Those countries will be rich which 
 retain and attract people of property and people 
 capable of performing particularly valuable 
 services. 
 
 If, then, we adopt the ideal of maximum material 
 welfare for countries, every one should advocate, 
 each for his own country, the adoption of measures 
 which will retain and attract such people, even if 
 these measures involve sacrifices by the rest of the 
 inhabitants. " Attract the rich and drive out the 
 poor " becomes the keynote of economic policy. 
 
 I do not think this is reasonable " from an 
 economic point of view." Why should poor 
 persons inhabiting a country make themselves still 
 poorer in order that they may have as neighbours 
 certain people who would have lived across the 
 political boundary if they had not done so ? Why, 
 short of that, should they even deplore the poverty 
 of their country because they have not such neigh- 
 bours ? I feel this is a good place to ask the 
 question, because since I came to Ireland a month 
 ago I have come across persons in all ranks of 
 life below the wealthy who have spoken of the 
 poverty of Ireland as compared with England in 
 a regretful way, not apparently in the least 
 because they were troubled by poverty themselves
 
 280 THE ECONOMIC OUTLOOK 
 
 or by the poverty of those below them, but simply 
 because there is a larger rich class in England. 
 I do not suppose the regret is really very great. 
 Possibly it is merely assumed out of Irish politeness 
 to strangers. But, genuine or not, it seems to be 
 supposed to be the correct attitude, and I protest 
 against it. I cannot see that a particular English- 
 man who happens to be as poor as a particular 
 Irishman has any reason to consider himself better 
 off because he lives in the same island with a 
 larger rich class than the Irishman. 
 
 I do not see any chance of the inhabitants of 
 Ireland, taken all together, ever being as rich or 
 as well off as those of England : but there does 
 not appear to be the smallest reason why Ireland 
 should not approach the true economic ideal as 
 nearly as England or, indeed, nearer. I think I 
 should say that the economic ideal is attained for 
 a country when the labour which it is found con- 
 venient to carry on in the country is as productive 
 as possible. This would enable us to compare 
 like with like — to compare, for instance, Irish 
 butter-making with that of Devonshire and 
 Denmark. But I said I would not promise to 
 answer my question. I have asked it at consider- 
 able length, and must leave you to your own 
 nnswer.
 
 X 
 
 THE INCOMPATIBILITY OF SOCIALISM AND 
 NATIONALISM ^ 
 
 It is always useful to know with what sort of bias 
 a writer starts. Otherwise you waste your energy 
 in trying to make out which way he is going. 
 And if it happens, as it sometimes does, that he 
 has no bias at all, you go on wondering to the 
 end on which side he is, and then you find you 
 have altogether missed his real point. If any one 
 asks me if I am a socialist, and demands an 
 answer, yes or no, in the rude way ill-informed 
 people have, I say no. But if any one asks me 
 if I am an anti-socialist or an individualist, I say 
 no with equal readiness. I am not an anti -socialist, 
 because I think progress involves a great exten- 
 sion of conscious organisation, and I do not object 
 to that extension and try to hinder it as much as 
 possible. Even when I feel such doubts as to 
 some particular proposal for extension that I feel 
 bound to oppose it, I often have a sort of desire 
 that opposition may fail because the experiment 
 
 • Read at Ruskin Collerjc, Nov. 27, 1909. 
 
 281
 
 282 THE ECONOMIC OUTLOOK 
 
 will be so interesting and afford matter for 
 economic lectures. On the other hand, I refuse 
 to call myself a socialist, because it seems to me 
 that (i) most socialists still found themselves on 
 an antiquated economic doctrine which is invalid in 
 itself, and is not useful as a working approximation 
 to truth ; (2) in spite of the historical researches 
 of prominent socialists, most socialists still show a 
 very unhistorical spirit in regard to things as they 
 are ; and (3) I am not prepared to take the line 
 of advocating or opposing things simply on the 
 ground that they seem to be in accordance with a 
 general principle ; I think it is best to consider 
 each proposed change entirely on its merits and 
 let principles look out for themselves. Peasant pro- 
 prietorship is a good example of that ; I prefer 
 to judge such a scheme entirely with a view to its 
 results in promoting material welfare in the future 
 so far as we can see it, and without troubling 
 myself about the greater number of proprietors 
 standing in the way of progress in some remote 
 future, when the whole situation may be different. 
 In the present discussion, however, it is not in the 
 least necessary for us to concern ourselves with these 
 particular features of socialism as it is commonly 
 taught ; we may be content to take socialism 
 merely as the principle held by those who think 
 progress is in the direction of greater conscious 
 control by society of the Labour and the machinery 
 (natural and other) of which each generation of
 
 SOCIALISM AND NATIONALISM 283 
 
 men become possessed, and who expect and wish 
 that the control shall be exercised in such a way 
 as at least to give every one an equal chance of 
 economic welfare. 
 
 Now as to my other term. Nationalism may be 
 merely an aspiration for internal autonomy, an 
 aspiration on the part of the inhabitants of a par- 
 ticular territory to get rid of the control exercised 
 over them by the inhabitants of some other terri- 
 tory. I do not mean that sort of nationalism. I 
 mean rather the principle followed by those who 
 practically identify their own nation with Society, 
 and hold that the duty of the good citizen is to 
 promote the welfare of the nation even if the 
 means or the end involve greater ills to the people 
 of other nations. The extreme form of nation- 
 alism, which denies all rights to persons outside 
 the nation, is dead. You can see it in full force 
 in the Old Testament history of the occupation of 
 Canaan. The most violent nationalists of the 
 present day are ready to recognise some rights to 
 nations, and the people of nations, other than their 
 own, but even the more moderate of them, if their 
 nation is the stronger party in a dispute, always 
 seem to find extraordinary difficulty in believing 
 that any third party can be found who will decide 
 justly between them. Moreover, these admitted 
 rights only go a very little way, even in the opinion 
 of the mildest nationalist. You can see that 
 if you reflect with what universal approval any
 
 284 THE ECONOMIC OUTLOOK 
 
 proposal to " tax the foreigner " is hailed, except 
 in regard to its practicability. It is opposed, no 
 doubt, but only on the ground that it cannot be 
 done ; opponents almost always begin by saying 
 it is a highly desirable object, if only it could be 
 effected. No one ever thinks of asking what 
 possible justice there can be in such a plan. If 
 the four Powers which surround Switzerland were 
 to agree to boycott Switzerland by prohibiting 
 all imports and exports across her frontier, I do 
 not think there is any recognised principle of inter- 
 national law to which the inhabitants of Switzerland 
 could appeal. The newspapers would be full of 
 commiseration of the hard fate of Switzerland, 
 followed by admissions that the four Powers 
 were quite within their rights. If it could be 
 proved that they could benefit themselves in the 
 least degree, it would not matter to the convinced 
 nationalist that they were doing a great deal 
 more harm to Switzerland than good to themselves. 
 
 I propose to contend that this identification of 
 the nation to which a man happens to belong with 
 the Society to which he owes a duty is a great 
 obstacle to socialism, which must be removed 
 before socialism can make any considerable pro- 
 gress. I shall then add some discussion of the 
 probability of the removal of the obstacle. 
 
 To begin with, it seems to me that nationalism 
 suggests an entirely unsatisfactory unit of social 
 organisation. There is often doubt, indeed, as to
 
 SOCIALISM AND NATIONALISM 285 
 
 what unit it does suggest. You find it very generally 
 assumed both by advocates and opponents of 
 socialism that the social unit is to be the nation, 
 but no precise information as to what the nation is, 
 for example, in the case of the British Empire. I 
 suppose, however, that if the question were put to 
 them, all parties would agree that the British 
 Empire, as a whole, would not be the unit, but 
 would be divided into several great " nations," 
 say the United Kingdom (or perhaps Great Britain 
 and Ireland as two nations), Canada, Australia, 
 with or without New Zealand, South Africa, and 
 India. Different reasons would be given for this. 
 The opponents of socialism would say it would 
 obviously be necessary, since the British Empire 
 would break up before the change to socialism 
 was effected ; the friends of socialism would say 
 it would be more convenient and workable, but in 
 their hearts they would also say because they did 
 not want to give the 300 millions of inhabitants 
 of India a share in the ownership and management 
 of the means of production which have been accu- 
 mulated in the white portions of the Empire. At 
 bottom they would be very much influenced by a 
 habit we have got into of reckoning as units 
 those areas which have a common fiscal system, 
 especially if that system involves common customs 
 duties with the incidental result of common 
 statistics of imports and exports. Few realise 
 how powerful these influences are. Two areas may
 
 286 THE ECONOMIC OUTLOOK 
 
 be mixed up in the most puzzling way by a 
 tortuous boundary like Manchester and Salford, 
 but if you once give them a separate financial 
 system, the liveliest local patriotism arises in the 
 one which has the lowest rates ; when, in addition 
 to an internal fiscal system like that, you set up 
 customs duties, the people begin to think they have 
 a solidarity and common interest which they never 
 thought of before, and which has no foundation in 
 fact. We may take it, then, I think, that nation- 
 alism suggests for the social units a number of 
 territorial circumscriptions differing not very 
 widely from the political areas of the present day. 
 Here and there a scattered empire like the British 
 would be divided, and here and there some 
 rearrangement might be made to satisfy some old 
 tribal sentiment, such as that which would probably 
 lead the Irish to wish for separation from the 
 English and Scotch, even if they lost heavily 
 by it, or to satisfy prejudices arising from 
 colour. Here and there, too, language might sug- 
 gest an alteration. But on the whole the map 
 would not be very much changed. 
 
 Now, I say that these territorial divisions, even 
 with considerable improvements, would form an 
 impossible basis for socialism of any except the 
 most imperfect and crude type. Whatever may be 
 said in favour of mankind, or Society as a whole, 
 owning the natural and artificial means of pro- 
 duction, there is nothing to be said for giving such
 
 SOCIALISM AND NATIONALISM 287 
 
 means of production as happen to be situated in 
 each of a number of small areas to the people 
 who happen at present, and may happen in the 
 future, to be the inhabitants of each of those 
 areas. 
 
 At present the ownership does not correspond 
 anything like exactly with the inhabitancy of the 
 areas. The older countries, or rather the inhabi- 
 tants of the older countries, such as England, 
 France, and Germany, o,wn a great deal of 
 property in the new, such as Australia and 
 Argentina, and formerly in the United States. I 
 do not remember having seen any statement as to 
 what is to be done with this property if social 
 reorganisation takes place on a national basis. Is 
 a socialised area to confiscate the property of 
 foreigners, without compensation, or is it to reject 
 a principle on which a great many socialists still 
 found themselves, and pay rent and interest to 
 the other areas? Whichever plan is adopted, great 
 difficulties must arise, and some very uneconomical 
 results must ensue. If the plan of confiscatioin 
 is adopted, it means that each area must ever 
 afterwards be self-sufficient so far as the supply 
 of capital, in the sense of miachinery of production 
 made by ttian, is concerned. This would have 
 some very awkward consequences. The utilisation 
 of new areas by the human race could not be 
 carried on by individuals going out, naked and 
 without tools, into the wilds. They would not go,
 
 288 THE ECONOMIC OUTLOOK 
 
 and if they did, they would not accompUsh much. 
 Consequently all extension of this kind that was 
 done would have to be done by way of authorised 
 colonisation from the old-established territorial 
 units, who would send out batches of their own 
 people equipped with the necessary tools and 
 material. You would then be liable to all the 
 quarrels about colonies and areas for national 
 expansion which you have at present, and which 
 are, at any rate, usually supposed the greatest 
 obstacle to peace. Besides — and this is more 
 important — the newer areas which are already 
 established as nations, such as Argentina and 
 Australia, would be starved of capital as compared 
 with the " old countries." There would be an 
 uneconomical distribution of resources as between, 
 say, England and Australia and France and 
 Argentina. 
 
 On the other hand, if you suppose the plan of 
 borrowing to be adopted, you have to face, not 
 only the abandonment of the tenet of the illegiti- 
 macy of interest, which, from my point of view, 
 would not matter, but also the fact that there 
 would, at first, be considerable differences in the 
 material welfare of the people of the different units 
 in consequence, not of differences in efficiency of 
 labour taken by itself, but in consequence of the 
 difference in the amount of capital and the differ- 
 ence in the value of the land possessed. Perhaps 
 you will say it would not be enough to matter. I
 
 SOCIALISM AND NATIONALISM 289 
 
 think it would. But my difficulty is not so much 
 that the difference is great, but that, whatever it 
 is, it will either not last, being destroyed in a very 
 uneconomical way, or else it will give rise to most 
 undesirable restrictions on freedom of locomotion, 
 (i.) In the absence of restrictions on freedom 
 of movement it will not Last, because movement of 
 people will take place into the richer areas till 
 they get crowded enough and the others get empty 
 enough to equalise matters ; that is, if the capital 
 may not move, the people will move to the capital. 
 And this process will be very uneconomical, since 
 it will reduce the productiveness of industry as a 
 whole, by leading to an improper distribution of 
 population over the globe. You can see that if 
 you take a strong case. Imagine London a nation 
 with all the property in it belonging to any one 
 who might like to come to London ; obviously 
 London would be far too attractive. Why don't 
 we go to London now? Because the ground land- 
 lords keep us out by charging the value of the 
 ground against us if we go. If we didn't have 
 to pay that, we should go, and London would be 
 more overcrowded than it is. (ii.) If, on the other 
 hand, you suppose each area not to hesitate about 
 adopting a policy restrictive of immigration, each 
 of the richer areas will become closed to immi- 
 grants, and as people will not emigrate from them 
 to the poorer, the population of the globe will 
 tend to be shut up in a number of watertight 
 
 19
 
 290 THE ECONOMIC OUTLOOK 
 
 compartments, and a most undesirable inbreeding 
 will become the rule. 
 
 Another great difficulty arises from the fact 
 that a good many of the territories would be 
 monopolists of particular natural products — e.g., 
 North America of tobacco, South Africa of 
 diamonds — and might exercise their privileges as 
 monopolists to the disadvantage of the rest. 
 
 No reasonable person can doubt that a world- 
 wide organisation is necessary for the proper work- 
 ing of a socialistic system. If territorial units 
 are to exist at all, they tnust be kept in very strict 
 subordination to the world power. 
 
 But the socialist may say, " May we not work 
 for the territorial unit, for national socialism in 
 the first place, and leave the creation of the world- 
 wide organisation to come afterwards? Why must 
 we meantime abandon the national ideal to which 
 we are accustomed? What present obstacle is 
 nationalism to the progress of socialism? " 
 
 Well, in the first place, nationalism is far too 
 expensive. 
 
 It is becoming clear that all that any one is 
 likely to do by inventing and disclosing new 
 sources of taxation, whether they bleed the rich 
 or not, is simply to enlarge the expense of what 
 writers on public finance call hypocritically 
 " defence." No better scheme of taxation has yet 
 been invented than graduated death duties. The 
 effect of the graduated duties introduced by
 
 SOCIALISM AND NATIONALISM 291 
 
 Harcourt in 1894 is that the United Kingdom 
 draws between three and four milHons more than it 
 would be drawing at the old uniform rate. Mean- 
 time the military and naval expenditure has gone 
 up by well over thirty millions. What is the use 
 of bleeding the rich by taxation, or of taking 
 possession of the land, or even the instruments of 
 production as a whole, if all the result is merely to 
 give the Governments ten times more to spend 
 on " defence "? Not long ago a supposed organ 
 of peace and retrenchment congratulated itself on 
 the carrying of a portion of the army from London 
 to Hastings in automobiles on the ground that it 
 showed how what was at first a luxury of the 
 rich became eventually " serviceable to the general 
 needs of the community." I should much rather see 
 automobiles and flying machines remain for ever 
 the plaything of the rich than become a new and 
 expensive part of the machinery by which different 
 factions of the human race, bound by no other 
 real tie except contiguity of residence, attempt to 
 destroy each other. What, too, of the money 
 borrowed for carrying on wars? Socialists never 
 seem to realise how enormously the creation of 
 great national debts for unproductive, or rather 
 for destructive, purposes worsens the position of 
 the " disinherited." Nearly all of those millions, 
 if they had not been borrowed and shot away, 
 would have been " productively invested " ; that 
 is to say, they would have appeared in the form
 
 292 THE ECONOMIC OUTLOOK 
 
 of new houses and other instruments of enjoy- 
 ment, or factories, docks, railways, and other 
 instruments of production. They would, it is true, 
 not have belonged to the disinherited, but they 
 would have belonged to somebody, and would have 
 improved the position of the disinherited by 
 making capital cheaper. Why do you have to pay 
 one-half per cent, more interest now than in 1897? 
 For many reasons, no doubt, but the borrowing 
 for the South African and Russo-Japanese wars 
 is one of the greatest. The tolerance which most 
 socialists display towards this form of property 
 always surprises me. If it is bad that I should 
 inherit £100 worth of land and take all the fruits 
 of it, surely it is worse that I should inherit 
 £1,000 of Consols and get £25 a year, less income 
 tax, sent me by post every year without ever 
 doing a hand's turn for it. Then you must 
 remember that this is a particularly strong form 
 of property, because it rests on the promise of the 
 State, which in nationalistic theory is identified 
 with society ; in some countries it is even promised 
 that the interest on the public debt shall be free 
 of taxation. A socialist has some difficulty in 
 dealing with it. 
 
 Unless sociahsts can somehow get rid of this 
 military incubus, socialism will become unattrac- 
 tive to every one. A world composed of territorial 
 socialist societies in which the whole surplus 
 income over bare necessaries was spent in war and
 
 SOCIALISM AND NATIONALISM 293 
 
 preparations for war would obviously be a more 
 miserable place than the world as we know it. 
 It is no use saying that this is all going to be 
 altered when you get a Labour Parliament and a 
 Labour Ministry. It will not be altered as long 
 as the present nationalist feeling prevails in this 
 and other countries. It is all very well for Labour 
 Members (or rather those of them who do not 
 represent dockyard constituencies) to vote against 
 the last million or two which is proposed at 
 present, when they know quite well they will be 
 beaten. Put these same men into office, and make 
 them responsible for " the safety of the country," 
 as the phrase is, and they will change their tone 
 just as quickly as the members of the present 
 Government have done. And if they did not, 
 they would be turned out. 
 
 Perhaps you say they would make an agreement 
 for the limitation of armaments. I am not sure 
 that something of that kind may not be done 
 even now, and I think, on the whole, I would 
 go for it. But it is impossible to feel very 
 sanguine about such arrangements when you reflect 
 that they could only tie the parties in particular 
 directions, such as building Dreadnoughts, and 
 however faithfully each party observed the agree- 
 ment, the jingo papers of the other side would 
 always be accusing them of breaking, or at least 
 of evading, the terms. These partial limited 
 agreements are not likely to do much good. Duel-
 
 294 THE ECONOMIC OUTLOOK 
 
 ling flourished long on the limited agreement that 
 men should fight with equal armament. 
 
 Secondly, the nationalist sets up a wholly 
 irrational ideal which is incompatible with the 
 humanity of the socialist. The socialist's idea 
 is to arrange things in a manner which will be 
 good for human beings. The nationalist's idea 
 is the glorification of a mere territory. Once, 
 indeed, the nationalist sought the good of his 
 tribe, and that, at any rate, was a rational object, 
 of which some clear conception could be formed. 
 It had, too, the sort of respectability which is 
 supposed to attach to family afi'ection. But nowa- 
 days nationalism is nothing more than territorial. 
 Each person who, by whatever accident of birth, 
 happens to " belong " to some particular territory, 
 is brought up in the belief that he ought to be 
 ready to fight, and if necessary die, for " it." 
 What is " it "? He never really knows. There is 
 a fine passage on that inWallas's "Human Nature 
 in Politics," where he says that the Frenchman 
 dying for his country thinks of the statue of la 
 France in the market-place of his native to\Mi, the 
 German of an antiquated printing type which other 
 countries have given up, and the Englishman of 
 the row of pollarded elms behind his house at 
 home. It is difficult to keep free of that kind 
 of feeling. I have felt it myself. Not of the 
 chestnut in my back-garden, but of the view of 
 the Vale of White Horse from the brow of Cumnor
 
 SOCIALISM AND NATIONALISM 295 
 
 Hill. But the rational man must surely claim 
 that " it," his " country," for which he thinks it 
 right to fight and die if necessary, is something 
 human, some persons present or to come. Clearly 
 his country is for the present the people who 
 happen to " belong to " that territory, and for 
 the future it is the people who will happen to 
 belong to it in the future ; probably most of 
 these future people will be the descendants of 
 the present inhabitants, but that is not necessary, 
 and is not always expected, as in the case of new 
 countries which attract immigrants in large 
 numbers. But the curious thing is that in fact 
 the good of these people is never clearly con- 
 ceived as an object of endeavour. It is, indeed, 
 rather difficult to conceive it, if you admit that 
 their number may alter. People do not know 
 whether they want a high average or a large 
 aggregate of welfare on their territory, and 
 generally decide in favour of a large aggregate. 
 Thus all the nations are each striving for the 
 greatest possible population on their respective 
 areas. Some one may, perhaps, say this will 
 tend to the general good, but that is not true. 
 Take the case of Ireland. The population has 
 diminished one-half in sixty years. Those who 
 left Ireland and their descendants are better off 
 by far in the United States than they could have 
 been in Ireland, and those who have remained are 
 better off, too. The descendants of the whole
 
 296 THE ECONOMIC OUTLOOK 
 
 number of persons who were in Ireland in 1840 
 are both more numerous and more wealthy in 
 consequence of the depletion of Ireland. Yet 
 where will you find an Irish nationalist who will 
 not deplore the depopulation of Ireland? The 
 aim of Irish national policy would be to retain 
 the population even by measures which would 
 damage every one concerned. And why? Merely 
 because the United States are not politically a 
 part of Ireland. If only the United States had not 
 Home Rule, then it would be all right. The 
 colonisation of North America would be merely 
 " a wholesome filling up of our western territory 
 which relieves congestion in the old settled portion 
 of our domain." Is this rational? Is a policy 
 directed by such absurd sentiments likely to turn 
 out to the general good which the true socialist 
 desires to promote? You see it at work in all 
 the colonial and protective arrangements which 
 have done so much to obstruct the progress of 
 mankind and have had so much to do with the 
 discrediting of State regulation of everything. 
 
 The hope is that the Socialist or Labour move- 
 ment, I care not which you call it or which it is, will 
 become so international in character that the forces 
 which oppose the movement will be obliged, how- 
 ever much they dislike it, to become international 
 also. The day that both parties in a quarrel begin 
 to feel that they are more in sympathy with a cor- 
 responding party outside the country than with
 
 SOCIALISM AND NATIONALISM 297 
 
 their opponents within the country the nationahsm 
 of that country is doomed. At the time of the 
 great navy scare in England there was an instruc- 
 tive letter in the Times from a writer signing 
 himself " Nationalist." He asked socialists to 
 support a large navy on the ground that if they 
 did not, the " unregenerate militarists " in Ger- 
 many would invade the country and leave socialists 
 nothing much to nationalise. I expect that person 
 does not really even now dislike the German 
 militarists as much as he dislikes the German 
 social-democrats or the French anti-militarists who 
 go to prison rather than serve in the army : in 
 twenty years' time he may be a member of the 
 Anglo-German anti-socialist association, with 
 several retired fire-eating British and German 
 admirals and generals for vice-presidents. When 
 we get to that stage, we shall not be very far 
 off the creation of the United States of Europe, 
 and when that comes there will not be much 
 difficulty with nationalism. The colour difficulty 
 will remain, and give the next ten generations 
 plenty to think about outside their merely economic 
 interests, but it will leave them a sufficiency of 
 means for the promotion of those interests, which 
 they have not at present.
 
 XI 
 
 EQUITY AND ECONOMY IN THE REMUNERA- 
 TION OF LABOUR ' 
 
 I AM not one of those who believe in the early 
 possibility of getting rid of " industrial conflicts " 
 in the sense of stoppages of work owing to 
 refusals to accept what is ofifered or refusals to 
 give what is demanded, and I think that the evil 
 effects of such stoppages when carried on with 
 tolerable good-humour on both sides are usually 
 much exaggerated in common estimation. But 
 whether this is so or not, I am confident that every 
 one will agree that a large proportion of the evil 
 effects of the stoppages would be avoided if they 
 were conducted with less bitterness : they would 
 often be shorter and would all cost less while they 
 lasted and leave a less expensive aftermath in 
 discontented feeling on both sides which hinders 
 the resumption of efBcient working in all kinds 
 of ways. The causes of bitterness are many, 
 and probably most of them are " trivial," such as 
 
 ' Written just after the great railway strike of August, 191 1 : 
 not hitherto published. 
 
 298
 
 THE REMUNERATION OF LABOUR 299 
 
 want of politeness and the use of an unduly turgid 
 literary style in speech and correspondence. But 
 there is one important cause which we find at the 
 bottom of almost every dispute, however inflamed 
 by the " trivial " causes, and this is the profound 
 belief, which seems implanted by Nature in the 
 mind of almost every one, that his income 
 " ought " to be, that is to say, would be, if justice 
 prevailed, somewhat bigger — about 25 per cent. 
 is the average — than it actually is. It is quite a 
 mistake to suppose that the belief is confined to 
 persons in receipt of wages and salaries : it is held 
 just as strongly by those whose income is obtained 
 by way of business profits or by way of interest 
 or rent from' investments and property — and that, 
 too, whether the investments and property have 
 been the result of the saving of the owner or have 
 been given or bequeathed to him. 
 
 The universality of the belief ought to awaken 
 doubts about its soundness. It is clear that there 
 is not enough at present to allow of the distribu- 
 tion of 25 per cent, or even i per cent, more than 
 people actually get. Somebody or other gets 
 every particle that is produced. Every one, then, 
 cannot be right in thinking that justice demands 
 that his income should be immediately raised about 
 25 per cent. This will be generally admitted: 
 the trouble is that each person thinks he and his 
 own class are right, and that it is the other classes 
 who are wrong, in the belief that their incomes
 
 300 THE ECONOMIC OUTLOOK 
 
 "ought" to be about 25 per cent, higher than 
 they are. It seems worth while to inquire what 
 our ideas of justice in the distribution of what is 
 produced really amount to. 
 
 On the Sunday morning after the settlement 
 of the railway strike a nonconformist minister 
 prayed fervently that righteousness might prevail. 
 One at least of his audience remarked on getting 
 outside that righteousness was all very well, but 
 it would never settle whether some particular wages 
 should be 20s. or 25s. a week. The remark 
 will seem to some to suggest undue levity of 
 mind, but it contains profound truth. It is really 
 useless to expect to decide the distribution of 
 wealth on any generally accepted ideas of justice 
 or equity. 
 
 No one really believes that it is actively just 
 or equitable that one infant should be born the 
 possessor of millions and another with nothing but 
 what can be got from parents with 15s. a week 
 or from the Poor Law Guardians. But nearly 
 ev^ery one thinks that it would be grossly unjust to 
 pass an Act of Parliament to take the property of 
 the deceased Midas away from his posthumous 
 offspring and give it to some Oliver Twist in the 
 workhouse : every one would expect the little 
 Midas to be an object of general sympathy when 
 he succeeded to Oliver's place in the workhouse, 
 while the promoted Oliver would be received with 
 hisses in the public street. This, it may be said,
 
 THE REMUNERATION OF LABOUR 301 
 
 is only a question between individuals — " of course 
 public sentiment would not approve merely hap- 
 hazard alterations in distribution like that." But 
 it is surely also true that public sentiment or the 
 public's idea of justice does not approve of any 
 drastic alterations in distribution, even if equally 
 applied to whole classes. Why are the rich 
 allowed to retain their riches in democratic 
 countries ? Not because the multitude believes the 
 existing economic organisation to be a good one, 
 but because it believes it to be unjust — " robbery " 
 — to take away what people have once got, and 
 also because it has a somewhat less strong, but 
 still very powerful, belief that it is unjust to make 
 any very considerable inroad on the old customs 
 which allow the living to step into the places of 
 the dead. These ideas are purely negative. They 
 supply, in the absence of the sound economic 
 teaching which should replace them, a useful brake 
 upon the wheels of change, and that is all. They 
 cannot provide a guide for progress. 
 
 "It may be true," some one may say, " that 
 with regard to property, our current ideas of 
 justice do not amount to more than a certain 
 amount of reverence for custom, but surely you 
 must admit that . we have much more positive 
 beliefs about the just remuneration of labour. "^ 
 One tolerably clear idea we certainly have — the 
 idea that when two persons do the same kind, 
 the same quantity, and the same quality of work
 
 302 THE ECONOMIC OUTLOOK 
 
 in the same place and at the same time they 
 " ought " to receive the same remimeration. 
 Though all these conditions are scarcely ever 
 exactly fulfilled, they are often approximately 
 fulfilled, so that this rule of justice plays a large 
 part in many wage discussions. But the greater 
 inequalities of earnings are between different 
 kinds of work, and then the rule is of no use 
 whatever. 
 
 There appears to be a very general acquiescence 
 in the general features of the scale in which 
 dift'eren'c kinds of labour is graded. We find 
 people generally demanding a small increase in 
 remuneration for their own class and imagining 
 they would be perfectly contented if they got it. 
 They do not think that justice demands that they 
 should be raised to a very much higher level 
 in the general scale : scavengers, for example, 
 may ask for a rise from 24s. to 30s. a week, 
 and may even think they "ought " to have 35s., 
 but they never think of claiming that they 
 " ought " to be paid as much as is earned by the 
 average medical practitioner. Still less do they 
 see anything much wrong with the scale so far 
 as it does not affect themselves. We should all 
 like to touch up the scale here and there, but none 
 of us seem to want to alter it fundamentally. 
 If, then, we allege that there is some " just " 
 remuneration of labour which labour " ought " to 
 get, we are bound to find some defence of the
 
 THE REMUNERATION OF LABOUR 303 
 
 existing scale of remuneration on grounds of 
 justice. 
 
 No such defence, however, can be found, any. 
 more than in the case of the inequalities of income 
 derived from inherited property. Several rather 
 stupid suggestions are made by the man in the 
 street. One is that " skill " is a thing which 
 " ought " to be paid for, so that it is " just " that 
 the professions and skilled trades should be higher 
 paid than the other occupations. But why the 
 skill which is possessed by an average member 
 of one of the professions or skilled trades " ought " 
 to yield more or less than the skill possessed by 
 the average member of another of these occupa- 
 tions or more than that possessed by the average 
 member of a so-called " unskilled " occupation, 
 nobody seems to know. There is no way of com- 
 paring the skill required in different occupations. 
 If we could compare it, we should still be met with 
 the fact that the skill is either natural or acquired: 
 if it is natural, we know of no reason for 
 supposing that the happy possessor ought to be 
 paid higher, and if it is acquired, it was 
 probably acquired chiefly in consequence of oppor- 
 tunities created by persons other than the possessor 
 himself. Another suggestion, to which Adam 
 Smith in one of his weakest moments lends some 
 countenance, is that " responsibility " is a thing 
 which " ought " to be paid for. The railway- 
 men have sometimes urged the " responsibility "
 
 304 THE ECONOMIC OUTLOOK 
 
 of the occupation as one ground for their demands. 
 There are, no doubt, many excellent reasons which 
 make it expedient to pay responsible persons 
 more than those who cannot do much damage 
 by fraud or carelessness, but it is surely rather 
 absurd to claim that it is justice to the employee 
 which demands that he should be higher paid when 
 trusted with responsible work. Still more absurd 
 is the suggestion, often thoughtlessly made, that 
 the better paid kinds of work are the " more 
 important," and that it is just that persons engaged 
 in important work should be higher paid than 
 others. There is no solid ground for either belief: 
 agricultural labour is at least as important as any, 
 of the professions, and it could not possibly be just 
 to those who were not selected for the important 
 duties to pay them less than those who were, 
 simply because the important duties did not find 
 work for all. 
 
 What the existing scale of remuneration for 
 different kinds of labour does is to give each kind 
 its market value, and this value is obviously 
 settled by a great many influences, among which 
 justice plays no part at all. Attempts to tinker 
 it here and there on the ground that particular 
 small features in it are unjust, and that justice 
 would be done if this or that class had lo or 
 20 per cent, more than at present are really 
 childish. 
 
 While a clear appreciation of this fact should
 
 THE REMUNERATION OF LABOUR 30£ 
 
 take away a good deal of the bitterness which at 
 present accompanies the necessary haggling 
 between employers and employed, it certainly does 
 not follow from it that no class of men or women 
 should ask for more than they are getting, nor. 
 that disinterested persons should not be glad when 
 some of the demands made are successful. 
 
 The first point surely requires little elaboration. 
 The whole of our present economic organisation is 
 really dependent on people asking for as much 
 as they can get, and the world would be thrown 
 into a state of unimaginable confusion if they 
 suddenly ceased to do so and began deliberately, 
 to let their property for less and to work for less 
 than they could get. Mr. ^Wells himself could 
 not make much of such a hypothesis. No one 
 doubts that an individual is acting in the public 
 interest as well as in his own when he sells his 
 services to the highest bidder. Even the rather 
 unreasonable middle-class British matron, 
 grumbling furiously at the rise in the cost of 
 domestic service brought about by the purest 
 individual competition, makes no accusation against 
 the principle, but only alleges that young women 
 do not carry it out, because they do not under- 
 stand their own best interest. " They are," she 
 says, " much better off in domestic service." The 
 only difficulty arises from the fact that attempts 
 are made to draw an altogether unsound distinc- 
 tion between individual competition on the one 
 
 20
 
 306 THE ECONOMIC OUTLOOK 
 
 side and combination to secure good terms on 
 employer employing more than a small number 
 domestic servants do not act in concert, and are 
 nearly equal in number to the employed, no single 
 employer employing more than a small number 
 and most only one or two, refusals to work below 
 a certain wage in this industry excite no public 
 attention, though all the year round there is a 
 certain percentage of women " changing situa- 
 tions " and not immediately " suited " because they 
 cannot immediately get what they ask, and prefer 
 to hold out. There are no breaches of contract, 
 no violence, and no bombastic speeches. But if 
 wages and conditions were standardised by the 
 employers forming a combination, or by the 
 formation of large companies which undertook to 
 provide domestic service for payment and paid 
 the servants themselves, strikes would naturally 
 occur from time to time, just as in other industries 
 at present. And why not? How else could the 
 older persons in the employment guard their 
 interests when deprived of the former resource 
 of playing one employer off against another ? Of 
 course the terms offered by other industries com- 
 peting with domestic service for recruits would 
 affect the terms offered for recruits by the com- 
 bination or the companies, but it would be quite 
 possible in an occupation with many varieties and 
 grades to screw a good deal for the recruits out 
 of the older hands, so as to make the position of
 
 THE REMUNERATION OF LABOUR 307 
 
 those older hands very much worse than it would 
 have been if the former conditions of individual 
 competition had continued in force. It is true that 
 in the long run it would not be to the interest of 
 the combination or companies to act in this way, 
 since in time the worse condition of the older 
 hands would begin to tell upon the minds of the 
 intending recruits, but it is unreasonable to expect 
 more than a very moderate " length of view " from 
 such institutions. Hence the concerted refusal of 
 large numbers of men to work on the terms offered 
 by employers (to which we give the name of 
 " strike ") is just as necessary a part of modern 
 economic organisation as the individual refusals 
 of single persons acting alone. 
 
 As to the second point, many persons seem to 
 imagine that if there is no rule of justice in the 
 remuneration of different kinds of labour, it is 
 impossible for them to have sympathies in regard 
 to any change in wages which does not affect them 
 personally. Like Queen Victoria, they want to be 
 told what is right, not what is expedient. But 
 there are surely many things which we properly 
 welcome, and many which we properly deplore, 
 although no question of justice or righteousness is 
 concerned. We ought obviously to rejoice, as a 
 rule, at the occurrence of any event which in- 
 creases the material welfare of any class without 
 reducing that of other classes, and, of course, it 
 often happens that a rise of earnings is merely
 
 308 THE ECONOMIC OUTLOOK 
 
 the result of some change which causes the workers 
 to produce a larger quantity of product than 
 before without reducing the value of the unit of 
 quantity sufficiently to prevent them profiting by 
 the increase. But it is perhaps not quite so clear 
 what we ought to welcome and what we ought to 
 deplore when a rise of earnings in some par- 
 ticular occupation is not the result of increased 
 productiveness, but is distinctly at the expense of 
 some other class or classes of the community. 
 
 The popular belief — not, I think, only among 
 the weekly wage -earners but among all classes — is 
 that rises of wages in particular occupations are 
 always at the expense of the owners of property, 
 vaguely called " the capitalist " in popular oratory. 
 But this belief will not bear a moment's examina- 
 tion. The particular *' capitalists " from whom 
 the wages of particular kinds of labour come in 
 the first instance are usually merely middlemen 
 between the workers and the consumers: if the 
 price paid by the capitalists to the workers in- 
 creases, the capitalists will be able at once or after 
 no long interval to charge the increase to the 
 consumers. Wages are not ultimately paid by 
 the capitalist, but by the persons who want and 
 are able to pay for the product of the particular 
 labour in question. Of course, there are a' few 
 products which are only bought by rich people, and 
 rich people are mostly owners of property. But 
 this is not the ordinary case. In spite of the
 
 THE REMUNERATION OF LABOUR 309 
 
 enormous wealth of the very rich, the greater part 
 of the demand for products in general comes 
 from the moderately well-to-do and the poor, and 
 a very large proportion comes from the " working- 
 classes " in the ordinary sense of that term. Con- 
 sequently it is inevitable that when particular 
 workers get more without producing more, the 
 burden should fall largely, and sometimes chiefly, 
 upon wage-earners doing other kinds of work. 
 It would be absurd, then, even for one whose 
 sympathies were altogether on the side of the 
 workers against the owners of property to sym- 
 pathise indiscriminately and equally with every 
 demand for increased wages. Wage questions are 
 constantly questions about the relative remunera- 
 tion of different kinds of labour, and before we can 
 tell what we ought to welcome and what to deplore 
 we must have some notion of the scale of relative 
 remuneration which we approve. 
 
 The ordinary economic textbooks are at fault 
 m not insisting on the fact that the most 
 economical distribution of a given amount — the dis- 
 tribution which will " make the most of " the 
 amount, or " make it go farthest " — is distribution 
 according to need. Wherever an intelligent and 
 well-meaning person has the control of the dis- 
 tribution of a given amount between a number of 
 persons, and is not hampered or biassed by 
 thoughts about the effect of the distribution upon 
 the similar amounts which he may have to dis-
 
 310 THE ECONOMIC OUTLOOK 
 
 tribute in the future — that is to say, whenever the 
 sum to be distributed is really a given sum, and 
 not one liable to be affected in the future by the 
 distribution in the present — this rule is adopted. 
 It is adopted in besieged cities, in ships short of 
 provisions at sea, in hospital, and between 
 members of the family unable to support them- 
 selves in every well-conducted home. It is not 
 adopted by " nations," not because it is not a 
 good principle, but because the amount to be 
 distributed is by no means " given," but would be 
 immediately affected by the change in distribu- 
 tion and that in a very disastrous manner. But 
 the fact that we cannot put the principle in force 
 by territorial-government action does not prevent 
 us from very properly rejoicing when we see 
 approximations to distribution according to need 
 taking place without disturbance of the existing 
 organisation for production. Now, no one supposes 
 that there is any correspondence between the 
 present inequalities of income and the needs of the 
 recipients. Messrs. Rockefeller and Carnegie do 
 not possess their millions because they particularly 
 need a large amount, and at the other end of the 
 scale there are hosts of people whose needs are 
 made great by the very facts — illness and infirmity 
 — which make them unable to earn any income at 
 all. It is certain that as a general rule approxima- 
 tions towards greater equality of income mean 
 at the same time approximations towards distri-
 
 THE REMUNERATION OF LABOUR 311 
 
 bution according to need, and should therefore be 
 welcomed, whenever the advantage thus gained 
 is not offset by an equal or greater loss resulting 
 from damage to production and consequent 
 diminution in future amounts to be distributed. 
 
 It follows that the changes in the remuneration 
 of labour which we should welcome because they 
 are economical are those which, without injuriously 
 affecting production, reduce inequality of wealth. 
 Of course, it may sometimes happen that an 
 increase of earnings which are already high may 
 do this because the particular demand comes 
 entirely from the rich: a rise in the remuneration 
 of butlers and ladies' maids, for example, would 
 pinch nobody but the wealthy, while benefiting a 
 class with only moderate means. But such cases 
 do not amount to much. The really potent 
 changes of the character desired will be those 
 which raise the remuneration of the worst paid 
 occupations. 
 
 It will perhaps be said that every reasonable 
 person knows that a rise in the lowest wage is a 
 good thing, and that every well-disposed person 
 welcomes it accordingly. But do they do so 
 without the reservation " if the rise is not at the 
 expense of some other class "? Some such reser- 
 vation is implied in the phrase " the economy of 
 high wages " as the name of the doctrine which 
 teaches not that high wages are a good in them- 
 selves, but that they enable and induce the wage-
 
 312 THE ECONOMIC OUTLOOK 
 
 earner to produce so much more than the ultimate 
 payers of the wages gain. If what I have said 
 were really accepted, this reservation would not be 
 made. I think, too, that it would then be easier 
 than it now is to keep distinct the individualistic 
 ends of separate trade unions and the much more 
 altruistic aims of a " Labour Party " supported by 
 these same unions. It is only in the baser kind of 
 political strife that any one even pretends to find 
 inconsistency in the action of an individual who 
 drives the best possible bargains for himself in his 
 private business while doing the best he can for 
 his neighbours in his political or other public life. 
 All that is required of such' a man is that he should 
 recognise that he may be bound sometimes to 
 support public measures which will damage his 
 individual interests. Trade unions taking part in 
 politics, and especially those which represent the 
 better paid trades, will doubtless often find them- 
 selves subject to the same rule. 
 
 UNWIN BROTHERS, LIMITED, THE GRESIIAM PRESS, WOKING AND LONDON.
 
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