Chapter IV: Introduction (1)

So far I have been putting down the elements of Economics just as one might put down the elements of Arithmetic. But Economics have, just like Arithmetic, a _practical application_: if it were not for this, there would be no real use in studying Economics at all.

For instance: we find out, when we do the elements of Arithmetic, that solid bodies vary with the cube of their linear measurements. That is the general abstract principle; but the _use_ of it is in real life when we come (for instance) to measuring boats. We learn there from Arithmetic that, with boats of similar shape, a boat twice as long as another will be eight times as big; it is also by using the elements of Arithmetic that we can keep household accounts and do all the rest of our work.

It is precisely the same with Economics. We are perpetually coming upon political problems which Economics illustrate and to which economic science furnishes the answer--or part of the answer--and that is where the theoretical elements of Economics have practical importance.

For instance: once we know the elementary economic principle that rent is a surplus, we appreciate that it does not enter into cost of production. We do not try to make things cheaper by compulsorily lowering rent. Or, again, when we have learned the nature of money we can appreciate the dangers that come from using false money.

In these political applications of Economics we also come upon what is much more important than mere politics, and that is the question of right and wrong. We see that such and such a thing ought to be so as a matter of justice; but we may blunder, as many great reformers have blundered, in trying to do the right thing and failing to do it, because we have not made a proper application of our economic science. And the opposite is also true: that is, a knowledge of Economics prevents their being wrongly applied by those who desire evil. Many men take refuge in the excuse that, with the best will in the world, they cannot work such and such a social reform because economic science prevents their doing what they know to be right. If we know our Economics properly we can refute these false arguments, to the great advantage of our own souls and of our fellow-men.

For instance: it is clearly our duty to-day to alleviate the fearful poverty in which most Englishmen live. A great many people who ought to know better say, or pretend, that economic laws prevent our doing this act of justice. Economic laws have no such effect; and an understanding of Economics clears us in this matter, as we shall see later on.

We have hitherto been following the statement and examination of economic laws: that is, the _theoretical_ part of our study and its necessary foundation. Now we go on to the _practical_ part, or “Applied Economics,” which is the effect of those laws on the lives of men.

Before leaving this Introduction I think it is important to get quite clear the difference between what is called “theoretical” study and the practical application of such study. People are very often muddle-headed about this, and the more clearly we think about it the better.

A theoretical statement is a statement following necessarily and logically from some one or more known first principles. Thus, we know that two sides of a triangle are longer than the third, so we say it follows _theoretically_ that a straight road from London to Brighton is quicker motoring than going round by Lewes. But the number of first principles at work in the actual world is indefinitely large. Therefore one must test any one theoretical conclusion by practice: by seeing how it works. Because, side by side with the one or two first principles upon which our theory is built, there are an indefinitely large number of other first principles which come into play in the real world. Thus there is, in motoring, the principle that speed varies with road surface. So the way round by Lewes may be quicker than the straight road if it has a better surface. There is yet another principle that speed is checked by turnings in the road, and it may prove that on trial the two ways are about equal.

Or again: we know that the tidal wave is raised on either side of the earth, and that there is, therefore, about twelve hours of even ebb and flow, six hours each on the average and taking the world as a whole: because the earth takes twenty-four hours to go round.

But if you were to act upon that first principle _only_ in any one part of the world, and to say without testing the thing in practice, “I can calculate the tide theoretically,” you would very often wreck your ship. For many other principles come into play in the matter of the tide besides this twelve-hour period. In one case the tide will be delayed by shoals or by the current of a river. In another there may be two or three tides meeting. In a third the sea will be so locked that there will be hardly any tide for many hours, and then a rush at the end--and so on.

Now it is just the same with Economics. Your economic first principle makes you come to such and such a _theoretical_ conclusion. But there are a lot of other first principles at work, and they may modify the effect _in practice_ to any extent. When people object to “theoretical dreaming,” as they call it, they mean the bad habit of thinking that one conclusion from one particular set of first principles is sufficient and will apply to any set of circumstances. It never does. One has always to watch the thing in practice, and see what other forces come in.

In the political applications of economic science we have to deal with the effect of human society upon economic law. For instance: economic law tells us that, given a certain standard of living for labour--the “worth while” of labour--and a certain minimum profit without which capital will not accumulate--the “worth while” of capital--there is, as we have seen, a lowest limit of production; a set of conditions below which production will not take place. Land which is below a certain standard of fertility will not be farmed; a vein of metal below a certain standard of yield will not be mined under such and such social conditions. But all circumstances in which production has greater advantages than this lowest limit produce a surplus value called “Rent.” That is an economic law, and it is always true.

But it does not follow that the owner of the land, for instance, will get the full economic rent of the land. There may be customs in society, or laws, by which he is compelled to share with the tenant. The theoretical economic rent is there all right, but one cannot deduce from this truth that the landlord will necessarily and always get the whole of it. And so it is with every other political application.

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Having said so much by way of Preface, let us turn to the particular problems, and first of all consider the idea which underlies all practical economic conclusions, the idea of =Property=.

The very first governing condition of economic production and distribution in the real world is the condition of _control_. Who _controls_ the process of production in any particular Society? Who in it owns (that is, has the right and power to use or leave idle, to distribute or withhold) the means of production, the stores of food and clothing, and houses and machinery? On the answer to that question depends the economic structure of a society. This control is called _Property_, and as the first thing we have to study in practical Economics is the character of _Property_, we will make that the first division of our political applications.

PROPERTY

THE CONTROL OF WEALTH

All the political application of Economics--that is, all the application of Economic Science to the conduct of families in the State--turns on The Control of Wealth, and of the things necessary to make wealth.

The first thing to grasp is that _someone_ must control every piece of wealth if it is to be used to any purpose. Every bundle of economic values in the community must be under the control of some human will; otherwise those pieces of wealth “run to waste,” that is, are consumed without use to mankind. For instance, a ton of threshed wheat represents a bundle of economic values. It represents a piece of wealth equivalent, in currency measure, to say £16. If no one has the right to decide upon its preservation and use, when and how it is to be kept dry and free from vermin, when and how it is to be ground and the flour made into bread, then it will rot or be eaten by rats, and in a short time its economic values will have disappeared. It will be worthless. The £16 worth of wealth will have been “consumed without use”; in plain language, wasted. But if wealth were all wasted humanity would die out. So men must, of necessity, arrange for a _control_ of all wealth, and this they do by laws which fix the control of one parcel of wealth by one authority, of another by another; men make laws allowing such control by some people and preventing attempted control by other people not authorised. This lawful control over a piece of wealth we call _Property_ in it.

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Thus, the coal in your cellar which you have bought is by our laws your property. It is for you to burn it as you want it and when you choose. If another person comes in and takes some of it without your leave, to burn it as _he_ chooses, he is called a thief and punished as such. The coal in the Admiralty Stores is State property. The State has the right to decide into what ships it is to be put and how and when it is to be burnt, and so on. But whether the control is in private hands such as yours, or in the naval authorities who are officers of the State, control there must always be.

When people say that they want to “abolish property,” or that “There ought to be no property,” they mean _Private_ property: the right of individuals, or families, or corporations to control wealth. Property in the full sense, meaning the control of wealth by _someone_, whether the State, or private individuals, or what not, is inevitable, and is necessary in every human society. So, granting that property must exist, we will first examine the various forms it may take.

At the beginning of our examination we noticed that wealth, owned and controlled by whoever it may be--the State, or an individual, or a corporation--is of two kinds. There is the wealth which will be consumed in enjoyment and the wealth which will be consumed in producing future wealth.

The wealth which will be consumed in producing future wealth is, as we have seen, called _Capital_. For instance: if a man has a ton of wheat and eats half of it while he is doing nothing but taking a holiday, or doing work which has some moral but no material effect--that is not Capital. But if he uses the other half to keep himself alive while he is ploughing and sowing for a future harvest, and keeps a little of it for the seed of that harvest, all that he so uses is _Capital_. Since control of wealth is necessary, no matter of what kind the wealth be, it is clear that there must be property not only in what is about to be consumed in enjoyment but also in Capital. Someone, then, must own Capital.

But here comes in a very important addition. The fertility of land, space upon which to build, mines of metal, water power, natural opportunities of any kind and natural forces, _though they are not wealth_,[2] are the necessary conditions for producing wealth. Someone, therefore, must control these also: someone must have the power of saying, “This field shall be ploughed and sown thus and thus. This waterfall must be made to turn this turbine in such and such a spot, and the power developed must be applied thus and thus.” For if no one had such power the fertility of the land, the force of the stream, would be wasted.

Property, therefore, extends over two fields, one of which is itself divided into two parts. A.--It extends over natural forces. B.--It extends over wealth, and, in the case of B, wealth, it extends over B.1 wealth to be used for future production (which kind of wealth, when it is so used, is called Capital), and also B.2 wealth which is going to be consumed without the attempt to produce anything else: consumed, as the phrase goes, “in enjoyment.”[3] Natural forces may be grouped, as we have grouped them in the first part of this book, under the conventional term “Land.” So Property covers Land and Capital, as well as Wealth to be consumed without the attempt to produce other wealth. You may put the whole thing in a diagram thus:--

In studying the social effects of Property it is convenient to group together _Land_ and that part of wealth which is used for further production and is called _Capital_, and to call the two “_the means of production_”: because, in a great many social problems the important point is not who owns the Capital separately or the land separately, but who owns the whole bundle of things which constitute the “Means of Production,” without which no production can take place.

For instance: Supposing a man owns a hundred acres of fertile land, that is his property, and though we call it wealth in ordinary conversation it is not real wealth at all. It is only the opportunity for producing wealth. If no one worked on that land, if no one even worked so little as to take the trouble of picking fruit off the trees or cutting the grass or looking after animals on it, it would be worth nothing. Supposing another man to own the stores of food and the houses and the clothing necessary for the livelihood of the labourers on the land, and also the horses and the ploughs and the stores of seeds necessary for farming, then that man owns the Capital only. But to the _labourers_ the important thing is that someone else owns the “Means of Production,” _without which they cannot live_, and they are equally dependent whether one or many control or own the _Means of Production_ in any particular case. _Their_ condition has for its main character _the fact that they do not own the “Means of Production.”_

Labour must be kept going. That is, human energy, for producing wealth from land, while it is at work, waiting between one harvest and another, will consume part of the stores of food and some proportion of the housing (which is a perishable thing, though it only perishes slowly) and of the clothing, and of the seed, etc. So we have to examine the various ways in which labour (which is not wealth) and land (which is not wealth) and capital (which _is_ wealth) may be controlled.

There are three main types of human society which differ according to the way in which control is exercised over these three factors of Labour, Capital and Land. These three types are:--

1. =The Servile State=: that is, the state in which the material Means of Production are the property of men who also own the human agents of Production.

2. =The Capitalist State=: that is, the state in which the material Means of Production are the property of a few, and the numerous human agents of Production are free, but without property.

3. =The Distributive State=: that is, the state in which the material means of Production are owned by the free human agents of Production.

There is also a fourth imaginary kind of state which has never come into being, called the Socialist or Communist State. We will examine this in its right place, but the only three _actual_ states of which we know anything in history and can deal with as real human experiences, are these three just described: the _Servile_ State, the _Capitalist_ State, and the _Distributive_ State.

But, before going farther, we must get hold of a very important principle, which is this:--

=The nature of an economic society is not determined by its arrangements being universal, that is, applying without exception to all the families of the State, but only by their applying to what is called= _The Determining Number_ =of the families of the State: that is, in so great a proportion as to colour and give its form to the whole society.=

No one can exactly define the amount of this “determining number,” but we all know in practice what it means. For instance: we say the English are a tall race, from 5½ to 6 feet high. But that does not mean necessarily that the majority of the people are over 5½ feet. You have, of course, to exclude the children, and there are a great number of very short people and a few very tall people. It means that the general impression conveyed when you mix with English people--the size of the doors and the implements with which men work, and the clothes that are produced, and the rest of it--turn upon the general experience that you are dealing with a race of about that size--5½ to 6 feet. Or again, you say that the _determining_ number or proportion of our society speaks English. That does not mean that they all speak English. Some are dumb; some speak Welsh or Gaelic. Many speak with such an accent that others with a different accent find it difficult to understand them. Yet it is true to say that the society in which we live speaks English.

Now it is exactly the same with the economic conditions of society. You may have a society in which there is a certain number of slaves, and yet it is not a slave-owning society, because the number of free men is so great as to give a general tone of freedom. Or you have, as we have in England, a great deal of property owned by the State--barracks and battleships and arsenals, some of the forests, and so on--but we do not say that England is economically a State-owned society, because the _determining_ proportion of property is not owned by the State but by private people. The general effect produced is one of private ownership and not of State ownership.

One more principle must be set down before we go farther, and that is that almost any society is mixed. A society of which the determining proportion is slave-owning will yet certainly have a proportion of free men; for if it did not there would be no one to own the slaves. In the same way what is called a Capitalist Society, which I will describe in a moment (and which is the society in which we now live in England) has a great number of people not living under purely capitalist conditions. It is mixed.

But, though only a _determining number_ is required to mark the character of a particular society, and though every society is _mixed_ in its character, it remains true that all societies we know of, in the past or the present, fall into one of these three groups--the Servile (that is, slave-owning), the Capitalist, and the Distributive.

The definition of these three systems is as follows:--

1. In the Slave-owning Society, or SERVILE STATE, a certain minority owns a determining amount of the wealth and also of land--that is, the means of production (land and capital) and the wealth ready for consumption in enjoyment. The rest of the community is compelled by positive law to give its labour for the advantage of these few owners; and this rest of the community are, by economic definition, (whether they call themselves by the actual name or not) slaves: that is, they can be compelled to work for the owners, and can be punished by law if they do not work for the owners.

2. In the CAPITALIST STATE a determining number of the families or individuals are free; that is, they cannot be compelled by positive law to work for anybody. They are at liberty to make a contract. Each can say to an owner of land or capital: “I will work for you for so much reward, such and such a proportion of the wealth I produce. If you will not give me that I will not work at all,” and no one can punish him for the refusal.

But the mark of the Capitalist State is that a determining amount of land and capital is owned by a small number of people, and that the rest of the people--much the greater number--though free, cannot get food or housing or clothing except in so far as the owners of these things (that is, of the means of production) choose to give it them. In such a state of society the people who own nothing, or next to nothing, are free to make a contract and to say: “I will work on your farm” (for instance) “if you will give me half or three-quarters of the harvest. If you will not, I will not work for you.” But this contract is bound by a very hard condition, for if they push their refusal to the limit and continue not to work they will starve, and they will not be able to get housing against the weather or clothes to wear.

We are living to-day, in England especially, in such a Capitalist State. In such a state the free men who contract to sell their labour often have a certain very small proportion of things on which they can live for a short time. They have a suit of clothes and perhaps a little money with which they can purchase a few days’ livelihood--some of them more, some of them less. But the tone or colour of the society is given by the fact that _the great majority, though free, are dispossessed of the means of production, and therefore of livelihood, and that a small minority controls these things_.

The word “Capitalism” does not mean that there exists capital in such a society. Capital exists in all societies. It is a necessary part of human society and of the production of wealth, without which no society can live at all. The word “Capitalism” is only “shorthand” for the condition we have just described: a condition where capital and land are in few hands though all men are free.

3. The DISTRIBUTIVE STATE is a state in which a determining number of the citizens, a number sufficient to colour the habits, laws and conditions of the whole society, is possessed of the means of production, as private property, divided among the various families. The word “distributive” is an ugly, long word, only used for want of a better; but the reason that we have to use such a tiresome word is an odd and paradoxical reason well worth grasping. The Distributive State is the natural state of mankind. Men are happiest in such conditions; they can fulfil their being best and are most perfectly themselves when they are owners and free. Now whenever you have natural and good conditions, not only in Economics but in any other aspect of life, it is very difficult to find a word for it. There is always a word ready for odd, unnatural conditions: but it is often difficult to find a word for conditions normal to our human nature. For instance: we have the words “dwarf” and “giant,” but we have no similar common, short word to describe people of ordinary stature. So it is with the Distributive State. We have to use an ugly new word, because men more or less take for granted this state of affairs in their minds, and have never thought out a special word for it.

However, a name it must have; so let us agree to call that kind of society in which most men are _really_ free and dignified and full citizens, not only possessing rights before the law, but _owning_, so that they are at no other man’s orders but can live independently, “The Distributive State.”

Then we have these three main types of Society within human experience: the Servile, the Capitalist, the Distributive.

To put these three estates clearly before our minds, let us describe the kind of thing you would see in any one of the three.

In the _Servile State_, as you travelled through the country, you would most ordinarily see working on the fields men who were the slaves of a master. That master would own the land and the seed, and the food and the houses, and the horses and ploughs and everything, and these men you would see working would be compelled to work for their master, and he would have the right by law to punish them if they did not.

If you were in a _Capitalist State_ (as we are in England) the men you would see working would, as a rule, be earning what are called “wages,” that is, an allowance (actually of money but immediately translated into food and clothes and house-room and the rest), which allowance would be paid to them at fairly short intervals, and without which they could not live. The ploughs and horses with which they would be working, the seed they would be sowing, the houses they lived in would be the property of another man owning this _capital_, and therefore called _The Capitalist_. If you asked any one of these men who were working whether he were _compelled_ to work by law he would indignantly tell you that he was not. For he is a free man; his wages are paid him as a result of a contract; he has said: “I will work for you for so much,” and no one could compel him to work if he did not choose to work. But in this state of society a man without capital must make a contract of this sort in order to live at all. He is not compelled by law to work for another, but he is compelled by the necessity of living to work for another.

Lastly, if you were travelling through a _Distributive State_ (Denmark is the best example of such a state in modern Europe) you would find that the man working on the land was himself the owner of the land, and also of the seed and of the horses and the houses, and all the rest of it. He would be a free man working for his own advantage and for nobody else’s. He would also have a share in the factories of the country and be a part owner in the local dairies, sharing the profit of those dairies where the milk of many farms is gathered together, turned into butter and cheese, and sold.

This is what we mean by the three types of State. In each you would find many exceptions, but each has its _determining number_--of slaves in the one case, wage earners in the other, and independent men in the third.

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We will now take each of these three kinds of State separately and see the good and evil of them and what the consequences of them are.

THE SERVILE STATE

The Servile State is that which was found among our forefathers everywhere. It is the Servile State in which we Europeans all lived when we were pagan two thousand years ago. For instance: In old pagan Italy before it became Christian, or in old pagan Greece--both of them the best countries in the world of their time and both of them, as you know, the origins of our own civilisation--most of the people you would have seen working at anything were slaves, and above the slaves were the owners: the free men.

Since we are talking of the political applications of political economy, we have to consider _human happiness_, which is the object of all human living; and when we talk of “advantage” or “disadvantage” in any particular economic state we mean its greater or less effect on human happiness.

The great disadvantage of the slave-owning state is clearly apparent: in it the mass of men are degraded: they are not citizens: they cannot exercise their own wills. This is so evident and great an evil that it must be set against all the advantages we are about to notice. Slavery is a most unhappy condition in so far as it wounds human honour and offends human dignity; and that is why the Christian religion gradually dissolved slavery in the process of many centuries: slavery is not sufficiently consistent with the idea of man’s being made in the image of God. Slavery can also be materially unhappy, if the masters are cruel or negligent. The great mass of slaves in such a society might be, at the caprice of their masters, very unhappy; and under bad phases of those societies they _were_ very unhappy.

But we must not be misled by the ideas that have grown up around the word “slave” in the modern mind. Because we have no one in England to-day who is called a slave and bought or sold as a slave, and no one is yet compelled by law to work for another man, therefore we regard slavery as something odd and alien; and because it is natural to dislike things which are odd and alien, unaccustomed, we think of slavery as something simply bad.

That is a great mistake. The Servile State had--and, if it comes back, will have again--two great advantages: which were _personal security_ and _general stability_.

_Personal security_ means a condition in which everybody, master and man, is free from grave anxiety upon the future: can expect regular food and lodging and a continuance of his regular way of life.

_General stability_ means the continuance of all society in one fashion, without the violent ups and downs of competition and without the friction of unwilling, constantly interrupted labour--as in strikes and lock-outs.

In the Servile State work always got done and was done regularly. The owners knew “where they were.” With so much land and so many slaves they were sure of a certain average annual produce. On the whole it was to the advantage of a man to keep his slaves alive and fairly well fed and housed. Also, the human relation came in, and a man and his slave, in the better and simpler forms of the Servile State, would often be friends and were usually in the same relation as people are to-day with their dependents. For instance: in well-to-do houses of the Servile State we know from history that certain slaves were often the tutors of the children, and thus had a very important and respectable position, and there were other slaves who acted as good musicians and architects and artists. There was always the feeling of a fixed social difference between slave and free, but this did not necessarily nor perhaps usually lead to great unhappiness.

This stability and security which slave-owning gave to all society (to the owned to some extent, and to the owners altogether) also produced a very valuable effect, which is, the presence of _leisure_. Because revenue was fairly certain, because this kind of arrangement prevented violent fluctuation of fortune, competition in excess, and the rest of it, therefore was there a considerable proportion of people at any time who had ample opportunity for study, for cultivating good tastes, for writing and building well, and judging well, and--what is very important--for conducting the affairs of the State without haste or the panic and folly of haste.

One alleged _economic_ disadvantage of slave-owning must be looked at narrowly before we leave this description of the Servile State.

One often hears it said that slave labour is less productive than free labour, that is, labour working at a wage under Capitalism. People sometimes point to modern examples of this contrast, saying that places like the Southern States of America, where slave labour was used a lifetime ago, were less productive than the Northern States, where labour was free. But though this is true of particular moments in history, it is not generally true. Free labour working at a wage under the first institution of capitalism--when, for instance, a body of capitalists are beginning to develop a new country with hired free men to work for them--will be full of energy and highly productive. But when what is called “free labour”--that is, men without property working by contract for a wage--gets into routine and habit, it is doubtful whether it is more productive than slave labour. It is accompanied by a great deal of ill-will. There is perpetual interruption by strikes, and lock-outs,[4] and the process of production cannot be as minutely and absolutely directed by the small and leisured class as can slave labour. _There is no reason why a free man working for another’s profit should do his best._ On the contrary, he has every reason to work as little as possible, while a slave can be compelled to work hard.

But whether slave labour be more or less productive is not so important as the two points mentioned above, of advantage and disadvantage. The _disadvantages_, as we have seen, are (1) that it offends our human love of honour and independence, degrading the mass of men, and (2) that it is so terribly liable to abuse in the hands of cruel or stupid owners, or in conditions where great gangs of slaves grow up under one owner who can know nothing about them personally and is therefore indifferent to their fate. The _advantages_ are security and stability, running as a note throughout society and showing themselves especially in the leisure of the owning classes, with all the good fruits of leisure in taste, literary and artistic. It was a society based on slavery which produced what is perhaps the best fruit of leisure, and that is the profound and fruitful thinking out of the great human problems. All the great philosophy and art of the ancients was worked out by the free owners in the slave-owning states, and so was the best literature ever made.

THE CAPITALIST STATE

The Capitalist State is that one in which though all men are free (that is, though no one is compelled to work for another by law, nor anyone compelled to support another), yet a few owners of the land and capital have working for them the great mass of the people who own little or nothing and receive a _wage_ to keep them alive: that is, a part only of the wealth they produce, the rest going as rent and profit to the owners.

The Capitalist State is a recent phenomenon compared with the great length of known recorded history. It is a modern phenomenon produced by our white race alone, by no means covering the whole of that race, nor the most of it, but of great interest to us in England because we alone are, of all nations, an almost purely capitalist society.

Here again we can tabulate the advantages and disadvantages.

The chief moral advantage of Capitalism as compared with the Slave-owning State is that _every man, however poor, feels himself to be free and to that extent saves his honour_. He may be compelled by poverty to suffer a very hard bargain; he may see himself producing wealth for other men, of which wealth he is only allowed to keep a portion for himself. To that extent he is “exploited,” as the phrase goes. He feels himself the victim of a certain injustice. He remains poor in spite of all his labour, and the man for whom he works grows rich. But, after all, it is a contract which the free workman has made, and he has made it as a citizen. If those who own nothing, or next to nothing, in a capitalist state (this great majority is technically called in economic language “the _proletariat_”) organise, they can bargain, as our great Trade Unions do, with the few owners of their means of livelihood and of production, and be fairly certain, for some little time ahead, of a reasonable livelihood.

Another advantage of Capitalism, purely economic, is the _effectiveness of human energy_ under this system, at least, _in the first part of its development_. We spoke of this in the last section.

But the disadvantages are very grave indeed.

Under Capitalism the capitalist himself acts competitively and for a profit. He does not, like the slave-owner, direct a regular, simple machine which works evenly year in and year out. He is perpetually struggling to rise; or suffering, through the rise of others, a fall of fortune. He is always on the look-out to buy labour as cheaply as he can and then to sell the product as dearly as he can. There is thus a perpetual gamble going on, the owners of Capital rapidly growing rich and poor by turns and a general insecurity gradually poisoning all the owning part of society. A far worse insecurity affects the propertyless majority. The Proletariat--that is, the mass of the State--lives perpetually under the fear of falling into unemployment and starvation. The lash urging the workman to his fullest effort is this dread of misery. At first that lash urges men to intense effort, but later it destroys their energy. Capitalism was marked by nothing more striking when it first arose than by the immense expansion of wealth and population which followed it. In every district which fell under the capitalist system this expansion of total wealth and of total population could be observed; and England, which has become completely capitalist, had in the hey-day of its Capitalism--up to the present generation--a more rapid rate of expansion in wealth and population than any other ancient people. But already the tide has turned, and the inhumanity of such a life is beginning to breed everywhere an ill-ease and revolt which threaten our civilisation.

The disadvantages of Capitalism are, in the long run, so great that now, after not more than a lifetime of complete Capitalism, and that in only one State--the English State--nearly everybody is profoundly discontented with it and many people are in violent rebellion against it. This grinding and increasing insecurity which attaches to the Capitalist system is killing it. No one is safe for the morrow. Perpetual competition, increasing with every increase of energy, has led to a chaos in human society such as there never was before. The mass of the people, not being slaves, cannot be certain that they will be kept alive. They live in a state of perpetual anxiety as to whether their employment will continue; while among the owners themselves the same anxiety exists in another form. The competition among them gets more and more severe. The number of owners gets less, and even the richest of them is more insecure than were the moderately rich of a generation ago. All society is like a boiling pot, with individuals suddenly coming into great wealth from below and then dropping out again; the whole State suffers from an increasing absence of leisure and an increasing turmoil.

There is, then, this very grave disadvantage of insecurity everywhere, and particularly for the mass of the people, who live under permanent conditions of insecurity; nearly all the wage-earners have had experience at some time, longer or shorter, of insufficiency through unemployment. Capitalism leaves free men under a sense of acute grievance (which they would _not_ feel if they were slaves, accustomed to a regular and fixed status in society), and, what is worse, Capitalism _in its later stages_ need not provide for the livelihood of the mass of citizens, and, in effect, _does not_ so provide.

The magnitude of these evils is obvious. A man who is a free man, a citizen, able in theory to take part in the life of the State, equal with the richest man before the law, yet finds himself living on a precarious amount of necessaries of life doled out as wages week after week; he sees his labour exploited by others and suffers from a sense of injustice and oppression. The wealth of the small, owning, class does not seem a natural adjunct to its social position, as it does in the slave-owning state; for there is no tradition behind that class; it has no “status,” that is, no general respect paid to it as something naturally--or, at any rate, traditionally--superior to the rest of men. Many a modern millionaire capitalist, exploiting the labour of thousands of his fellows, is of a lower culture than most of his labourers; and, what is more, he may in a few years have lost all his economic position and have been succeeded by another, even baser than himself. How can the masses feel respect for such a man in such a position of chance advantage?

It is inevitable that a moral evil of this sort should make the whole State unstable. You cannot make of great differences in wealth between citizens a stable state of affairs, save by breeding respect for the owners of great wealth. But the more the turmoil of Capitalism increases the less respect these owners of great wealth either deserve or obtain: the less do they form a class, and the less do they preserve traditions of any kind. And yet it is under these very conditions of Capitalism that there is a greater disparity of wealth than ever the world knew before! It is clear that society in such a condition must be as unstable as an explosive.

So much for the first great disadvantage of Capitalism, chaos. But the second main disadvantage--the fact that Capitalism in its later stages ceases to guarantee the livelihood of the people--is a little less easy to understand. Indeed, most people who discuss Capitalism, even when they strongly oppose it, seem unable to grasp this second disadvantage--so let us examine it closely.

I have said that Capitalism, in its later stages, _does not provide for the maintenance of the mass of the people_.

To see how true this is, consider an extreme case.

Supposing one man were to own all the means of production, and supposing he were to have in his possession one machine which could produce in an indefinite amount all that human beings need in order to live. Then there would be no economic reason why this one man should provide wealth for anyone except himself and his family. He might turn out enough things to support a few others whom he wanted for private servants or to amuse him, but there would be no reason why he should support the masses around him.

Now it is true that we have not yet come, under Capitalism, to so extreme a case. But the moral applies, though modified, to Capitalism in its last stages, when very few men control the means of production, when machinery has become very efficient, and when the great mass of people are dependent upon employment by the capitalist for their existence.

Consider that it is of the essence of Capitalism to keep wages down, that is, to buy labour cheap. Therefore, the labourer who actually produces, say, boots cannot afford to buy a sufficient amount of the boots which he himself has made. The capitalist controlling the boot-making machinery, when he has provided himself with a dozen pair of boots, and the working classes of the community with such boots as their wages permit them to buy, must either try to sell the extra boots abroad (and that outlet can’t last long) or stop making them. He has restricted the home market by the necessity of cheap labour, and you have the absurd position of men making more goods than they need, and yet having less of those goods available for themselves than they need: the labourer producing, or able to produce, every year enough clothing for ten years, and yet not being able to afford sufficient for one: the labourer producing or able to produce ten good overcoats, yet not able to buy one.

So under Capitalism in its last stages you have the abnormal position of millions of men ready to make the necessaries of life, of machinery ready to produce those necessaries, of raw material standing ready to be worked up by the machinery if only labourers could be put on, and yet all the machinery standing idle, the wealth not being produced, and the mass who could produce it going hungry and ill-shod and badly clothed. And the more Capitalism develops the more that state of things will develop with it.

Now this gradual lessening of purchasing power on the part of the working masses under Capitalism is _the destruction of the home market_. Low wages make great masses of English bootmakers unable to buy all the boots they would. Therefore the capitalist who owns the boot-making machinery must try to sell his surplus abroad. But the foreign countries, as they grow capitalist, suffer from the same trouble: property being badly distributed and the wage-earners kept as low as possible, their power to buy foreign goods also diminishes. Thus you have _gradual destruction of the foreign market_. You get in the long run the full working of what we will call the “_Capitalist Paradox_,” which is that Capitalism is a way of producing wealth which, in the long run, prevents people from obtaining the wealth produced and prevents the owner of the wealth from finding a market.

There is no doubt that, on the balance, the disadvantages of Capitalism have proved, even after its short trial, overwhelmingly greater than the advantages.

Capitalism arose in small beginnings rather more than 250 years ago. It grew strong and covered the greater part of the community (in England, at least) about 100 years ago. It came to its highest development in our own time; and it is already doomed. People cannot bear it any longer. Future historians looking back upon our time will be astonished at the immense productivity of Capitalism, the enormous addition to wealth which it made, and to population, in its early phases; but perhaps they will be still more astonished at the pace at which it ran down at its end. Urged by the extreme human suffering, moral and material, which capitalism now produces, remedies have been proposed, the chief of which is generally called Socialism, or, in its fully developed form, Communism.

But before we talk of this supposed remedy, which has never been put into practice (it is an imaginary state of things) we must describe the third form of state--the Distributive State.

THE DISTRIBUTIVE STATE

A state of society in which the families composing it are, in a determining number, owners of the land and the means of production as well as themselves the human agents of production (that is, the people who by their human energy produce wealth with those means of production), is probably the oldest, and certainly the most commonly found of all states of society. It is a state of society which you get all through the East, all through Asia, and in all the primitive states we know. It is the state to which men try to return, as a rule, after they have blundered into any other, though the first state we described--the Servile State--runs it very close as a thing suitable to human nature; for we know that the Servile State did also last for centuries quite normally and stably in the Pagan past.

The reason men commonly adopt the Distributive form of society, and tend to return to it if they can, is that the advantages it presents seem greater in most men’s eyes than its disadvantages.

The advantages are these:--

It gives freedom: that is, the exercise of one’s will. A family possessed of the means of production--the simplest form of which is the possession of land and of the implements and capital for working the land--cannot be controlled by others. Of course, various producers specialise, and through exchange one with the other they become more or less interdependent, but still, each one can live “on his own”: each one can stand out, if necessary, from pressure exercised against him by another. He can say: “If you will not take my surplus as against your surplus I shall be the poorer; but at least I can live.”

Societies of this kind are not only free, but also, what goes with freedom, elastic--that is, they mould themselves easily to changed conditions. The individual, or the family, controlling his or its own means of production, can choose what he will do best, and can exercise his faculties, if he has sufficient knowledge, to the best advantage.

This arrangement also gives security, though not as much security as the Servile State. Men in this position of ownership are not in dread of the immediate future. They can carry on. They may, if they choose, make a reserve of their produce to carry them over moments of difficulty. For instance, they will probably have each a reserve of food to carry them over a bad harvest or some natural disaster. Further, it is found in practice that societies of this kind continue for centuries without much change. They go on for generations with a property well divided among them and everybody free, so far as economic situation is concerned. No such society has ever been destroyed except by some great shock; and so long as every shock can be warded off, this system of having the land and the means of production controlled by the mass of the citizens as private owners is enduring. There are districts of Europe to-day where the system has continued from beyond the memory of man. Such a little state as Andorra is an example, and many of the Swiss valleys. Further, when the system has been laboriously reconstructed, when the mass of families who used to be dispossessed have been again put into possession of land and the means of production, we find that the state arrived at is stable.

The best example of that sort of reconstruction to-day is to be found in Denmark, but you have it also in a less marked fashion in most parts of France and in most of the Valley of the Rhine, in Belgium and Holland, in Norway, and in many other places. Wherever it has been settled it has taken root firmly.

The disadvantages of such a system are, first, that though in practice it is found usually stable, yet in theory it is not necessarily stable, and in practice also there are some communities the social character of which is such that the system cannot be established permanently.

It is obvious that, with land and the means of production well distributed among the various families, a few may by luck or special perseverance and cunning, tend to buy up the land and implements of their less fortunate neighbours, and nothing will prevent this but a set of laws backed up by strong public opinion. In other words, people must desire this state of society, and desire it strongly in order to maintain it; and if the desire for ownership and freedom is weak this distributive arrangement will not last.

In the absence of special laws, and a public opinion to back them, the idler or the least competent or least lucky of the owners will gradually lose their ownership to the more industrious or the more cunning or more fortunate.

Another disadvantage which has often been pointed out is that a state of society of this sort, though usually stable and enduring, falls into a routine (that is, into a traditional way of doing things), which it is very difficult to change. The small owner will not have the same opportunities for travel and for wide experience as the rich man has, and he will tend to go on as his fathers did, and therefore when some new invention arises outside his society he will be slow to adopt it. In this way his society becomes less able to defend itself from predatory neighbours and goes under in war. For a society of this kind is unfitted to the discovery of new things. Contented men feel no special spur to discover or to act on such discovery. That is why we find societies in which land and all the other means of production are well distributed among the greater part of the families of the State becoming too conservative--that is, unwilling to change even for their own advantage.

This, of course, is not universally true. For instance: no society in Europe has made more progress in agriculture than the Danish society of small owners. But, take the world all over, this kind of state is usually backward, that is, slow to take up improvements in production and to avail itself of new discoveries in physical science.