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 THE GIFT OF 
 
 MAY TREAT MORRISON 
 
 IN MEMORY OF 
 
 ALEXANDER F MORRISON
 
 /**- 

 
 THE LABOUR MOVEMENT
 
 THE 
 
 LABOUR MOVEMENT 
 
 BY 
 
 L. T. HOBHOUSE 
 
 THIRD EDITION, COMPLETELY REVISED 
 
 
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 THE MACMILLAN COMPANY 
 
 1912
 
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 (i4// n^/z/s reserved)
 
 PREFACE TO THIRD EDITION 
 
 Written nearly twenty years ago, this little volume 
 was intended as a brief and elementary analysis 
 of the principles underlying the Labour Move- 
 ment of that time. Though several times reprinted 
 it has never been fully revised, and now that the 
 task has been undertaken it has been found neces- 
 sary in large measure to rewrite the book. At 
 the same time I have kept as closely as possible 
 to the original form and scope of the work, which 
 was intended to be an outline sketch, not at any 
 point an exhaustive treatment. I have felt justi- 
 fied in so doing because after twenty years the 
 social theory outlined appears to me, even more 
 clearly than before, to express the real mind of 
 the Labour Movement and the possible lines of 
 social regeneration better than the more familiar 
 forms of Socialistic theory. Indeed, the present 
 Syndicalist Movement, wild in many of its ex- 
 pressions and incoherent as a substantive plan as 
 it may be, becomes intelligible as a protest of 
 despair against bureaucratic Socialism and the 
 cumbersome slowness of the Parliamentary 
 machine. The need of the day is still as it was
 
 6 PREFACE TO THIRD EDITION 
 
 twenty years ago to appreciate the right relations 
 between ** voluntary " associations like Trade 
 Unions and the collective action of the State, to 
 decide on the true function of each, and to dis- 
 tinguish what they can and cannot do to bring 
 about more human, more equitable, and more har- 
 monious relations in the economic world. As I 
 write the greatest strike of our industrial history 
 is ending. Deeply impressive as an example of 
 democratic organisation, the lesson of the struggle 
 is that even under favourable circumstances the 
 power of combination is narrowly limited except 
 so far as it carries with it an effective force of 
 public sympathy. The history of the crisis gives 
 no substance to the vague alarm lest Society be 
 some day arbitrarily " held up " by a corribination 
 of workpeople controlling some vital instrument 
 of production. That is a bare possibility against 
 which the State may fairly take its precautions, 
 but it has little substance in comparison with the 
 urgent and ever-present reality that even with the 
 best organisation labour has the utmost difficulty 
 in securing a reasonable standard of living. The 
 comparison of men demanding a very moderate 
 wage in return for very arduous work to robber 
 barons preying on Society is a bitter satire, not 
 on Trade Unionism but on an attitude of mind too 
 common among the more fortunate classes. 
 
 A more democratic State than ours might con- 
 ceivably dispense w'ith Trade Unionism and settle 
 industrial disputes by compulsory arbitration. With
 
 PREFACE TO THIRD EDITION 7 
 
 us I am afraid that the beautiful doctrine of indus- 
 trial peace does not always mean peace with social 
 honour. It is too much like a soothing formula 
 crooned over harsh and inequitable conditions 
 against which it is right to war. The acute tem- 
 porary misery of a strike impresses the imagination, 
 but the long-drawn-out wretchedness of j)erma- 
 nent and hopeless poverty is accepted as a part of 
 the natural order. The method of the strike alone 
 will not work a cure, but it at least puts an edge 
 upon the social conscience, and cuts into the com- 
 fortable acquiescence in those conditions which 
 cause massive misery and tend to social decay. 
 
 In revising this book I have been stimulated and 
 aided by Mr. J. A. Hobson, who has kindly read 
 the MS. and made many useful criticisms. The 
 general view of the problem coincides more closely 
 with his economic analysis than with any other, 
 and, in fact, in its new form owes much to the 
 work of this most original and independent of 
 
 our econornists. 
 
 L. T. HOBHOUSE. 
 
 HiGHGATE, 
 
 Aprils 191 2.
 
 CONTENTS 
 
 CHAPTER I 
 
 PAGE 
 
 LABOUR AND WEALTH . . . . . .II 
 
 CHAPTER II 
 TRADE UNIONS AND THE CONDITIONS OF LABOUR . . 20 
 
 CHAPTER III 
 CO-OPERATION AND THE CONTROL OF PRODUCTION. . 59 
 
 CHAPTER IV 
 THE DISTRIBUTION OF WEALTH . . . .94 
 
 CHAPTER V 
 
 THE CONTROL OF INDUSTRY AND THE LIBERTY OF THE 
 
 INDIVIDUAL . . . . . .127 
 
 9
 
 
 THE LABOUR MOVEMENT 
 
 CHAPTER I 
 
 LABOUR AND WEALTH 
 
 The movement which originally suggested this 
 volume took definite shape in 1888-9. Primarily 
 an attempt to extend the benefits of Trade Union- 
 ism to the unskilled worker, it achieved some not- 
 able successes in its own sphere. But its wider 
 and more permanent influence is to be seen in 
 the change of attitude which it effected in the world 
 of organised Labour as a whole. The " New 
 Unionism " as a distinct movement died away in 
 the early Nineties, and during the last years of 
 the century the public mind was turned to other 
 thoughts than those of social reform. A period 
 of reaction set in and the democratic spirit slum- 
 bered and slept. But meanwhile the elements of 
 a newer, a wider, and a more considered Labour 
 policy had been formed. Not only had the Inde- 
 pendent Labour Party arisen out of the New 
 Unionism, but in the ranks of Trade Unionism in 
 general the prejudice against what was called 
 " State Interference " had largely broken down, 
 and the idea of using the machine of Government 
 to further the interests of Labour had become 
 familiar on all hands. Meanwhile Trade Union- 
 ism itself was seriously threatened. The failure 
 
 u
 
 12 THE LABOUR MOVEMENT 
 
 of the Amalgamated Engineers in 1897 revealed 
 elements of weakness, or perhaps we should say 
 rather that the success of the Federated Engineer- 
 ing Employers gave evidence of a new force on 
 the other side. , There followed a series of judicial 
 decision? which undermined the whole legal posi- 
 tion of the Trade Union as it had been understood 
 since 1875, ^^^ organised labour found itself com- 
 pelled to fight for its existence at the polls. That 
 which no Socialist writer or platform orator could 
 achieve was effected by the judges. They called 
 into existence the Parliamentary Labour Party. 
 Moreover, they caused this party, in spite of all 
 differences, personal or substantial, to work on 
 the whole in alliance with Parliamentary Liberal- 
 ism, and so maintain a majority for a far-reaching 
 policy of social reform. Thus the course of events 
 — that ultimate arbiter of all book controversies- 
 has decided the main question which this volume 
 originally set out to discuss, and has confirmed 
 the view that labour organisation needs to be 
 supplemented by labour politics. Many recent 
 events equally emphasise the converse truth that 
 labour politics must work hand in hand with labour 
 organisation. 
 
 The efforts of the working class to maintain and 
 improve its standard of life under modern indus- 
 trial conditions began at a time when the mass 
 of its members were excluded from the parlia- 
 mentary franchise. They therefore necessarily 
 took the shape of " voluntary " or rather extra- 
 parliamentary organisations. Labour built up for 
 itself the Trade Union for the defence of the 
 standard wage, the Co-operative Store for the 
 supply of necessaries at a reasonable price, and 
 the Friendly Society to meet the contingencies of 
 life, without the aid and to some extent against
 
 LABOUR AND WEALTH 13 
 
 the will of Government. When the extension of 
 the franchise placed the balance of political power 
 in the hands of the masses a new avenue of pro- 
 gress was opened up. It became possible to use 
 political machinery to achieve results which hitherto 
 had been outside the scope of any but a volun- 
 tary organisation. But it was inevitable that there 
 should at first be doubt and hesitation as to the 
 new method. It is not surprising that there should 
 have been a time when Trade Unionists and Co- 
 operators looked on one another with suspicion, 
 while both were decried by the partisans of State 
 action as the Whigs of the Labour Movement who 
 were bent on framing a new aristocracy within the 
 working class. But the era of mutual suspicion 
 has passed away, partly because each of the move- 
 ments in question is emerging from its primitive 
 limitations and fulfilling wider and higher pur- 
 poses, and partly because along with this growth 
 comes a better understanding of other methods 
 of reform. 
 
 The truth is, as I hope to show, that Trade 
 Unionism, Co-operation, and State and Municipal 
 Socialism have in essentials one and the same end 
 to serve. Far from being alternative or incom- 
 patible methods, each is, I believe, the necessary 
 supplement to the others in the fulfilment of the 
 common purpose, and my present object is to 
 consider what this purpose is and how each will 
 help to work it out. 
 
 In a general way it is easy enough to lay down 
 the objects of any genuine movement of economic 
 reform. That the means of livelihood should be 
 shared by all members of society, and this in such 
 a way that all should have a chance, not merely of 
 living, but of making the best of themselves and 
 their lives — thus much must be the desire of every
 
 14 THE LABOUR MOVEMENT 
 
 one who considers the subject. And though no 
 economic progress can of itself produce good 
 family life, nor intellectual culture, nor public 
 spirit, yet that all of these may flourish certain 
 economic conditions must be fulfilled, and the 
 object of industrial reform is to bring about these 
 conditions. On the national industry the whole 
 of the national life is based, and whatever powers 
 may build up the fair edifice of the common weal, 
 the economic system is responsible for the sound- 
 ness of the substructure. This soundness may be 
 said to consist in the provision by honest methods 
 of the material requisites for a good and full life 
 for all members of the community. Probably all 
 would recognise this as desirable, though some 
 may deny its possibility. 
 
 With this denial I shall deal later. Meanwhile 
 I would point out that controversy really begins 
 when we attempt to lay down the necessary pre- 
 requisites of our admitted aim. But in all the 
 movements which I am considering it would be 
 agreed that, if the economic basis of social life is 
 to be sound, not increased production, but a better 
 distribution of wealth, is essential. It is true that 
 wealth is not an end in itself. It is true that be- 
 yond a certain point increase of wealth does not 
 augment happiness, but rather tends to mar it. 
 It is true that the acquisition of wealth, as such, 
 is a. base end to set before a man, or a class, or 
 a nation. It is true that you will never satisfy 
 your " infinite shoeblack " by filling his stomach. 
 Unfortunately, these truths, or shall we say 
 truisms, are oddly applied. They are apt to be 
 most vividly realised by the possessors of wealth' 
 (who are certainly in a position to judge of its 
 vanity) when they hear the poor complaining of 
 their lot. But this effect is not just what might
 
 LABOUR AND WEALTH 15 
 
 be anticipated. Instead of prompting the wealthy 
 to eager acceptance of measures which would 
 disembarrass them of those gifts of fortune which 
 obstruct their higher hfe, it serves only to make 
 them draw tighter the purse-strings and save in 
 subscriptions what they are paying in extra 
 taxation. Their dread of wealth appears to be 
 wholly altruistic. It is an anxiety so refined that 
 it only concerns other people, and torments itself 
 lest men should be " spoon-fed " with too much 
 of the goods of this world if the aid of the State 
 be invoked to secure them a minimum wage, 
 regular employment, and five shillings a week at 
 seventy. Upon the whole this anxiety seems mis- 
 placed. Great wealth is useless and may be worse. 
 But in relation to the claims of labour the very 
 term " wealth " conveys misleading suggestions. 
 There are in a modern society two classes. There 
 are those who have never known unsatisfied hunger 
 unless, perchance, they have missed a train or 
 found a refreshment -room closed. There are those 
 who from day to day are uncertain of the next 
 meal, and with these may be ranked in their 
 general outlook on life the much larger mass of 
 those who live so near the margin of subsistence 
 ^s to be permanently aware that a slight turn of 
 fortune, a change in the course of trade, the failure 
 of an employer, an illness, or advancing age may 
 reduce them to the same predicament. As be- 
 tween these two classes there is the gulf of a 
 widely different experience. For the one wealth 
 means a more or less of things which, after all, 
 man may make shift to do without. For the other 
 it means security for bare wants. No one who 
 has felt these wants or realised in imagination 
 what it is to feel them will listen with anything 
 but contempt to the imputations of materialism
 
 16 THE LABOUR MOVEMENT 
 
 and class-selfishness when directed against the 
 claims of labour to economic security. Exceptional 
 men can take poverty as a bride. For the mass 
 a material sufficiency is necessary to a healthy 
 and civilised existence, and rest from manual toil, 
 especially the very mechanical labour imposed by 
 machine industry, is the condition of the full 
 development of the faculties. Now it cannot be 
 denied that this sufficiency and this leisure are 
 out of the reach of vast numbers in the wealthiest 
 countries of the world. I do not wish to dwell 
 on this. We have had enough and to spare of 
 denunciations of economic injustice and of pictures 
 of social misery. Let us face the fact once for 
 all, and not be blinded to it by the " barren opti- 
 mistic sophistries of comfortable moles." Having 
 faced it, let us consider the remedy, and admit, 
 once for all, that whatever be the character of 
 that remedy, it must fulfil this first condition of 
 distributing the products of industry with more 
 regard to the welfare of the masses than is paid 
 by the blind and sometimes blindly adored forces 
 of competition. 
 
 The moralist is also concerned lest we should 
 insist too much on rights and too little on duties, 
 too much on machinery and too little on the social 
 spirit. But the better distribution of wealth is 
 likely to carry with it a better distribution of 
 duties. A system which provides that all shall eat 
 and be filled will have of necessity to secure that 
 all who are able-bodied shall first work. The 
 only doubt is whether the stern disciplinarians 
 who insist on self-support fully realise the revolu- 
 tionary nature of their doctrine. If a system is 
 wrong which maintains an idle man in bare 
 necessaries, a system is much more wrong which 
 maintains an idle man in great superfluity, and
 
 LABOUR AND WEALTH 17 
 
 any system which allows the inheritance of wealth 
 on the great scale is open to criticism on this 
 side. People are apt to forget that property is a 
 social institution, that if they can count securely 
 on enjoying what they have earned, saved, or in- 
 herited, it is because the State provides judges, and 
 policemen, and prisons, to guarantee their rights 
 and to punish depredators. Forgetting this, they 
 are apt to think of what is " their own " as part 
 of themselves, and even if it has been acquired 
 without service rendered as emancipating them 
 morally from the common lot which decrees that 
 in the sweat of his brow man shall eat bread. In 
 fact, it seems sometimes to be regarded as quite 
 a providential arrangement that some should be 
 born without the necessity of working for their 
 own living so that they have leisure to impose this 
 fundamental duty on others. We need not for the 
 moment ask ourselves whether the inheritance of 
 wealth is a good or a bad thing. Of this we shall 
 have to speak briefly in its place. We are con- 
 cerned only to insist that any criticism of the 
 economic system should be applied impartially, and 
 on this understanding we need have no hesitation 
 in accepting the doctrine that a good system must 
 emphasise obligations just as much as rights, work 
 just as much as reward. 
 
 Again, we need not quarrel with the disciplinarian 
 when he lays emphasis on " character," but we 
 may remark that the kind of character that is to 
 be most admired is a point on which people may 
 differ. For our part we shall certainly decline 
 to regard competitive commercialism as a kind of 
 lifelong examination in which the highest character 
 gets top marks. On the contrary, we are so far 
 impressed with the evils that competition brings 
 in its train that we should admit that no mere 
 
 2
 
 18 THE LABOUR MOVEMENT 
 
 change of machinery can undo the moral damage 
 it has done. Machinery — laws, administration, or- 
 ganisations — are after all valuable only as the lever 
 by which the moral forces of society can work. 
 Mere reform of machinery is worthless unless it is 
 the expression of a change of spirit and feeling. 
 If economic reform meant nothing but economic 
 reform, it would leave the nation no happier or 
 better than before. The same dishonesty, the same 
 meanness, the same selfish rapacity would simply 
 find different outlets. But if machinery without 
 moral force is worthless, good intentions without 
 machinery are helpless, A better spirit, if it is 
 to survive, must be incarnated in better institu- 
 tions, and if there is to be a keener sense of justice, 
 a livelier feeling for the common good, a broader 
 and deeper sense of common responsibility, these 
 qualities must find avenues of expression in the 
 normal working of the social system. 
 
 The better distribution of wealth, then, it may 
 be granted, is not the be-all and end-all of 
 progress. But the existing maldistribution is, 
 industrially, the gravest and most distressing 
 symptom of a deep-seated disease. If we would 
 consider how to regain social health, we may take 
 advantage of the metaphor and consider that 
 health consists in the co-operation of many func- 
 tions, wherein each organ must obtain its due 
 of nourishment, to repair the waste which its 
 action involves. In the body this relation of 
 function and nourishment is called Health. In 
 Society it is called Justice. In both cases there 
 may be over-nourishment here and under-nourish- 
 ment there, and in both cases with bad results. 
 The difference is that in the case of the body 
 there is one individual which suffers equally in 
 either event. In the case of society the mal-
 
 LABOUR AND WEALTH 19 
 
 adjustment may be felt as want and misery by 
 one man and as a misplaced self-complacency 
 by another. But in proportion as the social con- 
 sciousness develops it becomes less tolerant of 
 these contrasts. It seeks a fuller and therefore 
 a more equitable co-operation. It comes to regard 
 work more and more definitely as a public service, 
 and accordingly concerns itself more and more 
 closely with the conditions under which it is per- 
 formed, and with the measure of its reward. But 
 this conception raises many questions of difficulty. 
 It compels us to ask on what principles reward 
 should be based, to what extent society can or 
 should control the aims and methods of industry, 
 what kind or degree of responsibility is left to 
 the individual, and what function remains for the 
 voluntary association which stands intermediate 
 between the individual and the State. I propose 
 to approach these questions in the first instance 
 by taking the movements named above — Trade 
 Unionism, Co-operation, Municipal and State 
 Socialism — and asking of each in turn what it 
 has to contribute to the ideal of an equitable 
 co-operation, what it is doing at the present day, 
 and what it contains of promise and potency for 
 the future, whether it is of permanent or tem- 
 porary value, whether it is sufficient of itself for 
 all good purposes or needs other movements to 
 supplement its defects.
 
 CHAPTER II 
 
 TRADE UNIONS AND THE CONDITIONS OF 
 
 LABOUR 
 
 A Trade Union is an association of wage-earners 
 in a given industry for the purpose of securing 
 the best possible conditions of labour for the 
 workers in that industry. It owes its existence, 
 as the historians of the movement have shown, 
 to the sharp separation of employers and em- 
 ployed. As long as the workman can easily rise 
 in the industrial scale, and has hopes of becoming 
 an employer in his turn, he is unwilling to enter 
 into a permanent combination against employers, 
 and if such combinations are formed they are 
 always liable to be drained of their most capable 
 members. Even in industries where the workman, 
 though without hopes of becoming an employer, 
 may rise steadily and perhaps rapidly from one 
 grade to another, stable and comprehensive com- 
 binations are hard to maintain. The compara- 
 tive weakness of combinations among railwaymen 
 sufficiently illustrates this point. A Trade Union 
 is effective in proportion as the workers in an 
 industry are brought into close contact with one 
 another and are pervaded by the sense of a 
 common interest. The same conditions govern 
 the extension of combination from the individual 
 workshop to a locality, from a locality to a national 
 branch of industry, and from a branch of industry 
 to the wage-earning class as a whole. Trade 
 Unionism in our time has become a national move-
 
 TRADE UNIONS 21 
 
 ment because, in spite of great divergences of 
 interest as between one occupation and another 
 and between one grade of workers and another, 
 there are certain principles which appeal to all 
 men who work with their hands for a weekly- 
 wage and inspire them with a sense of solidarity. 
 Combination might seem the natural refuge of 
 isolated workers beaten down to starvation point 
 by the iron laws of competition. But history shows 
 us that revolutions seldom occur when they are 
 most needed— that is to say, at the extreme point 
 of depression. People who have sunk too low 
 lose the recuperative power which would help them 
 to rise again. The history of labour movements 
 is no exception to the general rule. The great 
 and enduring Trade Unions have generally been 
 formed among the better paid and more skilled 
 artisans, and it is still uncertain how far the mass 
 of unskilled labourers can prove themselves capable 
 of forming durable combinations. Now, a close 
 combination of highly skilled workmen may com- 
 mand and deserve little sympathy from the general 
 public. It may be inspired by all the ambitions 
 of a narrow ring of monopolists, and it would be 
 ill to deny that the monopolistic spirit has ever 
 swayed a Trade Union. Fortunately, it has in the 
 main been checked and overborne by a wider 
 feeling of class sympathy, and particularly since 
 the advent of the " New Unionism " in the later 
 years of last century, the highly organised work- 
 man has tutored and led and at times effectively 
 assisted his less fortunate brother. Combinations 
 of unskilled labour have, in fact, been formed 
 from time to time with striking temporary success, 
 as witness the movements of the past year. Nor 
 do such movements pass away without leaving 
 at least a nucleus of solid organisation behind.
 
 22 THE LABOUR MOVEMENT 
 
 A permanent and dominant force among miners 
 and artisans, combination is at lowest a principle 
 of spasmodic but recurrent and effective energy 
 among workers of lower grades. 
 
 Thus the organised workmen are in a way the 
 leaders of the working class as a whole. As 
 such, and as controlling labour conditions in the 
 great industries of the country, they have an influ- 
 ence out of all proportion to their numbers. The 
 actual number of Trade Union members has no 
 doubt grown, not only in absolute figures, but in 
 proportion to the working population, as the 
 following figures show : — 
 
 Members of Trade Unions." 
 
 1900 i)957'7io 
 
 1905 1,923,868 
 
 1907 2,412,611 
 
 1909 2,347,461 
 
 The last figure includes 207,518 female mem- 
 bers. Thus the male Trade Unionists barely 
 exceed one-fourth of the eight million or more 
 of workmen in regular employment, and the in- 
 fluence of Trade Unionism is at bottom an effect, 
 not of quantity but of quality. 
 
 Among the conditions of labour. Trade Unions 
 are mainly concerned with the hours of work and 
 its remuneration. Their avowed object is to obtain 
 a " fair day's pay for a fair day's work," and 
 that for all workers. But these are terms that 
 require some definition. As to the " fair day's 
 work," the difficulty is not so great. It would 
 be generally agreed that it should bear a close 
 relation to the strain put upon physical and mental 
 energies. A man's work ought to give full exercise 
 
 ' "Abstract of Labour Statistics, 1908-9" (published in 191 1), 
 pp. 176-7. "Only those Trade Unions are included for whicn 
 complete comparative information is available. The Unions 
 excluded are few and generally unimportant."
 
 TRADE UNIONS 23 
 
 to his faculties, physical or mental, and never to 
 overtax them, and wherever work is adjusted to 
 this equation there a fair day's work is being 
 done. This, of course, implies considerable differ- 
 ences between one occupation and another. Many 
 brain -workers find five hours a day their limit. If 
 they attempt more, they effect less. Darwin 
 worked four hours a day with great regularity, 
 and he cannot be accused of unproductiveness. 
 On the other hand, a man may be on duty for 
 ten or twelve hours, and have little consecutive 
 effort to tax him. But at this point another con- 
 sideration enters. A man or woman needs leisure 
 from regular work, even if it be light in itself, 
 if he or she is to be anything more than a " hand." 
 The more mechanical the work the greater the 
 need of ample time for exercising the more human 
 faculties and living the life of a civilised beiiig. 
 Upon the whole the " eight -hour day," which has 
 long been a watchword in the Trade Union world, 
 is an intelligible ideal, but it is to be regretted 
 that the attention of legislators has not long since 
 been directed to the cases, not as rare as they 
 should be, of far longer hours. That it should 
 have been necessary for carters to secure a week 
 of seventy-five hours by a strike in 191 i is some- 
 thing of a disgrace to our industrial code. 
 
 The " fair " wage is something much less easy 
 to define on any comprehensive principle. 
 
 The phrase, indeed, is probably used in every 
 trade dispute that arises, but if a precise definition 
 could be attached to it perhaps there would be 
 fewer disputes than there are. Without here at- 
 tempting a general definition it may be allowable 
 to offer a few considerations, all of which may 
 be, and perhaps are, taken into account by em- 
 ployers and employed at the present day, and
 
 24 THE LABOUR MOVEMENT 
 
 might be more fully acted on by a more developed 
 industrial organisation. In asking what wages are 
 fair, I shall mean by " fair wages " the amount 
 we should fix if we had the fixing in our power ; 
 in other words, I shall inquire how a well-ordered 
 society would fix the rate of wages if it had the 
 whole distribution of wealth under its control. 
 
 Any actual negotiation with regard to wages of 
 course starts from the amount actually paid, and 
 any reduction would be felt as " unfair " by the 
 workpeople unless it were proved to be necessary 
 by the conditions of trade. Conversely any rise 
 would be regarded as " unfair " by employers un- 
 less it could be shown to be compatible with those 
 conditions, and among them the provision of a 
 fair profit for the employer would be one. But 
 this only throws us back on the question, What is 
 a fair profit? What we need is something to tell 
 us what is fair, whether we are dealing with profits 
 or wages, or indeed with any division of the fruits 
 of industry and commerce. Now, in any dealings 
 between men, one thing is sufficiently clear : a man 
 will not consider the result fair to him if it leaves 
 him worse off than he was before. Whether he 
 buys or sells, the least that he expects is equal 
 value. You may say that he expects more than 
 this, that he expects a profit since otherwise he 
 would not be at the pains to go into the bargain, 
 but as to this two remarks must be made. The 
 first is that if the bargain is fair, one party must 
 not gain at the expense of the other ; both must 
 gain, the profit must be divided between them.' 
 
 ' How, then, it may be asked, does profit arise ? A may 
 profit at the expense of B, or B at the expense of A, but how 
 can A and B both make a profit by an exchange of their goods ? 
 A simple illustration will explain. A buys a pair of boots for 
 fifteen shillings. He would rather pay £i than go without a new 
 pair. B would rather sell for ten shillings than not sell at all. 
 The transaction is profitable to both.
 
 TRADE UNIONS 25 
 
 The second is that if the profit is needed as an 
 inducement to take the trouble necessary to the 
 bargain, then if a man takes the trouble and ob- 
 tains no profit, he gets less than equal value, he 
 is to that extent worse off than he was before he 
 went into the transaction. This being understood, 
 we may say that in any transaction a fair appor- 
 tionment is one which gives back to each man 
 value equal to that which he has put in, of his 
 goods, his time, his trouble, his risk, his brains, 
 and so forth, while if there is any surplus remain- 
 ing when such an apportionment has been made, 
 it is divided among all the parties to the trans- 
 action. The apportionment of this surplus will 
 be considered later. It does not come into con- 
 sideration till each party has received its equal 
 value, and this value has therefore to be deter- 
 mined first. Now, when a man puts money or 
 measurable money's worth into a business it is 
 possible to state in figures the equal value which 
 he will expect, but besides the man who puts money 
 into a business there may be a man who puts brain 
 into the business and a man who puts muscular 
 work into the business. What in their case is the 
 equal value to which they are entitled? Consider 
 the manual worker. What he expends is his 
 energy, an expenditure involving a certain waste 
 of tissue, and the value equal to this is at least 
 such a wage as makes good that waste. Now, 
 what does this waste involve? The worker puts 
 out so much muscular energy in the day. Like a 
 steam-engine, he must be fed or he will run down. 
 Physiologists know that there is an equation 
 between the stores of energy absorbed by the 
 body in food and the output of energy in the form 
 of manual work and heat. But though like a steam- 
 engine in requiring a supply of energy from with-
 
 26 THE LABOUR MOVEMENT 
 
 out, the worker is very unlike the steam-engine in 
 two things. On the one hand, he cannot work un- 
 ceasingly and yet must be kept going with his 
 fires, so to say, still alight during the hours of 
 rest. On the other hand — unfortunately for him 
 in the world of competition — he can make shift 
 to do for a time without enough coal. Thus the 
 equation between intake of food and output of 
 energy only works itself out in course of time. 
 It is only by degrees that insufficient food, bad 
 housing, want of warmth, lack of proper clothing 
 will tell on the health, and through the health on 
 the efficiency of work. Hence it is that low wages 
 may pay if there is no necessity to retain the work- 
 man over the time in which the ill effects of low 
 wages will have begun to tell on his work. But 
 we can now begin to see the kind of wage which 
 the worker will regard as fair. It must be enough 
 to repay him for what he puts into the work, and 
 what he puts into the work is his strength, and 
 his strength depends on his health. 
 
 But this is by no means the whole of the matter. 
 The hardj, muscular man who gets the coal at the 
 face in a given mine has not only to repair from 
 day to day the waste of his own muscular tissue 
 and to keep himself fit for his arduous work. From 
 the point of view of this particular mine, indeed, 
 that is all that is required. But from the social 
 point of view, more is necessary. This powerful 
 man was once a child dependent on others ; he 
 is still liable to sickness or disablement, and he 
 hopes to live to an old age when he will no longer 
 spend his days at the face of the seam. The 
 just equivalent of his work is support through all 
 these changes and contingencies. Again, as his 
 own childhood had to be supported by others, so he 
 should be able to support children to replace him,
 
 TRADE UNIONS 27 
 
 and the wife that brings them up, and to provide 
 for his own old age and hers, and for all the 
 manifold contingencies of life. At any rate, 
 whether out of his wages or from other sources, 
 all this burden has to be met if the national 
 industry is to be maintained as a going concern 
 without loss. 
 
 We can lay it down now in general terms that 
 what is fair to each party in industry is that 
 which at least makes good the contribution of that 
 party, or in other words suffices to stimulate and 
 to maintain in permanent and efficient working 
 order the particular function which the party per- 
 forms. Thus the minimum that an adult male 
 worker is entitled to regard as a fair wage is 
 the amount on which he can maintain an average 
 family in complete health. For it is only by the 
 maintenance of a healthy population that the func- 
 tion of labour can be permanently maintained in 
 efficient working order. Nor, if we look at the 
 matter more simply, just as a question of the social 
 welfare, can we doubt that this is the minimum 
 which it is desirable that any class of worker 
 should enjoy. That any substantial proportion of 
 society should still be unable by honourable work 
 to supply themselves adequately with the means 
 of a healthy livelihood is a challenge to our entire 
 civilisation. It throws a shadow of doubt over 
 all our progress, a shadow which nothing could 
 darken but the comparative indifference with which 
 those of us who are more fortunately placed con- 
 template the mass of suffering that passes under 
 our eyes day by day. 
 
 Of the methods by which these wrongs may be 
 redressed we must speak more fully farther on. 
 But there remain several points to clear up with 
 regard to the fair wage. Observe first that as
 
 28 THE LABOUR MOVEMENT 
 
 the social view is longer and wider than that of the 
 single industry, so it is deeper and more exacting. 
 Socially what is required of every man is not 
 merely that he should be a physically efficient 
 worker, but that he should fill his place in the 
 social order, that he should, in a word, be a good 
 citizen. This requirement involves a measure of 
 mental and ethical training. It involves the quali- 
 fications that distinguish a civilised man from a 
 savage and a free man from a slave. For average 
 humanity— for we do not speak of the saint on his 
 pillar, who may or may not be a desirable element 
 in the social order— these qualifications must have 
 an economic basis. They imply education. They 
 imply some postponement of the routine of labour 
 until education has been sufficiently advanced. 
 They imply adequate rest and change from the 
 more brutalising forms of toil. All these are part 
 of the fair wage that a man may claim of a 
 civilised social order. They represent the mini- 
 mum necessary to maintain him in a life which 
 can contribute to such an order. If he fails to 
 secure such conditions of life, he cannot perform 
 his functions, and not only does he suffer him- 
 self, but the social order suffers through him. He 
 may become an idler or a criminal. He may be 
 physically enfeebled or morally slack. He may 
 turn into a bad husband and careless father. In 
 all these ways he makes others pay, and misery 
 spreads. Conversely it is not only good for him 
 but best for society as a whole that he should be 
 able, as the reward of work, to secure the material 
 conditions, not only of a healthy life but of what 
 we may call succinctly a civic life.' 
 
 ' It will be seen that there is a possible discrepancy between 
 what is " fair " from the industrial and what is fair from the 
 social point of view. A piece of work may require no faculties
 
 TRADE UNIONS 29 
 
 Next we may remark that the wherewithal of 
 these conditions might be obtained through the 
 regular weekly wage. For this purpose the wage 
 would have to be enough, not only to maintain 
 an average family, but to meet all the con- 
 tingencies of life, to provide education and 
 rational amusement, to lay by against sickness, 
 unemployment, disability, and old age. Where 
 remuneration is, in fact, sufficient to cover all 
 these liabilities, people are expected to make pro- 
 vision for themselves and their families accord- 
 ingly. It is the growing sense of the inadequacy 
 of the wages of manual labour in general to meet 
 these requirements which is prompting the State 
 to undertake some of them for the worker, and to 
 assist him in respect of others. Of the economics 
 of such provision we shall speak later. For the 
 moment we have only to note that in so far as 
 any requirement is supplied from other sources, it 
 reduces the minimum which the " fair " wage must 
 cover. For the present, however, we may take 
 the minimum amount of the fair wage as that 
 
 but those of a healthy animal ; it is, industrially, overpaid by 
 a wage that barely suffices for the " civic life." Conversely 
 labour so mechanical is, for a life work, something of a degrada- 
 tion to a human being. Thus there is loss to both parties, to the 
 worker and the industry. This equalises matters in a sense but 
 in a disastrous sense. The discrepancy may be partially 
 remedied by provision for some of the workman's needs out of 
 the surplus wealth of the nation, but is fully overcome only when 
 the conditions of industry are such that the lowest quality of 
 labour employed is worth the socially fair wage and, in fact, earns 
 it. We shall see later that at least an approximation to this 
 equation is in practice a condition of the attainment and 
 maintenance of a fair-wage standard. Meanwhile note that for us 
 the social point of view governs the economic. Wc are consider- 
 ing the individual in account with society and are asking what 
 is due to him and from him to the entire structure of social 
 organisation. The answer is on the one side the conditions, on 
 the other the active fulfilment of a civic life.
 
 30 THE LABOUR MOVEMENT 
 
 which will maintain an average family — a man, 
 wife, and three children — in healthy and socially 
 desirable conditions, including the provision 
 against sickness (and, in certain trades, unem- 
 ployment) which the Insurance scheme will 
 require, and including provision against any other 
 contingencies with which the State does not deal. 
 
 Further, we must insist that the wages of an 
 adult man alone should suffice to meet these 
 requirements. True, the wife may be a wage- 
 earner, but so far as she gives her time to industry 
 it is withdrawn from the management of the home 
 and the care of the children. That this is generally 
 desirable few would maintain, and in any case 
 where it occurs an equivalent expenditure on 
 housekeeping and on the care of the children is 
 needed. Equally it is desirable that the house- 
 hold should be independent of the children's earn- 
 ings, so that their school life may be prolonged 
 considerably beyond the present limit, and that 
 when they begin to earn thej should be able to 
 provide for themselves and their own future. We 
 take the standard of family needs, then, as govern- 
 ing the minimum for an adult male worker at the 
 height of his powers. In the case of women 
 workers the desirable minimum is not quite so 
 easy to define. But it is much too hastily assumed 
 that the woman has only to provide for herself. 
 The tragedy of woman's work is that a widow, a 
 deserted wife, an unmarried mother, or perhaps a 
 spinster with an invalid sister, has, in fact, to 
 support others on a wage which is barely enough 
 to support herself. A woman worker may 
 ordinarily be regarded as having others to support, 
 but those others ought not to include a husband 
 or any male relation. The husband ought to be 
 punished if idle, and if invalided or incompetent
 
 TRADE UNIONS 31 
 
 he ought to be 'supported by public charity. 
 Having this in view, we may get at a definition 
 near enough for our purposes if we take the 
 woman's wage as that which would support the 
 average family minus the husband — that is to say;, 
 as enough to support the woman herself and three 
 children. Whether, indeed, it is good economy to 
 compel the mother of young children to work out- 
 side the home, instead of regarding her services 
 as a mother as entitling her to adequate public 
 maintenance, is a further question. But it does 
 not concern our immediate problem, which is that 
 of defining the minimum wage. 
 
 Now, if we confine ourselves to the male worker, 
 it is possible to translate the definition, by the 
 aid of Mr. Seebohm Rowntree's researches, into 
 approximate figures. It will be best to give Mr. 
 Rowntree's own words ' : — 
 
 " Let us lay out the labourer's weekly wage, 
 eliminating all waste due to ignorance or laziness. 
 First, then, it will cost 13s. gd. a week to provide 
 a family of two adults and three children with 
 the nutriment necessary for physical efficiency 
 even if we choose a dietary more stringently 
 economical than that of any workhouse in England 
 or Wales — one containing no butcher's meat, and 
 bacon only three times a week ; where margarine 
 is substituted for butter, and porridge and skim 
 milk figure largely in place of the usual tea and 
 bread and butter. Adding 2s. 3d. for clothing, 
 IS. lod. for coal, and 2d. per head for sundries,, 
 we get 23s. 8d. as the absolute minimum on 
 which a family of five, paying 5s. for rent, can 
 be maintained in a state of physical efficiency. 
 It must be remembered that this sum allows 
 nothing for sick-clubs or Trade Unions, or beer 
 
 ' Contemporary Review, October nth, p. 454.
 
 32 THE LABOUR MOVEMENT 
 
 or tobacco, or trams or travelling, or amusement 
 or newspapers, or writing materials and stamps ; 
 and if an evening paper is bought or the children 
 have coppers given them to go and see the 
 'moving pictures,' physical efficiency suffers." 
 
 To put it in a slightly different way, i8s. 8d. 
 plus house rent represents the barest minimum 
 for an average family. In a town this will 
 generally mean about 23s. 8d., in the country 
 rather less, say, 21s. 6d. To make a real 
 minimum living wage it is easy to see, from what 
 Mr. Rowntree says, that something substantial 
 must be added. It could hardly be called ex- 
 travagant if we put the additional sum at 5s. 
 But it will be safer to say roundly that something 
 between 20s. and 25s. is the minimum in the 
 country districts, and something between 25s. and 
 3 OS. in towns. 
 
 Now let us turn to the actual figures. In the 
 same article Mr. Rowntree gives, on the authority 
 of Professor Bowley, a table showing that of an 
 estimated population of 8,000,000 men employed 
 in regular occupations — 
 
 4 per cent, earn less than 15s. 
 
 8 „ „ from 15s. to 20s. 
 
 20 „ „ „ 20s. to 25s. 
 
 21 „ „ „ 25s. to 30s. 
 
 These figures, of course, include agricultural 
 labourers, but excluding them they show that at 
 least i^ million industrial workers earn less than 
 25s. a week. If, again, we consider agricultural 
 labourers, we find that the average weekly earn- 
 ings of an " ordinary labourer " in England are 
 given at 17s. 6d., of men in charge of horses at 
 19s., of cattlemen at 19s. 3d., and of shepherds
 
 TRADE UNIONS 33 
 
 at 19s, 7d.i It is, then, sufficiently clear that some 
 32 per cent, of the entire working population earns 
 less than the minimum defined, while the earnings 
 of another 21 per cent, range round the minimum 
 a little above or a little below— that is to say, they 
 are from 25s. to 30s. a week. It must be added 
 that these are the earnings of men in regular em- 
 ployment, that no allowance is made for unem- 
 ployment and no account taken of the casual 
 labourer. It needs no further argument to show 
 that the actual deficiency of remuneration con- 
 stitutes the greatest economic problem. 
 
 But before considering this problem we have 
 a word to add on the idea of the fair wage. What 
 we have been considering hitherto is the minimum. 
 We are not urging that no one should get more, 
 but only that no one should get less. Some 
 thinkers, it is true, have held actual equality of 
 remuneration to be the ideal. Others have said 
 that there are two forms of injustice. One consists 
 in treating equals unequally, the other in treating 
 unequals equally. If, again, one school of 
 Socialistic thought has pressed equality of reward, 
 another has laid stress on the right of each man 
 to the whole produce of his labour, and has found 
 the iniquity of the competitive regime to lie in the 
 power of the capitalist to take toll of the worker's 
 product. In point of fact it is impossible, in the 
 complexities of an economic order such as that 
 of the modern world, to treat the matter from 
 the point of view of the individual alone, since, 
 apart from any other consideration, it is generally 
 impossible to assign any separate value to the 
 product of a single worker. We must keep to 
 
 ' Standard Time Rates of Wages in the United Kingdom 1910, 
 (Labour Dept., Cd 5459). The figures in each case allow for the 
 addition of the " estimated value of allowances in kind " to actual 
 cash wages. 
 
 8
 
 34 THE LABOUR MOVEMENT 
 
 our assumed standpoint. We are supposing our- 
 selves, that is to say, for the moment to possess 
 plenary power to determine every one's reward, and 
 we are asking on what principles we are to pro- 
 ceed. One of the first things that would strike 
 us if we were in that position would be that in 
 the value of the work that they do men are very 
 unequal, and we should have to deal with this 
 inequality. In doing so we should have to be 
 guided by the requirements of production. We 
 should be responsible for maintaining and im- 
 proving the efficiency of industry, regarded as the 
 mechanism by which society supplies its material 
 needs. We have agreed that every one who is 
 employed at all should receive the minimum wage. 
 Could we, then, expect for the same wage to get 
 men to face the most arduous and unpleasant 
 forms of work, to acquire and apply the highest 
 skill, to put forth the utmost of their efforts, to 
 give us the best of their brain power? We might 
 expect these results in Utopia, but not, I fear, in 
 the world as we know it. It is true that the best 
 and highest talents never have been paid for, and 
 perhaps work better without pay. Many a poet 
 of the first order has had to be content with 
 less remuneration than a literary hack — " What 
 porridge had John Keats? " But the genius is an 
 exception to all rules, and it is fair to say of 
 creative work — literary, artistic, or scientific — that 
 it is in a measure its own reward. It carries an 
 interest and a perpetually renewed stimulus of 
 its own which no enthusiasm of social service 
 could ever impart to mechanical drudgery. Men 
 who work without recognition are the salt of the 
 earth, but precisely because they are the salt it 
 does not do to generalise from them to the whole 
 lump .
 
 TRADE UNIONS 35 
 
 If we are asked on what scale remuneration ought 
 to rise above the minimum, it is impossible to reply 
 a priori with any precision. The principle is clear 
 enough ; it is the same that we have used already. 
 The fair wage in every case is that which suffices 
 to stimulate and maintain in permanence the 
 function which is socially necessary. If we were 
 really in that position of responsibility which I 
 have imagined, I take it that we should have to 
 be guided by experience. If we found that we 
 could not get the ability that we required 
 at a given rate, we should have to raise the 
 rate. The only general principle that we could 
 apply is that the minimum is more important 
 than the maximum, and more generally that 
 as we rise above the minimum every succes- 
 sive increment of income makes less and less 
 difference to the real wellbeing of the recipient. 
 If any particular form of ability required so much 
 of us that to pay for it we should have to deplete 
 the fund available for ordinary labour, we should 
 have to put it down as too expensive ; we should 
 have to make shift to do without it. It would not 
 be, from our point of fview, paying its way. For our 
 assumed object is to make of industry an adequate 
 basis of effective civic life for all, and this involves 
 a universal minimum, and, for as many as possible, 
 a substantial margin over and above the minimum. 
 Now, no one has, or is likely to have, the kind of 
 responsibility which I have imagined. But the 
 principles on which we can try to reorganise in- 
 dustrial society are those which we should introduce 
 if we had the power, and they serve as a guide 
 in the judgment of contemporary events. They 
 compel us to give our sympathy and support to 
 all well-considered efforts to raise wages to the 
 minimum, and for any work that involves more
 
 36 THE LABOUR MOVEMENT 
 
 than average effort or skill, for the arduous work 
 of the miner or the skill of the spinner or the 
 engineer, to something substantially above the 
 minimum. In the concrete this means that organi- 
 sations or legislative methods directed to raising 
 the remuneration of ordinary labour to a level of 
 something between 20s. and 25s. a week in the 
 country, and to something between 25s. and 30s. in 
 urban districts are fulfilling a vital social need, 
 and that eft'orts directed to the maintenance and 
 improvement of the standard of life of those at 
 present earning anything from 30s. to 50s. a 
 week I are in general deserving of sympathy and 
 support. This is not, of course, to say that every 
 movement inspired by these objects is right or 
 wise. Many of them may be so foolishly directed 
 as merely to defeat their own ends. It is to 
 say that society, as a whole, is the gainer by every 
 improvement in the economic standard of those 
 whose family incomes fall so materially below the 
 present general average, provided that the improve- 
 ment is not obtained at the cost of a general 
 loss which by lowering the average would in the 
 end defeat itself. 
 
 One further question of principle remains — that 
 of those who do not rise above but fall below the 
 level of competence necessary to earn the minimum 
 wage. Not every one is worth 20s. to 25s. a 
 week. In this case what is to be done with him? 
 Now, at the present day we have a number of 
 sinecures, rents, annuities, charities, endowments, 
 workhouses, jails, and other admirable arrange- 
 
 ■ I take the figure of 50s. as barely double the minimum. 
 Any one who will read again the conditions which that minimum 
 is supposed to secure will, I think, agree that to double it is to 
 make a modest claim on behalf of special skill or arduous labour. 
 The actual average family income in this country may be taken 
 at from £3 los. to £4.
 
 TRADE UNIONS 37 
 
 ments fo keep th'e incompetent from: starvation. 
 If society were able to control industry and wealth 
 for the good of its own members as a whole, I 
 imagine that the only differences in this respect 
 would be two. First, it would be only the in- 
 competent, and not also the idle, who would be 
 allowed thus to live on the surplus products of 
 other men's industry. Idleness would be regarded 
 as a social pest, to be stamped out like crime. 
 Secondlv, the miscellaneous selection of the in- 
 competent for suitable provision at present effected 
 by birth, fortune, favouritism, intrigue, quackery, 
 and other means, would be superseded by a more 
 scientific adjustment. All who could work would 
 have to work, and those who, after adequate effort, 
 proved incompetent to earn by their work the 
 minimum of a decent livelihood, would have to 
 be treated as a particular class of the infirm — 
 that is to say, as subjects for charity or for 
 discipline, or both combined. The worst way 
 of treating them is to allow them to drag on life 
 in semi-idleness and semi-starvation. They are 
 necessarily a burden on the surplus produced by 
 the work of other men and women. But it is not 
 only inhumane but unwise economy to seek to 
 lighten this burden by stinting the actual neces- 
 saries of life. It is encouraging to find that both 
 the majority and the minority of the Poor Law 
 Commissioners agree that relief wherever given 
 should be adequate, and this means that it should 
 not fall short of the minimum as we understand it. 
 The penalty that must be exacted of those who will 
 not or cannot earn such a minimum is not priva- 
 tion of necessaries which will only make them 
 worse, but such restrictions and such discipline 
 as those responsible for relief find it necessary to 
 impose. I need not here go into questions which 
 
 4G3S98
 
 38 THE LABOUR MOVEMENT 
 
 have been so thoroughly sifted in the Reports 
 referred to. For our present purpose what is 
 essential is merely to insist that no fringe of in- 
 competent labour should be allowed to remain to 
 drag down by its competition those who might 
 otherwise secure for themselves the minimum 
 standard. 
 
 Summarily, then, our conclusions are : (i) that 
 a " fair " wage is that which serves to stimulate 
 and maintain in permanence a socially desirable 
 service ; (2) that of every one a well-ordered 
 society demands a certain standard of civic life 
 and that this involves a certain minimum standard 
 of remuneration ; (3) that in England at present 
 prices this minimum is between 20s. and 25s. a 
 week in rural districts and between 25s. and 30s. 
 in towns ; (4) that above this minimum special 
 effort and ability have a fair claim to such addi- 
 tional reward as is in fact required to maintain the 
 supply, provided always that it is good economy 
 to pay it ; (5) that this economy is directed in the 
 first place to the establishment of the minimum and 
 next to the maintenance of the standard which rises 
 but little above the minimum, the social value of 
 remuneration decreasing from this point upwards 
 as the rate advances ; (6) that those unable to 
 earn the minimum are proper subjects for charity 
 or for discipline, as the case may be. 
 
 We have now to ask by what methods these 
 objects can be attained, and whether, indeed, it is 
 possible to compass them. We have seen that 
 some 32 per cent, even of those in regular em- 
 ployment and while in regular employment fall 
 short, while another twenty-one per cent, are in 
 the neighbourhood of the minimum, a little above 
 or a little below, as long as they are well and at
 
 TRADE UNIONS 39 
 
 work, but only so long. Thus the problem to be 
 grappled with is sufficiently big. Now, until the 
 other day, there was only one form of organised 
 effort which definitely set itself to maintain and 
 improve the standard of remuneration for labour. 
 This was the Trade Union. Let us, then, inquire 
 how the Trade Union operates and what measure 
 of success it has achieved or can achieve. 
 
 Unfortunately, it is not possible to answer these 
 questions by a direct appeal to history or to statis- 
 tics. The causes that affect real wages are too 
 complex to be readily sifted out. Thus it is not 
 enough to point out that in general wages 
 have risen where Unions are strong, as compared 
 with places or industries in which they are 
 weak. Nor is it enough to show that the 
 period in which Unions have grown has witnessed 
 a great improvement in the whole economic con- 
 dition of the classes which have formed them. 
 Other causes besides Trade Unionism have been 
 acting during the period. It might seem a more 
 promising course to point to instances in which 
 the Unions have actually agitated or fought for 
 advantages with success. It would be easy enough 
 to pile up lists of successes from all epochs of 
 Trade Unionism, and from every kind of trade. 
 But it would also be easy to reckon against them 
 many disappointments and defeats. Indeed, we 
 cannot count by victories alone. Though a strike 
 may be defeated, the fight may be justified by 
 results.! A brave people may be beaten, but can- 
 not be trampled on and enslaved. So, to put it 
 in the concrete, a Union may fight a reduction 
 
 ' Disputes, it must be remembered, are the failures of Trade 
 Unionism, and are but partially redeemed by victory. That is 
 to say, it is the business of Trade Union organisation to secure 
 reasonable advantages without fighting, and its real success lies 
 in this direction.
 
 40 THE LABOUR MOVEMENT 
 
 of lo per cent, and lose ; but the stubbornness of 
 the battle may stop further reductions, which would 
 have stripped unorganised workmen of 20, 30, or 
 40 per cent. Both sides know this, and hence the 
 seemingly narrow issues on which long and stub- 
 born disputes are often fought. 
 
 But the most effective Union seldom fights 
 because it has no need to do so. It is by the 
 steady pressure of organised opinion, by the deli- 
 cate tact of skilled negotiators, by the quietly 
 effective ways about which newspapers are silent, 
 that the best work is done. But when we take 
 this quiet and gradual work into account, no one 
 can tell by any comparison of figures what the 
 effect of Unionism on wages and hours has been, 
 because no one knows what wages and hours would 
 have been to-day but for the Unions. It is not 
 enough to compare the state of non-Union trades, 
 for they, too, have benefited indirectly by the 
 organisation of the others.^ The standard is set 
 by the combination and the Union men do the 
 fighting for the rest. 
 
 Thus the test of direct statistical evidence is 
 very difficult to apply. There are, however, certain 
 very simple and general considerations that are 
 worth looking at as showing how Trade Unionism 
 operates, what sort of help it gives to the worker, 
 and what, in fine, it can and cannot accomplish. 
 
 The isolated worker, in bargaining with the 
 employer, is almost always at a considerable 
 disadvantage. If he refuses work there are almost 
 always others who can do it. He cannot afford 
 to wait, for he has no reserve to fall back upon. 
 He is much in the same case as a tradesman who 
 is forced to sell and cannot bandy words with 
 purchasers, but must take what price he can 
 get. And the difficulty has more force the
 
 TRADE UNIONS 41 
 
 lower we go in the scale. The poorer the 
 workman is, the less he can afford to wait, 
 and the more unskilled his occupation, the 
 greater the crowd of competitors for it. Competi- 
 tion, of course, may be the other way. The 
 " worker " may himself be sought after. There 
 is a continuous gradation from the great lawyer 
 or doctor who can choose his own fee, and, what- 
 ever price he names, will be beset by " employers," 
 down through the mass of professional men and 
 artisans who will wait a bit rather than take a 
 second-rate place, to the crowd of " casuals " who 
 throng round you at a railway-station to carry your 
 bag for a copper. The point is, that the farther 
 we descend the economic scale the keener the 
 competition and the worse the position of the 
 worker for bargaining. His sole resource is the 
 Union. The Union arrests the undercutting pro- 
 cess., It provides the fund which enables a man 
 to wait a little while rather than allow himself 
 to be beaten down to a lower price, and it supplies 
 officials to conduct negotiations., On this point 
 there is often much confusion in public discussion. 
 The Union officials are spoken of as third parties 
 intervening between employers and employed. In 
 reality they are agents, and in no other relation 
 of life is the employment of agents questioned. 
 If a man has a house to buy or sell, to let or 
 to take on lease, he probably employs a solicitor 
 or an agent, unless, indeed, the buying or letting 
 is part of his regular business. Wherever a man 
 has no special skill he uses, if he is wise, (the 
 special skill of others. Now, the business of selling 
 one's work to the best advantage is a very different 
 thing from the business of doing it well, as many 
 who are not workmen know. But the workman 
 has to live by selling his work. He cannot sell it
 
 42 THE LABOUR MOVEMENT 
 
 advantageously unless he comes to terms with 
 others who have the same commodity to dispose of. 
 Nor does he know the market. Accordingly he 
 forms a union that all sellers of labour may act 
 in concert, and chooses as officials the best experts 
 he can find, appoints them to watch the market 
 for him, and pays them for their advice as to his 
 dealings. In these ways the labourer puts himself 
 on an equality with his employer, the employer 
 being already, as Professor Marshall has pointed 
 out, an absolutely rigid combination to the extent 
 of the number of workers he employs, and being 
 also, as a rule, well versed in the condi- 
 tions of the market and the general business of 
 bargaining. 
 
 Now, prima facie, we should assume that if a 
 man is a good bargainer he is likely to be better 
 off through life than a bad one. But we are told 
 by economists that wages, being the price of 
 labour, will tend like all other prices to an equiU- 
 brium point. This point is fixed, primarily and for 
 short periods, by two things— («) The demand for 
 labour—/.^., the amount of money employers are 
 ready to spend on hiring labour ; and {b) the 
 supply—/.^., the number of labourers seeking em- 
 ployment at the price employers are willing to 
 pay. To the point so fixed wages will always be 
 tending slowly or quickly. They may never reach 
 it or rest at it, but they oscillate about it as a 
 pendulum swings about the vertical line. Well, 
 let it be granted that in any market prices are all 
 tending to an equilibrium. That will not alter the 
 fact that the least skilled purchasers in that market 
 will get the least for their money, and if there is 
 one class of purchasers less skilled on the average 
 than another, that class on an average will come 
 off worse. Prices will, if you please, ultimately 
 tend to the equilibrium point. Meanwhile the in-
 
 TRADE UNIONS 43 
 
 ferior marketers will have bought at the high price, 
 or let goods go at the lower. Here they will 
 hasten to purchase when they might have waited 
 for a fall. There they will sell in a hurry while 
 the market is, in fact^ rising. We need hardly 
 labour this point. No one will deny that a good 
 housewife makes a shilling go farther than a bad 
 one, and there is no reason to reverse the judg- 
 ment when it is a question of a class instead of an 
 individual. 
 
 Let it be granted, then, that wages tend of 
 themselves to an equilibrium, and let it be for the 
 moment supposed that no deliberate action can 
 affect this equilibrium, still, the worker who can 
 bargain well will get the advantages of every 
 turn in the market. It takes perhaps years for an 
 expansion of demand for labour resulting from 
 some new commercial development to work itself 
 out unaided on the rate of wages. Let us con- 
 cede (we shall see reason subsequently for with- 
 drawing the concession) that no Trade Union 
 action can affect the rate which wages will arrive 
 at by the end of that time. Yet meanwhile the 
 market might admit all along of the higher rate. 
 The pressure of tendency will not make itself 
 felt for years if the party which stands to win 
 is not in a position to make use of his advantages. 
 Take a parallel case. A farmer's wife sells her 
 eggs at a shilling a dozen because that is the 
 price this morning and she cannot wait. Another, 
 shrewder, more patient, or less pressed for cash, 
 scents a coming rise, holds back, and finally sells 
 the dozen for I4d. The weak bargainer loses, 
 and if there is a class of weak bargainers it 
 loses as a class and all along the line. Thus it: 
 is quite intelligible that there should be sufficient 
 " buoyancy " in the labour market to admit of a
 
 44 THE LABOUR MOVEMENT 
 
 rise years before it takes place if the labourers 
 are neither strong nor far-sighted. Now, if there 
 were any tendency in bargaining to right itself 
 this would not much matter. If the very fact 
 that I am underpaid to-day set some law of justice 
 or economic harmony into operation which would 
 overpay me to-morrow, we should cry quits all 
 round and leave the market to take care of itself. 
 But since such harmonies figure only in the 
 mythology of early nineteenth-century science, it 
 will be readily seen that to be permanently the 
 weaker in a series of bargains is likely to im- 
 poverish you in the long run. If then, a Trade 
 Union could do no more than merely " anticipate 
 a rise, or delay a fall," and if it did this per- 
 manently and continually its existence would be 
 abundantly justified— its effect on the average rate 
 of wages would be a very real one. And there is 
 no need, we may remark, to suppose that the Union 
 gets the better of the bargain, or that it makes 
 " economic friction " work on the side of the 
 employed against the employer. We need not, 
 that is to say, suppose that by combination the 
 worker will get a larger share of the produce 
 than he would as an isolated worker who should 
 be on perfectly equal terms, as to acuteness, 
 power of waiting, and the like, with his employer. 
 Nor need we therefore hold that the rate of profit 
 would be lower than it would be under such a 
 system of perfectly free and equal competition. 
 It is quite enough for the Union to prove that 
 it raises wages to the point obtainable by such 
 competition between equals. The fact is that the 
 Trade Union suppresses free competition in one 
 sense, but institutes it for the first time in another. 
 It abolishes the unrestricted competition of isolated 
 individuals against one another which places all
 
 TRADE UNIONS 45 
 
 at the mercy of the employer, and substitutes for 
 it a combination of men bargaining for employment 
 on free and equal terms. 
 
 So far we have dealt only with the effect of com- 
 bination on the temporary fluctuations of the 
 Labour Market. Considering the Union as the only 
 efi'ective mechanism of bargaining available for 
 the labourer, we have seen that it enables him 
 to take advantage of the various fluctuations of 
 demand instead of allowing these to take advantage 
 of him. Unionism finds the Labour World in the 
 state analogous to that of a market where skilful 
 dealers are selling to ignorant customers at enor- 
 mous profits. And just as such a market is 
 revolutionised when the customers become educated 
 and acquire knowledge of goods and their prices, 
 so the old methods of selling the commodity of 
 labour are all upset by combination. 
 
 In all this we have assumed with the economists 
 that there is a normal price to which wages tend 
 to return, however violently they may be raised 
 or lowered for a time, and that the Union can have 
 no influence in fixing that price. But the assump- 
 tion is not accurate because Labour, though a 
 marketable commodity, is not quite like other 
 marketable commodities. If the price of coal 
 falls and I get them 2s. or 3s. a ton cheaper, 
 the coals are just as good as they were before 
 and perform their function just as well. But if 
 wages fall, say, in an agricultural district, from 
 I2S. to I OS. per week, the labourer does not do his 
 work so well. The labourer's capacity for work — an 
 economic factor of the first importance on which the 
 present commercial position of the nations of the 
 world may be truly said to rest— varies directly up 
 to a certain maximum with the remuneration of his 
 work. Send a man out underfed and scantily
 
 46 THE LABOUR MOVEMENT 
 
 clothed to his wintry toil in the frozen farmyard, 
 and bid him return at night to an unwholesome, 
 dirty, draughty cottage, and as the months go 
 by his mental and physical strength is drained. 
 He becomes spoiled goods, and at last has to 
 be thrown away — into the workhouse. Meanwhile 
 his children are growing up under similar con- 
 ditions, kept mercilessly alive for a battle they 
 are not fit to fight. 
 
 When we get below the minimum of comfort 
 the price of labour has an immediate and cumu- 
 lative eft'ect upon its efficiency. The farther we go 
 below the minimum the more important is this 
 effect — until we reach starvation point. Hence it 
 is clear that anything which affects the reward 
 of Labour for a short period tends to affect its 
 efficiency beyond that period. And the " short 
 period " may be very short. If I take a half- 
 starved tramp off the road and put him to work in 
 my garden, in return for food, clothes, and shelter, 
 for a week, I shall lose on the transaction. If 
 I keep him a second week, he may be capable of 
 twice as much work, and I may be the gainer. 
 This is an extreme case. But on a wider scale, 
 with more far-reaching effects, though in a lesser 
 degree, every increase in wages that are still below 
 the minimum of comfort tends in the same 
 direction. Now it is easy to understand that the 
 efficiency of Labour reacts on wages ; for it in- 
 creases the total produce of the country, and with 
 it, though in a lesser degree, the share that falls 
 to the labourer.' Granting, then, that Trade 
 
 ' The total product is divided between Labour and other 
 factors in production in a proportion that depends upon their 
 relative strength. The increase of the total does not necessarily 
 involve any change in this proportion and unless it does so each 
 share will be increased.
 
 TRADE UNIONS 47 
 
 Unionism raises the price of Labour for short 
 periods by enabHng it to take advantage of every 
 turn of the market, it follows that it tends to 
 make a permanent improvement in the condition 
 of the labourer by the best of all methods, the 
 improvement of the labourer himself. 
 
 These considerations help us in dealing with 
 a question which must have been present to 
 the reader's mind from the first, What is the effect 
 of a rise in wages upon profits? This question is 
 forced upon us, not only by general economic con- 
 siderations, but by the patent fact that in many 
 of the worst paid trades the employers, or some of 
 them, find it difficult to keep their heads above 
 water ; and in some of the most sweated trades 
 the employer is said to be absolutely worse off than 
 his half-starved underling. At first sight this is a 
 paradox. If in the Labour market, and especially 
 in the unskilled Labour market, the advantage in 
 bargaining is almost without exception on one 
 side, profits should be high, and they should be 
 highest where wages are lowest. As it turns out 
 the case is often the other way. The general 
 discussion of this question is a matter for the 
 political economist. It concerns us at present only 
 as raising the question how the employer can afford 
 to raise wages. Must not profits suffer, and will 
 not Capital leave the country? 
 
 An increase of wages acts upon profits mainly by 
 affecting the cost of producing goods for the market. 
 But how an increase of wages will affect cost in any 
 case, and how a change in cost of production will 
 affect profits, is very uncertain. But that there 
 may be cases in which the increased cost of manual 
 labour does raise the price at which a commodity 
 can be sold with profit it would be hard to deny. 
 If we are to believe the reports of many of our
 
 48 THE LABOUR MOVEMENT 
 
 principal railway companies, the " agitator " ' has by 
 this means largely increased net expenses of many 
 of them in the last few years .2 Supposing cost of 
 production to be thus increased, what will happen? 
 It is held by some economists that the process 
 will be self-defeating. Capital will leave the 
 country and wages will fall. That this may be the 
 result in extreme cases, and even has been the 
 result in some instances, it would be rash to deny ; 
 though we may remark, following good authority, 
 that it has more probably come about, if at all, 
 from injudicious disputes than from simple increase 
 of cost. 
 
 Further, if capital does not leave the country, 
 foreign goods enter it, and how, asks the employer, 
 is he to pay 30s. a week and hold his own with 
 the German, who only pays 25s.? This argument 
 meets with the especial approval of the Tariff 
 Reformer, who has his ready specific to meet the 
 case. Keep out foreign goods or compel them to 
 pay a duty, and it at once becomes possible for 
 the British manufacturer to raise prices to the 
 extent of the duty and wages in proportion. The 
 Tariff Reformer's argument would be more im- 
 pressive if he did not in the same breath assure 
 us that prices will not be raised by a tariff. ^ But 
 this belongs to the humorous side of political 
 controversy. For serious purposes we may assume 
 that a tariff would raise prices in rough propor- 
 tion to the amount of the duty in each case, and 
 we may ask whether in effect this would help us. 
 We are to raise prices in order that we may raise 
 
 » The "agitator" is not infrequently attacked almost in the 
 same breath (a) for ruining the employer by causing him to pay 
 higher wages, and (b) for humbugging the workman into thinking 
 that he can get wages raised. But this must be one of the 
 " inner contradictions " of Capital spoken of by Karl Marx. 
 
 - Written in 1892 and requiring little modification in 1912.
 
 TRADE UNIONS 49 
 
 wages above the foreign level. Now at this point 
 again we come upon a familiar contradiction in the 
 Protectionist case which on the surface is merely 
 funny, but has a deeper suggestiveness. For it 
 assures us at one and the same moment (a) that 
 we must protect ourselves against the competition 
 of the underpaid workman of the Protectionist 
 lands, and (b) that we must imitate the policy of 
 Protection for the sake of the advantages which 
 it confers on the workman. Now the fact that 
 lies behind this contradiction is that it is not the 
 underpayment of the workman which enables the 
 foreign producer to compete with us successfully. 
 A country will beat us in competition where she 
 has natural or acquired advantages, such advan- 
 tages, for instance, as the chemical schools or the 
 highly-developed commercial technique of Ger- 
 many. But she will not as a rule beat us by 
 underpaying her workmen, because it has been 
 repeatedly shown by careful comparisons that a 
 firm may employ its men for shorter hours, and 
 pay them more per day, and yet turn out its goods 
 at something less per piece than its competitors. 
 This is due to a combination of causes. The 
 better-paid workman is more efficient, produces 
 more, and destroys or hinders less. The man who 
 sets out to organise his workshop with good and 
 well-paid workers is a better manager. The 
 efficiency and the very expensiveness of labour 
 impose higher organisation. The weaker em- 
 ployers go under. The stronger brains concen- 
 trate the business more in their own hands. Pro- 
 duction passes into the larger scale. The whole 
 level of competence is raised. The process has its 
 bad as well as its good side. There is in it 
 some of the ruthlessness inherent in competition, 
 and we shall perhaps see a glimpse later of a 
 
 4
 
 50 THE LABOUR MOVEMENT 
 
 more excellent way. For the present we have 
 to note that it is in fact by this all-round reaction 
 on efficiency that increase of remuneration is 
 possible under existing economic conditions. Were 
 there no such reaction, high wages would mean 
 loss and there would be no advance, unless in, 
 some favoured industry where profits are ruling 
 so high that employers could incur increased 
 expense without curtailing output. 
 
 But would it not in any case be possible to 
 protect the home market by a tariff and so avoid 
 the difficulties of foreign competition, whether due 
 to well or ill-paid labour? It would, of course, be 
 possible to benefit any single trade by a tariff, 
 but not trade as a whole. Our total production 
 is partly for our own and partly for the foreign 
 market, and what we send abroad is paid for by 
 goods sent to us. If we succeed in stopping the 
 entry of foreign goods to the amount of ten million 
 pounds, we stop the export of our own goods to 
 an equivalent value. ' Nor is this all. Under the 
 
 ' This would be clearer to the general public if exports and 
 imports were evenly balanced. As it is what we import pays 
 for our shipping, for a good deal of banking and insurance work 
 done for foreign account, and interest on capital invested abroad. 
 It is not therefore true to say that every piece of goods imported 
 is paid for by a corresponding export, but it is true that, with the 
 exception of that which is imported as payment of interest, all 
 imports are paid for by British industry. If a tariff were imposed 
 and succeeded in diminishing total imports, foreign investors 
 would still require their interest, and the fall would accordingly 
 affect that portion of our imports which is paid for by exports or 
 other forms of industry. Every such reduction of the import 
 trade would therefore involve an equal curtailment of British 
 industry. 
 
 It may be objected that this argument takes no account of the 
 existence of unemployed capital and labour. Suppose the 
 importation of foreign motor-cars were diminished by a duty, 
 this capital and labour might be applied to making them. But 
 foreign and protected countries also have unemployed capital 
 and labour, and the supposed check to their export trade would
 
 TRADE UNIONS 51 
 
 actual conditions of our trade the main effect of 
 a tariff on imported goods would be either to 
 increase the cost of production or to diminish the 
 real wages of labour or both combined. For 
 roughly nine-tenths of our imports consist of food 
 and foodstuffs, or materials and appliances for 
 use in industry. The Board of Trade divides 
 imports of manufactured and partly manufactured 
 goods into three classes, which it distinguishes 
 as follows : — 
 
 Class A — Articles completely manufactured and ready for 
 
 consumption. 
 Class B — Articles manufactured but requiring to pass through 
 
 some process of adaptation or combination before 
 
 entering into consumption. 
 Class C — Articles partly manufactured. 
 
 Apart from Class A, everything that we import 
 is either a foodstuff or some material or appliance 
 used in production.' But the net imports under 
 Class A amounted in 1908 to 44'8 million 
 pounds out of a total of 513 million pounds. For 
 the four years 1905-8 Class A imports averaged 
 49*2 million pounds out of a total of 519 million 
 pounds. 2 The remaining nine-tenths of our im- 
 ports are either foodstuffs or materials and appli- 
 ances of industry. Hence, even if it did not 
 directly diminish our production by interfering 
 with the exchange of goods, a general tariff would 
 increase the cost of production and make it not 
 
 add to it. If the productive power thus displaced could not find a 
 market abroad, it would be induced to find one at home. Home 
 demands would be increasingly met by home production, and 
 the demand for British goods proportionately reduced, 
 
 ' The same is in reality true of many of the objects included 
 in Class A itself, since though fully manufactured they are of use 
 only as subserving some further industrial process. 
 
 = " British and Foreign Trade and Industry, 1909" (Cd. 4954) 
 pp. 19 and 49.
 
 52 THE LABOUR MOVEMENT 
 
 less but more difficult to raise the standard of real 
 wages. To avoid this objection it would be neces- 
 sary to confine the tariff to the small class of 
 fully manufactured goods, an impossible piece of 
 favouritism and one that could have no general 
 effect on the level of wages. 
 
 The protection of a tariff is therefore illusory. 
 The practical possibility of raising wages and 
 maintaining them at a high level must depend on 
 the response of the workman and his employer to 
 the improvement. Experience has amply shown 
 that high wages and good conditions may also 
 be merely from the point of view of production the 
 most economical. But this depends on the increase 
 of product being at least proportionate to the in- 
 crease of wages. Suppose that a man receiving 
 2 OS. a week produces on the average a value of 
 30s., the margin going to the other expenses of 
 the industry. Suppose that all these expenses re- 
 main the same, but that his wages are raised to 
 25s. It is clear that his week's work must now 
 be worth at least 35s. unless the cost of production 
 is to increase. In reality it must be worth more, 
 for the increase will imply some improvement of 
 organisation and some further outlay of capital. 
 But let us take the figure at 35s. At this figure 
 it will still be possible for the low-grade works 
 employing low-grade labour at the old rate of 
 20S. to compete with the firms which pay the 
 higher wage, while if the product is anything less 
 than 35s. the low-grade firms will win in the 
 competition. There will be a tendency to revert 
 to their methods. It is here that the real danger 
 of low-grade foreign labour comes in. The effect 
 is psychological. The employing class point to 
 cheap goods made by cheap foreign labour and 
 ask how they can possibly compete with them if
 
 TRADE UNIONS 53 
 
 they are to increase the margin of superiority 
 already enjoyed by the British workman. The 
 workman himself feels the sting of the question, 
 and responds by asserting his solidarity with the 
 foreign Trade Unionist and not seldom by furnish- 
 ing him with direct material support, I have 
 never learnt that employers on their side have 
 drawn this very natural deduction from their 
 premises. 
 
 I conclude that the raising of wages is not a 
 self-defeating process, though it is not free from 
 practical difficulties. The most serious of these 
 difficulties is that the full economic profit of high 
 wages is not immediate. A given individual is 
 not immediately able to produce twice as much 
 because his wages are suddenly doubled. The 
 full effect will not be felt for a generation. An 
 ill-paid workman has ill-fed and ill-educated 
 children, and is the correlative of a driving and 
 oppressive employer. The full effects of an im- 
 provement in his conditions are many-sided and 
 gradual. They will ^ come out partly in his own 
 lifetime, more fully in that of his children. They 
 will appear partly in the improvement in his own 
 work, partly in the improvement of methods of 
 business management, and in an actual change in 
 the character of employers. The prevention of 
 underpayment eliminates from the ranks of em- 
 ployers the men who, whether from incompetence 
 or from other defects, are only able to keep their 
 heads above water by employing low-grade labour 
 at an inadequate rate of wages. 
 
 The indirect value of Trade Unionism to indus- 
 trial production as a whole is now very commonly 
 recognised by the most enlightened employers, and 
 I gladly reproduce a passage quoted in the first
 
 54 THE LABOUR MOVEMENT 
 
 edition of this book from an article by Mr. (now 
 Sir .William) Mather as expressing opinions rarer 
 then than now. 
 
 " We employers owe more than, as a body, we are inclined to 
 admit to the improvements in our methods of manufacture, due 
 to the firmness and independence of trade combinations. Our 
 industrial steadiness and enterprise are the envy of the world. 
 The energy and pertinacity of Trade Unions have caused Acts of 
 Parliament to be passed which would not otherwise have been 
 promoted by employers or politicians, all of wliich have tended 
 to improve British commerce. And it is worthy of note that this 
 improvement has gone on concurrently with great and growing 
 competition of other nations, owing to tlie development of their 
 own resources. The enormous production of wealth in Great 
 Britain during the present half-century, which is due to natural 
 resources and the labour and skill bestowed upon their develop- 
 ment, has grown most rapidly during a period remarkable for 
 the extension of the power of Trade Unionism. Prosperity 
 beyond the dreams of avarice has followed in the wake of our 
 industrial habits and customs, and these have undoubtedly been 
 largely promoted by the great labour organisations. . . . Every 
 intelligent employer will admit that his factory or workshop, when 
 equipped with all the comforts and conveniences and protective 
 appliances prescribed by Parliament for the benefit and protection 
 of his workpeople — though great effort, and, it may be, even 
 sacrifice, on his part has been made to procure them — has 
 become a more valuable property in every sense of the word, and 
 a profit has accrued to him owing to the improved conditions 
 under which his workpeople have produced. ..." And speaking 
 of the importance of permanence and stability in a trade, he 
 adds : " The keen interest they feel in seeking to secure 
 permanence and progress in the trade they pursue has been 
 strikingly shown by the fact that Trade Unions have agreed to 
 reductions of wages, advocated short time, and offered many 
 suggestions involving sacrifice on the part of the workers, in 
 order to stem the tide of temporary adversity." ' 
 
 So far we have studied Trade Unionism as it 
 actually works. We have seen that it regulates 
 the conditions of employment in the interests of 
 all the workers. It puts the manual labourer on 
 
 ' Article on " Labour and the Hours of Labour," in the 
 Contemporary Review for November, 1892.
 
 TRADE UNIONS 55 
 
 an equality with his employer in arranging terms, 
 and accordingly it raises wages and diminishes 
 hours of work. It effects general economy by 
 eliminating incapable employers, and by raising 
 the standard of comfort among workmen it is not 
 only a direct benefit to them, but, by making them 
 more efficient agents in production, promotes the 
 general health of the national industry. 
 
 If now we ask what hope there is that Trade 
 Unionism may succeed in establishing fair con- 
 ditions as above defined for all workers, we shall 
 recognise a far greater obstacle in the weakness 
 of Trade Unions than in any defect in the nature of 
 collective bargaining or in the principle of the fair 
 wage. The competition of non -Union men, and the 
 mistaken policy and narrow interests of some of the 
 Unions themselves, keep the movement back far 
 more than any inherent weakness in the principle 
 of Unionism. These obstacles are, however, being 
 in part overcome by the spread of moral and 
 economic education among workmen, and by the 
 consolidation and federation of Unions. The 
 federal principle has the special merit of over- 
 coming sectional antagonisms and the tendency to 
 a narrow corporate spirit.' The larger Unions 
 are in a position to choose abler men to administer 
 their affairs. They are not wont to precipitate 
 expensive disputes, and they command the respect 
 which is necessary as a basis of negotiation ; and 
 as different trades act together it becomes increas- 
 ingly difficult to deal with them by bringing in out- 
 side labour instead of by an open and honourable 
 discussion of difficulties. The first step, then, for 
 
 * On some of the drawbacks of these extensions, and on 
 the danger that a Trade Union may acquire the power of a 
 monopoly as against the pubhc in certain industries a few words 
 will be said in Chap. III.
 
 56 THE LABOUR MOVEMENT 
 
 Trade Unionism is to extend and perfect itself as 
 a moral, educational, and economic movement. 
 
 The forces which it sets working will help it 
 whenever wages are below the minimum on which 
 the worker can best develop his powers. I mean 
 the economic advantages already explained of rais- 
 ing wages to this minimum. If the Unions were 
 fighting against a continual and ever-increasing 
 economic pressure, one might doubt the perman- 
 ence of their success. But to a certain point their 
 work gets easier as it goes on. The second 
 advance may be more easily won than the first. 
 This holds as long as wages remain below the 
 minimum. Up to that point as a rule a rise of 
 wages really pays in the long run. 
 
 Lastly, we have been assuming all along that 
 the Union has to fight the employers and the public 
 at every step. This would once have been practi- 
 cally true, but it is true no longer. Even as 
 regards private concerns the education both of 
 Unionists and of their employers has improved of 
 late years, and the employer has come to see 
 that it " pays " in the end, not only from the 
 humanitarian but from the business point of view, 
 to employ Union men on Union conditions. Still 
 more fundamental is the change in public feeling. 
 The growing inclination of public bodies and Co- 
 operative Societies to pay Union rates marks a 
 new era in the history of Unionism. It is the 
 beginning of a definite system of fixing wages by 
 the moral sense of the community. The rate on 
 which the Unions, the ratepayers, and the best 
 employers agree has moral as well as economic 
 forces at its back, v/hich the inferior employer 
 cannot long resist. As to the justice and desira- 
 bility of supporting the " living " wage no one 
 who holds the diffusion of the means of the
 
 TRADE UNIONS 57 
 
 elementary comforts to be the first object of an 
 industrial system can have any possible doubt. On 
 the other hand, Trade Unionism is weakest just 
 where the need for its work is most urgent. The 
 worst paid workers have not the reserve of force 
 necessary for building up a stable combination, 
 and though the past year has seen a revival of 
 combination among ill-paid and unskilled workers, 
 it is not possible to write as hopefully of the per- 
 manent prospects of unassisted Trade Unionism in 
 this direction as it was twenty years ago, when 
 the " New Unionism " of that day was in the full 
 vigour of its youth. Fortunatel}^, in the interval 
 the sense of public responsibility for the condition 
 of the workers has developed, and we have now 
 legislative recognition of the principle of the mini- 
 mum wage. Wages Boards with statutory powers 
 define wages in four of the most sweated industries, 
 and have already raised them in at least one case 
 in drastic measure. The working of these Boards 
 will be carefully watched, and if they succeed there 
 will doubtless be a steady demand for their exten- 
 sion. It is not beyond the bounds of hope that 
 the minimum wage may become as much a matter 
 of the general law as the limitation of hours in 
 the factory. On the other hand, the law only pre- 
 scribes minimum conditions in any trade. The 
 maintenance of a higher standard and the general 
 provision for the fair treatment of the individual 
 worker will remain the peculiar function of the 
 workers' organisations. We are likely, therefore, 
 to see the extension of the legal minimum accom- 
 panied by an increase rather than a diminution of 
 Trade Union activity. 
 
 Thus in securing the fair wage the Trade Union 
 and the democratic State must work together. But 
 the fair wage is only one of the objects of industrial
 
 58 THE LABOUR MOVEMENT 
 
 organisation. We have said nothing as yet of the 
 general direction of production. We have said 
 nothing of regularity and continuity of employ- 
 ment. Though we have had to touch on the 
 support of the infirm and the incompetent, we have 
 said nothing of the sources out of which they are 
 to be maintained. These questions take us outside 
 the province of such control of industry as can be 
 exercised by combinations of wage-earners or by 
 the State acting in the interest of wage-earners 
 as such. They raise two distinct but related ques- 
 tions. One concerns the general direction of 
 industrial activity, the other the disposal of the 
 surplus that remains over when the worker has 
 received his fair wage. These questions direct our 
 attention to other forms of the collective control 
 of industry to which we must now turn.
 
 CHAPTER III 
 
 CO-OPERATION AND THE CONTROL OF PRODUCTION 
 
 If Trade Unionism represents the control of in- 
 dustry by communities of workers in the interest 
 of all as workers, Co-operation is the system by 
 which production may be organised wholly or in 
 part in the interest of the community as con- 
 sumers. Let us ask, then, what Co-operation is 
 doing, and can do, in the way of regulating pro- 
 duction and making a fair distribution of surplus 
 wealth. 
 
 In ordinary usage Co-operation is the name of 
 a movement instituted and maintained by volun- 
 tary associations. We shall see reason presently 
 for a more extended usage. But let us first con- 
 sider the growth and the value of the Co-operative 
 movement in the usual sense. W^ have not here 
 to tell again the twice-told tale, but merely to 
 recall half a dozen figures to show that whatever 
 be the precise economic value of Co-operation, 
 it is a great and growing power to be reckoned 
 with, and that whatever it can do it probably will 
 do on an ever-increasing scale. 
 
 Not to go back to the days of infancy, there 
 were, in 1862, 440 Co-operative Societies known 
 to exist in England and Wales, with a membership 
 of 90,341 persons. Their sales in that year 
 amounted in round numbers to £2,330,000. They 
 
 made a profit of about £165,500. In 1890 there 
 
 59
 
 60 THE LABOUR MOVEMENT 
 
 were about 1,303 Societies existing in England 
 and Wales, of which 1,092 made returns published 
 in the Report of the Co-operative Union. These 
 1,092 Societies had a membership of 883,000, and 
 sold goods to the amount of £33,000,000 during 
 the year, with a net profit of £3,200,000. In 
 addition, there were 333 Societies in Scotland, 
 with a membership of 171,000, bringing the total 
 membership of the Co-operative State to some- 
 thing considerably over a million persons. ' 
 
 In 1 910 there were 1,555 Societies making 
 returns, including 25 in Ireland (291 in Scot- 
 land 2). Of these 1,428 were Retail Distributive 
 Societies, which had 2,542,532 members, and sold 
 goods to the value of £71,861,383, with a net 
 profit of £10,938,331. Thus in a generation 
 before 1890 the Co-operative population increased 
 nearly tenfold, the business nearly fifteenfold, and 
 the profits twentyfold. In the twenty years since 
 1890 the population has again more than doul^led, 
 while the business and profits show a corresponding 
 increase. 
 
 We have now to ask. What is this great move- 
 ment doing for the interests we have at heart? 
 What is the economic significance of Co-operation? 
 In most industries at the present day the produc- 
 tion of any article is left to any one who chooses to 
 undertake it. A man makes soap, or cotton, or 
 clothes, not because he wants to use all that he 
 turns out from his mill or workshop himself, nor 
 necessarily because some one else who is going to 
 use them has ordered them, but because he guesses 
 or calculates from the general state of the market 
 
 • See the " Report of the Twenty-fourth Annual Co-operative 
 Congress, 1892," p. 136. 
 
 ^ The number of Scottish Societies has decreased since 1892, 
 but the membership has risen from the figure given above to 
 409,522. See the 43rd Report of the Co-operative Union (191 1).
 
 CO-OPERATION 61 
 
 that some one or other will buy what he makes. 
 The case is not much altered when the actual 
 manufacturer produces for a middleman. The 
 middleman is not a consumer, but an agent in 
 production, and when the speculation and the risk 
 are not undertaken by the maker of goods, they are 
 merely handed over to the merchant, whether he be 
 the large wholesale dealer or finally the shop- 
 keeper. The modern system of commerce, then., 
 will not be greatly misrepresented if we figure it 
 as being carried on between two individuals, A 
 and B, in such a way that A, without consulting 
 B, guesses at what B will want, and spends much 
 labour in making it, B meanwhile doing the like 
 for A. The natural consequence is that when A 
 and B come together to exchange their goods they 
 do not find themselves altogether suited. For 
 example, instead of A making hats for both, while 
 B made boots, it may have occurred to each of 
 them to make hats. The result is that they will 
 have four hats between them and no boots, and 
 severe commercial depression will ensue. The 
 superfluous hats will be worthless, and both A 
 and B will go barefoot. 
 
 Now, something like this actually occurs in our 
 industry. One employer is, of course, not wholly 
 ignorant of what others are doing. He watches 
 the course of trade, and forms the best judgment 
 possible of the probable fluctuations of the market. 
 But it is the interest of each employer to extend 
 his own business, whether at the cost of others 
 or not. There is, therefore, a constant pressure 
 to expand, which in process of time has its efifect 
 in a collapse of prices, which makes it impossible 
 to pay the fixed charges on industry and leave 
 a margin of profit. Stagnation ensues. Produc- 
 tion is arrested till prices begin to rise again and
 
 62 THE LABOUR MOVEMENT 
 
 the cycle renews itself. There is no systematic 
 attempt to get what is necessary and good for the 
 community produced, neither more nor less. On 
 the contrary, every man produces what he thinks 
 some one will give a good price for, and if many 
 other people have been thinking the same thing 
 there will be a glut in the market. And hence 
 the paradox of modern industry, that plenty is 
 the cause of starvation. ^ 
 
 Now, if we go back to A and B we may hope 
 that they will learn wisdom from experience. They 
 have but to take a very simple step. Instead of 
 retiring each to his own abode to work apart, 
 they have merely to consult with one another as 
 to their respective needs, and set about to help 
 one another in supplying them. Instead, then, of 
 A making something that he thinks B will buy, 
 with a view to proving on the exchange, while B 
 works similarly for his profit, A and B will now 
 work together, create a joint product, and share 
 it between them — in other words, they will co- 
 operate. 
 
 Now, the beginning of this method, humble as 
 it is, is seen in the Co-operative Store. Instead of 
 leaving it to individual millers and shoemakers 
 and grocers to supply their needs and make what 
 
 * It was at one time contended by economists that permanent 
 and general over-production is an impossibility. This is probably 
 true, supposing the machinery of exchange — social and material- 
 perfected. Meanwhile, nothing prevents continual and repeated 
 over-production in many departments of industry at once, over- 
 production being understood relatively to the existing effective 
 demand. From the point of view of good economic organisation 
 there is over-production whenever the price is too low to allow 
 adequate remuneration for producers, whether employers or 
 employed. Such a contingency is not only possible, but frequent, 
 the low price continuing for considerable periods, and varying 
 according to circumstances — i.e., according to the ease with 
 which demand for the article expands or the supply of it gets 
 contracted.
 
 CO-OPERATION 63 
 
 profit they can, Co-operators undertake to supply 
 their own needs, or to direct others to do so. 
 Co-operation accordingly represents the organisa- 
 tion of industry by a community of consumers in 
 the interest of all as consumers. As such, it is the 
 natural supplement to organisation by producers. 
 Now, a Co-operative Society, like a Trade 
 Union, is primarily an association of some of the 
 residents in a particular town or village. As such;, 
 its scope and influence on the regularity of industry 
 and the distribution of wealth are necessarily 
 limited and partial. It is, for one thing, almost 
 entirely confined to the business of shopkeeping. 
 It is thus a partial regulation of one form of 
 industry in the interests of a small group of con- 
 sumers. A wider future opened upon Co-operation 
 when the Federal principle was introduced. We 
 have seen something of what Federation can do 
 for the Trade Union movement. What it has done 
 for Co-operation is even greater. It has trans- 
 formed an aggregate of isolated and comparatively 
 petty shops into an almost national organisation, 
 undertaking wholesale production and distribu- 
 tion ^ on a scale large enough to form an appre- 
 ciable fraction of the commerce of the country, 
 and linking a million men and women all over the 
 island by a common interest. Through the Federal 
 principle, then, Co-operation and Trade Unionism 
 are growing to be modes of national organisation, 
 and it is only as their development in this direction 
 grows complete that they take their true place 
 as contributing to the collective control of in- 
 
 ' The two great Wholesale Societies exist to supply the Retail 
 Stores. They are, in fact, associations of which the local societies 
 are members. The English Wholesale had, in 1891, a member- 
 ship of 966 societies, and sold goods to its members to the value 
 of £8,000,000. In 1910 it had 1160 members and its sales 
 amounted to ;£26,567,ooo.
 
 64 THE LABOUR MOVEMENT 
 
 dustry in the interests of the nation as a 
 wlwle. 
 
 The Co-operative Society, according to our 
 analysis of its principle, is a community of con- 
 sumers, undertaking, through their committee and 
 officials, to provide the goods they require for 
 their own use. They find the capital and direct 
 the management, and we have thus a form of the 
 control of production by consumers. 
 
 This fact has been in some degree obscured 
 by the tendency of the movement to concentrate 
 itself upon that form of production which is known 
 as retail trade. Many people would hardly con- 
 sider the retail trader as a producer at all, and 
 are puzzled by the inclusion of shopkeeping among 
 the branches of production. 
 
 But there is a genuine sense in which every- 
 body is an agent of production who assists in 
 conveying goods to the consumer. The baker's 
 boy who brings the bread round in a cart to the 
 house is no whit less a producer of the bread than 
 the baker who makes the loaf, or the seamen and 
 railwaymen who carried the wheat from the 
 Argentine. What one wants is not wheat that is 
 in the Argentine, nor bread that is in the bakery, 
 but a loaf on the table ; and every one who has 
 assisted in making the loaf out of its original 
 material, and in bringing it to the table, is equally 
 an agent in the production of the loaf which is 
 required. But, furthermore, Co-operation is no 
 longer confined to retail trade. It not only, as 
 above shown, does a large wholesale, and therefore 
 also a large transport business, but it is steadily 
 extending itself to manufactures of various kinds. 
 Here, then, we have a vigorous and growing move- 
 ment based on the principle that the customer 
 sets the producer to work, and regulates his in-
 
 CO-OPERATION 65 
 
 dustry through his committee. That is, we have 
 the beginnings of a machinery for correlating 
 demand and supply, and thus doing something to 
 mitigate the fluctuations of trade, from which all 
 classes suffer so much.' 
 
 Now, in a Co-operative enterprise profit either 
 accrues to the community or it is simply abolished. 
 The method by which this is effected is well known. 
 The member purchasing goods at the Co-opera- 
 tive Store pays, in the first instance, the full 
 market price of the article. But he receives 
 a tally for the amount of the purchase, and 
 on sending in his tallies at the end of the quarter 
 receives a share of the dividend proportionate to 
 the amount of his purchases as guaranteed 
 
 ' This result cannot, indeed, be expected on any great scale 
 until a far larger proportion of the trade of the country is 
 conducted, in one form or another, on Co-operative lines. But 
 the tendency is already evident. Both Mr. Mitchell and Mr. 
 Maxwell (Chairman of the Scottish Wholesale Society) dwell on 
 this effect of Co-operation. Mr. Mitchell (Evidence before 
 Labour Commission, p. 13) expressly attributes the greater 
 continuity of work for the Co-operative employee to the 
 fact that "we have an organised market for our produc- 
 tions." Mr. Maxwell (Evidence, p. 36) says that, owing to 
 the steady increase of trade, " workmen and workwomen have 
 almost a certainty of constant employment in the Society." In 
 the clothing factories, he says, "during the slack season we 
 are so certain of an outlet for our productions, we make up 
 larger stocks, thus giving employment all the year round." 
 There is, again, a confidence in the relations of the Wholesale 
 Society and its customers, which prevents injury from the small 
 accidents of commerce, and tends to stability. And this result 
 would be more marked if Co-operative trade were large enough 
 to set the tone to industry as a whole. 
 
 Messrs. Hallsworth and Davies, on the other hand ("The Work- 
 ing Life of Shop Assistants," pp. 108 seq), hold that regularity of 
 employment in co-operative service is a thing of the past. Yet 
 they give tables of members of the National Union of Shop 
 Assistants on unemployed benefit from which it appears that the 
 average percentage on benefit since 1894 has been 7*3, while 
 the corresponding figure for the Amalgamated Union of 
 Co-operative Employees is 2"o. 
 
 5
 
 66 THE LABOUR MOVEMENT 
 
 thereby. To some people this looks like a mere 
 clumsy way of giving to him with one hand and 
 taking away with the other. " Why not lower 
 prices at once? " they say. Others have attached 
 importance to it as a means of encouraging thrift 
 by putting people in possession of two or three 
 pounds at once, instead of saving for them on 
 each purchase. But there is more in the device 
 than this. It cancels profit. A society of con- 
 sumers has undertaken production. All the pro- 
 ducers being paid, cost of production, including 
 management, being met, there remains a balance. 
 This balance would be a profit if the community 
 were selling to outsiders. But they are selling to 
 themselves. There are, therefore, two things that 
 they can do with the profit. They can either 
 communise it— apply it to certain common pur- 
 poses. Or they can cancel it — that is, return to 
 each individual the share of the profit that has 
 been made out of his purchases. Actual societies 
 follow both methods, but in unequal proportions. 
 They reserve a percentage for provident and 
 educational purposes, and the rest they return.' 
 Both methods abolish profit on exchange in the 
 strict sense of the term. There accrues from the 
 sales a surplus value over the cost, and this is 
 profit. But the profit returns to those out of whose 
 pockets it comes — to the individual purchaser or 
 the community. There are no separate business 
 establishments exchanging one with another, and 
 
 ' In earlier editions I described the whole of the profits as 
 communised. This is an error, and I fancy an error closely 
 connected with the actual weaknesses and limitations of 
 Co-operation. Had the Co-operative Societies really determined 
 from the first to hold the profits as a common possession, and 
 found means of investing them, for example, in land and houses 
 for members, co-operation might have spread automatically and 
 we should have heard fewer complaints of the individualistic 
 spirit within it.
 
 CO-OPERATION 67 
 
 therefore no one who makes profit out of another. 
 The nerve of competition is severed. 
 
 Now, voluntary Co-operation is a great and 
 growing movement, and some of its more modern 
 developments are of great promise for the future 
 of the country. But the total fraction of the 
 national industry organised on this basis is still 
 very small. We should have to wait a very long 
 time for social progress if we had nothing to 
 trust to but the growth of this movement, benefi- 
 cent as it is. But, in fact, one of the greatest 
 services that the Co-operators have done is to 
 set a model of the control of industry by asso- 
 ciated consumers. The model can be followed, 
 at any rate the principle involved in it can be 
 applied, in directions and by methods very different 
 from those of the Co-operative Store. 
 
 There are many things which practically all the 
 members of a community require. Such are 
 security to life and property, good roads, means 
 of conveyance and communication, light, fresh air 
 in open spaces, water, and the rest. And as to 
 these, notice that demand is very constant, and 
 people are very nearly unanimous as to the quality 
 of the article desired. There is little room for 
 variation of taste in the matter of drinking-water, 
 or even railway travelling. In these cases, then, 
 where all, or nearly all, people require a com- 
 modity, and where individuals do not differ much 
 in their tastes, a different form of co-operation has 
 been growing up— I mean the co-operation that 
 makes use of legally established machinery. The 
 dwellers in any thriving town which provides 
 itself through its corporate government with the 
 requisites mentioned are, industrially considered, 
 members of a large Co-operative Society. They 
 find that as a body they have certain needs in
 
 68 THE LABOUR MOVEMENT 
 
 common ; they direct their servants, the mayor 
 and the councillors, to make arrangements to 
 supply these needs, and they raise the necessary 
 capital by a rate upon themselves. This is Co- 
 operation, or, if you prefer it, Socialism. On this 
 side the two ideas are one. In each case the 
 persons vv^ho are to use the product set the pro- 
 ducer in motion, and determine the quantity and 
 quality of the product. 
 
 In this, as in voluntary Co-operation, we have 
 the community of consumers directing production ; 
 if there is a surplus over the cost of production, 
 it can be used either to reduce prices or to relieve 
 the rates or for public improvements,' and for this 
 area of industry once more we eliminate " profit 
 on exchange." Municipal trading, then, is simply 
 a step to the collective control of industry in the 
 interests of all. It differs from voluntary co- 
 operation essentially in the employment of legal 
 machinery, a difference justified by the nature of 
 the commodities provided. Its works are financed 
 out of the rates to which every householder must 
 contribute whether he personally requires the ser- 
 vice or not. The Co-operative Society is an associa- 
 tion which any one is free to join or leave. The 
 municipal business is one in which every rate- 
 payer must take his share of the risks. In the 
 case of the State the compulsion is even more 
 general. Every one who lives in the country may 
 be said to be a partner directly or indirectly in 
 its undertakings. Yet industrially considered the 
 national and the municipal government differ in 
 size rather than in anything more fundamental ; 
 
 ' The alternatives are closely analogous to those already 
 described in the case of the Co-operative Societ}'. In the 
 first case profit is cancelled ; in the second and third it is 
 applied to common purposes.
 
 CO-OPERATION 69 
 
 and if the dwellers in a municipality may with 
 advantage co-operate for producing what is 
 needed for their town, a whole nation may, with 
 equal advantage, set its central government to work 
 for things pertaining to the country as a whole. 
 
 Two objections are taken both to municipal and 
 to national trading, which must be briefly noticed. 
 The first turns on the very principle of compul- 
 sion, A man wishes to educate his own children 
 at home or at a private school. Why should he be 
 made to pay rates and taxes for the education of 
 other people's children? Again, he has a motor- 
 car and never uses the trams. Why should his 
 money be risked— even if there is a chance of 
 ultimate return— on the tramways? He does not 
 use electric light, or could conveniently supply 
 power enough for himself. In fine, he cares for 
 none of these things. These questions probe deep 
 into the social structure. At this point it is suffi- 
 cient to reply that there are two sides to the 
 account between the State and the individual, or 
 the city and the ratepayer. The prosperous citizen 
 who has built up a great business through energy, 
 ability, and enterprise is apt to think of himself 
 too exclusively as the architect of his own fortunes, 
 and of the machinery of life that he finds to his 
 hand as though it were the gift of Nature. The 
 State taxes, the city rates, present themselves to 
 him as a mere deduction from his profits, a burden 
 imposed upon him by a community which gives 
 him nothing in return. In some measure this 
 burden is increased by the necessities of less pros- 
 perous people to whom he would not mind giving 
 something in charity, though he resents the com- 
 pulsion. On reflection he may recall that he 
 himself uses the streets, and he may even be 
 persuaded by figures that his motor costs the public
 
 70 THE LABOUR MOVEMENT 
 
 something in road repairs. He will admit that 
 lighting and sanitation affect him, and on consider- 
 ation he may acknowledge that policemen and 
 prisons exist very largely for his good. What he 
 seldom succeeds in grasping clearly is that he 
 himself only exists through the goodwill of society. 
 The business of which he is doubtless in a direct 
 sense the immediate creator is in a more indirect 
 but equally real sense the creation of society. It 
 is the outcome of the entire social order. It pre- 
 supposes peace, prosperity, industry, health, unim- 
 peded commercial intercourse^ a certain degree of 
 probity and competence in business dealings, a 
 measure of intelligence, sobriety, and uprightness 
 in the classes from which his employees are drawn, 
 and a hundred other things, to name any one of 
 which is to mention some element in the social 
 order, something which has been achieved in 
 degree by the painful efforts of successive gene- 
 rations of reformers, something which can only 
 be achieved in higher degree by further efforts of 
 a social character. Now, to the prosperous indi- 
 vidual the community has a right to say : "Go 
 to. You think that you made yourself, and that 
 we are a mere drag on you. But before you ever 
 were we are. We sheltered and nourished your 
 life. We are the order which made your path 
 straight. We are the atmosphere of thought from 
 which you took your ideas, which you imagined 
 to be your own. We are the men and women 
 whom you employ. We are the men and women 
 who buy of you. Without us you are absolutely 
 nothing. We quite grant that without you and 
 the like of you we, too, should be less than we 
 are. You are a part of us, and a part which we 
 can value. But grant, if you please, that this is 
 a partnership, that we are partners whom you
 
 CO-OPERATION 71 
 
 cannot dispense with, and that we may make our 
 terms for the continuance of the association. Our 
 terms are that you contribute your rateable share 
 to this common life of ours and to the things 
 which, judging according to the best of our lights 
 and after hearing all points of view discussed, 
 we deem advantageous to its healthy maintenance 
 and further development. If you do not personally 
 benefit by this or by that enterprise, ask yourself 
 whether you do not upon the whole gain in health, 
 security, and comfort from the measures taken to 
 promote the general health, the general comfort, 
 the general intelligence. If you are still not satis- 
 fied we must ask you to reflect that you are re- 
 paying a debt and that we are far from demanding 
 twenty shillings in the pound." 
 
 The argument for compulsion rests entirely on 
 the social value of the State or municipal organisa- 
 tion. In industrial matters it is commonly opposed 
 by the contention — and this is the second of the 
 objections to which we have referred — that public 
 service is less efficient than private enterprise. This 
 contention is not easy to confute by a direct appeal 
 to the great extension of municipal undertakings. 
 That extension, indeed, would hardly have con- 
 tinued as it has done if the municipal undertakings 
 were generally ill-conducted. But it is open to 
 objectors to reply that hitherto public enterprise, 
 whether national or municipal, has been confined 
 to a single class of public services. The alternative 
 to public organisation was monopoly. Gas-works, 
 water-works, tramway services, it would be pointed 
 out, do not provide a suitable field for competition. 
 There could not well be two sets of tramlines 
 following the same route, nor could there con- 
 sistently with economy be competing gas-mains 
 or rival electric supplies. Now, the objectors would
 
 72 THE LABOUR MOVEMENT 
 
 very generally admit that, monopoly for monopoly, 
 a public service is preferable to private supply. 
 If there are monopoly profits, they should go into 
 the pockets of the community. If there is to be 
 monopoly management, it should be in the hands 
 of men responsible to the public, not of men whose 
 business it is to make as much as possible out of 
 the public. Thus it would be said there has been 
 a perfectly intelligible reason for that extension of 
 public enterprise which the last quarter of a 
 century has witnessed, but it is a reason which, 
 rightly understood, puts a limit to that extension. 
 The best organisation of industry in the interest 
 of the consumer is that of perfectly free and open 
 competition. For where competition exists pro- 
 ducers will always be endeavouring in their own 
 interests to attract custom by lowering cost, devis- 
 ing economies, and inventing new and more 
 effective methods. Where competition fails there 
 a public body steps in to prevent things falling 
 into the hands of monopoly, but not elsewhere. 
 
 It must be admitted that the extension of public 
 enterprise has been in the main in the sphere of 
 monopoly, and it may be admitted further that 
 the most suitable sphere of public enterprise is 
 the supply of goods of standard character, in uni- 
 versal or very general demand, and not admitting 
 of much variety of taste. Where there is great 
 variety of individual taste purely individual pro- 
 duction will probably have a permanent function. 
 The spheres of literary and artistic production are 
 the typical examples. In other cases, again, where 
 certain groups of people desire a special commodity 
 in common voluntary co-operation has a part to 
 play. The political, literary, or scientific associa- 
 tion which runs a journal and perhaps maintains 
 premises, a laboratory, or an institution for its
 
 CO-OPERATION 73 
 
 common purposes, is a case in point. But there 
 seems to be no valid reason for placing a definite 
 limit on public enterprise at the point where 
 monopoly ends and competition becomes possible. 
 The municipal services have been sufficiently de- 
 veloped to prove that a public body can, if it has 
 a mind, run an industry with great efficiency. In 
 fact, of late years it has almost ceased to be 
 necessary to argue the abstract principle. People 
 in general would agree that the desirability of 
 entrusting a particular service to a public body 
 depends on the nature of the case. In this country 
 we have brought our public service to a point at 
 which we can generally rely on at least as high 
 a standard of honesty and good sense as in private 
 enterprise, and if in anj case people see some 
 palpable reason for the public organisation of the 
 supply of a necessary they are no longer willing 
 to listen to general and abstract reasons for refus- 
 ing to make the experiment. Meanwhile there 
 are definite advantages to be gained from public 
 organisation. There is the control of the con- 
 ditions of labour, the organisation of industry 
 which tends to mitigate periods of industrial de- 
 pression, the economies of large scale production, 
 the common enjoyment of the profit, and from the 
 point of view of the consumer the public guarantee 
 of the soundness and regular supply of the article. 
 On the other side, if the public undertaking of a 
 service is not opposed, neither can it be pressed on 
 merely general grounds. The public service must 
 rnaintain and develop its efficiency in order to 
 justify each new extension. All that we can insist 
 on here is that, given equal efficiency, there are 
 definite points gained by public control in the 
 communisation of profit, the regulation of industry, 
 and the opportunity of maintaining the conditions 
 of labour in accordance with public feeling.
 
 74 THE LABOUR MOVEMENT 
 
 But these advantages are no small makeweight 
 in the scale. In substituting Co-operation— 
 whether voluntary or State-regulated— for competi- 
 tion, we are Introducing a new and, I should 
 contend, a desirable principle into industry. 
 
 Those who at the present day carry on business 
 for personal profit or wages are unintentionally 
 performing a social function of the first import- 
 ance. I say unintentionally because, as things 
 now stand, neither employers nor workmen exercise 
 themselves much, as a rule, about the social 
 usefulness of the commodity they are producing 
 or distributing. For them the one thing needful 
 is to find sufficient purchasers, and the true com- 
 mercialist spirit cares little for the destiny or use- 
 fulness of the commodity it has produced when the 
 sale is once made. Of course there are honourable 
 exceptions to this rule. There are men who would 
 rather starve than engage in a socially noxious 
 traffic of any kind, and there are many who would 
 bear considerable loss rather than turn out an un- 
 sound article. Nevertheless, the difficulty of stir- 
 ring any social feeling against trades^ or forms of 
 conducting trade, which cost the lives or impair 
 the health of many, is a sufficient evidence of 
 the fact that, however important be the actual 
 function subserved by producers under an indi- 
 vidualist system, the performance of that function 
 is not the motive of production, and, certain 
 honourable exceptions apart, bears no relation to 
 that motive at all. 
 
 Since, then, the all-important work of supplying 
 the material and other needs of society is left to 
 Nature or to chance, there is little need for wonder 
 if the said work is ill performed. Nor is it of 
 the slightest use to hurl denunciations at the head 
 of any particular class at present engaged in pro-
 
 CO-OPERATION 75 
 
 duction. If over-pressure of work alternates with 
 enforced idleness, if 50 per cent, profits are found 
 side by side with ruin, if shoddy or adulterated 
 goods fill the market, society has no one but itself 
 to blame. It countenances and upholds a certain 
 system— or rather absence of system— and it must 
 take the consequences. 
 
 The reform needed, then, is a quite different 
 method of producing wealth. We want a new 
 spirit in economics— the spirit of mutual help, the 
 sense of a common good. We want each mari to 
 feel that his daily work is a service to his kind, 
 and that idleness or anti-social work are a dis- 
 grace. This new spirit, and the practical arrange- 
 ment for giving it effect, we have seen growing 
 up from small beginnings, with many drawbacks 
 and limitations, in the movements here reviewed, 
 and we see accordingly in their development the 
 best hope for the immediate future. 
 
 But now, supposing this control of industry by 
 consumers completed, with all the results above 
 enumerated fully realised, what guarantee is there, 
 it may be asked, that the worker will be adequately 
 paid or good conditions of work secured? We 
 may regulate trade, and so increase our total 
 product, and we may communise our surplus, but 
 all without adequately remunerating the worker. 
 This is particularly obvious where the com- 
 munities of consumers and producers are not the 
 same— /.^., when men consume who do not pro- 
 duce. Take a Co-operative Society employing 
 workmen, shop-assistants, &c. These employees 
 need not be members of the Society, and if they are, 
 they may be a very small minority. What is to 
 safeguard their interests? How can we be sure that 
 the Society will not be as anxious to increase the 
 common profit at the expense of the workers as an
 
 76 THE LABOUR MOVEMENT 
 
 ordinary Joint Stock Company, which collectively 
 is apt to be far more callous in such matters than 
 its members are as individuals? 
 
 There are two possible answers. First it may 
 be said that the principle of democratic control 
 will suffice to secure every class against overwork 
 and under-payment. Thus it would be contended 
 that the Co-operative movement owes its vitality 
 to a spirit of mutual aid, which would not tolerate 
 unfair conditions of work for its own employees. 
 In fact, co-operators have in more than one 
 instance taken a leading part in improving con- 
 ditions of employment. They led the way in the 
 reduction of hours for shop-assistants, and in this 
 respect critics admit that they compare favourably 
 with private employers.' As to wages and general 
 conditions, the case is not so clear. In a number 
 of stores Messrs. Hallsworth and Davies find the 
 average minima for male assistants to vary from 
 24s. 2d. in the grocery to 25s. 6d. in the butchery 
 departments, but they maintain that these figures 
 apply mainly to the " organised and best-paid 
 co-operative workers," and they quote cases of 
 men receiving less than £ i a week, which is not a 
 living wage. 2 For women assistants they give 
 an average of 15s. lod., but they also quote 
 instances of more serious under-payment. 3 A 
 vigorous movement is now on foot for the establish- 
 ment of a general minimum wage. A Committee 
 of the Co-operative Union reported in 1908 in 
 
 ' " It is, of course, well known that so far as hours of labour are 
 concerned co-operative societies are far in advance of private 
 establishments'' ("The Working Life of Shop-Assistants," by Jos. 
 Hallsworth and Rhys J. Davies, p. 13). The writers are " members 
 of the permanent staff of the Amalgamated Union of Co-operative 
 Employees." A table (p. 79) shows considerable reductions in 
 hours between 1893 and 1909. Only 9-9 of the Societies making 
 returns at the later date had a working week exceeding 58A hours. 
 
 = Op. cii., pp. 46 ff. 3 p, 57,
 
 CO-OPERATION 77 
 
 favour of a wage of 24s. for men and 17s. for 
 women,' with a corresponding scale for boys and 
 girls, and over a hundred societies have adopted 
 this scale,3 but the Wholesale Society has hitherto 
 (April, 191 2) declined to do so. Upon the whole 
 it may be said that while materials for a full com- 
 parison with competitive trade are not available, 
 the impression left by criticism of the Co-opera- 
 tive movement on this side is that it has done 
 something for the position of the employee, but 
 that it has by no means done enough to justify 
 the view that the conditions of labour may safely 
 be left to the care of an organisation of 
 consumers. 3 
 
 We come, then, to our second answer. The 
 natural guardian of the rights of producers, or 
 any branch of producers as such, is the Trade 
 Union. Now, this answer is not free from diffi- 
 culty. When an industry has become a branch of 
 the public service, a strike wears something of the 
 aspect of rebellion. Even the railway strike of 
 191 1 was regarded in this light in some cjuarters, 
 though the railways are not national property, and 
 though the men were striking for the elementary 
 rights of combination. But apart from nationalisa- 
 tion, as industry becomes more and more an inter- 
 dependent whole it offers opportunities to form 
 combinations, whether of labour or of capital, to 
 paralyse the whole by a stoppage at certain vital 
 points. If any single organisation independent 
 of the State controls the coal, the railway traffic, 
 or in any great town the lighting, it is in a position 
 to exact heavy terms from society for permission 
 
 ■ The Women's Co-operative Guild recommend 19s. 
 
 = The Co-operative Employee, March, 1912. 
 
 3 In some cases it appears that societies even disfranchise 
 employees, not allowing them to speak or vote at business 
 meetings (Hallsworth and Davies, pp. 140, 141).
 
 78 THE LABOUR MOVEMENT 
 
 to go on with its ordinary avocations. The 
 danger is likely to increase with the development 
 of invention. The day may come when all the 
 main industries will be dependent on a supply 
 of electrical energy, and those who control this 
 energy will control the situation. This is one 
 of the reasons which will force society, with or 
 against its will, to assume ultimate responsibility 
 for the supply of the fundamental necessaries. But 
 even if all such services were directly managed by 
 State officials, it is only one side of the problem 
 that would be solved. The State might control 
 the management, but the labour problem would 
 remain. It is not enough to reply that the work- 
 people would have the vote to guarantee just con- 
 sideration of their rights. This proves both too 
 much and too little. The voting power of public 
 servants when well organised and selfishly exer- 
 cised is already in certain places a serious political 
 problem. It means that certain seats are won 
 and lost on considerations of work and wages 
 which are not broad considerations of public 
 policy. In proportion as public services are ex- 
 tended the problem will become more urgent, and 
 the cry will be to remove all spending departments 
 from direct parliamentary control in order to save 
 elections from turning on questions of the wages 
 and hours of certain local classes of public em- 
 ployees. » On the other hand, if the workpeople 
 
 » This is at best a partial solution. The ultimate control 
 must remain with Parliament. Now, recent events have brought 
 the nationalisation of railways to the verge of practical politics. 
 Should this step be actually taken the political problem would at 
 once become urgent. In almost every constituency there would 
 be a group of public servants, numerous enough in many cases 
 to turn an election. But we could not suffer a large proportion 
 of elections to turn on bargains between candidates and 
 public servants on questions of hours and wages. The only
 
 CO-OPERATION 79 
 
 are not politically organised and concentrated they 
 may get very insufficient attention. In particular 
 the worst paid, who have always the greatest 
 difficuky in stating their case and making their 
 voice heard, may be left to the somewhat chilly 
 mercies of officialism. The difficulty would remain 
 if the entire industry of the country were under 
 national control. Each individual, and what js 
 more important, each section of workers would 
 still have particular interests opposed to the 
 interests of others. Hence within any period which 
 we need consider it will remain necessary for 
 each group of workers, whether engaged in the 
 public service or not, to form and maintain their 
 own organisations for their protection. 
 
 But if the right of combination is to be granted 
 to the weakness of the individual, what of the 
 power of combination in the vital industries? 
 Where an industry is like a main artery which one 
 might compress with the finger and so stop the 
 entire circulation, is any one but the community to 
 have the control of that artery? If a close 
 combination can control the entire coal trade, 
 what terms might it not demand of the 
 public for the means of warmth and of 
 industry? It is to be observed here that, given 
 perfect combination, the workman is in a stronger 
 position for once than the employer. For in 
 the last resort as against a group of coal- 
 owners the State might appropriate and work the 
 mines. But no power of law could compel half 
 
 resource would be to let railwaymen group themselves for the 
 return of their own candidates as between whom general 
 political sympathies would decide. This is the solution proposed 
 by the advocates of Proportional Representation alike for this 
 and for other multitudinous difficulties that arise from the great 
 complexity of the issues submitted to the constituencies at any 
 election.
 
 80 THE LABOUR MOVEMENT 
 
 a million of men to go underground as long as 
 they choose to " clem" on the surface. I do not 
 suggest that the Miners' Federation, Oir any other 
 Trade Union has ever yet enjoyed, still less that it 
 has taken undue advantage of such power. On 
 the contrary, in the recent strike the demands of 
 the miners were moderate, and their power, as 
 the event shows, much more restricted than ap- 
 peared on the surface. In general Trade Unions 
 have been the organisations of the weaker party, 
 and they -have in the main fought for rights, or 
 for gains which command the sympathy of im- 
 partial men. But we have to deal with a possibility 
 which may at any time arise, and we haVe to. 
 ask how Society will be able to protect itself. 
 Without pretending to a complete theoretical solu- 
 tion, it may be suggested ( i ) that the recurrence 
 of disputes in the vita] industries will probably 
 force the State to assume close control of their 
 conditions, and quite possibly the direct function of 
 management ; (2) that to disallow combination 
 would be deeply resented, possibly futile, and 
 possibly also a source of future injustice to the 
 public employees, and that accordingly (3) the 
 State will be forced to protect itself by other 
 methods. In the case of coal a simple and 
 probably sufficient method would be that of 
 accumulating stocks by keeping up full work in 
 slack times, stocks which, if they belonged to the 
 community, would save the public from being 
 fleeced iri the preparatory period of a struggle, and 
 which should be sufficient in quantity to outlast a 
 strike. • In other cases it would be wise to secure 
 
 ' It must be borne in mind that the greater the number of 
 strikers involved the greater is the difficulty of holding them 
 together through a long period of privation. It is impossible 
 to think that 1,000,000 men scattered through the kingdom would,
 
 CO-OPERATION 81 
 
 an alternative staff, and this will not be difficult 
 if the public services increase in number. It will 
 be a matter of organising technical instruction, 
 which would, in fact, be desirable on other grounds. 
 
 Furthermore there are many channels through 
 v/hich Trade Unions become penetrated by wider, 
 more unselfish, and more enlightened views of 
 their duties and their interests. Less and less 
 can a small group look to its own interests alone 
 or m^aintain them in opposition to public needs. 
 The federation of Union forces, if formidable in 
 the extension of power which it gives, is surely 
 beneficent in subduing and harmonising local 
 rivalries and stimulating a broader outlook. But 
 if we conceive Trade Unionism as extending its 
 borders so as to include the bulk of the working 
 population, we may reasonably expect a parallel 
 development of such connecting links. There 
 would then be a regular machinery for the adjust- 
 ment of disputes between different classes of 
 workers. At the same time, some such principles 
 of remuneration as have been suggested above 
 are, in fact, coming to be recognised, and in pro- 
 portion as they are generally accepted they will 
 form a basis for the impartial settlement of dis- 
 puted claims. Lastly, in so far as remuneration 
 is fairly adjusted and profit brought into the public 
 coffers, the sense of a common interest in the 
 economic prosperity of the nation becomes a living 
 force which may hold in check though it cannot 
 extinguish sectional ambitions and class or trade 
 selfishness. 
 
 In the last chapter we saw that the control of 
 
 in fact, hold out against long privations without a deep conviction, 
 of a just cause. But given such a conviction, it is desirable that 
 they should have some power of holding out even as against 
 the community. 
 
 6
 
 82 THE LABOUR MOVEMENT 
 
 industry by consumers was the necessary supple- 
 ment to Trade Unionism, We have now seen that 
 the control by consumers, whether in the form of 
 voluntary Co-operation or of Municipal or State 
 Socialism, leaves a gap which even at the cost of 
 permanent possibilities of friction must be filled 
 by organisations of workers. For any period that 
 we can reasonably take into account the Trade 
 Union has a permanent function in the furtherance 
 of industrial progress. We are led, therefore, to 
 consider these different forms of the Labour 
 Movement as necessary to one another. In fact, 
 in one shape or another all three alike are 
 introducing the principle of the collective control 
 of industry by the community in the interests of 
 all its members. They are seeking to replace 
 competition and the forces of individual self- 
 interest as the arbiters of industry, by a deliberate 
 and systematic arrangement of labour and com- 
 merce in the best interests of society as a whole. 
 They are all at present in an inchoate or incom- 
 plete condition which, to some extent, disguises this 
 common character, but this none the less expresses 
 their essential tendencies and the secret of their 
 life and vigour. 
 
 iWithin its own sphere, and so far as it is able 
 to carry out its objects, the Trade Union entirely 
 supersedes free competition between individuals 
 actuated by their own interests as the controlling 
 force of industrial life. Where the Union is strong 
 the individual workman is powerless against it. 
 He has to conform to its regulations as to wages, 
 hours, and conditions of work, no matter how much 
 better a bargain he may think that he could drive 
 on his own account. It might pay him on occasion 
 to take work below the standard wage, but the 
 Union will prevent him. He may be able to work
 
 CO-OPERATION 83 
 
 beyond the regulation hours without injury to him- 
 self. He is forbidden by an association of men 
 of average strength. He might be willing and 
 able to take risks which others shun, but it is 
 not allowed him. In every direction he is limited 
 and confined. It matters not in the least that 
 the compulsion is not put upon him by the law 
 or any legally constituted authority. His " liberty " 
 is " interfered with " every bit as much wherever 
 the Union is sufficiently strong for the purpose, 
 ^e has to learn the lesson that a man must put 
 up with some losses and inconveniences for the 
 general good of his neighbours. He is confronted 
 with the authority and power of the judgment of 
 the community as to its common welfare. The 
 community is here not the State but a body of 
 workers, and its decisions are enforced, not by 
 officials in uniform, but by duly appointed com- 
 mittees and officers taken from the ranks of the 
 workers themselves. But the principle of common 
 action for common good imposing limits on indi- 
 vidual action for personal good is apparent here, 
 just as it is apparent in every law passed by 
 the Houses of Parliament. 
 
 There is, however, an important difference. 
 Parliament represents, or should represent, the 
 people as a whole. The Trade Union represents 
 a certain section of the people, and in the past 
 these sections have been relatively small and iso- 
 lated. Hence the Union's authority is relatively 
 weak and often unduly dominated by sectional 
 interests. The true principle of the collective con- 
 trol of industry means a control exercised, if not 
 by the whole nation, yet in the interests of the 
 whole nation. But we have alread^^ called atten- 
 tion to tendencies which hold sectionalism in check. 
 In the great national Unions of to-day very diverse
 
 84 THE LABOUR MOVEMENT 
 
 interests of many localities have to be weighed 
 against one another, and the merits of disputes 
 may be adjudged coolly and dispassionately by 
 persons living at a distance, and responsible to 
 many other branches than the one affected. ^ In 
 this way the sectional character of Trade Unionism 
 grows less and its decisions grow in weight, 
 deliberateness, and power. This process is 
 furthered by the development of the Federal 
 Principle, by the Trade Union Congress, by the 
 formation of a Parliamentary party, and in another 
 direction by the International Congresses of par- 
 ticular trades which are building up a valuable 
 counterpoise to the national rivalries of aggressive 
 finance. All this development involves an immense 
 extension of outlook, incompatible in the end with 
 the narrowness, the pettiness, and the tendency 
 to monopolistic spirit which were almost insepar- 
 able from the original form of Union, while it gives 
 free play and full encouragement to the broader 
 public spirit which recognises the true identity of 
 interest for all workers. 
 
 This is quite a normal and healthy development. 
 Regarded as a moral and educational force, 
 Unionism begins rightly with the elements of the 
 subject. It starts with the workshop and teaches 
 the doctrine of fellowship and brotherhood for all 
 who work at the same bench. The lessons of 
 public spirit and public action are thus first learnt 
 by the Trade Unionist in relation to the comrades 
 with whom he is actually associated in his work 
 and daily life. But the training once perfect, the 
 
 ' Sometimes it would even seem that an opposite danger has 
 come into being, and that the officials have become too far 
 removed from the men at the works. Hence we have had strikes 
 directed virtually, and not unsuccessfully, against the authority 
 of the officials themselves.
 
 CO-OPERATION 85 
 
 principle is easily applied to a wider area. He 
 who is faithful in small things will be faithful 
 also in great, and he who loves and will serve his 
 brother whom he hath seen will learn to aid his 
 brother whom he hath not seen. This is working 
 from the base upwards— there is no other safe 
 method. Just as the Trade Union represents the 
 limitation of each man's freedom by the whole body 
 of workers, so it depends for its very existence on 
 the loyalty of each member to the common cause. 
 Every advance in Trade Unionism involves a pro- 
 gress in the intelligence and public spirit of the 
 workers. No Union can exist unless the mass 
 of its members are prepared for mutual help and 
 forbearance, unless they have unlearnt the lesson 
 of self-seeking and are ready to make sacrifices 
 for the good of all. 
 
 Trade Unionism, then, as it grows and broadens, 
 introduces little by little a new spirit into industry 
 and becomes the means of regulating it in the 
 interest of the working community. And as in 
 a healthy community all are workers who are 
 capable of work, this means the community at 
 large. It is, of course, a mere vulgar error to 
 regard the principle of Trade Unionism as limited 
 to manual work. The majority of the learned 
 professions form closer Trade Unions — either vol- 
 untary or supported and incorporated by law — 
 than are yet to be found in the world of Labour. 
 It is true that these Unions of professional men 
 leave much to be desired in their constitution and 
 regulation. It is even possible that they might have 
 something to learn from associations of manual 
 workers. But be that as it may, there is no reason 
 why Trade Unionism should not extend itself to the 
 entire working population, and at least so far as 
 manual workers are concerned, provide avenues
 
 86 THE LABOUR MOVEMENT 
 
 of communication and methods of mutual aid which 
 should hold sectional interests in check and estab- 
 lish a true control of the conditions of industry 
 in the interest of the working classes as a whole. 
 
 We have already remarked that, as Trade 
 Unionism represents the control of industry by the 
 body of producers, so Co-operation represents the 
 control by the body of consumers. So far as its 
 influence extends, it supersedes the anarchy of 
 competition, introduces steadiness and continuity 
 of employment, and secures the enjoyment of the 
 surplus product for all who join in promoting it. 
 Like Trade Unionism also, it rests on the public 
 spirit of its members, and their readiness to sacri- 
 fice personal profit for the common good. It 
 controls industry, so to say, from the other end, 
 and hence its action is complementary to that of 
 the Unions, securing for the community as con- 
 sumers the benefits which as workers they could 
 hardly obtain. 
 
 Now, both the Trade Union and the Co-operative 
 Society are voluntary associations of men con- 
 sciously formed for securing certain common ends. 
 But if we inquire a little more deeply than usual 
 what the State is, why it has come into being, 
 and what justifies its existence, the answer must 
 be that the State also is an association of all the 
 dwellers in a country, an association that has no 
 doubt grown up unconsciously, but which has 
 grown because it has secured certain valuable 
 results for all its members. And in the democratic 
 State we get the true principle of association clearly 
 worked out, namely, that all citizens shall be called 
 on to serve the common weal, and, on the other 
 side, that the State shall serve, not the interest of 
 the Few, nor even of the Many, but the interest 
 of All.
 
 CO-OPERATION 87 
 
 Like the State, the Municipality is a kind 
 of association, but exercising a more limited 
 authority over a smaller area. There is a differ- 
 ence between the State or the Municipality and 
 other associations formed by men, in that to these 
 two every man living in a given locality must 
 belong, whether he likes it or not. He must sup- 
 port them by his contributions and he must submit 
 to their authority. In the case of the Trade Union 
 or Co-operative Society he need not belong to 
 the association unless he chooses. Yet, at least 
 in the case of the Union, he may often be con- 
 trolled by the common power notwithstanding that 
 he denies its authority. That the Union is a volun- 
 tary association makes no difference whatever to 
 the reality of the control which it exercises over 
 individuals, nor does it diminish by one jot the 
 sternness of its " interference " with the " liberty 
 of the subject " when the said liberty is judged 
 hostile to the common good. The apostles of 
 liberty in the abstract — of the right divine of all 
 men to do wrong — are perfectly logical in attacking 
 the Trade Union just as much as " Socialistic " 
 legislation. And conversely those who believe that 
 the collective control of industry is necessary to 
 the economic welfare of society may recognise that 
 this control may on some sides be best exercised 
 by a voluntarily formed organisation, on others by 
 the State itself. 
 
 Now, the control of the State may take 
 many forms. It may directly organise a public 
 service, as the Post Office, or, again, the railway 
 system. This is essentially a form of the control 
 of industry by consumers, and given a com- 
 petent Civil Service and efficient criticism by 
 a representative authority, this is a form of 
 control suited to certain kinds of industry, but
 
 88 THE LABOUR MOVEMENT 
 
 by no means to all. After all, the main function 
 of the State in industry as in all other things is 
 to be the supreme regulative authority. Every 
 lesser community has its sectional interests, and 
 as the power of such sections grows by organisa- 
 tion, the authority of the central power is needed 
 not so much to supersede as to balance and har- 
 monise them. The type of society to which we are 
 working, largely under the impulsion of the Labour 
 Movement, is neither Individualist nor, in the 
 narrower sense, Socialist. The old self-governing 
 industrial unit is no more. As a mode of business 
 organisation it has given way to the Joint Stock 
 Company, the Amalgamation, the Ring. In rela- 
 tion to labour the unfettered bargaining of indi- 
 viduals is yielding to comprehensive arrangements 
 between Trade Unions and Employers' Federa- 
 tions, and behind Union and Federation alike there 
 arises the growing authority of the State. Neither 
 unlimited freedom of contract nor the imprescript- 
 ible rights of property are any longer formulae 
 to which the legislator must bow. Yet this is 
 not to say that either private property or free 
 industrial enterprise is in process of abolition. 
 What has actually been happening is rather that 
 both property and contract have come much more 
 closely under the supervision of the State. The 
 State has not destroyed freedom of contract, but 
 it has imposed, and will continue to impose, limita- 
 tions and conditions which the terms of the contract 
 must observe — rules of the game intended to secure 
 fair play. It has laid down that there are conditions 
 of industry which are injurious to the common 
 wellbeing and incompatible with the common 
 responsibility for fair treatment of all members 
 of Society. These conditions it does not leave 
 to Trade Unions to secure if ihey can by collective
 
 CO-OPERATION 89 
 
 bargaining, but prescribes them by law. Such 
 conditions are sanitation and safety in work, the 
 limitation of hours, provision for sickness and acci- 
 dent, and finally the minimum wage. In practice 
 legislation in all these directions has at each step 
 enforced as matter of law that which was already 
 the policy of the best employers. In so doing 
 it has levelled up the bad or the less capable, and 
 has made it possible for the best men to advance 
 a little farther with their pioneer work. It is 
 ver3'' seldom that any work of this kind has to be 
 undone. It is justified of its results, and it is 
 destined to go farther, until every form of employ- 
 ment which is prejudicial to the life and health of 
 the employed is ruled out. But in all this, though 
 the State is prescribing limitations, it is by no means 
 destroying free contract. On the contrary, in so 
 far as it is redressing inequality, it is rendering 
 contract free in a deeper and more genuine sense 
 than before. The weaker party gains the protec- 
 tion of the law, and can no longer be driven into 
 accepting conditions to which no man, unless he 
 were driven, would accede. Again, though it 
 imposes conditions upon industry, the State is by 
 no means superseding the private employer. It 
 leaves to him the initiative. It leaves him. the 
 immediate management and control of his business. 
 But it assumes a certain right of supervision. He 
 is lord, but the State is overlord. 
 
 Much the same thing is happening in other 
 directions. Some Socialists have thought that the 
 family would be merged in the State. What is 
 happening is rather that by insisting on the rights 
 of wife and children the State is reconstituting 
 the family on the basis of a deeper and more 
 mutual responsibility. Destroying the conception 
 of the family as the property of the father, it is
 
 90 THE LABOUR MOVEMENT 
 
 restoring it as an association of persons in the 
 full ethical and legal sense of that term. It does 
 not destroy parenthood, but it constitutes itself 
 the over-parent. It does not destroy parental 
 responsibility. On the contrary, legislation on 
 behalf of children has on the whole tuned up and 
 tightened the obligation of the parent, by enforcing 
 as a matter of law that which was formerly a 
 moral obligation — e.g., in punishing neglect — or by 
 bringing within reach of all that which was practi- 
 cally possible only for the more fortunate— ^.g'., 
 in the provision of free education. The function 
 of control is not to destroy, but to guide, sustain, 
 and purify those family relationships in which, 
 after all, the great mass of mankind finds the one 
 substantial and abiding source of happiness. 
 
 So again with property. There is a tendency 
 to national ownership of certain forms of property 
 such as land and the means of transport. But 
 apart from these, the tendency of the State is to 
 become not so much immediate owner as eminent 
 OAvner. The doctrine that a man can do what 
 he likes with his own is not so often heard as of 
 old. More and more it is recognised on the one 
 hand that property is a State institution, an institu- 
 tion resting on the law and the force that the 
 community maintains at the back of the law, and 
 on the other hand that the sources of wealth are 
 social as well as personal. As the full bearing of 
 these principles is realised it becomes clear that 
 the State must have a free hand to deal with the 
 institution of property in the common interest, that 
 at bottom it is not limited by the rights of owners 
 but rather that owners 'hold subject to the supreme 
 requirements of the common good. As in feudal 
 days men held the land, not in absolute ownership 
 but as tenants of the king, and conditionally on the
 
 CO-OPERATION 91 
 
 discharge of certain duties, so in the State system 
 which is gradually emerging out of individualism 
 the owner holds of the community and subject to 
 the duties which the community requires. It is 
 not the business of the State, as some of the 
 narrower forms of Socialism seem to suggest, to 
 get all property into its own hands and to serve 
 out to individuals such necessaries and comforts 
 as seem good to a committee of officials. It is 
 its business rather to irnpose such a use of property 
 and such arrangements of industry as secure to 
 all who work honestly the means of directing their 
 own lives on the lines which they find most suit- 
 able to themselves, and this it does, not by abolish- 
 ing private property, but rather by extending to 
 all its citizens a certain lien upon the common 
 stock. The old age pensioner of to-day differs 
 from the pauper of yesterday not so much in that 
 he has more food or better lodging than he might 
 have had in a well -arranged workhouse, but in 
 that he has a definite claim on the public funds 
 independent of the decision of officials^ not entail- 
 ing any restriction on his mode of life, not implying 
 previous destitution. He remains, in short, a free 
 man, and free because he has secured to him a 
 certain right of private property in national funds. 
 Private property is not abolished by such measures. 
 On the contrary, it is extended to those who 
 formerly had nothing but the insufficient weekly 
 wage. At the same time, it is limited and con- 
 trolled. 
 
 As is the relation of the State to the private 
 business, to contract, to the family, to property, 
 so is it also to the voluntary organisation as 
 the Trade Union, the Co-operative Society, the 
 Friendly Society. Its true function is not to super- 
 sede but to supervise, to guide, to harmonise. The
 
 92 THE LABOUR MOVEMENT 
 
 State is too big a body and its methods are too 
 mechanical to admit of its dealing directly with 
 the endlessly varying needs of the individual. 
 Between the two poles intermediate bodies of many 
 kinds and degrees are needed, and a wise demo- 
 cracy will not seek to destroy such bodies but to 
 utilise them. The Insurance Act, however open to 
 criticism in some points, is admirable in the attempt 
 that it makes to foster and to guide the Friendly 
 Societies which the thrift of the working class had 
 already built up. Similarly if there is to be healthy 
 progress either in Trade Unionism or in State 
 Socialism it may be confidently laid downi that 
 this must depend, not on the victory of either 
 principle over the other, but on the growth of 
 harmonious relations between the two. Hitherto 
 these relations have not been fortunate. The law 
 has been a step-mother to the Unions, and in 1906 
 they revolted from her control and established by 
 statute their emancipation from civil process. What 
 made the Trade Disputes Act possible was the 
 sense that the principles of ordinary commercial 
 law administered by judges unskilled in industrial 
 questions did not render due justice to the special 
 needs of organised labour. Yet the position in 
 which the law is left is satisfactory neither to the 
 Unions nor to the public. We may see in the new 
 Industrial Council the germ of a better organisa- 
 tion. Compulsory arbitration can only come into 
 being when the principles of remuneration are 
 generally understood and have become common 
 ground to all parties. But a panel representing 
 employers and employed rather than a bench of 
 judges is the true tribunal in labour disputes. Such 
 a court might arbitrate on the incidents of indus- 
 trial warfare— on complaints of breach of contract, 
 for example — and its decisions might be given the
 
 CO-OPERATION 93 
 
 force of law long before it will be possible to 
 secure the general submission of questions of hours 
 and rates to arbitration. What organised labour 
 needs is not emancipation from law, but from the 
 atmosphere of law-courts administering principles 
 which are no longer adapted to industrial con- 
 ditions. 
 
 To discuss these questions adequately would re- 
 quire a separate treatise. Here we are only con- 
 cerned with elementary principles, and, to resume, 
 our contention is that it is the function of the 
 State, not merely to organise certain departments 
 of industry, but to exercise a general supervision 
 of the conditions of labour, the regulation of pro- 
 ductive activity, and the division of the fruits of 
 work in the interest of the community as a whole, 
 and that in so doing its object is not to displace 
 or destroy personal initiative, freedom of choice, 
 private property, family life, or voluntary organisa- 
 tion, but rather to bring them within the limits 
 of a system in which they will contribute, not to 
 selfish aggrandisement but to public ends. The 
 modern Social reformer reverts to the Aristotelian 
 ideal of the State as " coming into being that men 
 may live, but existing that they may live well."
 
 CHAPTER IV 
 
 THE DISTRIBUTION OF WEALTH 
 
 Let us now try to sum up the joint economic 
 result of the movements under consideration. We 
 have seen that each is attacking its appropriate 
 part of the problem of industrial organisation. 
 Let us now consider ho.w far they are naturally 
 fitted to work together in solving the problem 
 as a whole. We shall get some light on this 
 point if we examine the present " system " of un- 
 regulated industry and compare its main results, 
 point by point, with those which our methods of 
 organisation are tending to put in their place. 
 
 In drawing the broad outlines of a system of 
 private enterprise, such as on the whole prevails 
 in England at the present day, we shall simplify 
 our task if we follow the ordinary method of econo- 
 mists, and assume for the moment that the com- 
 petitive system described is really a system of free 
 competition. But when we speak of competition 
 as free, we imply, be it remembered, a good deal 
 more than absence of any legal or other collectively, 
 imposed restraint. We imply equality of advant- 
 age— /.£?., that all bargainers in the markets of 
 the country are equal in position and in knowledge 
 of their own interests. That being understood, it 
 will be seen at once that our assumption is a 
 large one, and not fully realised in any existing
 
 THE DISTRIBUTION OF WEALTH 95 
 
 state of society. Certain results of this will be 
 considered in their place. Meanwhile, it will be 
 convenient to proceed as though the assumption 
 were justified, precisely as in many problems of 
 mechanics it is convenient to assume that bodies 
 are perfectly rigid, or move without friction. In 
 this way we get certain broad truths first, and can 
 introduce the necessary limitations and corrections 
 afterwards. 
 
 The central fact of modern industry is the 
 Division of Labour, and the consequent production 
 of goods— not for the use of the producers, but— 
 for Exchange. In the regulation of industry 
 everything depends on the way in which the Ex- 
 change value of goods is determined. Think, first, 
 for a moment, how we should determine Exchange 
 value, if we had it in our power to do so, on the 
 principles above determined — that is to say, with a 
 view to the fair payment of the producer. Supposing 
 the commodity to be useful to society,' we should 
 try to reward the producer in proportion to the 
 time, effort, and skill applied in making it. And 
 in considering the reward due for a given quantity 
 of time, effort, and skill, we should be guided by 
 the amount it would be possible to give to all 
 workers, so that the minimum would suffice for a 
 civilised existence. In apportioning our reward, 
 then, we should take into account the social utility 
 of the product, and the amount and character of 
 the work done upon it. The result would then be 
 that we should get what we wanted done, and the 
 producer would make as good a living as might be 
 compatible with the wealth of society. The ex- 
 
 ' From the point of view of abstract- justice, this is obviously 
 the first consideration. If my time and skill are spent in devising 
 an infernal machine for use in a public building, my just reward 
 is penal servitude.
 
 96 THE LABOUR MOVEMENT 
 
 change value of the goods as reckoned in money- 
 would have to suffice to cover this reward, and, as 
 we shall see presently, to leave a certain surplus. 
 
 I Turning to the actual effect of competition, 
 we find first that the value of things as estimated in 
 money is continually fluctuating, and that when 
 we ask what is the normal value of a thing and 
 how is it fixed, we must make it clear whether 
 we are referring to short or long periods.' Con- 
 sider a " market " for a day, and you find very 
 likely that prices are different in different places 
 or at different hours. But you can strike an 
 average and call it the normal price for the day — 
 some prices being higher and some lower than the 
 normal. Take the same market for a week, and 
 you will find prices differ from day to day. The 
 average price of Monday may be higher or lower 
 than the average for Tuesday. But you can, of 
 course, strike an average for the week as 
 a whole, and speak of the prices for each day 
 as above or below, as " fluctuating round " the 
 normal level for the week. In the same way the 
 week's average fluctuates about the normal level 
 for the year and so on for any period, as Professor 
 Marshall has ably shown. When we speak of the 
 normal price of a commodity we mean the average 
 price for the period we are considering, whether 
 that period be short or long. 
 
 Consider first a short period. There is a certain 
 quantity of goods in a market,^ and an effective 
 
 ' In what follows I am guided mainly by Professor Marshall, 
 whose account is the most comprehensive. But it will be at once 
 understood that I am not attempting even to sketch a theory of 
 value as a whole. I wish merely to bring out certain points 
 with regard to exchange which explain some of the obvious 
 evils of our industrial system. 
 
 '^ We need not here complicate the question by referring to 
 expected goods.
 
 THE DISTRIBUTION OF WEALTH 97 
 
 demand for a certain quantity on the part of the 
 purchasers in the market taken as a whole. No 
 one can calculate either quantity precisely, though 
 an acute dealer can make a good guess. But, 
 what is important, the extent of the demand may 
 vary with the price of the goods. The third-class 
 carriage is crowded while the first is nearly empty. 
 More people will be likely to buy fresh sole at is. 
 than at is. 6d. the pound.' Now if you can sell 
 off all your fish at is. 6d. you will do so, and I, 
 who cannot afford to go beyond is., will go with- 
 out.' But if you cannot find purchasers who will 
 take off all your fish at is. 6d., it will pay you 
 to lower the price. If all your fish goes off at 
 IS., you get more in the long run than if you sell 
 half at IS. 6d. You have to consider this, and 
 your aim being to get the maximum return, you will 
 all the time be feeling after a price at which you 
 will get off so much that multiplying price into 
 quantity your takings are greater than they would 
 be at any other price. Suppose this price to be 
 IS. 3d., I then IS. 3d. will be an equilibrium point 
 to which the price will be constantly tending, 
 though it may never reach it. 
 
 Now, the important point to notice is that the 
 price thus fixed by the equilibrium of demand and 
 supply bears no relation whatever to the cost of 
 production. One man, favoured by circumstances 
 or by ability, may find his fish cost him only 
 ,9d. per lb. to bring into the market, and, accord- 
 ingly, he takes a profit of 6d. on the price of 
 IS. 3d.— roughly, 66 per cent, on his outlay. 
 
 ' Suppose, e.g., you can sell 60 lb. at is. 3d. your total return 
 is £2, 15s., and suppose you could only get off 40 lb. at is. 6d. 
 you could get only £3 at that price, while again 70 lb. at is. 
 gives you ;£3 los. In such a condition of the market — assuming 
 that you have 60 lb. or more on your hands — is. 3d. gives you 
 the best return. 
 
 7
 
 98 THE LABOUR MOVEMENT 
 
 Another, by ill-luck or niismanagement, finds it 
 costs him 2s. to bring the selfsame fish to the 
 selfsame market, and his time, labour, and anxiety 
 are rewarded by a loss of some 37 per cent, on his 
 transaction. Nevertheless, notice, he will not be 
 able to sell one penny higher than his neighbour, 
 or, if he does, he will only lose the more, suppos- 
 ing IS. 3d. to be the equilibrium price. 
 
 Now, the question is, What is to become of this 
 man, supposing his ill-luck or mismanagement to 
 continue? It is clear that he must eventually go 
 under water, and that the longer he struggles the 
 worse off he will be. Now, this introduces us to 
 the determination of long-period values. For the 
 disappearance of the unsuccessful competitors 
 diminishes the quantity of goods in the market, and 
 given the same demand as before with a decreased 
 supply, the equilibrium price will rise.' It is clear, 
 then, that, in the long run, taking an average of 
 prices extending over a sufficient time to cause 
 an extension of production when the market is 
 good or a contraction of it when bad, this average 
 will be sufficient to compensate every producer 
 in the market for his expenditure of time, trouble, 
 capital, and the like. The average price over a 
 long period tends, then, to equal the cost of pro- 
 duction. But we have seen that the cost of produc- 
 tion differs for each producer. A and B are both 
 farmers. A is an able man, farming rich land 
 near a great town, B a bad farmer on poor soil 
 at a considerable distance. But the state of 
 demand is such as to require all B's corn as well 
 as A's. Then if this state of things is to continue 
 
 ' For if I have only 40 lb. to sell, and if as before I can find 
 buyers for 40 lb. at is. 6d., then is. 6d. gives me a better return 
 than IS. 3d. (viz., ;^3 instead of £2 ids.) It may even pay to 
 raise the price further, as if I can find 35 buyers at 2s.
 
 THE DISTRIBUTION OF WEALTH 99 
 
 permanently the price of corn must be sufficient to 
 remunerate B—i.e., to allow B to pay the average 
 rate to his labourers and to receive the average 
 rate of interest on his capital, and the average 
 return for his own risk, anxiety, management, and 
 the like — the average in each case being deter- 
 mined by relation to the rate obtainable in other 
 occupations open to men of the stamp of B. But 
 it is clear that if the price is thus high enough 
 to give an average reward to B, it will give some- 
 thing very much above the average to A — unless, 
 indeed, A has already had to pay a landlord or 
 the community for the privilege of farming rich 
 land in a good situation. In this case the surplus 
 that goes primarily to A will ultimately find its 
 way into other pockets. But notice first that price 
 is thus determined (on the average of a long 
 period) by the cost of producing that part of the 
 commodities sold which are brought to market 
 under the greatest disadvantages. These goods 
 being, as it were, on the margin of the market, so 
 that a further fall in price would exclude them 
 from it, they are spoken of as on the margin of 
 production,! and the cost of producing them is 
 the marginal cost of production for that market. 
 This being understood, it holds that when men are 
 very wise in their own interests and competition 
 very free, the average cost of a commodity in 
 a long period will tend to coincide with the 
 marginal cost of production. Notice, secondly, 
 that this being so, a surplus remains over to every 
 producer except those on the margin — the surplus 
 which, in our instance, was left to farmer A by 
 the price which just satisfied farmer B. The exist- 
 ence of this surplus depending on the inequalities 
 
 ' The phrase was, of course, suggested by land supposed to 
 be physically on the margin of cultivation.
 
 100 THE LABOUR MOVEMENT 
 
 in human and non-human nature, it must remain 
 in being as long as human industry persists. 
 Its existence is not one of the hypothetical laws of 
 political economy, but one of its categorical or 
 unconditional generalisations. But the disposal of 
 the surplus is a very different matter, depending 
 very largely on human institutions. 
 
 We have now before us two main elements in 
 the returns which a farmer or manufacturer gets 
 for his labour. A certain portion of the return 
 reimburses him for the cost of producing his 
 article. Another portion, which may vary from 
 zero I to any quantity, is a surplus over and above 
 the cost of production. We must consider, then, 
 the elements which make up both these divisions 
 of the return. To do this fully would be to write 
 a book on political economy. But consider for a 
 moment very briefly what goes to build up Jie 
 cost of producing an article. We may distinguish 
 the elements of ordinary manual labour and of 
 skilled labour. The price of these, it must be 
 remembered, is determined, not immediately by the 
 value of their product but rather by the bargain 
 that their possessors are able to make, as to which 
 more will have to be said. Next come earnings 
 of management, and under them we must include, 
 not only salaries paid to clerks, foremen, over- 
 lookers, or managers, but a sufficient recompense 
 to the employer himself for his trouble and anxiety. 
 A man of capital will not permanently occupy, 
 himself in a business which gives him no return 
 for his trouble beyond what he could safely get 
 for his capital if invested in something else. This 
 brings us to the last element in cost — viz., interest 
 on the capital employed. Now, of all these 
 
 • Or as I shall notice presently from a minus quantity.
 
 THE DISTRIBUTION OF WEALTH 101 
 
 elements there is a certain average which goes to 
 determine the marginal cQst , of production, and 
 through it the average -price '. of .the commodity. 
 In the long run, probably the. prjce^ ol ^hese ele- 
 ments determines that of 'the'cdmmD'dlty and not 
 vice versa. Some of them act more slowly than 
 others, and all act clumsily and roughly, but 
 all probably act in the long run. It is different 
 when we turn to the surplus left to each producer. 
 Here we have to do with rewards determined by 
 price and not determining it. It is sometimes 
 difficult to say what earns these rewards. Some- 
 times they seem due to pure luck. Others depend 
 on the special abilities or sagacity of a captain 
 of industry. Others on the monopoly of an inven- 
 tion. Others on a State-created monopoly. Others, 
 again, on situation. We may, however, distinguish 
 the persons who receive the surplus. One in 
 general is the ground landlord on whose land the 
 undertaking is carried on, and as situation is an 
 important factor in success^ ground rents, whether 
 in country i or town, take up an important part of 
 the surplus. The other recipient is in general the 
 entrepreneur, who undertakes the risk of the enter- 
 prise. When rent is paid he takes the balance, and 
 this balance is profit proper. But, of course, entre- 
 preneur and landlord may be one individual (as in 
 the case of a peasant proprietor), or there may 
 be many recipients, as in some profit-sharing 
 schemes. And it is important to notice that some 
 factors in the production of the surplus are tan- 
 gible, their value measurable, and the returns to 
 them nearly constant. Such, for instance, is situa- 
 tion. These are the factors which can be let 
 
 ' In the country of course the value of the land, and hence the 
 rent, depends largely on previous investments of capital in 
 the soil.
 
 102 THE LABOUR MOVEMENT 
 
 off and secure a rent. Other factors, like keen 
 business, sagacity, are less easy to measure, and 
 get a variable re-tuin. Generally they induce a 
 man to, u^dqrtake business en his own account and 
 their reward, .is profit. B.ut they may also be sold 
 by their possessor to the conductor of a business 
 for a special salary or for a share in the profits. 
 This distinction is of practical importance when any 
 attempt is made to control the distribution of the 
 surplus. 
 
 For the average producer, then, the returns of 
 his industry may be theoretically divided into two 
 portions, that which reimburses the expenses of 
 production and a surplus over and above, varying 
 in amount. This division, we have seen, is in- 
 dependent of human institutions, though human 
 institutions may determine who shall receive it. In 
 one way human institutions or efforts also affect 
 the amount of the surplus. Not only may they 
 increase or decrease the productivity of labour, 
 but they affect the cost of production. For 
 example, if interest is lowered by general pro- 
 gress and social security, one element in the cost 
 of production is reduced and it tends to fall, leav- 
 ing an increased producer's surplus for the entre- 
 preneur, landlord, or other recipient. Conversely, 
 a rise in the price of any of the elements determin- 
 ing cost of production tends to raise that cost and 
 lower the surplus. In this way only, it appears, 
 can alterations in the supply prices of any general 
 agents of production affect the quantity of the 
 producer's surplus. 
 
 Having thus briefly sketched the effect of free 
 competition on the distribution of wealth, let us 
 consider how it affeccs the welfare of society. We 
 have seen that the two first essentials of a 
 thoroughly economical system of production would
 
 THE DISTRIBUTION OF WEALTH 103 
 
 be that only good and useful commodities should 
 be produced, and that all the producers of such 
 commodities should be remunerated at a suitable 
 rate — the elements for determining which we dis- 
 cussed in Chapter II. Now, at first sight, it would 
 appear that both these conditions are satisfied by 
 the competitive system. To begin with, under 
 such a system, nothing can be repeatedly and 
 continually produced in excess of the demand for 
 it. The actual consumers, it would appear, call 
 forth and regulate the supply, and each man being 
 the best judge of his own interests, who can be 
 so fit to determine how many shoes are to be 
 made as those who are going to wear them? In 
 the second place, the price of an article cannot 
 permanently fall short of the cost of production ; 
 that is, it must be at least enough to give a 
 " fair " rate of remuneration to all parties engaged 
 in producing it, and that, be it remembered, to 
 the parties who produce it under the greatest 
 possible disadvantages, our generous system leav- 
 ing an ample surplus to more favoured or gifted 
 individuals. 
 
 So much for the credit account. What of the 
 per contral Take first the correlation of Demand 
 and Supply on which all hinges. The salient fact 
 here is that this correlation is effected indirectly 
 and almost unconsciously. There are few things 
 more capricious and incalculable than the modern 
 market. Cotton is " flat " and wool is " brisk," 
 and few men fathom the ultimate causes, which 
 may arise from changes on the other side of the 
 globe. Shrewd men make a guess. Cunning 
 men suck no small advantage out of the turns of 
 the market. But the majority even among the 
 experts are like men groping in the dark, who 
 know the road to be clear as far as the hand can
 
 104 THE LABOUR MOVEMENT 
 
 reach, but can never tell what blank wall they 
 may not touch at any step. The truth is, that 
 though demand ultimately governs supply, it has 
 to use very indirect means, and very rough means. 
 To use an old comparison, it is like a force working 
 under a great deal of friction. The individualist 
 producer of old days was a market to himself." 
 He lived, as it were, apart, not only " Cyclops- 
 wise, governing wife and children," but also in 
 true Cyclops fashion, producing just his own needs. 
 He delved and his wife span as they required. 
 They knew what they wanted, and procured it by 
 their toil, and they had the fruits of their toil as 
 its reward. A very uneconomical system of 
 industry from the point of view of production, but 
 presenting some m^erits from that of distribution. 
 In modern industry we have changed all that. 
 The modern individualist producer sows that 
 another may reap, and that whether he is wage- 
 earner or employer. The essence of the modern 
 system, of which Exchange is the central feature, 
 is that I produce what I think you will buy at an 
 advantage to myself. .Whether I am a farmer, 
 merchant, millowner, or shopkeeper, the same 
 holds. You do not set me to work, but I set to 
 work myself in the hope that you will want what 
 I make. 2 Meanwhile others are setting to work 
 in the same way. Now, if I have made a good 
 guess at what you want, I make a large profit ; 
 if a bad one, I may be ruined. In the first case, 
 too little of the desired commodity is being pro- 
 duced ; in the second, too much. In either case 
 
 ' If he is not altogether an economic figment. It is truer to 
 economic history to think of a small community tlian of a single 
 family as very nearly self-sufficing. 
 
 = Of course at any one stage goods are in large measure made to 
 order. But the stock is accumulated in anticipation of orders 
 to come.
 
 THE DISTRIBUTION OF WEALTH 105 
 
 the discrepancy from the required amount tends 
 to right itself, but in the meanwhile one set of 
 men are ruined while others retire with a fortune. 
 This is the nature of the friction under which com- 
 petition acts in adjusting supply to demand. Men's 
 lives are the brake upon the wheel. 
 
 Let us consider this in close connection with the 
 theory of value. We have seen that for short 
 periods value is determined by the equilibrium of 
 demand and supply and has no connection with 
 cost of production. We have seen that the price 
 thus fixed may be too low to remunerate certain 
 of the producers, and that in the long run these 
 will retire from the market. But at what time and 
 at what cost? If the operation of competition were 
 swift and decisive, we should have little to charge 
 against it on this count, but the " long period " 
 in question may extend over years, during which 
 time a w^hole trade is disorganised, employers are 
 contending miserably with forces that are too 
 strong for them, and wage -earners are pinched. 
 See how this works out. The price of an article 
 is fixed for a short period, say three months, by 
 the equilibration of demand and supply at a price 
 which does not remunerate a millowner. If he 
 could at once contract his production or close his 
 mill and transfer his capital elsewhere, all would 
 work well. Supply would fall oft to the required 
 amount, and the remaining members of the trade 
 would receive a good profit. But he is not in a 
 position to do anything of the sort. His capital 
 is locked up. He has acquired certain special 
 business aptitudes and a certain connection. You 
 cannot turn a cotton manufacturer into a farmer, 
 nor a cotton -mill into a coalmine. When you are 
 able to do that, competition will begin to work 
 without friction.
 
 106 THE LABOUR MOVEMENT 
 
 Yet this is not the only difficulty. Over-pro- 
 duction in one industry is not balanced as might 
 be expected by under-production in another. 
 Rather, as hinted above, there is a tendency to 
 over-production all round. It is the interest pi 
 each single employer to work his particular plant 
 to the utmost and get for himself the largest 
 possible share of the market. Hence all employers 
 are constantly pressing forward and increasing 
 production. The consequence is that after a time 
 prices tend to fall.' If employers were merely 
 exchanging against one another, this would not 
 matter. As they sold cheap they would also buy 
 cheap. But, in fact, while their selling prices fall 
 their costs are fixed in two directions. They are 
 working in large part on borrowed capital and 
 the rate of interest is fixed. It does not diminish 
 because selling price has diminished. In many 
 cases, too, their premises are rented and the rent 
 is similarly fixed. At the same time, trade unions 
 resist a reduction of money wages. Thus em- 
 ployers have the same fixed charges to meet with 
 a diminishing income. But further, it is probable 
 that the general lowering of prices does not extend 
 so rapidly to raw material as to manufactured 
 goods. The increase of manufacture and trans- 
 port will increase the demand for coal, but with 
 a given number of mines open the supply of coal 
 will not readily expand except at increased cost. 
 Other raw materials are affected in the same way, 
 and food supplies, cotton, &c., are independently 
 affected by good and bad harvests. Thus the 
 manufacturer may find that his raw materials are 
 
 ' Unless, indeed, there should be a corresponding increase in 
 the output of gold. But as this output is regulated mainly by 
 the richness of available mines it does not vary concomitantly 
 with the general expansion or contraction of trade.
 
 THE DISTRIBUTION OF WEALTH 107 
 
 costing him the same, and his fixed charges are 
 the same, while his selling price has descended, 
 and this may hold right through the area of pro- 
 duction.! 
 
 The result is that he will make a desperate 
 effort to struggle on. Not only so, but he may 
 resort to desperate expedients, endeavouring to 
 make up for diminished prices by increasing his 
 output, or to attract customers by underselling. 
 Each step plunges him deeper into the mire. In 
 both ways he still further diminishes the price 
 of the article and he plunges others into the same 
 difficulties. The struggle may, if the gods are 
 merciful, be short and sharp, and in that case ruin 
 and bankruptcy follow at once. Rich men lose 
 everything ; large stocks of machinery and costly 
 buildings become worthless, hundreds of workmen 
 are turned out into the street. Yet nobody really 
 was in fault. The crisis is worse the further it is 
 prolonged, for it means years of depression pi 
 trade, irregularity of employment, falling wages, 
 and vanishing profits. Such is the " friction " 
 which attends the working of competition. 
 
 When enough stoppages have occurred the sup- 
 plies in the market diminish. Prices of manu- 
 factured goods rise again. Coal and materials are 
 abundant for the reduced production, and there- 
 fore relatively cheap. The crisis has produced a 
 break in money-wages. There is a good margin. 
 Works are presently going full time, and the whole 
 process begins anew. Such in outline seems to be 
 the nature of periodical unemployment, the re- 
 
 ' The only thing that can right him is an inci^eased supply of 
 gold which will keep prices high. This is to the advantage of 
 the employer, as against the capitalist, the landlord, and the 
 salaried official. The effect on the workman depends on the 
 elasticity with which money wages respond to increased cost 
 of living.
 
 108 THE LABOUR MOVEMENT 
 
 current sore of the body economic, the effect in 
 the last resort of the lack of all means of regu- 
 lating industry and adjusting supply equably to 
 demand. 
 
 If, then, we were responsible for the deliberate 
 regulation of industry, we should need, to begin 
 with, to take some measures for adjusting pro- 
 duction to requirements. We should have to fore- 
 cast the quantity of goods likely to be required 
 in an industry as a whole and to regulate our 
 capital expenditure, our organisation, and the 
 supply of labour accordingly. Further, if the ex- 
 change of goods through the medium of money 
 remained a part of our system, we should have to 
 fix the price of goods in any given branch of 
 industry at the point which would repay the cost 
 of those goods which it was most expensive to 
 produce, leaving a surplus of varying and in some 
 cases probably of very considerable amount on the 
 sale of that portion of the stock which was more 
 economically produced. The surplus, it would be 
 seen, would remain even if we transformed industry 
 from an individualist to a completely Socialist 
 basis. We shall return to this point presently. 
 But we have first to note certain further defects 
 in the competitive system. 
 
 Let us suppose the marginal cost of production 
 determined and maintained without fluctuation by 
 competition so that the losses attendant on fluctu- 
 ation may be put out of mind for the moment. 
 Will everything then go smoothly? Cost of pro- 
 duction, remember, includes the elements of wages 
 for labour, skill, and management ; the compensa- 
 tion for risk and the interest on capital. Now, 
 will the cost of production be fixed at a rate which 
 will provide due remuneration for all of these? 
 And, again, supposing this condition satisfied, will
 
 THE DISTRIBUTION OF WEALTH 109 
 
 the competition of these several factors for their 
 portion of the price distribute it in the justest 
 way — that is, in the way most useful to the com- 
 munity? Not to go into the full theory of this 
 aspect of distribution, consider the operation of 
 unrestricted self-interest on one factor in the cost 
 of production, the wages of labour, and contrast 
 it with the effect of combination already con- 
 sidered. To understand this we must, as in 
 Chapter II., regard Labour as a commodity which 
 the labourers possess and are ready to sell to 
 the highest bidder. Now, supposing the labourer 
 and the employer to arrange terms by unrestricted 
 personal bargaining, wages will be fixed for short 
 periods by the equilibrium of demand and supply. 
 And we saw that in the case of material commo- 
 dities the equilibrium price bore no relation to 
 cost of production, and might leave the pro- 
 ducer in a bad plight. So it is with wages. 
 The market price for short periods bears very 
 little relation ' to the needs and comforts of the 
 labourer who sells his work and may leave him in 
 very bad plight. In practice the iron rule of 
 demand and supply is mitigated in the case of 
 wages, not only by combinations but by custom 
 and in some degree by goodwill. On the other 
 side we have to reckon with the vast economic 
 advantage which the great majority of employers 
 have over average unorganised labourers, an ad- 
 
 ^ The labourer if denuded of all other resources must even 
 for a week earn enough to feed him. But if, e.g., the worker 
 is a girl who lives at home and works for pocket money or to 
 add something to the family earnings, her wages need not, and, 
 in fact, often do not, so much as cover this bare minimum. An 
 industry in which wages are beaten down to such a point that 
 its operatives can only be supported out of the proceeds of wages 
 earned in some other occupation has been well called by Mr. 
 and Mrs. Webb a parasitic industry. It is in effect living on 
 others and as such ought not to be tolerated.
 
 no THE LABOUR MOVEMENT 
 
 vantage parallel to those of a horsedealer over a 
 tyro, and enabling the employer as a rule to buy 
 labour very much cheaper than would be possible 
 if the labourer were equally able to forecast the 
 market and to await a favourable turn. This acts 
 as a permanent force depressing the rate of wages, 
 and we have, in short, one of the most important 
 cases in which " free " competition as above 
 defined is a delusion. And now notice further two 
 peculiarities about labour as a marketable com- 
 modity. First the long period in which its price is 
 adjusted to the " cost of producing it " is abnor- 
 mally long. A low rate of wage in a giyen trade 
 tends to discourage the supply of labour for that 
 trade, but if the low rate be spread over many 
 trades or all the trades of a country, the tendency 
 could only operate by the actual diminution of the 
 working population, partly by discouragement of 
 marriage, more by emigration, and most of all by 
 increased mortality, especially among young 
 children. This, of course, is simply a form of 
 economic friction. The point at present, however, 
 is that the tendency would take nearly a generation 
 to work itself out. But meanwhile a second im- 
 portant peculiarity of labour as a marketable com- 
 modity has been manifesting itself, viz., the effect, 
 already insisted on, of wages on the efficiency of 
 the labourer. 
 
 Confining ourselves to the economic aspect of 
 this effect, we shall find that the productivity of 
 labour is diminished by every drain upon the 
 labourer's strength due to insufficient food, bad 
 housing, or unhealthy occupations. And the pro- 
 ductivity of labour is one factor in determining its 
 reward, inasmuch as it determines the total of 
 which labour receives a portion. Hence decreased 
 productivity tends to further decrease of wages,
 
 THE DISTRIBUTION OF WEALTH 111 
 
 and we have, in fine, one of those cases of cumu- 
 lative action to which Professor Marshall has care- 
 fully drawn attention. Observe : a low rate of 
 wages diminishes the productivity of labour ; 
 diminished productivity tends in turn to lower 
 wages, and so on, in a vicious circle. Conversely, 
 increased wages and increased productivity tend to 
 augment one another, and so on, in a circle of 
 hope. Economic injuries, as General Walker has 
 shown us, tend to perpetuate themselves, and the 
 same may be said of economic gains. The result ' 
 is that under a competitive system the wages of 
 labour do not necessarily right themselves at all. 
 Supply will, indeed, slowly tend to adjust itself 
 to demand, but, to say nothing of the bloodshed 
 by the way, // the labourer's remuneration is below 
 the minimum necessary to a certain development 
 in mind and body, the tendency of free competition 
 will be, not to raise him to a level with that mini- 
 mum, but to depress him farther below it. The 
 equilibrium wage will sink. I conclude, then, that 
 while it is of the last importance that the mass 
 of workers should have a sufficiency for health of 
 mind and body, there is no necessary tendency in 
 the action of competition to assign them such a 
 sufficiency ; and we have seen that it does not, in 
 fact, assign a sufficiency to a third, perhaps not 
 to one half, of the workers in the United Kingdom' 
 to-day. 
 
 For these deficiencies of free competition we 
 have already discussed the remedy. The grand 
 cause depressing " free labour " is here seen to 
 be the economic weakness of the labourer himself, 
 and it is precisely this that Trade Unionism and 
 labour legislation strive to correct. The more 
 clearly it is seen that industrial anarchy tends to 
 depress great masses of the workers and exclude
 
 112 THE LABOUR MOVEMENT 
 
 them from their due reward as servants of society 
 the greater is the need for the collective control of 
 work and wages. 
 
 Now, supposing the rate of remuneration fixed ; 
 supposing that workers of every class have ob- 
 tained for themselves a " fair " average remuner- 
 ation, taking into account, in accordance with our 
 original principles, not only the necessaries of life, 
 but also the claims of effort, skill, and brain 
 power ; supposing, therefore, that the employing 
 class has also fixed a " fair " average wage for 
 itself— there will still be a considerable surplus 
 of wealth to consider, not absorbed by the payment 
 of wages. 
 
 The first element 'in the surplus is profit proper, 
 and consists in what Professor Marshall has called 
 the quasi-Rent of commercial ability and mono- 
 poly, to which we should add good fortune. We 
 have seen that the individualist employer after pay- 
 ing labour, rent, and interest, in return for the 
 hard work of management may or may not find 
 himself in possession of a surplus, large or small. 
 This surplus depends partly on his skill and effort, 
 partly on circumstances over which he exercises very 
 slight control. It actually varies in amount, as 
 we have seen, from zero to any quantity. It is 
 the " fringe " of the national dividend where 
 expansion and contraction have their first effects. 
 If we could bring together all the industries of the 
 country into a single account, this fringe would 
 take the form of a very large surplus ; if, how- 
 ever, we conceive the industrial management of 
 the country to remain in its present condition, the 
 " fringe " will present itself as though cut very 
 irregularly along the surface of industry. In one 
 business the surplus will be enormous, in another 
 there will be none at all, in a third there will be a
 
 THE DISTRIBUTION OF WEALTH 113 
 
 positive loss. This we can see is a very un- 
 economical arrangement, enriching some people 
 beyond what is needful for the highest happiness, 
 and ruining others, to their own misery and the de- 
 rangement of trade. A small difference of ability, 
 an unforeseen turn of events, and one man makes 
 his fortune while another is ruined. The result 
 is that neither is happy. Neither beggary nor 
 princely wealth conduces best to a happy and well- 
 ordered life. For the wealth made there is no 
 tangible increase of happiness or development to 
 show. Meanwhile the lure of profit-making cor- 
 rupts all industry and changes honest work into 
 a constant struggle to get more and more, and an 
 unceasing effort to overreach others. Nor does 
 the evil cease with the producer. When money 
 becomes the test of success, and I am held to 
 have proved myself a better man than you if I 
 have earned more, then the signs of wealth are 
 held the proofs of merit and ability, and display 
 becomes the first object for men of means. The 
 vanity of wealth which corrupts the life, vulgarises 
 the social intercourse, destroys the simplicity of 
 men and women from the cottage to the castle, 
 and fills the world with ugliness and discomfort, 
 is doubtless referable in part to permanent human 
 weaknesses, but it owes its abnormal development 
 to the spirit of competition and pecuniary profit. 
 
 We have to quarrel, then, both with the dis- 
 tribution of the producer's surplus as effected by 
 competition, and with the results to character 
 which such a mode of distribution brings about. 
 
 Now, what are the compensatory benefits of the 
 system of private profit? Regarding profit as the 
 wages of the employer — the wages allowed him 
 by society under the economic system which it sup- 
 ports — we have to ask, Is it the most economical 
 
 8
 
 114 THE LABOUR MOVEMENT 
 
 method of payment? So far as the employer's 
 profit depends on luck — i.e., on causes beyond his 
 control — there is clearly no economic advantage 
 to society whatsoever in awarding it to him ; so 
 far as the prospect of additional gain stimulates 
 him to socially useful exertion society does obtain 
 a certain quid pro quo. But, in the first place, 
 the individual employer, aiming at his own profit, 
 does not necessarily use means thereto which con- 
 tribute to the general welfare. If, for example, 
 he is able by skilful advertisement to j)alm off 
 inferior goods on the public, his profit is due to 
 his sagacity or cunning, but not to any real social 
 service. To lie well requires consummate art to 
 which, in some departments of modern industry, 
 a lifetime may be profita^bly devoted, but it does 
 not conduce to the general comfort. Thus, if 
 honest employers make an honourable profit by 
 useful work directed with great ability, and are 
 paid less than the value of tlieir services, we must 
 set agamst them the dishonest traders who profit 
 at the expense of their own uprightness and the 
 general wellbeing, and who are encouraged thereto 
 by many of the circumstances of modern commerce. 
 But further, it may be doubted if the individu- 
 alist system either checks the bad or encourages 
 the good in the best way. The stakes are too 
 high. Men stand to win or lose their all. They 
 oscillate between riches and beggary. As a class 
 our modern captains of industry are not to be 
 envied. They bear the first brunt of commercial 
 storms. They are subject to repeated periods of 
 strain and over-pressure. The ups and downs 
 of fortune tell on their mental and physical health. 
 It has even been doubted whether the individualist 
 system of industry does not most afilict those who 
 are generally supposed to gain by it most.
 
 THE DISTRIBUTION OF WEALTH 115 
 
 We see, then, that the system which leaves the 
 producers' surplus as a prize to be fought for 
 may stimulate good work, but it also cherishes 
 sinister arts. It distributes its rewards in a way 
 that causes over-strain and worry, even to the 
 favoured ones. It produces a competitive spirit 
 concentrated on personal gain instead of public 
 good. And in the train of all this come the evils 
 we discussed before, the repeated disorganisation 
 of industry, and the consequent loss of capital and 
 deterioration of labour. 
 
 Now, when an industry is organised by con- 
 sumers for their collective benefit, profit on ex- 
 change, as we have seen, disappears. Either goods 
 are reduced to cost price or the balance falls 
 to the comxmunity which has organised production — 
 is communised. This is commonly held to be 
 dangerous to the efficiency of industry, and to 
 put a bar to the wide extension of consumers' 
 co-operation, whether voluntary or municipal or 
 national. Our analysis tends, on the contrary, to 
 reveal in the change the possibility of great gain — 
 financial gain to the common purse, gain in real 
 happiness to the producer, economic and social 
 gain in the direction of industry to common needs 
 in place of objects from the supply of which enter- 
 prising producers may derive personal advantage. 
 These gains are, it must be granted, governed 
 by the condition that through such an organisation 
 we can secure work ably and efficiently directed — 
 that is to say, that a community can command the 
 services of men of business capacity and organising 
 power by payment of adequate salaries, by the 
 selection of the best men for promotion, and by 
 rewarding the heads of the service by conferring 
 on them trust, responsibility, and honour. That 
 these conditions are realisable is questioned by
 
 116 THE LABOUR MOVEMENT 
 
 laissez-faire economists, but would not be regarded 
 as beyond hope either by those who take a more 
 concrete view of human nature or by those who 
 study the actual working of some of our best 
 institutions to-day. If Mill could hold that men 
 would some day learn to dig and weave for their 
 country as well as to fight for it, we may with 
 still more confidence hope that men may learn 
 to follow earnestly and strenuously the higher call- 
 ing of directing those who dig or weave for the 
 same end. 
 
 This is not a dream, nor even a supposition. 
 It is matter of fact realised in many departments 
 of industry to-day. In medicine, in the Churches, 
 in education, in the Civil Service, wherever men 
 feel an interest in the work as well as in its wage, 
 work is given gladly and willingly to the utmost 
 of a man's power for a fixed reward. And the 
 same holds in industry pure and simple. Take 
 the co-operative world, where, as Mrs. Webb has 
 well pointed out, we have men dealing with millions 
 of money, carrying on complicated operations on 
 a vast scale for the salary of a clerk. There are 
 in truth other motives to action than those of direct 
 and proportionate pecuniary reward. There is 
 the hope of advancement, of social esteem, there 
 is the pure love of work, and the desire to serve 
 society. There are motives mercenary and 
 motives of devotion. These last are indeed 
 diminished by a social system which makes 
 material success the main object of respect, and 
 tends to regard devotion to the public service as 
 either humbug or simplicity. But they can never 
 be extinct, and we have but to curtail the field 
 of the other impulses which compete with them 
 in human nature, and they will of themselves 
 expand to all their original vigour.
 
 THE DISTRIBUTION OF WEALTH 117 
 
 At the same time, we have already admitted that 
 the advance of Co-operative industry must be 
 gradual and even experimental. It must be justified 
 point by point by showing equal efficiency of per- 
 formance, and to obtain this efficiency it must build 
 up an honest and competent administrative service. 
 The actual evolution of such a service in England 
 during the last two generations in national affairs, 
 and its more recent growth in municipal affairs 
 is, in fact, the working basis of our practical 
 Socialism so far as it has as yet advanced. Every 
 further advance must depend on a parallel develop- 
 ment of the governing machinery. Whether it is 
 at all probable or even desirable that this method 
 of organisation should be extended to the whole 
 of industry, or whether there may not remain a 
 permanent sphere, not only for voluntary Co-opera- 
 tion but even for the independent producer, are 
 further questions on which we have touched 
 above, and to which we shall return in the next 
 chapter. For the present we maintain that the 
 effect of the collective organisation of industry in 
 communising profit and substituting the spirit of 
 social service for the motives of private gain are 
 to be reckoned as large items on the credit side of 
 this system, and a sound motive for its extension 
 so far as that is practicable. 
 
 But besides " Profit " in the narrower sense, 
 there is a second element in the surplus product 
 not yet considered. While profits are fickle and 
 variable a great portion of the excess of value 
 produced over the cost of producing it goes to 
 private pockets in fixed charges. And it will con- 
 tinue to do so however much you communise profit. 
 A Co-operative Society must pay interest on its 
 capital and rent on its premises. A municipality 
 must purchase or rent land for its public works.
 
 118 THE LABOUR MOVEMENT 
 
 Now, Rent is the price paid for differential ad- 
 vantages in production to those who own such 
 advantages. And "economic Rent" there always 
 is and always must be. For, as we have shown, 
 some goods are bound to be produced under more 
 favourable circumstances than others which are 
 brought to the same market. This advantage may 
 be due to various things, such as fertility or situa- 
 tion, and the owners of such advantages can exact 
 a price for the use of them. No legislation can 
 abolish economic rent. But the law can and does 
 determine who shall receive it. And the question 
 is, Does the law do wisely in allowing private 
 individuals to absorb this enormous portion of the 
 national produce? To ask this question is to make 
 no attack on the owners of Rents, who may be 
 most estimable men, and in many cases may, of 
 their free choice, be doing good service to the 
 State. It is merely to direct attention to the 
 existence of a permanent charge upon the 
 " National Dividend," for which no adequate return 
 is made and for which no return need be made 
 at all. 
 
 In many cases the value for which rent is paid 
 is due to natural causes and not to human effort. 
 Of this mining royalties are a conspicuous 
 example. In other cases it is due to the growth 
 of society, as instanced by the price of land in the 
 City of London. In yet other cases it is due 
 to a monopoly created by the State, as instanced 
 by the value of licensed premises. Whenever we 
 pay for value so created we get no compensatory 
 service rendered, and we thus violate the first 
 principle of a sound economic system. 
 
 It would undoubtedly be the object of a 
 democratic control of the industrial system to 
 divert every form of economic rent from private
 
 THE DISTRIBUTION OF WEALTH 119 
 
 to public coffers. The principle has, in fact, been 
 accepted by the nation in the Budget of 1909. 
 From this time forward, in the case of land, that 
 increment of value which does not depend on im- 
 provements made by the landowner is subject to 
 a special tax. Whether, indeed, with all the 
 limitations with which it is hedged in, this source 
 of revenue will be found very productive the future 
 will decide. But the principle is there, and it will 
 be extended. 
 
 But the increment tax looks only to the future. 
 What of the existing values locked up in urban 
 sites, enabling owners to draw so heavy a toll on 
 urban and suburban occupiers? The taxation of the 
 unearned increment has begun too late. It has 
 allowed a vast accumulation of value due to the 
 growth of the community to pass into private 
 hands. Is the community to suffer this in per- 
 manence? If yes, it must pay a large toll without 
 receiving any return of personal service. If no, 
 it must go back on its past and impose a burden 
 which will not easily be adjusted to the right 
 shoulders ; for it has always allowed land to pass 
 freely in the market. The valuable soil, or rather 
 space, of the City of London has doubtless changed 
 hands many a time and oft since London took its 
 high place among the cities of the world. Those 
 iwho have received the increment have sold it, 
 and existing owners have already paid a high and 
 possibly full value for it. Are they to be taxed 
 on that for which they have already paid? Let 
 us put it into figures. Here is a plot of land 
 worth thirty years ago, say, £100 an acre, and 
 now worth £400, The increment is £300, and we 
 agree that this ought to have fallen to the com- 
 munity. But, as likely as not, the land has been 
 recently sold, and that perhaps at its full value.
 
 120 THE LABOUR MOVEMENT 
 
 If we now tax the land we are not getting the 
 value back from the man who has received it, 
 but are exacting it a second time from the man 
 who has already paid for it. Questions such as 
 these— and this is one of the most elementary- 
 show the enormous difficulty in the application of 
 a principle, equitable in itself, to the facts of an 
 economic structure which has grown up on different 
 principles. More specifically, it suggests that in 
 this case if any one ought to be taxed it is not 
 the actual owner of the site ' but the man who 
 has capitalised the value and sold it— that is to 
 say, it introduces us to the question of the taxation 
 of capital and interest. Now, according to our 
 treatment and that of the economists, interest is 
 not a part of surplus, but a part of cost— that is 
 to say, the interest on the capital employed in 
 production must be reckoned as a part of the 
 normal cost of the article, and therefore as fixing 
 its price. Ought we not, therefore, to treat it 
 quite differently from rent and profits and to 
 regard it as legitimately accruing to private owners 
 
 ' There remain, however, sufficient reasons for such a change 
 of municipal taxation as will transfer the burden of rates from 
 buildings to sites. The rating of buildings and improvements 
 generally is a direct tax on industry. All such taxes it is 
 desirable to abolish and transfer them to the surplus of industry 
 in one form or another. Site value is a form of that surplus, 
 and should ultimately bear the entire burden of municipal 
 expenditure by which, at bottom, it is created. The fact 
 that land has always changed hands freely will cause any such 
 change to fall hardly on recent purchasers. This is a reason 
 for making the change gradually, and, as shown in the text, for 
 distributing the burden over ' capital generally. This gives 
 the purchaser time to recoup himself against any serious loss. 
 It must be remembered that all kinds of business transactions 
 go forward subject to the possibility of unforeseen loss or gain 
 through changes in the methods of collecting revenue. The 
 duty of considerate statesmanship is to make such changes so 
 gradual as to minimise the hardship to individuals which is too 
 often incidental to general improvement.
 
 THE DISTRIBUTION OF WEALTH 121 
 
 of capital as the appropriate return to them for 
 their share of production? 
 
 To determine this question we must put to- 
 gether the principles of distribution on which we 
 have been working. We laid down at the outset 
 that the fair wage is that which serves per- 
 manently to stimulate and maintain a social 
 service. If that is so, that principle measures 
 the income which (charity apart) will fall to each 
 individual for his private use in a well-organised 
 industrial system. Whatever he acquires over and 
 above that is " surplus." The line between cost 
 and surplus would then be drawn on different 
 principles and at a different point by a collectively 
 controlled system as compared with a competitive 
 system. That is to say, a system founded on 
 principles of equity as the basis of a co-operative 
 organisation of industry would divide the total pro- 
 duct of national industry into two portions. The 
 one representing the sum of the fair wage of all 
 producers would go to the producers as their 
 private income. The other, being the surplus left 
 over, would have no individual with a just claim 
 upon it, and would therefore fall to the community 
 for the enrichment of the common life. Such a 
 division is, of course, an ideal which could only be 
 attained with mathematical exactitude by means 
 of a degree of centralisation which we do not 
 contemplate as practicable, and then only with the 
 aid of knowledge which is not perhaps fully attain- 
 able. But it serves to express the principle upon 
 which a just economic organisation would rest, 
 and by reference to which the organisation of the 
 industrial and fiscal system should be guided. 
 
 How, then, would interest on capital fare in this 
 distribution? Is it payment for a service or not? 
 Directly, it is payment for the use of capital ;
 
 122 THE LABOUR MOVEMENT 
 
 but from the present point of view a distinction 
 must be drawn between inherited and acquired 
 capital. The interest that a man obtains on his 
 own savings is earne"d by his own past industry. 
 Indirectly, he may be said to have paid for it 
 by his own work. That which he obtains from the 
 use by some one else of his patrimony he has 
 clearly not earned. He neither pays for it nor 
 has paid for it by work of his own. It would 
 seem, then, that the distinction between earned 
 and unearned income at present recognised in our 
 finance is only a rough approximation to the true 
 principle ; for in our income-tax arrangements all 
 rent and all interest on capital figure as unearned 
 income, without reference to the question whether 
 the land was bought or the capital acquired by 
 personal saving or by inheritance. It is right, 
 however, to remark that the balance is, in a 
 measure, redressed by the legacy and succession 
 duties ; and it may be added that the general 
 tendency of financial legislation to transfer taxa- 
 tion from productive industry to the surplus and 
 the accumulations of the past accords with the 
 principles of sound collective organisation. 
 
 But to return from taxation, as we know it, to 
 the question of principle, it is clear that industry, 
 whether collectively organised or not, requires 
 capital, and that in one form or other capital has 
 to be paid for. A community might by degrees 
 accumulate its own capital, but it would be at 
 the cost of saving on its annual expenditure. At 
 present its method is that of borrowing from its 
 own members ; the payment is interest, and the 
 rate of interest fixes itself in accordance with the 
 general demand for capital for investment and 
 the amount available for the purpose. Society 
 cannot lower this rate by arbitrary decree. What
 
 THE DISTRIBUTION OF WEALTH 123 
 
 it can do is, 'by the taxation of inherited wealth, 
 to make itself part heir of past accumulations ; 
 and it is desirable that it should do so, since 
 interest on inherited wealth is not payment for 
 service rendered to those by whom it is rendered, 
 but is a tribute to the dead hand. To this argu- 
 ment it is replied that a man's motive in saving 
 and building up a fortune is to provide for his 
 children and perhaps found a family. If inherit- 
 ance is taxed so heavily that in effect the State 
 becomes the heir, this motive, it is urged, would 
 cease to operate, saving would diminish, and we 
 should have insufficient capital. At any rate, if 
 any one country were to go too far beyond its 
 neighbours in such taxation, there would be a 
 transference of capital to other lands. This possi- 
 bility cannot be altogether ruled out. The taxation 
 of inheritance must be governed by the actual 
 need of industry for accumulation, and though 
 it could probably be carried a good deal farther 
 than has yet been done without risk, any more 
 thoroughgoing policy must rest on the repayment 
 of public debt and the acquisition by the State 
 and the Municipality of capital of their own. It 
 is clearly the object of a collectively organised 
 industry to emancipate itself from the tribute to 
 past generations, and this implies that the com- 
 munity would become, not only the supreme land- 
 owner, but also the chief capitalist.' But it will 
 
 ^ It may be asked whether the super-tax, which has become 
 a weapon of " democratic finance," is justified by any of the 
 above considerations, since it falls on large incomes whether 
 earned or unearned. And the same doubt may attach to the 
 graduation of death duties, since all inherited property, it may 
 be said, falls under the ban if there is a ban at all. The reply 
 is (i) that it may safely be assumed that incomes above the limit 
 at present taken of ;^5,ooo per annum contain large elements of 
 " surplus," which in the last resort means that the income which 
 remains when the tax is deducted is amply sufficient to maintain
 
 124 THE LABOUR MOVEMENT 
 
 achieve this end, not by the confiscation or con- 
 fiscatory taxation of any single form of property, 
 but by taxation equably distributed over all forms 
 of " surplus," and steadily diverting the flow of 
 surplus from the coffers of the individual to those 
 of the community. 
 
 It is, of course, possible to maintain that a 
 much more revolutionary break with the past is 
 required, and that measures that would press very 
 hardly on existing owners are justified by the needs 
 of poverty. But the history of revolutions is not 
 so encouraging that we should want to launch upon 
 them spontaneously, A country which flings away 
 national credit for the due fulfilment of all its 
 obligations parts with one of the greatest of its 
 permanent assets. Nor would it be in accordance 
 with the general feeling in the Labour world itself 
 to attack wealth as wealth. Considering the tre- 
 mendous contrasts of fortune which every London 
 street presents, there is remarkable absence of any 
 spiteful feeling against the more fortunate classes. 
 Most people, indeed, would agree that it matters 
 little how wealthy the few may be provided that 
 the many are not poor, and provided that adequate 
 provision is made for all socially desirable objects. 
 Creditable as this view is, there is something to 
 be said on the other side. The doctrine of the 
 needle's eye is sadly out of fashion in these com- 
 mercial days, and we may perhaps leave the ques- 
 tion of the effect of great riches on the happiness 
 of their possessors to those possessors. But from 
 the social point of view luxury, display, patronage, 
 
 any form of social service, whatever degree of ability it may 
 involve ; (2) as to capital, as long as society only provides the 
 bare minimum of maintenance and education for children 
 inherited private property on a modest scale is performing a 
 useful function. Inheritance on a larger scale does not perform 
 any further function of value.
 
 THE DISTRIBUTION OF WEALTH 125 
 
 and the power of the purse have evil effects not 
 merely as the correlatives of poverty, but in their 
 direct and indirect influence on the standard of 
 living. Merely as a political force, the influence 
 of wealth does not diminish. The means of 
 influencing, and even of informing or refusing to 
 inform, opinion are in the hands of those who hold 
 the purse-strings. Political organisation as it 
 becomes more efficient costs more money, and it 
 is only by the payment of Members of Parliament, 
 the provision of election expenses out of public 
 funds, and the rigorous limitation of private ex- 
 penditure that democracy can hope to maintain 
 itself. Socially, the employment of great wealth, 
 even if well-intentioned, is apt to be ill-directed. 
 The man who is surrounded by riches sees the 
 world as through a glass darkly. He hears its 
 cries as through a blanket ; he gets out of relation 
 to his kind. But the glitter of his life sets a 
 standard, dazzling but unreal, for the ambitions 
 of the less fortunate. It gives effort the wrong 
 orientation, directing it towards material accumula- 
 tion in place of the conditions which affect the 
 substance of human happiness. 
 
 With all this, it may be agreed that it would 
 be disastrous for democracy to attack wealth as 
 wealth. The problem of industrial democracy is 
 to secure the material conditions of a healthy life 
 for the community as a whole, to cure the disease 
 of poverty, and to provide for the community the 
 resources for all objects of common utility. In 
 financing these objects, it defeats its own ends if it 
 adds to the burdens on production. It must draw 
 on the surplus, and, so far as it can accurately 
 mark off that which is surplus from that which 
 is necessary to production, it can increase its drafts 
 without fear of impeding industry. But the legiti-
 
 126 THE LABOUR MOVEMENT 
 
 mate object is not to diminish the surplus for tlie 
 sake of diminishing it, but to provide for some 
 niatter of public utility. The simple principle of 
 democratic finance, in short, is the application of 
 the surplus that remains over and above the fair 
 wage of the producer to common needs. 
 
 We are, then, able to state in outline the distri- 
 bution of wealth at which an industrial democracy- 
 would aim. To all engaged in production, whether 
 by output of brain power or muscle power, it 
 would seek to assure a fair wage, and that is, such 
 a wage as serves to stimulate and maintain in per- 
 manence the function which they perform. The 
 surplus, whether in the form of interest, rent, or 
 profit, it would bring into the common chest for 
 public purposes. But a modern nation is too large 
 and its administration too cumbrous and mechanical 
 to carry out this ideal through the agency of the 
 central government alone. Local governments and 
 voluntary associations have their part to play. The 
 Trade Union has probably a permanent function 
 in watching over the interests of each group of 
 producers. The Co-operative Society will con- 
 tinue to organise forms of production and ex- 
 change which are not suited to the mechanical 
 methods of the State. Even the individual pro- 
 ducer will have his place wherever initiative, 
 originality, and personal taste are the essential 
 factors in value. The supreme function of the 
 State is to exercise such a measure of control as 
 will secure the general direction of industry to 
 ends of social value, fair conditions for the worker, 
 and equitable distribution of the product.
 
 CHAPTER V 
 
 THE CONTROL OF INDUSTRY AND THE LIBERTY 
 OF THE INDIVIDUAL 
 
 Let us now review our position. Let us suppose 
 the principles we have advocated to be recognised 
 and carried out to their logical conclusion, an'd let 
 us try to picture the resulting state of industry. 
 The work of the nation would then be carried on 
 in large measure under the direction of communi- 
 ties of consumers. There would be great national 
 [works giving the nation control over the vital 
 industries ; there would be probably a still greater 
 development of municipal works ; and there would 
 be, supplementing these, voluntarily formed Co- 
 operative Associations on the existing model, united 
 by the Federal principle, and, ultimately, co-exten^ 
 sive with the community. There would also be 
 private enterprise in the arts, the artistic handi- 
 crafts, and the profess'ions ; and it is probable 
 that many branches of industry would, as to their 
 immediate direction, remain in private hands. But 
 over all the State would exercise a supreme con- 
 trol, regulating and correlating economic forces 
 which are now left to adjust themselves as they 
 may. Throughout the industrial system suitable 
 remuneration and healthy conditions of work would 
 be ensured for all classes of producers by good 
 legislation, backed up and supplemented by strong 
 
 137
 
 128 THE LABOUR MOVEMENT 
 
 Trade Union action. The surplus product, when 
 this charge is met, would be in the hands of 
 the community for common purposes, that there 
 might be the means of life for the infirm, and of 
 culture and enjoyment for all ; and the ceaseless, 
 wearying roar of the great engine of competition 
 would be still. 
 
 Will such an ideal ever become actual? As to 
 its complete realisation I answer, " No one can 
 tell, and it is not our business to find out." What 
 concerns us to-day is not the possibility of a 
 complete ideal, but the practical value and imme- 
 diate promise of certain existing tendencies. Here 
 are certain great economic evils which all deplore, 
 and here are certain movements aiming at reform. 
 Are these movements actually doing good? Do 
 they promise, if developed along the same lines, 
 to go to the root of the matter? These are the 
 questions which we have tried to answer, and which 
 we have seen reason to answer in the affirmative. 
 If this answer be justified, then, whatever changes 
 the future may necessitate, these movements form 
 for the present the means of progress. 
 
 Thus we may readily admit difficulties in apply- 
 ing the co-operative form of industry to every 
 department of production. In the case of foreign 
 trade, for example, co-operation of consumers to 
 arrange for production ' would seem almost out 
 of the question, unless in some far-off Federation 
 of the world which is yet but a dream. Again, 
 in the case of some forms of production, the 
 principle seems somewhat out of place, and 
 is not likely to be realised unless in some 
 modified form. In short, wherever the industrial 
 revolution has not set its mark, and where industry 
 
 ' Transport, however, is already undertaken by the Wholesale 
 Societies in ships of their own.
 
 THE CONTROL OF INDUSTRY 129 
 
 passes beyond the limits of the nation, collective 
 control by consumers becomes a difficult matter. 
 The case of Agriculture is one of special interest 
 in this relation, and it is worth while to discuss a 
 little more fully the way in which our principles 
 seem capable of application in its case. 
 
 Here there is, at first sight, a strong drift of 
 things in the other direction. We seem to be 
 slowly sprinkling England with individualist pro- 
 ducers of a pre-revolutionary type. Allotments 
 and small holdings seem to many people opposed, 
 not only to every principle of " Collectivism," but 
 to the whole tendency of the Industrial Revolution. 
 But this is not altogether the case. The small 
 occupier himself is an individualist producer, no 
 doubt. And a system of yeomanry or peasant 
 proprietorship would doubtless bring back many, 
 of the evils, ethical and economical, of primitive 
 individualism. But with communal ownership a 
 very different system is introduced, and communal 
 ownership is already adopted as the principle of 
 a great political party— even though that party 
 has not yet taken the final step of repudiating 
 every opposing principle.' In the case of agricul- 
 ture, rent takes the greater share of the surplus 
 product. As owners and rent-receivers, then, the 
 community will exercise some of the most im- 
 portant rights and duties of collective control. 
 Of course, this supposes that we are not to be 
 satisfied with a simple quit rent to be fixed once 
 and for ever. Such a plan would be only one 
 degree better than a system of complete purchase. 
 Agricultural values are constantly shifting in rela- 
 tion to money, and if we fixed rents to-day, thirty 
 years hence our tenants might be in possession of 
 
 ' 98 per cent, of the Small Holdings acquired under the Act of 
 1907 are tenancies. 
 

 
 130 THE LABOUR MOVEMENT 
 
 great unearned increments, or— what is just as 
 likely — on their knees to us to relieve them of an 
 overgrown burden. The small holder requires 
 fixity of tenure, but subject to revision of rents 
 at stated periods of considerable length, with 
 allowance for all improvements made by the 
 occupier. In this way the community absorbs its 
 due share of the produce — the surplus over the 
 remuneration of the worker.' 
 
 Furthermore, voluntary co-operation has an 
 important function in relation to agriculture which 
 is of comparatively recent development. In rela- 
 tion to farming itself, indeed, it has not made much 
 progress. In the first edition of this work I noted 
 that 38 Co-operative Societies farmed 3,315 acres 
 in Great Britain. Eighteen years later (in the 
 figures for 19 10) I find that 89 Societies farmed 
 io,937| acres, with an aggregate profit of £5,371, 
 balanced by a loss of £4,238.2 These are not 
 figures which suggest any important movement. 
 It is in the matter of buying and selling that 
 Co-operation is beginning to play a large part 
 in agriculture, and if Small Holdings are to flourish 
 there will be a field for Co-operative Banking. 
 The Agricultural Organisation Society is now 
 affiliated to the Co-operative Union, and from 
 figures given in the Report of the Union for 19 10 
 it appears that there are altogether 411 Societies 
 concerned in one way or another with the organisa- 
 tion of agricultural business relations, doing in 
 
 ' In particular in view of the possible taxation of food, rents 
 should be adjustable, by an automatic scale if possible, to the 
 ruling price of the crops grown. 
 
 * 43rd Annual Report of the Co-operative Union, p. 46. 
 These farms were owned or rented by Wholesale or Distri- 
 butive Societies. In addition 2 farming societies rented 808 
 acres, and made a profit of £201 and a loss of ;£i2.
 
 THE CONTROL OF INDUSTRY 131 
 
 the year a trade of £1,974900.1 The small holder 
 will have even greater need than the large farmer 
 for co-operation both for selling and for buying ; 
 and though co-operation of producers for sale is 
 not the same thing as co-operation of consumers, 
 yet they admit of being linked together, and ex- 
 periments in that direction are in progress .2 It 
 would not seem rash to lay down that the future 
 development of Small Holdings in this country is 
 bound up with the possibility of devising methods 
 of co-operation which will enable the cultivator 
 to combine the advantages of the large dealer 
 with those of close attention to his own plot. 
 
 Outside agriculture, but still in relation to the 
 land, the Garden City movement is yet another form 
 of co-operation, which illustrates how much may be 
 done by concerted action, not necessarily to increase 
 wealth as measured in money, but to extend that 
 much more real and valuable social wealth which 
 consists in health, space, air, order, tranquillity, 
 and the preservation of all the natural beauties 
 that are compatible with the extension of bricks 
 and mortar. Perhaps the function of the Garden 
 City is rather to be a precursor of the Self -owned 
 City, which the Town-planning movement is be- 
 ginning to promise us, than to create a new and 
 permanent form of voluntary co-operation. In any 
 case, we are in presence of a new ideal of civic 
 organisation, which yet is quite a natural develop- 
 ment of the revived municipal life of the last 
 three generations. The first function of the 
 municipality was to establish a competent govern- 
 ment, efficient municipal police, cleanliness, and 
 sanitation. Then came the supply of public 
 
 ' Ibid., p. 47. 
 
 ' See the same Report, pp. 147-68, for an account of con- 
 ferences on the subject among some of the organisations 
 concerned.
 
 132 THE LABOUR MOVEMENT 
 
 services— gas, water, electricity ; and, again, 
 education, libraries, and art galleries. There 
 follows naturally an anti-smoke crusade, and with 
 it will come the possibility of considering the 
 appearance of the city — a hopeless task as long as 
 art was represented by a conventional smoke- 
 begrimed statue, and the lov^e of Nature by some 
 straggling sulphur-poisoned bushes lining the black 
 grass of a so-called park. But as the city gets 
 back its own in the value of its land, it will tend 
 to look on itself with clearer social consciousness 
 as a common home, which it will seek to make as 
 desirable, as full of comfort, and as free from all 
 that offends eye or ear, and, for that matter, nose 
 as the housewife makes her private home. This, 
 and no other, is the way of return to " Merrie 
 England." No rise of wages will make of our 
 Northern or Midland coalfields surroundings in 
 which men would or should willingly remain. But 
 each local community owning its land, and there- 
 fore able to get back its expenditure, might make, 
 even under the most untoward circumstances, a 
 home for itself which would be a home, and not 
 a collection of huts dumped down anywhere among 
 cinder-heaps. 
 
 It would be easy to suggest further applications 
 of the principle of social control. But it is no part 
 of my purpose to prove that such control must 
 necessarily extend over the entire sphere of indus- 
 trial life. What I am concerned to show is that 
 the principle underlying certain existing movements 
 is a sound one, self -consistent and coherent, and 
 full of promise for the better life of society. It 
 is a principle which men have come to appreciate 
 through experience, and the manner of applying 
 it and the limits of its value have also to be 
 learnt through experience. It is an interesting,
 
 THE CONTROL OF INDUSTRY 133 
 
 imaginative exercise, but a practically futile pro- 
 ceeding to work out in our heads a perfectly 
 finished political order, rounded off in every direc- 
 tion. Of such Utopias the only thing that can be 
 predicted with certainty is that they will always 
 be Utopias. We should bear in mind that the 
 accomplishment of any considerable part of our 
 hopes will open wider vistas of progress, will create 
 new problems of its own, and demand undreamed- 
 of methods of solution. No human system ever 
 yet existed in completeness. One after another 
 has grown and decayed, and none has stood still 
 in self-satisfied fullness of development. Like " the 
 waves in the moonlit solitudes mild of the mid- 
 most ocean," they swell and pass before we have 
 measured the height of their crest. Only human 
 society under wise human direction does not rise 
 to fall again with the ceaseless iteration of the 
 ocean waves. The tide of movement sweeps us 
 higher at each great pulsation ; it pauses, but it 
 does not sink, and it changes its course only to 
 find easier inlets to t"he shore. 
 
 We must, then, content ourselves with a limited 
 view of the future, and must not strain our eyes 
 to see the invisible. It is enough for us to trace 
 the tendencies of our principles to the farthest 
 point discernible, to see how they harmonise and 
 supplement each other, and how the application 
 of them would meet the economic evils of the day. 
 When these evils have been remedied new ques- 
 tions will arise, and it may be that new principles 
 will be required for their solution. 
 
 It will be well, however, before concluding, to 
 illustrate our principles further by considering 
 their bearing on some of the practical problems 
 of the day. For some years past Parliament has 
 been engaged on legislation designed to lighten
 
 134 THE LABOUR MOVEMENT 
 
 the load of poverty. At one point— in the estab- 
 lishment of Wages Boards in a few badly sweated 
 industries— it has directly attacked the problem of 
 insufficient wages. But for the most part it has 
 tacitly assumed that though wages may suffice, or 
 may come to suffice, for the needs of the average 
 workman's family as long as the workman is in 
 full vigour and regular employment, they do not 
 afford a margin, and cannot, through any change 
 which is within the bounds of probability, be ex- 
 pected to afford a margin, for the mass of wage- 
 earners out of which they could provide unaided 
 for the contingencies of life, for sickness, old age, 
 unemployment, and the education of children. If 
 that is the case, the living wag'e is calculated on 
 the basis of the maintenance of the family during 
 the full vigour and regular employment of the 
 father, and provision for these contingencies should 
 fall, in accordance with our view, on the 
 " surplus." In two leading cases the State has 
 adopted two different methods of making the 
 provision. In the case of Old Age Pensions, it 
 provided a low fixed minimum for all the poor— 
 with minor exceptions which need not here be 
 considered— leaving it to individuals to add to the 
 minimum or to antedate the pension through 
 their own exertions. Coupled with the financial 
 provisions of the Budget of 1909, this was a 
 clear attempt to throw this charge on the 
 " surplus," and is fully in accordance with the 
 principles here defended. In the case of sickness 
 and unemployment a different method has been 
 followed. The bulk of the expense is to be placed 
 on employers and employed, the State contributing 
 but a fraction of the whole. This method is 
 more questionable. For the contributory principle, 
 as applied to all wages above the minimum, there
 
 THE CONTROL OF INDUSTRY 135 
 
 is a good deal to be said. The provision against 
 sickness is a joint responsibility of the individual 
 and the State. The State has a duty to the sick, 
 and each man has a duty to himself and to his 
 wife and children. Moreover, he owes a duty 
 to the State in the matter, because in practice 
 the State cannot leave either him or his children 
 to die. He becomes a charge on the common 
 funds if he has not made provision out of private 
 funds. The State, therefore, 'has a right to say to 
 him : " Come, let us club together. We will do 
 half and you shall do half." But this is to assume 
 that the man has already a margin over his imme- 
 diate needs. The demand is not fairly applicable 
 to those who have no such margin, and it is to 
 be feared that the tax of 4d., weekly will, in fact, 
 press heavily on those whose incomes fall below 
 20S. to 25s. a week. The difficulty has been very 
 partially met by lowering the contribution on the 
 very lowest grades of labour, but it will be clearly 
 necessary to press for further exemptions. There 
 is, however, a more fundamental criticism on the 
 finance of the Insurance Law. Raising 46.. from 
 the employed workman (I need not here com- 
 plicate the argument by bringing in the case of 
 women) and 3d. from the employer, it imposes 
 a tax of 76. . per week on employment as such. 
 It thus places the whole burden of the cost upon 
 production, and economically there is every reason 
 to suppose that the employer's 3d. will have very 
 much the same effect as the employee's 4d. Now, 
 there is not the smallest reason, other than that 
 of financial convenience, for putting this tax on 
 employment. A man needs provision against sick- 
 ness, not because he is employed, but because he 
 is a man. The State owes it to him, not because 
 he is employed by somebody, but because he is a
 
 136 THE LABOUR MOVEMENT 
 
 citizen. The practical difference between the two 
 principles is considerable. It is the tax on the 
 employer which renders it impossible to insure 
 poor men and women who work for themselves 
 on even terms, which necessitates the complicated 
 provisions for married women, which causes the 
 difficulty as to casual labour, and as to the 
 responsibility for arrears after a season of un- 
 employment. Moreover, the Post Office scheme, 
 the blot on the whole law, might at least 
 have been left voluntary had there been no 
 employer's contribution to consider. But beyond 
 all this the tax on employment, it may be 
 predicted, will act like a tax on anything else. 
 It will tend to reduce employment.' In the trades 
 which are compulsorily insured against unemploy- 
 ment as well as sickness, the total tax on a week's 
 employment is is. — that is to say, on an unskilled; 
 labourer at 20s. a week it is a tax of 5 per cent. 
 Of this the employer directly pays 5|d., and this is 
 certainly sufficient to influence him when it is a 
 question of taking on or discharging hands in 
 a time of slack trade. It is also a very serious 
 burden on small employers, whose average weekly 
 income is perhaps not much greater, and is pos- 
 sibly more precarious, than that of some of the 
 men whom they employ. It is so great a thing 
 to have established the principle of National 
 Insurance that it may be argued that the price 
 was worth paying. That has now become a ques- 
 tion of academic interest. What is important is 
 to press the necessity that the State should assume 
 a larger share of the burden with a view, not 
 
 ' In other words, it adds to cost of production. In the view 
 here taken all such taxes are bad unless the aim is to diminish 
 production as in the case of taxes on liquor. Otherwise all 
 taxation should fall on surplus. This is the simple principle of 
 democratic finance.
 
 THE CONTROL OF INDUSTRY 137 
 
 merely to the relief of the poorer wage-earners, 
 but to the reduction, and ultimately the elimination, 
 of the tax on employment.' 
 
 An employer is fairly held responsible, not for 
 all the sickness of his workpeople, but for any 
 sickness that arises out of the conditions of their 
 employment ; and that clause of the Act is 
 thoroughly sound which places on employers a 
 special liability where an industry yields more than 
 an average share of sickness. It is by following 
 the same clue that we arrive at the true responsi- 
 bility of the employer in the matter of unem- 
 ployment. We have seen that fluctuations of 
 employment are largely attributable to the uncon- 
 trolled attempts of the individual employer to 
 expand his business in good times . There is no 
 check on his eagerness at such times to bring 
 workpeople into his trade. But the new hands 
 that he has introduced may in a few months or 
 years be out of work ; in fact, it is freely main- 
 tained that many industries could not run as at 
 present constituted without reserves of labour, 
 which they can call upon in good times, leaving 
 them to rot in slack seasons. This is a monstrous 
 system, and the only real check on it is to make the 
 profits of the industry bear the full burden of its 
 labour cost in slack as in full work. The Unem- 
 ployment Insurance scheme seems vaguely to 
 recognise this principle, but it proceeds so inconse- 
 quently as to tax the employer when he takes a 
 man on, remitting the tax when he turns him off. 
 This is not precisely the way to stimulate em- 
 ployment in slack periods. "What is needed is 
 
 ' If the employer had to pay the same amount in income tax 
 it might seem to be as broad as it is long. But the economic 
 effect would be quite different. Income tax falls on realised 
 profit, and provides no motive for reducing the number of those 
 employed.
 
 138 THE LABOUR MOVEMENT 
 
 rather to cause the employer to contribute to an 
 insurance 'fund in direct proportion to the fluctua- 
 tions of employment in his industry. Now, there 
 is a clause in the Act (clause 102) which provides 
 for a periodical revision of the rates of contribution 
 in relation to the actual cost of unemployment 
 insurance, and the avowed object of this clause is 
 to supply a motive for the reduction of unemploy- 
 ment. But as they stand, these provisions, and 
 others intended to give advantages to regulation 
 of employment, can only be regarded as mitiga- 
 tions of the general burden which the Act places 
 upon employment as such. The object should 
 rather be to base the employer's contribution, not 
 on each week's employment of each workman, but 
 on his presumable contribution to the total cost 
 of unemployment in his trade. This would be 
 measured accurately, not by the number of persons 
 employed by him in a given time, but by the 
 fluctuations in that number. Now, whether any 
 method of assessment can be devised which would 
 approximate to a fair measure of these fluctua- 
 tions is a question for the fiscal expert. But 
 failing such a method, which would give the em- 
 ployer an individual interest in the equalisation of 
 employment, far the best method of exacting his 
 contribution would be to make it a direct pro rata 
 charge on his profits ; that is to say, the total 
 cost of unemployment insurance in a given trade 
 in a given district being ascertained over a term 
 of years, a moiety would be charged on employers 
 collectively and divided among them in proportion 
 to their profits. There would be a reassessment 
 every three or five years, so that the charge would 
 vary directly with the amount of unemployment. 
 So placed, the charge would not operate as an 
 mducement to the earlier discharge or later recall
 
 THE CONTROL OF INDUSTRY 139 
 
 of workmen, but would simply supply a definite 
 pecuniary inducement to employers to act collec- 
 tively for the more equable regulation of trade ; 
 while in periods of depression the workman, having 
 his benefit to fall back on, would not cease to 
 be a purchaser of goods, and would not therefore 
 involuntarily assist in extending the area of stag- 
 nation. In such a form of public supervision it is 
 not unreasonable to see the beginnings of a radical 
 cure of cyclical unemployment,' 
 
 There is, however, one side of the Insurance 
 scheme which, in my view, deserves more praise 
 than it has received. It secures to the sick man 
 certain definite benefits as a matter of indefeasible 
 right. He can claim medical attendance, sana- 
 torium treatment, and a weekly income of definite 
 amount. He is taken out of the hands of com- 
 mittees, inspectors, and relieving officers, and is 
 given instead a legal claim which he can enforce. 
 This is the true break-up of the Poor Law, the 
 true line of emancipation for the great majority 
 —for they are, after all, the great majority— who 
 work honestly and well for a scanty return. To 
 assure them a certain definite provision, small as 
 it may be, as their own is to treat them as inde- 
 pendent citizens. To send them to plead their 
 
 ' Seasonal unemployment is a different problem due to natural 
 causes and can be best met, in accordance with the suggestions 
 of the Minority Report, by a dovetailing of different trades. 
 
 The proposals of that Report for an organisation of the Labour 
 market by such arrangement of public works as would increase 
 national and municipal production in bad seasons and relax 
 it in good seasons is a palliative which has some obvious disadvan- 
 tages but if cautiously employed may serve a useful purpose. 
 But instead of striking at the root of the matter it accepts 
 cyclical fluctuations as inevitable. To this view it may be 
 rejoined that if these fluctuations are not curable by some such 
 mild methods of public supervision as are suggested in the text 
 they will drive the nation to a much more radical form of the 
 collective organisation of industry.
 
 140 THE LABOUR MOVEMENT 
 
 case before inspectors or committees, be these 
 never so benevolent, is to reduce them to 
 dependence. There remain for oflicialdom the 
 rehef of exceptional misfortune and the discipline 
 of idleness. But the true cure of poverty is in 
 the establishment of a defined right of income in 
 times of helplessness, charged on the " surplus " 
 fund of industry. 
 
 So much may suffice to illustrate our general 
 principle, and farther I cannot attempt to go in 
 this connection. It will be well, however, in con- 
 elusion, to meet one or two theoretical objections 
 which may be urged against the general principles 
 of the collective control of industry. 
 
 It may be said, first, that economic laws render 
 our ideals impossible. This objection may mean 
 two or three things. It may mean generally that 
 sound economics are opposed to such views. If 
 that is so, we must of course have the particular 
 discrepancies pointed out before we can reply to 
 them. It may mean, again, that economic laws 
 are as inevitable as those of arithmetic or 
 astronomy, that it is equally hopeless to contend 
 against them ; that these laws have produced the 
 present state of society, and that the said state of 
 society cannot therefore be modified by human 
 efi"ort. Against this hypothetical but not unlikely 
 objection, the reply simply is that it rests on a 
 misconception of the idea of law. A law in 
 economics, as in any other science, simply states 
 what has resulted, and is expecte"d to result, from 
 certain conditions— what will be the effect of a 
 given cause. Political economy traces the existing 
 state of industry, distribution of wealth, &c., to 
 certain causes, and says that, given those causes, 
 the effects follow inevitably. Very likely, but sup- 
 pose we can control the causes? Given free
 
 THE CONTROL OF INDUSTRY 141 
 
 competition, enormous inequalities of wealth are 
 inevitable. Doubtless, but suppose we can super- 
 sede competition by an intelligent control of 
 industry? We cannot argue from what happens 
 now to what would happen under changed condi- 
 tions. The fields of economic and much other 
 scientific thought are strewn with the bones of 
 those who have tried to reach truth by this 
 method, and have perished intellectually in the 
 attempt . 
 
 In a somewhat similar spirit, it is sometimes 
 said that political economy favours free competi- 
 tion. This idea still seems to work confusedly in 
 the inner fogs of many minds, but it is about as 
 intelligible as to say that physiology favours 
 disease, or astronomy the motion of the earth 
 round the sun. Political economy has emerged as 
 a science at a period when free industrial enter- 
 prise has been more widely extended than hereto- 
 fore, and accordingly it has been mainly concerned 
 to examine the phenomena that arise under a com- 
 petitive regime. But political economy is con- 
 cerned purely with the ascertainment of facts. 
 It tells us, or tries to tell us, what happens under 
 given economic conditions. It does not tell us 
 what ought to happen, what would be most desir- 
 able in the general interests. It does not, as a 
 pure science, favour any one form of industrial 
 organisation rather than another. And if any 
 political economist does show such favour, we can 
 only say, that qua political economist he has no 
 business to do any such thing. The whole notion 
 implies an entire misunderstanding of the nature 
 of science as an attempt to interpret existing facts 
 as it finds them. The ordinary " scientific " objec- 
 tions to coUectivist reforms are, in fact, the 
 objections of pseudo-science.
 
 142 THE LABOUR MOVEMENT 
 
 There is, however^ one specific form of the 
 econ,omic objection which we can hardly expect 
 to escape. The population theory has been erected 
 into a bulwark against almost all theories of pro- 
 gress since the days of Malthus, and it is hardly 
 to be supposed that the Labour movement of to-day 
 will be allowed to pass unchallenged. I shall be 
 told that this reckless ministering to human life 
 and comfort, this monstrous preservation of the 
 incompetent, will have as its inevitable result the 
 increase of population, which must infallibly lead 
 to increased poverty. Observe the reasoning here. 
 There are more mouths to fill ; therefore there is 
 less for each. Quite so, if the whole stock of 
 food remains the same. But how if the supply of 
 food increases as fast as the population, or faster? 
 Is not this possible, since each new consumer is 
 (or is to be*) also a new producer? No, I shall 
 be told ; the law of Diminishing Returns prevents 
 this. Put ten men to labour on a farm, and you 
 get a certain return. Add ten more next year, and 
 you get a larger return, but not twice as large. 
 You have doubled your labour, but you will find 
 the produce less than double. And this gets worse 
 the farther we go on. Ten men, say, could pro- 
 duce enough from the farm to live in comfort. 
 Twenty men produce enough to keep fifteen in 
 comfort. Then five will be underfed. Thirty 
 men's labour will keep eighteen in comfort and 
 twelve will be in rags ; and so it goes on, getting 
 worse and worse. Now, all England and all 
 England's industry may be looked at thus. Ten 
 million, say, could live comfortably in England. 
 At twenty millions five will be submerged. At 
 thirty twelve will be in want, and so on. 
 
 I do not suppose that this argument would now 
 be used by any competent economist. But it may
 
 THE CONTROL OF INDUSTRY 143 
 
 be well to explain briefly the nature of the mis- 
 take. The simple truth is that the law of 
 Diminishing Returns is a misnomer. At one stage 
 returns increase proportionately to the amount of 
 labour applied — i.e., a given addition of labour 
 brings a more thaji proportionate increase of pro- 
 duct. At another stage returns decrease propor- 
 tionately to the amount of labour — i.e., a given 
 addition of labour brings a less than proportionate 
 increase. Thus a farmer working single-handed 
 in a Western State reaps a certain harvest. If he 
 is able to hire one labourer his return is more than 
 doubled. A second labourer adds yet more than 
 the first, and so on up to a certain maximum, after 
 which the addition of a fresh labourer makes a 
 smaller addition of produce than is obtained from 
 the average of preceding labourers. At this point 
 Increasing Returns give way to Diminishing 
 Returns. And so it is in all industry. There is a 
 period of Increasing and a period of Diminishing 
 Returns, and even an interweaving of the two, 
 so that we pass from one to the other and back 
 again. And thus considered, the conception must 
 be applied to manufacture, mining, transport, and 
 other industries, as well as to agricultural land. 
 If it be granted — I doubt whether any human 
 being knows it to be true — that English agricul- 
 ture is now permanently in the period of Diminish- 
 ing Returns, it must be remembered that England's 
 population does not depend for its food on 
 England's soil. And it has yet to be shown that 
 an increase in the population does not produce 
 such an increasing return in manufactures and 
 transport as more than counterbalances the 
 diminishing return from agriculture. That this has 
 been so up till the present time seems to be agreed. 
 Thus Professor Marshall says : —
 
 144 THE LABOUR MOVEMENT 
 
 " Political arithmetic may be said to have begun 
 in England in the seventeenth century ; and from 
 that time onwards we find a constant and nearly 
 steady increase in the amount of accumulated 
 wealth per head of the population." ' 
 
 RememlDering the enormous increase in the 
 population which has taken place during the same 
 time, we see here the action of Increasing Returns 
 on a large scale. In fact, the pressure of popula- 
 tion on subsistence may some day become a diffi- 
 culty. But that it in any way contributes to our 
 difficulties at present, or is likely to do so within 
 any period for which we are called upon to make 
 provision, there is no evidence to show. What 
 evidence we have points the other way. And for 
 those who look forward with anxiety to the time 
 when even standing-room will be difficult to find 
 on this earth, let us in platonic fashion crown 
 them with garlands as the wisest and most far- 
 seeing of men, and at the same time suggest to 
 them that they would find a more congenial society 
 among the philosophers of Laputa than among the 
 legislators of our city .2 
 
 A somewhat similar objection may be put in 
 simpler form. It may be said : " You propose 
 that every occupation should be made as safe and 
 healthy as possible, that it should never be carried 
 
 ' "Principles of Economics," vol. i., p. 729, 2nd edition, 1891. 
 
 = I leave the above passage as it was written twenty years 
 ago, because it is instructive to see how quasi-scientific arguments 
 against progress change with times. The fall of the birth rate 
 has laid the ghost of over-population. The talk now is all of 
 race suicide and the duties of parenthood, and the blessings of 
 laro'e families are being assiduously inculcated by celibates and 
 childless married people. The danger of race-suicide to-day 
 is no more real than that of over-population twenty years ago. The 
 standing danger is that people may be beguiled from the path 
 of rational progress by whatever happens to be the popular 
 pseudo-science of the hour.
 
 THE CONTROL OF INDUSTRY 145 
 
 to the point of exhaustion, but should leave 
 reasonable leisure for every worker, and yet that 
 every man should have enough to maintain himself 
 and his family in a way befitting a civilised being, 
 and that the old and infirm should be made com- 
 fortable. But where is the money to come froni? 
 Quite apart from the growth of population, where, 
 at the present day, is the wealth that will meet 
 this enormous charge? " 
 
 No doubt our wages bill will be much increased 
 if we are to support all the workers of the nation 
 at the price of moderate toil. But it is not at 
 present found impossible to support a considerable 
 number of people in a great deal more than com- 
 fort at the price of no toil whatever. If certain 
 persons hold a lien on the produce of the nation, 
 and exact a toll for which they make no adequate 
 return, our difhculties are cer'tainly increased ; but 
 the inference is not that we should abandon our 
 task, but that we should reconsider the position 
 of these persons. Every argument from the 
 " impossible " urged by the possessors of " sur- 
 plus " makes the case against the private appro- 
 priation of surplus so much the stronger. The 
 more difificult it is to satisfy the primary needs, 
 the more necessary it becomes to apply the whole 
 of our revenue to that purpose. And the first need 
 of all is life for the worker. In a true social 
 state every citizen counts for something — all alike 
 must be considered ; but the servants of society 
 must be considered first. If there were to be before 
 and after at all in a true State, those would be 
 before who, whether with brain or muscle, are 
 doing the hardest, most unpleasant, most dan- 
 gerous, most self-denying work for the common 
 good ; and next to the worker would come the 
 helpless. Not till these first needs are satisfied 
 
 10
 
 U6 THE LABOUR MOVEMENT 
 
 can we consider any other claims. But is there, 
 in point of fact, any ground for the suggestion 
 that the national income is not sufficient to meet 
 the demands of the minimum wage and yet leave 
 a large surplus? If we look again at the figures 
 of Mr. Rowntree and Professor Bowley, we may 
 make a very rough estimate of the addition to 
 the weekly wages bill which would be necessary 
 to raise wages generally to the standard. We 
 shall see that there are, in round numbers, four 
 millions of men earning between 15s. and 30s. 
 a week. Let us assume that the deficiency of 
 their wages, as compared with the minimum (which 
 we placed between 20s. and 25s. for the rural 
 districts, and 25s. and 30s. for urban areas), 
 averages 5s. per week. This would give a total 
 deficiency of £1,000,000 weekly. Then there are 
 320,000 receiving less than 15s., besides casual 
 workers, making perhaps a million in all. Let us 
 suppose that for this million the deficiency averages 
 los.aweek. This gives a sum of £500,000 weekly. 
 The total is, in round figures, £78,000,000 annu- 
 ally. Let us assume that, with similar provision for 
 women workers, it would reach 100 millions. The 
 figure will suffice to indicate the order of magni- 
 tude with which we are dealing. Now, let us 
 assume further that this increase of wages makes 
 no addition to the productive power of labour, but 
 will represent a net deduction from surplus. 
 What is the measure of the surplus? Again, we 
 can get no exact or even approximate figures, but 
 we can form a conception of the order of magni- 
 tude. Mr. Chiozza Money has given reasons for 
 thinking that the aggregate income of those above 
 the limit of abatement of income tax — that is, above 
 £700 a year — is £634,000,000 ; and this is 
 obtained by no more than some 280,000 families,
 
 THE CONTROL OF INDUSTRY 147 
 
 whose average income is thus, in round figures, 
 £2,260. We may take less than half of this 
 amount for " surplus " in the sense in which that 
 term is used here, and we may disregard all the 
 elements of surplus which are, of course, to be 
 found in smaller incomes as well, and still have a 
 sum which will be treble that required to make 
 good the deficiency of wages. If that is so, one- 
 third of the surplus wealth of the nation would 
 suffice to abolish the poverty of the nation, so far 
 as that poverty is due to maldistribution. 
 
 I conclude, on the whole, that the economic 
 objections to the collective control of industry are 
 not sound. 
 
 But one question remains to be raised. In all 
 this advocacy of collective control, are we not 
 leaving one side of life out of account altogether? 
 Does not the growth of the central authority mili- 
 tate fatally against the liberty of individual 
 citizens which is essential to progress? This is 
 a consideration which would have had more weight 
 in England twenty, or even ten, years ago than 
 it has to-day ; and I deal with it, not so much 
 because I think it will be considered as because 
 I hold that it ought to be considered. I shall not, 
 therefore, attempt an exhaustive discussion of the 
 arguments for individualism. I will content myself 
 v/ith one or two as representative, and will then 
 pass to the more positive treatment of the 
 subject . 
 
 First, then, the idea of the " rights " of the 
 individual as opposed to the good of society, 
 though it would hardly find countenance from any 
 competent thinker, still appears to lurk obscurely 
 in certain minds, from which it emerges from 
 time to time into the twilight of confused platform 
 speeches or magazine articles. We still hear of
 
 148 THE LABOUR MOVEMENT 
 
 the rights of property, the right to free labour, the 
 right to drink when and where you please, as 
 though these rights were not merely the creation 
 of society, sustained by society for its own con- 
 venience, and having no other moral justification 
 in the world, but superior to social welfare and 
 competent to give it the law. But a " natural 
 right " independent of the welfare of society is 
 as much a contradiction in terms as a legal right 
 independent of a law enforcing it. On this point 
 philosophers speak with one voice. That it is the 
 view of utilitarians, like Mill, holding as they do 
 that the greatest happiness of mankind is the test 
 of right and wrong, goes, of course, without saying. 
 Let us hear, then, one of the greatest English 
 representatives of a quite opposite school of 
 thought : — 
 
 " The dissociation of innate rights from innate 
 duties has gone along with the delusion that such 
 rights existed apart from society. Men were sup- 
 posed to have existed in a state of nature which 
 was not a state of society, but in which certain 
 rights attached to them as individuals, and then to 
 have formed societies by contract or covenant. 
 Society having "been formed, certain other rights 
 arose through positive enactment ; iDut none of 
 these, it was held, could interfere with the natural 
 rights which belonged to men antecedently to the 
 social contract or survived it. 
 
 " Such a theory can only be stated by an 
 application to an imaginary state of things, prior 
 to the formation of societies as regulated by custom 
 or law, of terms that have no meaning except in 
 relation to such societies. ' Natural right,' as 
 right in a state of nature which is not a state 
 of society, is a contradiction. There can be no 
 right without a consciousness of common interest
 
 THE CONTROL OF INDUSTRY 119 
 
 on the part of members of a society. Without this 
 there tmight be certain powers on the part of 
 individuals, but no recognition of these powers 
 by others as powers of which they allow the exer- 
 cise, nor any claim to such recognition ; and with- 
 out this recognition or claim to recognition there 
 can be no right." ^ 
 
 On this point, then. Utilitarian and Transcen- 
 dentalist join hands. A right is nothing but what 
 the good of society makes it. If, all things con- 
 sidered, it were well for society as a whole to 
 destroy every right of private property to-morrow, 
 it would be just to do so, and the owners would 
 have no right to object. They might resist with 
 physical force, but they would have no moral 
 ground to stand upon. If, therefore, any form 
 of property or any liberty no longer serves a 
 good social purpose, it ceases to be morally a 
 right. Even the compensation due to individuals 
 whose rights are affected by such changes is 
 assigned to them in the name of the common 
 welfare. 
 
 This being understood, we pass to the scientific 
 arguments for individualism. The chief of these 
 arguments is an application to human progress of 
 ideas derived from the organic world at large. 
 The struggle for existence among plants and 
 animals is continually eliminating the majority of 
 those which are born, and the survivors are only 
 able to maintain their ground by superiority to 
 the remainder in strength, swiftness, cunning, 
 endurance, or some similar quality. Hence the 
 natural result of the struggle is the survival of 
 the fittest, which is the means of the gradual 
 evolution of higher from lower forms. So in 
 
 ■ T. H. Green, "Principles of Political Obligation," Philo- 
 sophical Works, vol. ii., p. 354, 2nd ed., 1890.
 
 150 THE Lx\BOUR MOVEMENT 
 
 human life success is to the strong, the swift, the 
 cunning, and the patient. Let natural forces play, 
 and these shall inherit the earth, the weak and 
 feeble being rooted out. In this way, by slow 
 degrees, we attain to a higher type. But if by 
 artificial means we preserve the impotent and the 
 helpless, we hinder this beneficent natural pro- 
 cess. We prolong the misery of their extinction 
 and lower the average of human excellence. 
 Happiness and perfection are reached by men and 
 by other organisms when they are thoroughly well 
 adapted to their environment, and the supreme law 
 of progress is that the ill-adapted being should 
 be left to die : — 
 
 " Thou shall not kill, but ncedst not strive 
 Officiously to keep alive." 
 
 Now, we fully agree with the evolutionists in 
 their main position. It is desirable that the fit 
 should succeed and the unfit fail ; we are ready 
 even to exclude the utterly unfit from society alto- 
 gether by enclosing them in prison walls. But 
 who are the unfit? "Those who are ill-adapted 
 to their environment," say the evolutionists. Quite 
 so. And what is the environment of man? The 
 society of other men. Then who is the fit man? 
 Clearly the man who is best adapted for social 
 life. And who, again, is he? Is he the bold, 
 unscrupulous man of force— the exacting, the 
 merciless, the ungenerous? Such is the man who 
 succeeds in the anarchical struggle for existence. 
 Or is he the merciful and generous man of justice, 
 whose hardest fights are fought for others' lives, 
 who would rather, with Plato, suffer wrong than 
 inflict it, and who would lay down his life to serve 
 mankind? The first is fittest, actually, to survive in 
 the unregulated contest of individuals. The second
 
 THE CONTROL OF INDUSTRY 151 
 
 is fittest, morally, to survive in a society of 
 mutually dependent human beings. And that the 
 morally fittest shall actually survive and prosper 
 is the object of good social institutions.' 
 
 This society of the just may be an unattain- 
 able ideal upon earth ; it may be destined to exist 
 only in some heavenly place among the gods. But 
 according as we are brave or faint-hearted, wise 
 or foolish, virtuous or corrupt, we approach it or 
 fall off from it. There is not, and may never be, 
 a heaven upon earth, but that is no reason why 
 we should not strive to realise as much of heaven 
 as we can. We can approach, if we can never 
 reach, the rule of Right and of Justice— that those 
 shall prosper who deserve it. We can at least 
 institute and maintain conditions which favour this 
 result, which therefore promote the survival of the 
 fittest in the only sense in which that end is 
 desirable. But even the halt and the lame, if they 
 bear their trouble bravely, may be fitter for the 
 social state, and serve it better by their patient 
 
 ' It is almost superfluous to point out the ambiguity in the 
 word " fit." In any struggle the fittest survives. He would not 
 have survived had he not been the fittest to meet the particular 
 conditions of that particular struggle. It does not follow that 
 he is the fittest from a moral point of view — i.e., that he is the 
 competitor for whom a moral man, weighing the merits of the 
 rivals from a moral point of view, would desire the victory. 
 Very immoral qualities may be the condition of success in certain 
 states of social or non-social existence. If, then, we wish to 
 preserve the morally fit, we must make submission to moral laws 
 the main condition of success. Then the two meanings of fitness 
 coincide. The morally fit become the best fitted to survive. In 
 principle this argument is now generally recognised by biolo- 
 gists, who in relation to social progress substitute the conception 
 of a deliberate or rational selection by society for natural 
 selection as the method of securing racial progress. The 
 question of Eugenics, however, would require a separate volume. 
 I have briefly discussed some of the principles involved in 
 "Social Evolution and Political Theory," Chap. III.
 
 152 THE LABOUR MOVEMENT 
 
 lives, than the bold arid strong who, in pursuit of 
 their own ends, turn the earth into a hell. Better 
 to preserve the physically weak and their offspring 
 than the morally bad and their brood of evil. 
 Better to keep alive a maimed deformity than the 
 human monsters who, if the tale be true, " grow " 
 these deformities for gain. But we have no 
 such sad alternatives before us. A due regula- 
 tion of economic conditions would provide for 
 physical as for moral health, and, far from scorn- 
 ing the teachings of biology, would use them to 
 promote the evolution of a nobler species.' The 
 evolutionist argument thus correctly understood 
 makes straight for collective control. 
 
 The true value of liberty was, I venture to 
 think, better understood by older writers, like J. S. 
 Mill. That, in his phrase, " individuality is an 
 element of wellbeing " is, I believe, a permanent 
 truth. We do not want to run everybody into one 
 mould. We do not wish to turn our national 
 institutions into a Procrustes bed, in which every 
 man's nature is to be cut to one length. But 
 then, we entirely deny that the regulation of in- 
 dustrial life tends in this direction. If it were 
 proposed to impose a uniform religion, to dictate 
 a system of thought, to interfere with a man's 
 leisure, even to regulate his minor tastes in dress 
 or furniture, then, indeed, we should be cramping 
 individuality and inaugurating an era of stagna- 
 tion. And when such things are advocated, we^ 
 for our part, shall be found among the ranks of 
 the Individualists. But an active social life has no 
 
 ' So much has been said by evolutionists of the danger of 
 keeping alive tendencies injurious to society, that it is 
 surprising that they should not notice the tendency of indi- 
 vidualism to foster selfishness and callousness to suffering — the 
 most directly antisocial of all tendencies.
 
 THE CONTROL OF INDUSTRY 153 
 
 connection with the rule of bigotry and intolerance. 
 The best social life consists precisely in the har- 
 monious working out to their fullest possible 
 development of the best capacities of all members 
 of the community. And true liberty, to quote 
 Professor Green again, is found when each man 
 has the greatest possible opportunity for making 
 the best of himself. And the problem for society 
 is, so far as possible, to ensure such liberty for 
 all its members. To do this undoubtedly involves 
 the curtailment of individuals in some of their 
 actions. But some such limitations are essential to 
 the very existence of society. We cannot allow 
 people to discharge pistols in Piccadilly or bombs 
 at the base of our public buildings, however much 
 they may be convinced that they are but following 
 their best impulses in so doing. We have to 
 curtail the free play of their aspirations for the 
 safety of ourselves and our fellow-citizens. The 
 curtailment of the liberties of some, then, may 
 mean tlie maximum of liberty upon the whole. 
 And this maximum it is our object to ensure. 
 Thus free competition for employment is a form of 
 uncurtailed liberty, and it results in working hours 
 of twelve, fourteen, or sixteen a day, with full 
 liberty for self -development in the hours that 
 remain. If we curtail the liberty on one side, and 
 so obtain an eight -hour day for a group of workers, 
 with four, six, or eight hours' additional leisure, 
 do we add to liberty or subtract from it upon 
 the whole? If we compel so much education as 
 puts a child in a position in which he has all the 
 best thoughts that have been expressed in his 
 mother -tongue at his command, do we give him 
 a worse or a better chance of developing his nature 
 in the long run? In a word, if we exercise control 
 where the health and other material needs of
 
 154 THE LABOUR MOVEMENT 
 
 society are concerned, do we augment or diminish 
 the power of satisfying higher needs? I should 
 reply that all depends on the wisdom of our 
 control. If you govern badly or unwisely, prob- 
 ably enough you will get bad results. But it is 
 a bad government indeed that would not be better 
 than anarchy, just as it is a very poor brain that 
 is no better to its possessor than an empty skull. 
 The actual control itself is, in fact, a small 
 obstacle to liberty in its higher aspect. Just as 
 it matters little to control the body if you leave 
 the spirit free, so it is a small thing to order man's 
 doings in the way of providing material needs if 
 you leave him to roam unfettered in the larger 
 field of mental and spiritual development. And as 
 our object is to enable men to realise such develop- 
 ment, and find in it their greatest happiness, we 
 insist at one and the same time on perfect freedom 
 in this direction, and perfect organisation of all 
 the material basis of society which forms the 
 foundation of the wider life. 
 
 We do not, then, attack liberty, but defend it. 
 But we distinguish kinds— or, if you like, spheres 
 —of liberty as of very different importance. And 
 we advocate curtailment of the lower kinds in the 
 interests of the higher. It may be asked. Who 
 is the judge of higher and lower, and who decides 
 what is essential to the interests of the higher? 
 Only one answer can be given— the majority of 
 the citizens ; and this brings us to the second 
 of Mill's pleas for liberty — the fallibility of any 
 human authority. Here, again, we have a con- 
 sideration of great and permanent importance. No 
 human being, and, therefore, no collection of 
 human beings, can be perfectly wise. If we admit, 
 with Aristotle, that the wisdom of a body of meii 
 in their collective decisions may be greater than
 
 THE CONTROL OF INDUSTRY 155 
 
 the average wisdom of the component individuals, 
 we must yet allow that it is imperfect. The court 
 of appeal to the people is the highest human court, 
 because none higher and none safer can be devised. 
 But the voice of the people is not the voice of 
 God. And a whole generation may follow a mis- 
 taken idea about its own best interests. To ignore 
 this is the mere weakness of fanaticism. 
 
 But we have a corrective to all mistakes — the 
 only corrective open to mankind — in free criticism. 
 We must in many ways control action ; we cannot 
 control thought ; we should not control speech. 
 In all curtailment of freedom let this field be left 
 open, and the main danger of government — per- 
 sistence in a wrong course — is avoided. We shall 
 lose, we do lose, something by toleration in this 
 form. The promulgation of error is pro tanto 
 harmful. But Mill has showni that the open 
 advocacy of error is far less prejudicial to the 
 cause of truth than the suppression of divergences 
 of opinion. Free discussion is the best corrective 
 of stagnation, and free discussion involves some 
 error. And there is a suitable point at which the 
 repression of erroneous doctrines should begin — the 
 point, that is, where they issue in action to the hurt 
 of society. At that point repress them if you please, 
 but still leave men free to talk. This distinction 
 is, of course, recognised in law. It is open to a 
 man to advocate Mormonism in England, but it 
 is not open to him to be a bigamist. In most 
 respects the law already holds that it is best to 
 let men talk out their thoughts and to meet them 
 by reason and persuasion rather than with a whiff 
 of grapeshot. And so far from advocating an 
 extension of collective control in this direction, we 
 would rather see a clearer line of demarcation 
 drawn, and the rule of free discussion made as
 
 156 THE LABOUR MOVEMENT 
 
 nearly absolute as any rule can be.' Let the fresh 
 air of criticism move over the face of the v^aters 
 and keep them astir. Then, at least, we shall 
 avoid stagnation. It is difhcult to many people 
 to combine toleration and zeal— difficult, but neces- 
 sary. Half the progressive movements of the 
 world have failed in the long run through this 
 defect. To raise men one step on the upward 
 path, they have built up a macliinery which has 
 prevented all further movement ; and the next 
 stage has had to begin with the breaking down 
 of this cumbersome mechanism. If for the future 
 this error can be avoided, progressive movements 
 will no longer contain the causes of stagnation or 
 relapse within themselves. And the single general 
 principle which can be laid down to help us here 
 is the principle of free thought and free discussion. 
 It may be asked, "If you admit the State to be 
 fallible, how can you insist that we should let it 
 judge for us? " I purposely put the question in 
 this form, because I think that, however phrased, 
 it rests on an unanalysed idea of the State as some- 
 thing outside ourselves. The truth, of course, is 
 that we are the State, and when we judge and 
 decide things as a State, we are in no worse 
 position for judging than in the practical affairs of 
 daily life. I cannot get an infallible judgment 
 from any source on earth, whether on my own 
 
 ' Apart from obsolete absurdities like the Censorship and the 
 Blasphemy laws indecency on the one hand and direct incitement 
 to disorder on the other are punishable. In the latter case the 
 line between speech and action tends to disappear and it is 
 only at this point that words may be justly held criminal. In 
 the former case it is not the appeal to opinion that ought to be 
 punished but the manner of expression which is intended not to 
 influence opinion but to excite morbid feeling. It must be 
 admitted, however, that in both cases the line is difficult to draw 
 and any restrictive law — or for that matter any moral censorship 
 exercised by opinion — may be readily abused.
 
 THE CONTROL OF INDUSTRY 157 
 
 affairs or to assist anybody else. Even if it is 
 contended that every one, from Solomon to the 
 village fool, is the best judge of his own interest, 
 it cannot be held that either Solomon or the fool 
 is infallible even on this point. The argument, 
 then, cuts both way's. If the State is fallible in 
 dealing with the individual, the individual is fallible 
 in acting for himself. And it has to be considered 
 that each man's action affects other people, and 
 however well he may be able to judge for them 
 and for himself, there is no guarantee that, so 
 far as they are concerned, he has the will to judge 
 well. The democratic State, on the other hand, 
 represents the resultant judgment, so to say, of 
 the conflicting views of all its adult and sane 
 members ; and in this resultant judgment we get 
 the nearest approach to a collective judgment of 
 the social organism upon its collective interests, 
 parallel to the judgment of the individual man on 
 his private interests. 
 
 There are those who allow the uncertainty of 
 things to weigh so heavily upon them as to 
 paralyse their will in their own private affairs. 
 They exaggerate caution, and allow the one- 
 thousandth chance of failure to outweigh the 999 
 probabilities of success. They do not count the 
 cost before acting. They never act at all. The 
 thing in some instances, I believe, becomes a kind 
 of mania, ending in a sort of general paralysis. 
 Many people suffer from a similar paralysis when 
 they approach public affairs, and the only active 
 principle they appear to retain is that of spread- 
 mg the same paralysis throughout society. But 
 society must judge and act, as individuals 
 must judge and act. Inaction no more saves 
 us from responsibility than the ostrich secures 
 itself from its enemy by burying its head in the
 
 158 THE LABOUR MOVEMENT 
 
 sand. If we decline to act we are responsible 
 for all that follows from inaction, as surely as 
 we must take the consequences of action when we 
 do act. If we do not put down gambling, if 
 we do not limit the hours of industry, if we do 
 not punish criminals, we must be held respon- 
 sible for all that follows from our passivity. 
 Responsibility is hung about our necks, and we 
 cannot shake it off. For better or for worse, in 
 private and in public, at each emergency of life, 
 on each new question forced on us, we have to 
 judge as best we can, using all available light, 
 listening to every instructed teacher, and finally 
 coming to a decision not less resolute because 
 delayed. Consciousness of weakness and limita- 
 tion is all good if it leads to open-mindedness 
 and toleration, all bad if its result is the paralysis 
 of doubt. And in the great matters of life it is 
 our imperative duty, not only to hear all sides, but 
 also, having heard them, to form opinions of our 
 own. The duty of having convictions is correlative 
 and supplementary to the duty of tolerance and 
 open-mindedness . 
 
 Both duties may be recognised in our public 
 action, and the due balance of both can alone 
 secure a continuous forward movement of mankind, 
 and in it lies the solution of the old question 
 between liberty and authority. Using every avail- 
 able means of obtaining true ideas of what is 
 necessary as the fundamental condition of social 
 health, it is our right and duty to enforce that 
 by any and every form of collective authority 
 legally or voluntarily constituted. It is equally 
 right and good to leave a fair field of discussion 
 open to all who consider themselves aggrieved, 
 or who think we are in the wrong path. And, 
 finally, collective control has not so much to make
 
 THE CONTROL OF INDUSTRY 159 
 
 people good and happy as to establish the neces- 
 sary conditions of goodness and happiness, leaving 
 it to individual effort and voluntary association 
 to develop freely and spontaneously all the fair 
 flower and fruit of human intercourse and know- 
 ledge and beauty which can spring from a sound 
 root firmly planted in life-giving earth.
 
 "Cbe (Srcsbam press, 
 
 UXWIN BROTHERS, LIMITED, 
 WOKING AXD LONDON.
 
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