III. THE ASSOCIATIVE SOCIALISTS
The name “Associative Socialists” is given to all those writers who believe that voluntary association on the basis of some preconceived plan is sufficient for the solution of all social questions. Unfortunately the plans vary very considerably, according to the particular system chosen.
They differ from the Saint-Simonians, who sought the solution in socialisation rather than in association,[506] and thus became the founders of collectivism, which is quite another thing. The advocates of socialisation always thought of “Society” with a capital S, and of all the members of the nation as included in one collective organisation. The term “nationalisation” much better describes what they sought. Associationism, on the other hand, more individualistic in character and fearing lest the individual should be merged in the mass, would have him safeguarded by means of small autonomous groups, where federation would be entirely voluntary, and any unity that might exist would be prompted from within rather than imposed from without.
On the other hand, the Associationists must be carefully distinguished from the economists of the Liberal school. Fortunately this is not very difficult, for by means of these very associations they claim to be able to create a new social milieu. They are as anxious as the Liberals for the free exercise of individual initiative, but they believe that under existing conditions, except in the case of a few privileged individuals, this very initiative is being smothered. They believe that liberty and individuality never can expand unless transplanted into a new environment. But this new environment will not come of itself. It must be created, just as the gardener must build a conservatory if he is to secure a requisite environment. Each one has his own particular recipe for this, and none of them is above thinking that his own is the best.[507] It is this conception of an artificial society set up in the midst of present social conditions, bound by strict limitations which to some extent isolate it from its surroundings, that has won for the system its name of Utopian Socialism.
Had the Associationists only declared that the social environment can and ought to be modified, despite the so-called permanent and immutable laws, just as man himself is capable of modification, they would have enunciated an important truth and would have forestalled all those who are to-day seeking a solution of the social question in syndicalism, in co-operation, and in the garden-city ideal.
On the other hand, had they succeeded in carrying out their plans on an extensive scale, if we may judge by the desire to evade them on the part of those experimented on, it seems probable that the new kind of liberty would have proved less welcome than the liberty which is enjoyed under the present constitution of society.
They would have been very indignant, however, if anyone had charged them with desiring to create an artificial society. On the contrary, their claim was that the present social environment is artificial, and that their business was not to create but merely to discover that other environment which is already so wonderfully adapted to the true needs of mankind in virtue of its providential, natural harmony. At bottom it is the same idea as the “natural order” of the Physiocrats, much as their conception differs from that of the Physiocrats—an incidental proof that the order is anything but “natural,” seeing that it varies with those who define it. Some of their sayings, however, might very well have been borrowed directly from Quesnay or Mercier de la Rivière—for example, that of Owen’s in which he speaks of the commune as God’s special agent for bringing society into harmony with nature. It is just the “good despot” of the Physiocrats over again. Or take Fourier’s comparison in which he ranks himself with Newton as the discoverer of the law of “attraction of passion,” and believes that his “stroke of genius,” as Zola calls it, lies in knowing how to utilise the passions which God has given us to the best advantage.
What is still more interesting is that this newer socialism marks a veritable reaction against the principles of 1789.[508] The Revolutionists hated every form of association, and suspected it of being a mere survival of the old régime, a chain to bind the individual. Not only was it omitted from the Declaration of the Rights of Man,[509] but it was formally prohibited in every province—prohibitions which have been withdrawn only quite recently. It is difficult to imagine a greater contrast to the spirit of the Revolution than the beliefs which inspired Owen, Fourier, and Cabet, the founders of the new order.
But the men of 1789 were not so far wrong, nor were they deceived by their recollections of corporations and guilds, when they expressed the belief that any form of association was really a menace to liberty. There is an old Italian proverb which states that every man who has an associate has also a master. The Liberal school has to a certain extent always shared these apprehensions, and ample justification might be found for them in the many despotic acts of associates, whether capitalists or workmen.
But the “associative” socialists of the early part of the last century were impressed, even more than Sismondi and Saint-Simon were, by the new phenomenon of competition. The mortal struggle for profit among producers and the keen competition for wages among working men which immediately ensued upon the disappearance of the old framework of society seemed to them to wear all the hideousness of an apocalyptic beast. With wonderful perspicacity they predicted that such breakneck competition must inevitably result in combination and monopoly.[510] Voluntary association of a co-operative character (they paid hardly any attention to the possibilities of corporative association) appeared to supply the only means of suppressing this competition without either endangering liberty or thwarting the legitimate ambitions of producers. And it is not very clear as yet that they were altogether mistaken in their point of view.
The two best known representatives of this school are Robert Owen and Charles Fourier. Although they were contemporaries—the one was born in 1771, the other in 1772[511]—it does not appear that they ever became known to one another. Owen never seems to have paid any attention to Fourier’s system, and Fourier never refers to “Owen’s communistic scheme” without showing some trace of bitterness. Indeed, it is doubtful whether he knew anything at all about it except from hearsay.[512]
Such reciprocal ignorance does little credit to their powers of observation. Still it is easily explained. Despite a certain similarity in their plans for social regeneration—for example, they both proceed to create small autonomous associations, the microcosms which were to serve as models for the society of the future, or the yeast which was to leaven the lump—and notwithstanding that after their deaths they were both hailed as the parents of one common offspring, co-operation, they spent their whole lives in two very different worlds. Without any rhetorical exaggeration and without making any invidious distinctions we may truthfully say that Owen was a rich, successful manufacturer and one of the greatest and most influential men of his day and country, while Fourier was a mere employee in the realm of industry, or a “shop-sergeant,” as he liked to call himself. Later on Fourier became the recipient of a small annuity; but his reputation only spread slowly and with much difficulty among a small circle of friends. Contrary to what might have been expected, the millionaire manufacturer was the more ardent socialist of the two. A militant communist and an anti-cleric, he loved polemics, and advanced his views both in the Press and on the platform. His humble rival was just a grown-up boy with the habits of an old woman. He scarcely ever left his house except to listen to a military band; he wrote sedulously, attempting to turn out the same number of pages each day, and spent most of his life on the look-out for a sleeping partner, who, unfortunately, never turned up.
Other writers of whom we shall have something to say in connection with this school are Louis Blanc, Leroux, and Cabet.
I: ROBERT OWEN
Robert Owen of all socialists has the most strikingly original, not to say unique, personality. One of the greatest captains of industry of his time, where else have we such a commanding figure? Nor is his socialism simply the philanthropy of the kind-hearted employer. It is true that it is not revolutionary, and that he could not bring himself to support the Chartist movement, which seems harmless enough now.[513] He never suggested expropriation as an ideal for working men, but he exhorted them to create new capital, and it is just here that the co-operative programme differs from the collectivist even to this day. But for all practical purposes Owen was a socialist, even a communist. Indeed, he was probably the first to inscribe the word “socialism” on his banner.[514]
His passion for Utopias did not prevent him initiating a number of reforms and establishing several institutions of a thoroughly practical character. Special mention ought to be made of his interest in the welfare of his workers, an inspiration that has been caught by several manufacturers since.
Nor must we imagine, simply because we have placed him along with the Associative socialists, that association was the only solution that met with his approval. As a matter of fact there is scarcely a solution of any description which was not to some extent tried by him.
Beginning with the establishment of model workshops in his factory at New Lanark, there is hardly a suggestion incorporated in his exposition of socialism which was not attempted and even successfully applied in the course of his experiments there. Among them are included such important developments as workmen’s dwellings, refectories, the appointment of officials to look after the social and moral welfare of the workers, etc.
These experiments had the further distinction of serving as a model for the factory legislation of the next fifty years. We have only to glance at the following programme of reforms effected by him to realise this:
1. He reduced the hours of labour from seventeen to ten per diem.
2. No children under ten years of age were employed, but free education was supplied them in schools built for the purpose.
3. All fines—then a common feature of all workshops—were abolished.[515]
Seeing that neither his experiments nor his prestige as an employer was sufficient to influence his fellow employers, he now tried to gain the sympathetic attention of the legislature. He turned first of all to the British Government, and then to that of other countries, looking to legislation to provide what he believed should have been supplied by the goodwill of the ruling classes themselves.
Even before the days of Lord Shaftesbury he had inaugurated a campaign in favour of limiting the hours of children working in factories. In 1819 the first Factory Act was passed, fixing the minimum age at which children might be employed at nine years, although Owen himself would have put it at ten.
Discouraged by the little support which he obtained for his projects, and having satisfied himself as to the impotence both of patronage and legislation as forces of social progress, he turned his attention to a third possibility, namely, association. Association, he imagined, would create that new environment without which no solution of the social question was ever possible.
1. THE CREATION OF THE MILIEU
The creation of a social milieu was the one impelling force that inspired all Owen’s various experiments. This was his one desire, whether he asked it of the masters, the State, or of the workers themselves.
He has thus some claim to be regarded as the father of etiology—etiology being the title given by sociologists to that part of their subject which treats of the subordination and adaptation of man to his environment. His theory concerning the possibility of transforming the organism by influencing its surroundings occupies the same position in economics as Lamarck’s theory does in biology. By nature man is neither good nor bad. He is just what his environment has made him, and if at the present moment he is on the whole rather bad, it is simply because his environment is so detestable. Scarcely any stress is laid upon the natural environment which seemed of such supreme importance to writers like Le Play. Owen’s interest was in the social environment, the product of education and legislation or of deliberate individual action.[516] Change the environment and the individual would be changed. He failed to see that this meant begging the whole question. If man is simply the product of his environment, how can he possibly change that environment? It is like asking a man to raise himself by the hair of his head. But the futility of such criticism will be readily appreciated if we remind ourselves that it is to such insignificant beginnings as these that we owe the conception of the garden city. It was Owen’s concern for the worker and his great desire to provide him with a home where some degree of comfort and some measure of beauty might be obtainable that gave the earliest impetus to that movement.
From a moral point of view this deterministic conception resulted in the absolute denial of all individual responsibility.[517] Every noble or ignoble deed, every act, whether deserving of praise or blame, of reward or punishment, reflects neither credit nor discredit upon its author, for the individual can never be other than he actually is.
There was all the more reason, then, why all religious influences, especially that of Christianity, should be excluded. This contempt for religion explains why Owen found so little support in English society, which revolted against what appeared like cynical atheism, although Owen himself was really a deist.[518]
Economically, the doctrine of payment according to work rather than capacity was to result in absolute equality. For why should higher intelligence, greater vigour or capacity for taking pains entitle a man to a greater reward if it is all a question of environment? Hence Owen’s associations were to be communal.
We need not here detail the history of his experiments in colonisation. It is the usual story of failure and disappointed hopes. At last Owen himself was driven to the conclusion that his attempt to mould the environment which was to recreate society had proved unsuccessful. He renounced all his ambitions for building up a new social order, and contented himself with an attempt to rid society as at present constituted of some of the more potent evils that were sapping its strength. And this brings us to his second essential idea, the abolition of profit.
2. THE ABOLITION OF PROFIT
The first necessity, if the environment was ever to be changed, was to get rid of profit. There was the essential evil, the original sin. Profit was the forbidden fruit which had compassed the downfall of man and caused his expulsion from the Garden of Eden. Its very definition conveyed an implication of injustice, for it was always defined as whatever was over and above cost of production. Products ought to be sold for what they cost; the net price is the only just price. But profit is not merely an injustice, it is a perpetual menace. Economic crises resulting from over-production, or rather from under-consumption,[519] may always be traced back to an unhealthy desire for profit. The existence of profit makes it impossible for the worker to repurchase the product of his toil, and consequently to consume the equivalent of what he produced. Immediately it is completed the product is snatched up by a superior body which makes it inaccessible either to the maker or to the men who could furnish an equivalent amount of labour or who could offer as the price of acquiring it a value equal to that labour.
The problem is to abolish this parasitism, and the first question that suggests itself is whether the ordinary operation of competition, assuming it were altogether free and perfect, would be sufficient to get rid of it. The economists declare that it would, and the Hedonistic school makes bold to affirm that under a régime of perfect competition the rate of profit would fall to zero. But Owen believed nothing of the kind.[520] He regarded competition and profit as inseparable, and if one was war the other was simply the spoils of conflict.
Accordingly some form of combination must be devised which will suppress profit, together with “all that gives rise to that inordinate desire for buying in the cheapest market and selling in the dearest.” But the instrument of profit is gold or money. Profits are always realised in the form of money.[521] Gold is an intermediary in every act of exchange, and its intervention goes a long way towards explaining the anomaly of selling a commodity for more than cost price. The objective, then, must be money, and it must be replaced by labour notes, which will supply us with a measure of value altogether superior to money. Seeing that labour is the cause and substance of value, it is only natural that it should afford us the best means of measuring value. It is quite obvious that ample homage is paid to the Ricardian theory of value, but conclusions both novel and unproved are drawn from it.
The producer who wishes to dispose of his produce will be given labour notes in proportion to the number of hours which he has worked. In the same way the consumer who wishes to buy that product will be called upon to pay an equivalent number of labour notes, and so profit will be eliminated.
The condemnation of money was not new, but what was original was the discovery that labour notes could supply the place of money, a discovery which Owen considered “more valuable than all the mines of Mexico and Peru.” It has truly been a wonderful mine, and has been freely exploited by almost every socialist. But it hardly squares with Owen’s communistic ideal, which aimed at giving to each according to his needs. The labour notes evidently imply payment according to the capacity of each. Besides, what is the use of any system of exchange that is not to be employed for purposes of distribution?[522]
It remained to be seen whether this elimination of money could actually be realised in practice. An experiment to that effect was tried in London with the establishment of the National Equitable Labour Exchange. This was the most interesting experiment in the whole movement, although Owen himself was not very proud of his connection with it. It took the form of a co-operative society with a central depot where each member of the society could deposit the product of his labour and draw the price of it in labour notes, the price depending upon the number of hours of work the product had cost, which the member himself was allowed to state. These products, or goods as they were now called, marked with a figure which indicated the number of hours they had taken to produce, were at the disposal of any member of the Exchange who wished to buy them. All that a member had to do was to pay the ticketed price in labour notes. And so every worker who had taken, say, ten hours to make a pair of stockings was certain of being able to buy any other article which had also cost ten hours’ labour. In this fashion everyone got whatever his product had cost him, and every trace of profit automatically disappeared. The profit-maker, whether industrial or commercial or merely an intermediary, was effectively removed, because producers and consumers were brought into direct contact with one another, and so the problem was apparently solved.[523]
The experiment, which had about the same measure of success as the attempts to establish a communal colony in America, did not last very long. The slightest acquaintance with the laws of value would have convinced the reformer of the futility of his attempt. But it marks an important departure in the history of economic doctrines as being the first of a long line of experiments designed to solve the same problem, but with very different methods. It is the same idea that inspires Proudhon’s Bank and Solvay’s Comptabilisme social.
The particular mechanism wherewith the elimination of profit was essayed is really of quite secondary importance. But the essential idea which lay behind the whole attempt—namely, the abolition of profit—is at least partly realised in that solid and useful institution which is now found all over the world, and which was bequeathed to us by this experiment of Owen’s—the co-operative stores. Their first appearance dates from 1832, the year of the Bank of Exchange experiment, but it was not until ten years later that they assumed their present form as the outcome of the efforts of the Rochdale Pioneers.
The co-operative retail societies have as their rule either to make no profits or to restore any profit that may accrue to their members in proportion to the amount of their purchases at the stores. In reality there is no profit, but simply a cancelling of insurance against risks which has been shared in by all the members. The process of elimination is strictly in accordance with Owen’s method of putting producer and consumer in direct contact with one another with a view to getting rid of the middleman. But the elimination of profit is accomplished without eliminating money.[524] That close relation which Owen and a number of other socialists believed to exist between money and profit is purely imaginary. We know as a matter of fact that the highest profits are to be got under the truck system, in the African equatorial trade, for example, where guns are exchanged at five times their value for caoutchouc reckoned at a third of its value, representing a profit of 1500 per cent. The employment of money has brought such definiteness into the method of valuation that the rate of profit per unit on a yard of cloth, say, has become almost infinitesimal. Such exactness of calculation would have been impossible under either the truck or the labour note system.
The co-operative association, with its system of no profits, will for ever remain as Owen’s most remarkable work, and his fame will for ever be linked with the growth of that movement. But he was hardly conscious of the important part which he was playing in the inauguration of the new movement. It is seldom that we meet with the word “co-operation” in his writings, although that is not a matter of any great consequence, because the term at that time had not the significance which it has to-day, being then simply synonymous with communism. Not only was Owen unwilling to assume any parental responsibility for the co-operative society, his latest offspring, but he expressly refused to consider it as at all representative of his system. Shops of that description seemed to him little better than philanthropic institutions, quite unworthy of his great ideal.[525] Before passing judgment upon him it is only fair to remember that since those early days the character of the co-operative stores has been completely changed. He lived to see the establishment of the Rochdale society, with its twenty-eight pioneers, six of whom were ardent disciples of Owen himself, and two of these, Charles Howarth and William Cooper, were the very soul of that immortal association. But Owen was by this time seventy-three years of age, and he scarcely realised that a child had been born to him. This somewhat late arrival was to perpetuate his name, and more than any of his other schemes was to save it from oblivion.
Owen had founded no school, unless of course we consider that the co-operators are deserving of the title. There were, however, a few disciples who attempted to apply his theories. One of these was William Thompson, whose writings, forgotten for many years, have recently come in for a good deal of extravagant praise. His principal work, An Inquiry into the Principles of the Distribution of Wealth, was published in 1824. As compared with Owen he reveals a greater depth of thought and shows a more thorough acquaintance with economic science, and he ought perhaps to be given premier place as the founder of socialism. But, as we have pointed out in the Preface, we cannot readjust the judgment of history, and we are bound to accept the names which tradition has made sacred. And if a person’s rank in history is to be measured by his influence rather than his talent, then Thompson’s influence was nil, for at the time his work seems to have passed almost unnoticed.
We will only remark that Thompson’s grasp of the idea that labour does not enjoy all it produces is much firmer than Owen’s. This meant opening the way for a discussion of surplus value and unproductive labour, of which more anon. He agrees with Owen in thinking that expropriation would not remedy the evil, and he also would rather build up a new form of enterprise in which the worker would be able to retain for himself all the produce of his labour. This was precisely the co-operative ideal.[526]
II: CHARLES FOURIER
Owen’s practical influence has been much greater than Fourier’s, for most of the important socialistic movements of the last century can easily be traced back to Owen. But Fourier’s intellectual work, when taken as a whole, though more Utopian and less restrained in character than Owen’s, has a considerably wider outlook, and combines the keenest appreciation of the evils of civilisation with an almost uncanny power of divining the future.[527]
To some writers Fourier is simply a madman, and it is difficult not to acquiesce in the description when we recall the many extravagances that disfigure his work, which even his most faithful disciples can only explain by giving them some symbolic meaning of which we may be certain Fourier would never have thought.[528] The term “bourgeois socialist” seems to us to describe him fairly accurately, but its employment lays us open to the charge of using a term that he himself would never have recognised. But what are we to make of one who speaks of Owen’s communistic scheme as being so pitiable as to be hardly worth refuting; who “shudders to think of the Saint-Simonians and of all their monstrosities, especially their declamations against property and hereditary rights[529]—and all this in the nineteenth century”; who in his scheme of distribution scarcely drew any distinction between labour, capital, and business ability, five-twelfths of the product being given to labour, four-twelfths to capital (which is probably more than it gets to-day), and three-twelfths to management; who outbid the most brazen-faced company promoter by offering a dividend of 30 to 36 per cent., or for those who preferred it a fixed interest of 8 per cent.;[530] who held up the right of inheritance as one of the chief attractions that would be secured by the Phalanstère; and who finally declared that inequality of wealth and “even poverty are of divine ordination, and consequently must for ever remain, since everything that God has ordained is just as it ought to be”?[531]
To the men of his time, and to every one who has not read him, which means practically everybody, Fourier appears as an ultra-socialist or communist. That opinion is founded not so much upon the extravagance of his view or the hyperbolical character of his writing as upon the popular conception of the Phalanstère, which was the name bestowed upon the new association he was going to create. Visions of a strange, bewildering city where the honour of women as well as the ownership of goods would be held as common property are conjured up at the mention of that word. Our exposition of his system must obviously begin with an examination of the Phalanstère, upon the understanding of which everything turns.
1. THE PHALANSTÈRE
As a matter of fact nothing could be more peaceful than the prospect which the Phalanstère presents to our view. Anything more closely resembling Owen’s New Harmony or Cabet’s Icaria or Campanella’s Civitas Solis or More’s Utopia would be difficult to imagine. Externally it looks for all the world like a grand hotel—a Palace Hotel on a gigantic scale with 1500 persons en pension. One is instinctively reminded of those familiar structures which have lately become such a feature of all summer and winter resorts, containing all manner of rooms and apartments, concert halls and lecture rooms, etc. All of this is described by Fourier with the minutest detail. No restrictions would be placed upon individual liberty. Anyone so choosing could have a suite of rooms for himself, and enjoy his meals in the privacy of his own room—that is, if he preferred it to the table d’hôte. Hotel life is generally open only to the few. The Phalanstère would have rooms and tables at all prices to suit all five classes of society, with a free table in addition.
A number of people living under the same roof and eating at the same table, and adopting this as their normal everyday method of living, sums up the element of communism which the scheme contained. And the question is naturally asked, Why should Fourier attach such supreme importance to this mode of existence as to make it the sine qua non of his whole system and the key to any solution of the problem? The answer lies in the conviction, which he fully shared with Owen, that no solution is possible until the environment is changed, and so changed that an entirely new type of man will result from it.
Economically, of course, life under the same roof can offer to the consumer the maximum of comfort at a minimum of cost. Cooking, heating, lighting, etc., would under such conditions be cheaper and more efficient, and all the worries and anxieties of individual housekeeping would be swept aside.
Socially a common life of this kind would gradually teach different persons to appreciate one another. Sympathy would take the place of mutual antipathy, which under the present régime, as Fourier eloquently remarks, shows an “ascending scale of hatred and a descending scale of contempt.” Besides, the multiplicity of relations and interests, and even of intrigues, which would occasionally enliven this little world would at any rate make life more interesting.
On this double series of advantages Fourier is quite inexhaustible. He reckons up the economies with the painstaking care of an old clerk, and boasts the superiority of the table d’hôte over the family meal with the enthusiasm of an old bachelor. The social and moral advantages seem somewhat more doubtful. It is not very obvious that contact with the rich would make the poor more polished or amicable, nor is it very clear that either would be much happier for it. Fourier’s Utopia is already in operation in the United States, where, owing to the increase in the cost of living, the economic advantages of a communal life are more fully taken advantage of. Not only are there a great number of bachelors living at the clubs, but young couples have recently made a practice of taking up their abode at the hotels. They are already on the way to the Phalanstère.
This shows that Fourier was considerably in advance of his time, and those who hold that doctrines, after all, are always suggested by facts would find it difficult to discover anything pointing towards such communal experiments in the earlier part of the nineteenth century.
His solution of the servant problem, which is becoming more difficult every day, is one that is likely to be adopted in the near future. His suggestion was the substitution of collective for individual services as being more compatible with human dignity and independence, and the development of industrial rather than domestic production. This has already taken place in the case of bread-making and laundry work, and there are signs of its extension to house-sweeping (by means of the vacuum cleaner), carpet-cleaning, etc. A further extension to the art of cooking may also be expected.[532]
2. INTEGRAL CO-OPERATION
Careful scrutiny of the internal arrangements of the Phalanstère shows it to be something other than an ordinary hotel after all. It may perhaps be regarded as a kind of co-operative hotel, belonging to an association and accommodating members of that association only. It is much more thoroughgoing than the ordinary co-operative society, which is just content to buy commodities as an association without making any real attempt to practise communism, except in those rare cases where a co-operative restaurant is set up alongside of a co-operative warehouse.
The “Phalange,” not content to remain a mere consumers’ association, was to attempt production as well. Around the hotel was to be an area of 400 acres, with farm buildings and industrial establishments that were to supply the needs of the inmates. The Phalange was to be a small self-sufficing world, a microcosm producing everything it consumed, and consuming—as far as it could—all it produced. Occasionally, no doubt, there would be occasional surpluses or some needs would remain unsatisfied, and then recourse would be had to exchange with other Phalanges. Every Phalange was to be established as a kind of joint-stock company. Private property was not to be extinguished altogether, but to be transformed into the holding of stock—a transformation of a capitalistic rather than of a socialistic nature. M. de Molinari states that the future will witness the almost universal application of the joint-stock principle, and he for one would welcome its extension. Fourier has forestalled his prophecy by three-quarters of a century, with an insight that is truly remarkable for the time in which he wrote, for joint-stock undertakings were then exceedingly rare. He enumerates the many advantages which would result from such a transformation in the nature of property, and he roundly declares that “a share in such concerns is really more valuable than any amount of land or money.”
How were the extravagant dividends which he promised when propounding his scheme to be paid out? The usual method in financial and commercial transactions is to distribute them according to the holding of each individual. But such was not to be his plan. Capital was to have a third of the profits, labour five-twelfths, and ability three-twelfths. “Ability,” which signifies the work of management, was to devolve upon those individuals who were chosen by the society and were considered best fitted for the work. Fourier never realised that there was a possibility of the wrong man being chosen. He had no experience of universal suffrage, and he believed that within such a tiny group the election would be perfectly bona-fide.
Associations known as Phalanges have actually been established in Paris, and to some extent at any rate they have realised the ideal as outlined by Fourier. The profits are divided in almost strict accordance with Fourier’s formula,[533] and in order to emphasise their descent from him the members have caused a statue to be raised to his memory in their quarter of the town—the Boulevard de Clichy.
Not content with giving us an outline of a co-operative productive society, Fourier has also left us an admirably concise statement of the problem that faces modern society. “The first problem for the economist to solve,” says he, “is to discover some way of transforming the wage-earner into a co-operative owner.”[534]
The necessity for such transformation consists in the fact that this is the only way of making labour at once attractive and productive, for “the sense of property is still the strongest lever in civilised society.”[535] “The poor individual in Harmony who only possesses a portion of a share, say a twentieth, is a part proprietor of the whole concern. He can speak of our land, our palaces and castles, our forests and factories, for all of them belong partly to him.”[536] “Hence the rôle of capitalist and proprietor are synonymous in Harmony.”[537]
The worker will draw his share of the profits not merely as a worker, but also as a capitalist who is a shareholder in the concern, and as a member of the directorate, in which every shareholder has a voice. The administration of the business will form a part of his responsibilities. It is just what we are accustomed to call co-partnership. He will, moreover, participate in the privileges and management of the Phalange as a member of a consumers’ association.
All this seems very complicated, but it was a part of Fourier’s policy to transmute the divergent interests of capitalists, workers, and consumers by giving to each individual a share in these conflicting interests.[538] Under existing conditions they are in conflict with one another simply because they are focused in different individuals. Were they to be united in the same person the conflict would cease, or at any rate the battle-ground would be shifted to the conscience of each individual, where reconciliation would not be quite such a difficult matter.
A programme which aims, not at the abolition of property, but at the extinction of the wage-earner by giving him the right of holding property on the joint-stock principle, which looks to succeed, not by advocating class war, but by fostering co-operation of capital with labour and managing ability, and attempts to reconcile the conflicting interests of capitalist and worker, of producer and consumer, debtor and creditor, by welding those interests together in one and the same person, is by no means commonplace. Such was the ideal of the French working classes until Marxian collectivism took its place, and it is quite possible that its deposition may be only temporary after all. The programme which the Radical Socialists swear allegiance to, and which they set against the purely socialistic programme, is the maintenance and extension of private property and the abolition of the wage-earner. By taking this attitude they are unconsciously following in the wake of Fourier.[539]
3. BACK TO THE LAND
The title at the head of this section is to-day adopted as a motto by several social schools. It also figured in Fourier’s programme long ago. Fourier, however, employed the phrase in a double sense.
In the first place, he thought that there must be a dispersion of the big cities and a spreading out of their inhabitants in Phalanstères, which would simply mean moderate-sized villages with a population of 1600 people, or 400 families. Great care was to be exercised in choosing a suitable site. Wherever possible the village was to be placed on the bank of a beautiful river, with hills surrounding it, the slopes of which would yield to cultivation, the whole area being flanked by a deep forest. It was not, as some one has remarked, intended as an Arcadia for better-class clerks.[540] It was simply an anticipation of the garden cities which disciples of Ruskin and Morris are building all over England. These are designed, as we know, not merely with a view to promoting health and an appreciation of beauty, but also to encouraging the amenities of life and to solving the question of housing by counteracting the high rental of urban land.
In the second place, industrial work of every description, factory and machine production of every kind, were to be reduced to the indispensable minimum—a condition that was absolutely necessary if the first reform was ever to become practicable. Contrary to what might have been expected, Fourier felt no antipathy towards capitalism, but entertained the greatest contempt for industrialism, which is hardly the same thing.[541] A return to the land, if it was to mean anything at all, was to mean more agriculture. But care must be taken not to interpret it in the old sense of tillage or the cultivation of cereals. It was in no measured terms that he spoke of the cultivation of corn and the production of bread, which has caused mankind to bend under the cruellest yoke and for the coarsest nourishment that history knows. The only attractive forms of cultivation, in his opinion, were horticulture and arboriculture, apple-growing, etc., joined, perhaps, with poultry-keeping and such occupations as generally fall to the lot of the small-holder.[542] The inhabitant of the Phalanstère would be employed almost exclusively in looking after his garden, just as Adam was before the Fall and Candide after his misfortunes.
4. ATTRACTIVE LABOUR
The attractiveness of labour was made the pivot of Fourier’s system. Wherever we like to look, whether in the direction of so-called civilised societies or towards barbarian or servile communities, labour is everywhere regarded as a curse. There is no reason why it should be, and in the society of the future it certainly will not be, for men will then labour not because they are constrained to either by force or by the pressure of need or the allurement of self-interest. Fourier’s ideal was a social State in which men would no longer be forced to work, whether from the necessity of earning their daily bread or from a desire for gain or from a sense of social or religious duty. His ambition was to see men work for the mere love of work, hastening to their task as they do to a gala. Why should not labour become play, and why should not the same degree of enthusiasm be shown for work as is shown by youth in the pursuit of sport?[543]
Fourier thinks this would be possible if everyone were certain that he would get a minimum of subsistence by his work. Labour would lose all its coercive features, and would be regarded simply as an opportunity for exercising certain faculties, provided sufficient liberty were given everyone to choose that kind of work which suited him best, and provided also the labour were sufficiently diversified in character to stimulate imagination and were carried on in an atmosphere of joy and beauty. The sole object of the Phalanstère, as we have already seen, was to make labour more attractive by creating a new kind of social life in which production as well as distribution would be on a co-operative basis and horticulture would take the place of agriculture. But Fourier was not content to stop at that, and he proceeds to show the importance of combining different kinds of employment. Some of his suggestions are very ingenious; others, on the other hand, are equally puerile. The most notable of these is his proposal to bring individuals together into what he calls groups and series. A person would be allowed to join these groups according to his own individual preferences, and as it would not involve his spending his whole life in any one of them, he would be free to “flit” from one to the other.
* * * * *
But it is about time we took leave of our guide. We cannot pretend to follow the twists and turns of his labyrinthine psychology, with its dozen passions, of which the three fundamental ones are the desire for change, for order, and for secrecy; nor can we bring ourselves to accept his theodicy, nor his views on climatic and cosmogenic evolution, which was some day to result in sweetening the waters of the ocean, in melting the polar glaciers, in giving birth to new animals, and in putting us in communication with other planets. Yet even this muddy torrent is not without some grain of gold in it.
Take the question of education, for example, which holds a very prominent place in his writings. Old bachelor that he was, he never cared very much for children, but he nevertheless foreshadowed the development of modern education on several important points. Froebel, who conceived the idea of the kindergarten (1837), was among his disciples.[544]
His teaching on the sex question bears all the marks of lax morality, and indicates the fallacy of thinking that untrained passions and instincts can be morally justified.[545] His extreme views on this question, which even go beyond the advocacy of free union, have contributed a great deal to the downfall of Fourierism. Paul Janet remarks somewhere that the socialists have not been very happy in their treatment of the woman question, and we have already shown how this weakness led to the downfall of Saint-Simonism. But even on this subject Fourier has penned a few pithy sentences. “As a general rule,” he says, “it may be said that true social progress is always accompanied by the fuller emancipation of woman, and there is no more certain evidence of decadence than the gradual servility of women. Other events undoubtedly influence political movements, but there is no other cause that begets social progress or social decline with the same rapidity as a change in the status of women.”[546] Unfortunately his feminism was not so much inspired by respect for the dignity of woman as by his hatred of family life, and the liberty which he thought to be the true test of progress was generally nothing better than free love.
The anti-militarists have good claim to regard him as a forerunner. Speaking of present-day society, he said that “it consists of a minority of armed slaves who hold dominion over a majority of disarmed.”
It was not Fourier’s intention to introduce men into the world of Harmony at one stroke. He thought that as an indispensable preliminary they should go through a stage of transition which he calls Garantisme, where each one would be given a minimum of subsistence, security, and comfort—in short, everything that is considered necessary by the advocates of working-class reform.
Fourierism never enjoyed the prestige and never exercised the influence which Saint-Simonism did, but its action, though less startling, and confined as it was to a narrower sphere, has not been less durable. Nothing has been heard of Saint-Simonism these last fifty years, but there is still a Phalanstère school. It is not very numerous, perhaps, if we are only to reckon those who formally adhere to the doctrine, but if we take into consideration the co-operative movement, as we ought at least to some extent, it is seen to be very powerful still. For a long time Fourier’s ideas were scouted by everybody, but during the last fifteen years much more sympathetic attention has been given them.[547]
Among his disciples there are at any rate two who deserve special mention. Victor Considérant, one of the strongest advocates of Fourierism, has left us the best exposition of the doctrine that we have, in his book Doctrine sociale (1834-44). Like Owen, he experimented in American colonisation,[548] and gained a measure of notoriety in the Revolution of 1848 by insisting upon the right to work as a necessary compensation for the loss of property.
André Godin left a monument more permanent than books, in the famous Familistère which was founded by him. It consists of an establishment for the manufacture of heating apparatus at Guise, run entirely on co-partnership lines, the profits being distributed in accordance with the rules of the master.[549] It is not a new co-operative society of the humdrum kind, however. Close to the works, right in the middle of a beautiful park, are one or two huge blocks which contain the “flats” where the co-partners live, as well as schools, crèches, a theatre, and a co-operative stores. But despite its fame, and notwithstanding the fact that it has become a kind of rendezvous for co-operators all the world over, there is nothing very attractive about it, and if one wants to get a good idea of what a real Phalanstère is like it is better to visit either Bournville or Port Sunlight, or Agneta Park in Holland.
III: LOUIS BLANC
It is not the most original work that always attracts most attention. Stuart Mill, writing of Saint-Simonism and Fourierism, claims that “they may justly be counted among the most remarkable productions of the past and present age.” To apply such terms to the writings of Louis Blanc would be entirely out of place. His predecessors’ works, despite a certain mediocrity, are redeemed by occasional remarks of great penetration; but there is none of that in Louis Blanc’s. Moreover, his treatment is very slight, the whole exposition occupying about as much space as an ordinary review article.[550] And there is no evidence of exceptional originality, for the sources of its inspiration must be sought elsewhere—in the writings of Saint-Simon, of Fourier, of Sismondi, and of Buonarotti, one of the survivors of the Babeuf conspiracy,[551] and in the democratic doctrines of 1793. In short, Blanc was content to give a convenient exposition of such socialistic ideas as the public had become accustomed to since the Restoration.
Nevertheless, no sooner was the Organisation du Travail published in 1841 than it was read and discussed by almost everybody. Several editions followed one another in rapid succession. The title, which is borrowed from the Saint-Simonians, supplied one of those popular formulæ which conveniently summed up the grievances of the working classes in 1848, and during the February Revolution Louis Blanc came to be regarded as the best qualified exponent of the views of the proletariat. Even for a long time after 1848 the work was considered to be the most characteristic specimen of French socialistic writing.
Its success was in a measure due to the circumstances of the period. The brevity of the book and the directness of the exposition made the discussion of the theme a comparatively easy matter. The personal notoriety of the author also had a great deal to do with the interest which his work aroused. During the short career of the July monarchy, Blanc, both in the press and on the platform, had found himself one of the most valiant supporters of the advanced democratic wing. His Histoire de Dix Ans gave him some standing as a historian. Later on the rôle which he played as a member of the Provisional Government of 1848, and afterwards at the inauguration of the Third Republic, contributed to his fame as a public man. And, last of all, his unfortunate experience in connection with the failure of the national workshops, for which he was unjustly blamed, added to the interest which the public took in him.
All this, however, would not justify his inclusion in our history were it not for other reasons which give to the Organisation du Travail something more than a mere passing interest.
In no other work is the opposition between competition and association so trenchantly stated. Every economic evil, if we are to believe Blanc, is the outcome of competition. Competition affords an explanation of poverty and of moral degradation, of the growth of crime and the prevalence of prostitution, of industrial crises and international feuds. “In the first place,” writes Blanc, “we shall show how competition means extermination for the proletariat, and in the second place how it spells poverty and ruin for the bourgeoisie.”[552] The proof spreads itself out over the whole work, and is based upon varied examples gleaned from newspapers and official inquiries, from economic treatises and Government statistics, as well as from personal observations carried on by Blanc himself. No effort is spared to make the most disagreeable facts contribute of their testimony. Everything is arranged with a view to one aim—the condemnation of competition. Only one conclusion seems possible: “If you want to get rid of the terrible effects of competition you must remove it root and branch and begin to build anew, with association as the foundation of your social life.”
Louis Blanc thus belonged to that group of socialists who thought that voluntary associations would satisfy all the needs of society. But he thinks of association in a somewhat different fashion from his predecessors. He dreams neither of New Harmony nor of a Phalanstère. Neither does he conceive of the economic world of the future as a series of groups, each of which forms a complete society in itself. Fourier’s integral co-operation, where the Phalanstère was to supply all the needs of its members, is ignored altogether. His proposal is a social workshop, which simply means a co-operative producers’ society. The social workshop was intended simply to combine members of the same trade, and is distinguished from the ordinary workshop by being more democratic and equalitarian. Unlike Fourierism, it does not contain within itself all aspects of economic life. By no means self-contained, it merely undertakes the production of some economic good, which other folk are expected to buy in the ordinary way. Louis Blanc’s is simply the commonest type of co-operative society.[553] The schemes of both Owen and Fourier were much more ambitious, and attempted to apply the principle of co-operation to consumption as well as to production.
Nor was the idea altogether a new one. A Saint-Simonian of the name of Buchez had already in 1831[554] made a similar proposal, but it met with little success. Workers in the same trade—carpenters, masons, shoemakers, or what not—were advised to combine together, to throw their tools into the common lot, and to distribute among themselves the profits which had hitherto gone to the entrepreneur. A fifth of the annual profits was to be laid aside to build up a “perpetual inalienable reserve,” which would thus grow regularly every year. “Without some such fund,” says Buchez, with an unerring instinct for the future, “association will become little better than other commercial undertakings. It will prove beneficial to the founders only, and will ban everyone who is not an original shareholder, for those who had a share in the concern at the beginning will employ their privileges in exploiting others.”[555] Such is the destiny that awaits more than one co-operative society, where the founders become mere shareholders and employ others who are simply hirelings to do the work for them.
Whereas Buchez was greatly interested in petite industry,[556] Blanc was in favour of the great industry, and that seems to be the only difference between his social workshop and an ordinary co-operative society. But in Blanc’s opinion the social workshop was just a cell out of which a complete collectivistic society would some day issue forth. Its ultimate destiny did not really interest him very much. The ideal was much too vague and too distant to be profitably discussed. The important thing was to make a beginning and to prepare for the future in a thoroughly practical fashion, but “without breaking altogether with the past.” That seemed clearly to be the line of procedure. To give an outline of what that future would be like seemed a vain desire, and would simply mean outlining another Utopia.
It is just because his plan was precise and simple that Louis Blanc succeeded in claiming attention where so many beautiful but quite impossible dreams had failed. Here at last was a project which everyone could understand, and which, further, would not be very difficult to adopt. This passion for the concrete rather than the ideal, for some practical formula that might possibly point the way out of the morass of laissez-faire, may be discovered in more than one of his contemporaries. It is very pronounced in Vidal’s work, for example. Vidal was the author of an interesting book on distribution which unfortunately seems to be now quite forgotten.[557] Much of the success of the project, like that of the State Socialism of a later period, was undoubtedly due to this feeling.
The projected reform seemed exceptionally simple. A national workshop was to be set up forthwith in which all branches of production would be represented. The necessary capital was to be obtained from the Government, which was expected to borrow it. Every worker who could give the necessary moral guarantee was allowed to compete for this capital. Wages would be equal for everybody, a thing which is quite impossible under present conditions, largely because of the false anti-social character of a good deal of our education. In the future, when a new system of education will have improved morality and begotten new ideas, the proposal will seem a perfectly natural one. Here we come across a suggestion that seems common to all the associationists, namely, the idea of a new environment effecting a revolution in the ordinary motives of mankind. As to the hierarchy of the workshop, that will be established by election, except during the first year, when the Government will undertake to conduct the organisation, because as yet the members will hardly be sufficiently trained to choose the best representatives. The net revenue will be divided into three portions, of which the first will be distributed between the various members of the association, thus contributing to a rise in their wages; the second portion will go towards the upkeep of the old, the sick, and the infirm, and towards easing the burdens of some other industries; while the third portion will be spent in supplying tools to those who wish to join the association, which will gradually extend its sway over the whole of society. The last suggestion inevitably reminds us of Buchez’s “inalienable and perpetual capital.”
Interest will be paid on the capital employed in founding the industry, such interest being guaranteed against taxation. But we must not conclude that Blanc favoured this condition because he believed in the legitimacy of interest, as Fourier did. He was too pronounced a disciple of the Saint-Simonians ever to admit that it was legitimate. The time will come, he thinks, when it will no longer be necessary, but he gives no hint as to how to get rid of it. For the present at any rate it must be paid, were it only to enable the transition to be made. “We need not with savage impatience destroy everything that has been founded upon the abuses which as a whole we are so anxious to remove.” The interest paid, along with the wages, will form a part of the cost of production. The capitalists, however, will have no share in the net profit unless they have directly contributed to it.
It seems that the only difference between the social workshop and the present factory is its somewhat more democratic organisation, and the fact that the workers themselves seize all the profit (i.e. over and above net interest), instead of leaving it, as was hitherto the case, to the entrepreneur.
But this social workshop, as we have said, is a mere cell out of which a new society is expected to form. The amusing feature is this, that the new society can only come into being through the activity of competition—competition purged of all its more abominable features, that is to say. “The arm of competition must be strengthened in order to get rid of competition.” That ought not to be a very difficult task, for the “social workshop as compared with the ordinary private factory will effect greater economies and have a better system of organisation, for every worker without exception will be interested in honestly performing his duty as quickly as possible.” On every side will private enterprise find itself threatened by the new system. Capital and workers will gravitate towards the social workshop with its greater advantages. Nor will the movement cease until one vast association has been formed representing all the social shops in the same industry. Every important industry will be grouped round some central factory, and “the different shops will be of the nature of supplementary establishments.” To crown the edifice, the different industries will be grouped together, and, instead of competing with one another, will materially help and support each other, especially during a time of crisis, so that the understanding existing between them will achieve a still more remarkable success in preventing crises altogether.
Thus by merely giving it greater freedom the competitive régime will gradually disappear, to make way for the associative régime, and as the social workshops realise these wonderful ideals the evils of competition will disappear, and moral and social life will be cleansed of its present evils.
The remarkable feature of the whole scheme is that hardly anything new is needed to effect this vast change. Just a little additional pressure on the part of Government, some capital to set up the workshops, and a few additional regulations to guide it in its operations, that is all.
This is really a very important point in Louis Blanc’s doctrine, which clearly differentiates it both from Owen’s and Fourier’s. They appeared to think that the State was not necessary at all: private initiative seemed quite sufficient. It was hoped that society would renew itself spontaneously without any extraneous aid, and this is still the working creed of the co-operative movement. Wherever the co-operative movement has flourished the result has been entirely due to the efforts of its members. But Louis Blanc’s attention was centred on the highly trained artisan, and the problem was to find capital to employ him. Were they to rely upon their own savings, they would never make a beginning.[558] Moreover, somebody must start the thing, and power is wanted for this. That power will be organised force, which will be employed, however, not so much as an ally, but rather as a “starter.” Intervention will necessarily be only temporary. Once the scheme is started its own momentum will keep it going. The State, so to speak, “will just give it a push: gravity and the laws of mechanics will suffice for the rest.” That is just where the ingenuity of the whole system comes in, and as a matter of fact the majority of the producing co-operative societies now at work owe their existence to the financial aid and administrative ability of public bodies, without which they could hardly keep going.
Louis Blanc, accordingly, is one of the first socialists to take care to place the burden of reform upon the shoulders of the State. Rodbertus and Lassalle make an exactly analogous appeal to the State, and for this reason the French writer deserves a place among the pioneers of State Socialism.
This appeal of the socialists is beautifully naïve. On the one hand they invite the adherence of Government to a proposal that is frankly revolutionary, in which case it is asked to compass its own destruction—naturally not a very attractive prospect. On the other hand the project seems harmless enough, and the support which the Government is asked to extend further emphasises the modest nature of the undertaking. State socialism cannot escape the horns of this dilemma by proclaiming itself frankly conservative, as it has done in Germany.
Louis Blanc, like Lassalle after him, was much concerned with immediate results, and he failed to notice this objection. He paid considerable attention to another line of criticism, however, and one that he considered much more dangerous. He sought a way of escape by using an argument which was afterwards frequently employed by the State Socialists, as we shall see by and by.
The question was whether State intervention is contrary to liberty or not. “It clearly is,” says Louis Blanc, “if you conceive of liberty as an abstract right which is conferred upon man by the terms of some constitution or other. But that is no real liberty at all. Full liberty consists of the power which man has of developing and exercising his faculties with the sanction of justice, and the approval of law.”[559] The right to liberty without the opportunity of exercising it is simply oppression, and wherever man is ignorant or without tools he inevitably has to submit to those who are either richer or better taught than himself, and his liberty is gone. In such cases State intervention is really necessary, just as it is in the case of inferior classes or minors. Lacordaire’s saying is more pithy still: “As between the weak and the strong, liberty oppresses and law sets free.” Sismondi had already employed this argument, and much capital has been made of it by every opponent of laissez-faire.[560]
In the writings of Louis Blanc may be found the earliest faint outline of a movement that had assumed considerable proportions before the end of the century. State socialism, which was as yet a temporary expedient, by and by becomes an important economic doctrine with numerous practical applications.
The events of 1848 gave Louis Blanc an opportunity of partly realising his ideas. We shall speak of these experiments when we come to discuss the misdirected efforts of the 1848 socialists. But the ideas outlined in the Organisation du Travail were destined to a more permanent success in the numerous co-operative productive societies which were founded as a result of its teaching. They are still quite popular with a certain class of French working men.
Though inferior to both Fourier and Owen, Blanc gave considerable impetus to the Associative movement, and quite deserves his place among the Associative socialists.
* * * * *
Beside Louis Blanc it may be convenient to refer to two other writers, Leroux and Cabet, who took part in the same movement right up to the Revolution of 1848.
Pierre Leroux exercised considerable influence over his contemporaries. George Sand’s works are full of social dissertations, and she herself declares that most of these she owed to Leroux. However, one can hardly get anything of the nature of a definite contribution to the science from his own writings, which are vaguely humanitarian in character. We must make an exception, perhaps, of his advocacy of association,[561] and especially of the idea of solidarity, a word that has been exceedingly fortunate in its career. Indeed, it seems that he was the first to employ this famous term in the sense in which it is used to-day—as a substitute for charity.[562]
Apparently, also, he was the first to contrast the word “socialism” with its antithesis “individualism.”[563] The invention of these two terms is enough to save his name from oblivion in the opinion of every true sociologist.
Cabet had one experience which is rare for a socialist: he had filled the office of Attorney-General, though only for a short time it is true. Far greater celebrity came to him from the publication of his novel, Le Voyage en Icarie. There is nothing very original in the system outlined there. He gives the usual easy retort to those who question him concerning the fate of idlers in Icaria: “Of idlers in Icaria there will be none.” In his enthusiasm for his ideal he went farther than either Owen or Considérant by personally superintending the founding of a colony in the United States (1848). Despite many a grievous trial the settlement managed to exist for fifty years, finally coming to grief in 1898.[564]
Cabet is frankly communistic, and in that respect resembles Owen rather than Fourier, although he always considered himself a disciple of the latter. But this was perhaps due to his admiration for Fourier, with whom he was personally very well acquainted. Although he was a communist he was no revolutionist. He was a good-natured fellow who believed in making his appeal to the altruistic feelings of men, and was sufficiently optimistic to believe that moral conversion was not a difficult process.[565]
IV. FRIEDRICH LIST AND THE NATIONAL SYSTEM OF POLITICAL ECONOMY
By the middle of the nineteenth century the doctrine of Adam Smith had conquered the whole of Europe. Former theories were forgotten and no rival had appeared to challenge its supremacy. But during the course of its triumphant march it had undergone many changes and had been subjected to much criticism. Even disciples like Say and Malthus, and Ricardo especially, had contributed many important additions and effected much improvement. Through the influence of Sismondi and the socialists new points of view had been gained, involving a departure from the narrow outlook of the master in the direction of newer and broader horizons.
Of the principles of the Classical school the Free Trade theory was the only one which still remained intact. This, however, was the most important of all. Here the triumph had been complete. Freedom of international trade was accepted as a sacred doctrine by the economists of every country. In Germany as in England, in France as in Russia, there was complete unanimity among scientific authorities. The socialists at first neglected this topic, and when they did mention it it was to express their complete approval of the orthodox view.[566] A few isolated authors might have hinted at reservations or objections, but they never caught the public ear.[567] It is true that Parliaments and Governments in many countries hesitated to put these new ideas into practice. But even here, despite the strength of the opposing forces, one can see the growing influence of Smith’s doctrine. The liberal tariff of Prussia in 1818, the reforms of Huskisson in England (1824-27), were expressly conceived by their authors as partial applications of those principles.
However, there arose in Germany a new doctrine for which the peculiar economic and political conditions of that country at the beginning of the nineteenth century afforded a favourable environment. Although the development was slow it was none the less startling. Friedrich List, in his work entitled Das Nationale System der Politischen Oekonomie, promulgated the theory of the new Protection. “The history of my book,” he remarks in his preface, “is the history of half my life.” He might have added that it was also the history of Germany from 1800 to 1840. It was no mere coincidence that led to the creation of an economic system based exclusively upon the conception of nationality in that country, where the dominant political note throughout the nineteenth century was the realisation of national unity. List’s work was a product of circumstances, and these circumstances we must understand if we are to judge of the author and his work.
I: LIST’S IDEAS IN RELATION TO THE ECONOMIC CONDITIONS IN GERMANY
The Germany of the nineteenth century presents a unique spectacle. Her population was at first essentially agricultural, and the various states politically and economically isolated. Her industry was fettered by the corporative régime, and her agriculture was still in feudal thraldom. Freed from these encumbrances, and having established first her economic and then her political unity, she took her place during the last three decades of the century among the foremost of industrial Powers.
The Act of Union of 1800 had ensured the economic unity of the British Isles. The union of England and Scotland was already a century old, and Smith regarded it as “one of the chief causes of the prosperity of Great Britain.”[568] France had accomplished the same end by the suppression of domestic tariffs in 1791. But Germany even in 1815 was still a congeries of provinces, varying in importance and separated from one another by tariff walls. List, in the petition which he addressed in 1819 to the Federal Assembly in the name of the General Federation of German Trade and Commerce, could reckon no less than thirty-eight kinds of tariffs within the German Confederacy, without mentioning other barriers to commerce. In Prussia alone there were no fewer than sixty-seven different tariffs.[569] “In short,” says List in another petition, “while other nations cultivate the sciences and the arts whereby commerce and industry are extended, German merchants and manufacturers must devote a great part of their time to the study of domestic tariffs and taxes.”[570]
These inconveniences were still further aggravated by the complete absence of import duties. The German states were closed to one another, but, owing to the absence of effective central control, were open to other nations—a peculiarly galling situation on the morrow of the Continental Blockade. The peace treaty was scarcely signed when England—so long cut off from her markets and forced to over-stock her warehouses with her manufactured goods—began to flood the Continent with her products. Driven from France by the protective tariff established by the Restoration Government, these goods, offered at ridiculously low prices, found a ready market in Germany.
The German merchants and manufacturers became thoroughly alarmed, and there arose a general demand for economic unity and a uniform tariff. Public opinion urged a reform which appeared to be the first step in the movement towards national unity. In 1818 Prussia secured her own commercial unity by abolishing all internal taxation, retaining only those duties which were levied at the frontier. Her new tariff of 10 per cent. on manufactured goods, with free entrance for raw material, was not regarded as prohibitive, and was actually approved of by Huskisson as a model which the British Parliament might well imitate. But this reform, confined as it was to Prussia alone, did nothing to improve the lot of the German merchants elsewhere, for the Prussian tariff applied just as much to them as to foreigners.
This particular reform, far from staying the movement towards uniform import duties, only accelerated it. A General Association of German Manufacturers and Merchants was founded at Frankfort in 1819 to urge confederation upon the Government. The agitation was inspired by Friedrich List. He had been for a short time professor at Tübingen and was already well known as a journalist. He was nominated general secretary of the association, and became the soul of the movement. He wrote endless petitions and articles, and made personal application to the various Governments at Munich, Stuttgart, Berlin, and Vienna. He was anxious that Austria should take the lead. But all in vain. The Federal Assembly, hostile as it was to every manifestation of public opinion, refused to reply to the petition of the merchants and manufacturers. List himself was soon taken up with other interests. He was named as the deputy for Reutlingen, his native town, in the state of Würtemberg, in 1820, but was banished from the Assembly and condemned to ten months’ imprisonment for criticising the bureaucracy of his own country. After seeking refuge in France he spent a few years travelling in England and Switzerland, and then returned to Würtemberg, where he again suffered imprisonment. Upon his release from prison he resolved to emigrate to America, where Lafayette, whom he had met in Paris, promised him a warm welcome.
Returning to Germany in 1832, after having made numerous friends and accumulated a fortune, he found the tariff movement for which he had struggled thirteen years before just coming to a head. It was to be established, however, in a fashion quite different from what he had expected. It was not to be a general reform, and Austria was not to be leader. Prussia was to be the pivot of the movement, which was to be accomplished by means of a series of general agreements. In 1828 there were formed almost simultaneously two Tariff Unions, the one between Bavaria and Würtemberg, the other between Prussia and Hesse-Darmstadt. Within the areas of both of these unions goods were to circulate freely, and a common rate of duty was to be established at the frontiers. From the very first there was a rapprochement between the unions, but a definite fusion in one Zollverein was only decided upon on March 22, 1833. The new régime actually came into being on January 1, 1834. Even before that date Saxony and some of the other states had already joined the new union.
Thus by 1834 the commercial union of modern Germany was virtually accomplished. The Zollverein united the principal German states,[571] Austria excepted, and under this régime industry, assured of a large domestic market, increased by leaps and bounds. But a new problem presented itself, namely, what system of taxation was to be adopted by the union as a whole. In 1834 the liberal Prussian tariff of 1818 was adopted without much opposition, but nothing more was attempted just then. Many of the manufacturers, however, especially the iron-smelters and the cotton and flax spinners, demanded a more substantial means of protection against foreign competition. This clamour became more intense as the need for iron and manufactured goods increased the demand for raw material. Hence from 1841—the date of the completed Zollverein—a new discussion arose between the partisans of the status quo, inclining towards free exchange, and the advocates of a more vigorous protection.
List’s National System, advocating Protection, appeared at the psychological moment. This delightfully eloquent work is full of examples borrowed from history and experience. The peculiar condition of contemporary Germany was the one source of List’s inspiration, and since the work was written for the public at large it is remarkably free from all traces of the “schools.” Germany’s industry, the sole hope of her future greatness, had found scope for development only during the peace which followed 1815. It was still in its infancy, and found itself hard hit by the competition of England, with her long experience, her perfected machinery, and her gigantic output. This was the all-important fact for List. England, whose rivalry appeared so dangerous, had closed her markets to German agriculturists by her Corn Laws, while industrial competition was out of the question. Two other nations, France and the United States, destined, like Germany, to become great industrial Powers, indicated the path of emancipation. France, warned by the results of the Treaty of Eden (1786) as to the evils of English competition, hastened to defend her fortunes by means of prohibitive tariffs. Still more significant was the example of the United States, whose situation was in all respects comparable with that of Germany. In both cases economic independence was hardly yet fully established, the natural resources were abundant, the territory was vast, the population intelligent and industrious, with the hope of a great political future. Though scarcely free as yet, the Americans made the establishment of industry and the shutting out of English goods by means of protective tariffs their first care. Thus there was everywhere the same danger, the tyrannical supremacy of England, and the same method of defence, Protection. Would Germany alone stand aloof from adopting similar measures?
That is the essential point of List’s thesis. But these very practical views tended to damage the well-known arguments of those economists whom List refers to collectively as “the school.” The “school” maintained that nations as well as individuals should buy in the cheapest markets and devote all their energies to producing just those commodities which yield them the greatest gain. Industry can only grow in proportion to the amount of capital saved, but a protective régime hinders accumulation and so defeats its own end. To overcome these objections it is not necessary to combat them one by one, for the discussion may be carried to an entirely different field. The “school” adopts a certain ideal of commercial policy as the basis of its thesis, namely, the increase of consumable wealth, or, as List puts it, in an awkward enough fashion, “the increase of its exchangeable values.”[572] This fundamental point of view must be changed if we would avoid the consequences which naturally follow from it. List realised this, and in his attempt to accomplish the task he gave expression to new truths which make his book one of lasting theoretical value and ensure for it an important place in the history of economic doctrines.
In fact, he introduces two ideas that were new to current theory, namely, the idea of nationality as contrasted with that of cosmopolitanism, and the idea of productive power as contrasted with that of exchange values. List’s whole system rests upon these two ideas.
(a) List accuses Adam Smith and his school of cosmopolitanism. Their hypothesis rested on the belief that men were henceforth to be united in one great community from which war would be banished. On such a hypothesis humanity was merely the sum of its individuals. Individual interests alone counted, and any interference with economic liberty could never be justified. But between man and humanity must be interpolated the history of nations, and the “school” had forgotten this. Every man forms part of some nation, and his prosperity to a large extent depends upon the political power of that nation.[573]
Universal entente is doubtless a noble end to pursue, and we ought to hasten its accomplishment. But nations to-day are of unequal strength and have different interests, so that a definite union could only benefit them if they met on a footing of equality. The union might even only benefit one of them while the others became dependent. Viewed in this new light, political economy becomes the science which, by taking account of the actual interests and of the particular condition of each nation, shows along what path each may rise to that degree of economic culture at which union with other civilised nations, accompanied by free exchange, might be both possible and useful.[574]
List distinguishes several “degrees of culture,” or what we would to-day call “economic stages,” and he even claims actual historical sequence for his classification into the savage, the pastoral, the agricultural, the agricultural-manufacturing, and the agricultural-manufacturing-commercial stage.[575] A nation becomes “normal”[576] only when it has attained the last stage. List understands by this that such is the ideal that a nation ought to follow. As a matter of fact he would allow it to possess a navy and to found colonies only on condition that it kept up its foreign trade and extended its sphere of influence. It is only at this stage that a nation can nourish a vast population, ensure a complete development of the arts and sciences, and retain its independence and power. The last two ideas constitute the sine qua non of nationality.[577] Not all nations, it is true, can pretend to this complete development. It requires a vast territory, with abundant natural resources, and a temperate climate, which itself aids the development of manufactures.[578] But where these conditions are given then it becomes a nation’s first duty to exert all its forces in order to attain this stage. Germany possessed these desiderata to a remarkable degree. All that was needed was an extension of territory, and List lays claim to Holland and Denmark as a portion of Germany, declaring that their incorporation would be regarded even by themselves as being both desirable and necessary. Accordingly, he wished them to enter the Confederacy of their own free will.[579]
Hence the aim of a commercial policy is no longer what it was for Smith, viz. the enriching of a nation. It is a much more complex ideal that List proposes, both historically and politically, but an ideal which implies as a primary necessity the establishment of manufactures.
(b) This necessity becomes apparent from still another point of view. The estimate of a nation’s wealth should not be confined to one particular moment. It is not enough that the labour and economy of its citizens should at the present moment assure for it a great mass of exchange values. It is also necessary that these resources of labour and of economy should be safeguarded and that their future development should be assured, for “the power of creating wealth is infinitely more important than the wealth itself.” A nation should concern itself with the growth of what List in a vague fashion calls its productive forces even more than with the exchange values which depend upon them.[580] Even a temporary sacrifice of the second may be demanded for the sake of the first. In these expressions List merely wishes to emphasise the distinction between a policy which takes account of a nation’s future as compared with one which takes account only of the present. “A nation must sacrifice and give up a measure of material property in order to gain culture, skill, and powers of united production; it must sacrifice some present advantages in order to ensure to itself future ones.”[581]
But what are these productive forces which constitute the permanent source of a nation’s prosperity and the condition of its progress?
With particular insistence List first of all mentions the moral and political institutions, freedom of thought, freedom of conscience, liberty of the press, trial by jury, publicity of justice, control of administration, and parliamentary government. All these have a stimulating and salutary effect upon labour. He is never weary of recalling to mind the loss of wealth caused by the Revocation of the Edict of Nantes, or by the Spanish Inquisition, which, says he, “had passed sentence of death upon the Spanish navy long ere the English and the Dutch fleets had executed the decree” (p. 88). He unjustly[582] accuses Smith and his school of materialism, and condemns them for neglecting to reckon those infinitely powerful but perhaps less calculable forces.
But of all the productive forces of a nation none, according to List, can equal manufactures, for manufactures develop the moral forces of a nation to a superlative degree. “The spirit of striving for a steady increase in mental and bodily acquirements, of emulation and of liberty, characterise a State devoted to manufactures and commerce.… In a country devoted to mere raw agriculture, dullness of mind, awkwardness of body, obstinate adherence to old notions, customs, methods, and processes, want of culture, of prosperity, and of liberty prevail.”[583] Manufactures permit of a better utilisation of a country’s products than is the case even with agriculture. Its water-power, its winds, its minerals, and its fuel supplies are better husbanded. The presence of manufactures gives a powerful impetus to agriculture, for the agriculturist profits even more than the manufacturer, owing to the high rent, increased profits, and better wages that follow upon an increased demand for agricultural products. The very proximity of manufactures constitutes a kind of permanent market for those agricultural products, a market which neither war nor hostile tariffs can ever affect. It gives rise to varied demands and allows of a variation of cultivation, which results in a regional division of labour. This enables each district to develop along the most advantageous line, whereas in a purely agricultural country each one has to produce for his personal consumption, which means the absence of division of labour and a consequent limitation of production.[584]
Industry for List is not what it was for Smith. For him it is a social force, the creator of capital and of labour, and not the natural result of labour and saving. It deserves introduction even at the expense of a temporary loss, and its justification is that of all liberal institutions, namely, the impetus given to future production. In a beautiful comparison which would deserve a niche in a book of classical economic quotations he writes as follows: “It is true that experience teaches that the wind bears the seed from one region to another, and that thus waste moorlands have been transformed into dense forests; but would it on that account be wise policy for the forester to wait until the wind in the course of ages effects this transformation?”[585] The tariff, apparently, is the only method of raising the wind.
By placing himself at this point of view List is able to defeat the most powerful arguments used by his opponents. All we can say in reply is that manufactures will not produce these effects if they have not already a raison d’ètre in the natural evolution of a nation—that is, if they do not demand too costly a sacrifice. The land on which the settler sows his corn can scarcely be regarded as ready to receive it if it lacks the power to make it grow.
List’s Protectionism, as we may guess from what precedes, possesses original features. It is not a universal remedy which may be indifferently applied to every country at any period or to all its products. It is a particular process which can only be used in certain cases and under certain conditions. Subjoined are some of the characteristic traits of this Protectionism which List himself has neatly described.
(1) The Protectionist system can only be justified when it aims at the industrial education of a nation.[586] It is thus inapplicable to a nation like the English, whose industrial education is already complete. Nor should it be attempted by countries that have neither the aptitude nor the resources necessary for an industrial career. The nations of the tropical zone seem destined to the pursuit of agriculture, while those of the temperate zone are accustomed to engage in many and varied forms of production.[587]
(2) But a further justification is also necessary. It must be shown that the nation’s progress is retarded by the competition of a powerful manufacturing rival which has already advanced farther on the industrial path.[588] “The reason for this is the same as that why a child or a boy in wrestling with a strong man can scarcely be victorious or even offer steady resistance.”[589] This was precisely the case with Germany in her struggle with England. (It is interesting to come across a full account of the process of “dumping” in List’s letters to Ingersoll. “Dumping,” which has received much attention lately in connection with the trust movement, consists in selling at a low price in foreign markets in order to keep up prices in the home market.[590])
(3) Even in that case Protection can be justified “only until that manufacturing Power is strong enough no longer to have any reason to fear foreign competition, and thenceforth only so far as may be necessary for protecting the inland manufacturing power in its very roots.”[591]
(4) Lastly, Protection ought never to be extended to agriculture. The reasons for this exception are that on the one hand agricultural prosperity depends to a great extent upon the progress of manufactures—the protection of the latter indirectly benefits the former—and on the other hand an increase in the price of raw materials or of food would injure industry. Moreover, there exists a natural division which is particularly advantageous to the system of cultivation pursued by each country, a division dependent upon the natural qualities of their soils, which Protection would tend to destroy. This territorial division does not exist for manufactures, “for the pursuit of which every nation in the temperate zone seems to have an equal vocation.”[592]
One might experience some difficulty in understanding the sudden volte-face of List in favour of free exchange in agriculture did we forget the particular situation in Germany, to which his thoughts always returned. This is equally true of many other points in his system. Germany was an exporter of corn and suffered from the operation of the English Corn Laws. German agriculture needed no protection, but suffered from want of markets, and List would have been very happy to persuade England to abandon her Corn Laws. Agricultural protection was only revived in Germany towards the end of 1879, when the agriculturists thought they were being threatened by foreign competition.
II: SOURCES OF LIST’S INSPIRATION. HIS INFLUENCE UPON SUBSEQUENT PROTECTIONIST DOCTRINES.
The question of the origin of List’s Protectionist ideas has frequently been raised. The works of the Frenchmen Dupin and Chaptal undoubtedly gave him some material for reflection, but he was really confirmed in his opposition to laissez-faire by the men whom he met in America. While there he came into intimate contact with the members of a society which had been founded at Philadelphia for the encouragement of national industry. The founder of this society was an American statesman named Hamilton, the author of a celebrated report upon manufactures, who as far back as 1791 had advocated the establishment of Protection for the encouragement of struggling American industries.[593] Hamilton’s argument, as List fully recognised, bears a striking similarity to the thesis of the National System.[594] The Philadelphian society, which was then presided over by Matthew Carey (the father of the economist of whom we shall have to speak by and by), immediately after List’s arrival in America inaugurated an active campaign on behalf of a revision of the tariffs. Ingersoll, the vice-president, persuaded List to join in the campaign, which he did by publishing in 1827 a number of letters which caused quite a sensation.[595] They are really just a résumé of the National System. The policy which in the course of a few years he was to advocate in Germany he now recommended to the consideration of the Americans.
But facts were even more eloquent than books, and what chiefly struck the practical mind and the observant eye of List was the material success of American Protection, just as in Germany he had been impressed by the beneficial effects which temporary Protection enforced by the Continental Blockade had produced there.[596]
Far from being injurious to the economic development of the United States, it seemed as if Protection had really helped it. What it actually did was to quicken by the space of a few years an evolution which nature herself was one day bound to accomplish. So vast was the territory, so abundant the natural resources, and so advantageously were they placed for the application of human energy that no system, however defective, could long have delayed the accumulation of wealth. The similar condition of Germany lent colour to the belief that the same experiment carried on under similar circumstances would also succeed there.
Accordingly, List’s work, though not directly connected with any known American system, is the first treatise which gives a clear indication of the influence upon European thought of the economic experiences of the New World.
In a beautiful paragraph in the National System List has himself confessed to this. “When afterwards I visited the United States, I cast all books aside—they would only have tended to mislead me. The best work on political economy which one can read in that modern land is actual life. There one may see wildernesses grow into rich and mighty states; and progress which requires centuries in Europe goes on there before one’s eyes, viz. that from the condition of the mere hunter to the rearing of cattle, from that to agriculture, and from the latter to manufactures and commerce. There one may see how rents increase by degrees from nothing to important revenues. There the simple peasant knows practically far better than the most acute savants of the Old World how agriculture and rents can be improved; he endeavours to attract manufacturers and artificers to his vicinity. Nowhere so well as there can one learn the importance of means of transport, and their effect on the mental and material life of the people. That book of actual life I have earnestly and diligently studied, and compared with the results of my previous studies, experience, and reflections.”[597]
Though from this point of view List’s Protectionism seems closely connected with the most modern of economic units, a still closer tie links him to the Mercantilism of old. Nor did he ever dissemble his love for the Mercantilists, especially for Colbert. He accused Smith and Say of having misunderstood them, and he declared that they themselves more justly deserved the title of Mercantilists because of their attempt to apply to whole nations a very simple conception which they had merely copied from a merchant’s note-book, namely, the advice to buy in the cheapest and sell in the dearest market. He distinguishes between two classes of Mercantilists according as they are influenced by one or other of two dominating ideas. On the one hand we have those who emphasise the importance of industrial education, which is the dominant note in List’s philosophy. This idea has quite taken the place of the older idea of a favourable balance of trade, and has been adopted by such a Liberal thinker as John Stuart Mill, whereas the other has been definitely rejected by the science. Furthermore, the Mercantilism of the seventeenth century was a special instrument employed in the interests of a permanent policy, which was exclusively national; while List’s Protection, according to his own opinion, was merely a means of leading nations towards the possibility of union on a footing of equality. It was a mere transitory system, a policy dictated by circumstances.
List’s system cannot be regarded as the inspirer of modern Protection, any more than he himself can be regarded as a direct descendant of the old Mercantilists. Even in Germany, despite the great literary success of his work, its influence was practically nil, unless we credit it with the slight increase of taxation upon which the Zollverein decided in 1844, and couple with it the Protectionist campaign afterwards carried on by List in the columns of his newspaper.[598] But the Liberal reforms carried out by the English Parliament under the Premiership of Peel were during that very same year crowned by the abolition of the Corn Laws. This measure caused much consternation throughout Europe, and the confirmation which Cobden’s ideas thus received influenced public opinion a good deal and gave a Liberal trend to the commercial policy of Europe during the next few years. The régime of commercial treaties inaugurated by Napoleon III was an outcome of this change of feeling.
Towards the end of 1879 a vague kind of Protectionism made its appearance in Europe. Tariff walls were raised, but they never seemed to be high enough. One would like to know whether these new tariffs, established successfully by Germany and France, were in any way inspired by List’s ideas.
It does not seem that they were. Neither of the two countries which have remained faithful to a thoroughgoing Protection any longer needs industrial education. Both of them have long since arrived at that complex state which, according to List, is necessary for the full development of their civilisation and the expansion of their power. Germany and the United States have no longer any cause to fear England. Their commercial fleets are numerous, their warships powerful, and their empires are every day expanding. Were he to return to this world to-day, List, who so energetically emphasised the relative value of the various commercial systems, and the necessity of adapting one’s method to the changing conditions of the times and the character of the nation, but always laid such stress upon the essentially temporary character of the tariffs raised, would perhaps find himself ranged on the side of those who demand a lowering of those barriers in the interest of a more liberal expansion of productive forces. Has he himself not declared that “in a few years the civilised nations of the world, through the perfection of the means of transport, through the influence of material and intellectual ties, will be as united, nay, even more closely knit together, than were the counties of England a hundred years ago”?[599] Even the profound changes in the international economic situation during the last sixty years fail to supply a serious justification for the Protectionist policy of the great commercial nations, and the essential traits of this new régime differ toto cælo from the outlines supplied by List. Far from allowing agriculture to develop naturally, there has arisen the cry for some protection for the farmer, which has served as a pretext for a general reinforcement of tariffs in a great number of cases, notably in France and Germany. The competition of American corn has hindered European agriculture from benefiting by the advancement of industry as List had predicted. Modern tariffs, involving as they do the taxation of both agricultural and industrial products, imply a conception of Protection entirely different from List’s. He would have confined Protection to the most important branches of national production—to those industries from which the other and secondary branches receive their supplies. Only on this ground would he have justified exceptional treatment.[600] It is an essentially vigorous conception, and what he sought of Protection was an energetic stimulant and an agent of progress. But a tariff which indifferently protects every enterprise, which no longer distinguishes between the fertilising and the fertilised industries, and increases all prices at the same time, can have only one effect—a loss for one producer and a gain for another. Their relative positions remain intact. It is no longer a means of stimulating productive energy; it is merely a general instrument of defence against foreign competition, and is essentially conservative and timorous.
To speak the truth, tariff duties are never of the nature of an application of economic doctrines. They are the results of a compromise between powerful interests which often enough have nothing in common with the general interest, but are determined by purely political, financial, or electoral considerations. Hence it is futile to hope for a trace of List’s doctrines in the Protective tariffs actually in operation. His influence, if indeed it is perceptible anywhere, must be sought amid the subsidiary doctrines which uphold them.
The only complete exposition of Protectionism that has been given us since List’s is that of Carey,[601] the American economist. Carey was at first a Free Trader, but in 1858 became a Protectionist, and his ideas, which were expounded in his great work The Principles of Social Science, published in 1858-59, bear a striking resemblance to those of his German predecessor.
Carey, like List, directs his attack against the industrial pre-eminence of England, and substitutes for the ideal of international division of labour the ideal of independent nationality, each nation devoting itself to all branches of economic activity, and thus evolving its own individuality. According to him, Free Trade tends to “establish one single factory for the whole world, whither all the raw produce has to be sent whatever be the cost of transport.”[602] The effect of this system is to hinder or retard the progress of all nations for the sake of this one. But a society waxes wealthy and strong only in proportion as it helps in the development of a number of productive associations wherein various kinds of employments are being pursued, which increase the demand for mutual services and aid one another by their very proximity. Such associations alone are capable of developing the latent faculties of man[603] and of increasing his hold upon nature. These two traits help to define economic progress. Under a slightly different form we have a picture of the normal nation or the complex State so dear to the heart of Friedrich List—an ideal of continuous progress as the object of commercial policy being substituted for one of immediate enrichment.
Following List, but in a still more detailed fashion, Carey sought to show the beneficial effects that the proximity of protected industry would have upon agriculture. But unfortunately there are other arguments upon which Carey lays equal stress that are really of a much more debatable character.
Protection, according to Carey, by furnishing a ready market for agricultural products, would free agriculture from the burden of an exorbitant cost of carriage to a distant place. This argument, which List[604] merely threw out as a passing suggestion, continually recurs with the American author. But, as Stuart Mill justly remarked,[605] if America consents to such expenditure it affords a proof that she procures by means of international exchange more manufactured goods than if she manufactured them herself.
Another no less debatable point: The exportation of agricultural products, says Carey, exhausts the soil, for the products being consumed away from the spot where they are grown, the fertilizing agents which they contain are not restored to the earth; a manufacturing population in the immediate neighbourhood[606] would remedy this. But, as John Stuart Mill again remarks,[607] and justly enough, it is not Free Trade that forces America to export cereals. If she does so, it is because exhaustion of soil appears to her an insignificant inconvenience compared with the advantage gained by exportation.
Carey, finally, was one of the first to discover in Protection a means of increasing wages. Once the complex economic State is established there arises a keen competition between the entrepreneurs who require the service of labour—a competition which naturally benefits the workman. But this advantage, granting that it does exist, is more than counterbalanced by the increased price of goods.
We see that Carey, although sharing the fundamental conceptions of List, employs arguments that are much less valid. Both in power of exposition and in the scientific value of his work, the German author shows himself vastly superior to his American successor. He is also much more moderate. Carey is not content with industrial Protection; he demands agricultural Protection as well, and the duties, though a little higher than those proposed by List, seem hardly sufficient for him.
Despite all this similarity of views, Carey does not owe his inspiration to List. He was acquainted with the National System and he quoted it. But American economic literature had already supplied him with analogous suggestions. Even more than books, the economic life of America itself as it evolved before his very eyes had contributed to the formation of his ideas. It was the progress of America under a Protective régime, it was the spectacle of a country as yet entirely new and sparsely populated, increasing the produce of her soil as colonisation extended, and multiplying her wealth as population became more dense, that inspired him with the idea of a policy of isolation with a view to hastening the utilisation of those enormous resources. More fortunate than List, he saw his ideas accepted, if not by the scientific experts of his country (who on the whole remained aloof), at least by the American politician, who has applied his principles rather freely.[608]
Carey’s doctrine, accordingly, cannot be attributed directly to the influence of List. It remains to be seen whether List had any influence upon European doctrines.
He undoubtedly succeeded in forcing the acceptance of the idea of a temporary Protection for infant industries even upon Free Traders. The most notable convert to this view was John Stuart Mill.[609] But it was a somewhat Platonic concession that he made. He thought it inapplicable to old countries, for their education was no longer incomplete, and at best useful only for new countries.
Can modern Protectionists claim descent from List? In the absence of any systematic treatise dealing with their ideas, it is not always easy to glean the significance of their doctrines from the various articles, discourses, and brochures amid which they are scattered.[610] Neglecting those writers who are merely content to reproduce the old fallacies of the Mercantile arguments concerning the balance of trade,[611] the majority of them appear to base their case more or less explicitly upon two principal arguments: (1) the necessity for economic autonomy; (2) the patriotic necessity of securing a national market for national products.[612] These two points of view, which are more or less clearly avowed and accepted as political maxims, would, if applied with logical strictness, result in making all external commerce useless. Each nation would thus be reduced to using just those resources with which Nature had happened to endow it, but it could get little if any of the goods produced by the rest of mankind. These two ideas were not absolutely foreign to List’s thought, although they never assumed anything more than a secondary or subordinate character. He never considered them as the permanent supports of a commercial policy.
List frequently spoke of making a nation independent of foreign markets by means of industry. He considered that nation highest which “has cultivated manufacturing industry in all its branches within its territory to the highest perfection, and whose territory and agricultural production is large enough to supply its manufacturing population with the largest part of the necessaries of life and raw materials which they require.” But he also recognised that such advantages were exceptional, and that it would be folly for a nation to attempt to supply itself by means of national division of labour—that is, by home production—with articles for the production of which it is not favoured by nature, and which it can procure better and cheaper by means of international division of labour, or, in other words, through foreign commerce. Complete autonomy is accordingly an illusion. But we cannot deny that some of his expressions seem to give credit to the false idea that a country which obtains a considerable portion of its consumption goods from foreigners must be dependent upon those foreigners.[613] In fact, it is no more dependent upon the foreigner than the foreigner is upon it. In the case of a buyer and seller who is the dependent person? There is but one instance in which the expression is justified, and that is when a foreign country has become the only source of supply for certain commodities. Then the buyer does become dependent, and List rightly enough had in view the manufacturing monopoly enjoyed by England—a monopoly that no longer exists.
He also spoke of retaining the home market for home-made goods; but he thought that this guarantee would of necessity have to be limited to the period when a nation is seeking to create an industry for itself: at a later period foreign competition becomes desirable in order to keep manufacturers and workmen from indolence and indifference.[614]
At no period was List anxious to make economic autonomy or the preservation of the home market the pivot of his commercial policy. The creation of native industry is the only justification of protective rights, but this is the one point which modern Protectionists cannot insist upon without anachronism.
List left no marked traces of his influence either upon practical politics or upon Protectionist doctrines. It is in his general views that we must seek the source of his influence and the reason for the position which he holds in the history of economic doctrines.
III: LIST’S REAL ORIGINALITY
List’s method is essentially that of the pioneer. He was the first to make systematic use of historical comparison as a means of demonstration in political economy. Although he can lay no claim to be the founder of the method, still the brilliant use which he made of it justifies us in classifying him as the equal, if not the superior, of those who at the same moment were attempting the creation of the Historical school and the transformation of history into the essential organon of economic research.
List also introduced new and useful points of view into economics. The principle of free exchange as formulated by Smith, and especially by Ricardo and Say, was evidently too absolute and rested upon a demonstration that was too abstract for the ordinary politician. If, as List justly remarks, the practice of commercial nations has so long remained contrary to a doctrine that all economists regard as admirable, it is not without some just cause. As a matter of fact, can the statesman ever place himself outside of the point of view of national interest of which he is the custodian? It is not enough for him to know that the interchange of products will in some degree increase wealth.[615] He must be certain that this increased wealth will benefit his own nation. He must be equally well assured that Free Trade will not result in too sudden a displacement of population or industry, the social and political results of which might be very harmful. In other words, political economy must be subordinated to politics in general, and to-day there is no single economist who does not recognise the impossibility of separating them in practice.[616] There is none that does not perceive the influence of political power on economic prosperity, and that consequently does not recognise the necessity for the different complexion which the peculiar circumstances of each country imposes upon the practical application of the principle of commercial liberty.
This is not all. List by abandoning the favourite habit of eighteenth-century writers who contrasted man and society, and by giving us a picture of man as he really is, as a member of a nation, has introduced a fruitful conception into economics of which we have not yet seen the full results. He rightly treats of nations not merely as moral and political associations created by history, but also as economic associations. Just as a nation is politically strengthened by the moral cohesion of its citizens, so its economic cohesion increases the productive energy of each individual and enhances the prosperity of the whole nation.
And Governments, while charged with maintaining the political unity of a country, ought also to retain its economic unity by subordinating all local interests to the general interest, by preserving intact the liberty of internal trade, by organising railways and canals on a national basis, by keeping watch over the central bank, and by aiming at a uniform code of commercial legislation. This was the programme outlined by List in his paper the Zollvereinsblatt.
This belief in the power which a unified economic organisation can bring to a nation is by no means too common among individualists, who at bottom are often particularists. But List possessed it in the highest degree. He devoted many years of his life to advocating the establishment of a German railway system, and it was he who traced the principal highways which have since been established in Germany. Protection, in his opinion, was one means of increasing the economic cohesion of Germany, because of the solidarity of interests which would result from the presence of a powerful industry.
With similar enthusiasm he devoted himself to two apparently contradictory tasks—the suppression of inter-State duties and the establishment of protective rights. To him there was no element of contradiction in this, any more than there would be for us in a national system of political economy with no protective rights.[617]
He also extended the political horizon of the Classical school and substituted a dynamic for their purely static conception of national development. His thorough examination of the conditions of economic progress is a contribution to the study of international trade exactly analogous to the contribution made by Sismondi to the study of national welfare. But, unlike Sismondi, who wished to retard this progress, he is anxious to stimulate it, and so he charges the State with the duty of safeguarding the future prosperity of the country and with furthering its production. The actual procedure, involving as it did the establishment of protective rights, may appear to us to be unfortunate.[618] But the idea which inspires it—the recognition that in the interests of the future national power has a definitely economic rôle—is essentially sound. To-day it is a mere commonplace, but when List enunciated it it was quite a novel idea.
In attempting to define List’s real significance one feels that he failed in the achievement of his chief aim. He has not succeeded in breaking down the abstract theory of international trade. On the other hand, he did make a real contribution to economic science, a contribution which the whole of the nineteenth century seemed bent upon emphasising, namely, that the Classical writers had been too ready to draw universal conclusions from their doctrines, forgetting that in economics it is never safe to pass from pure theory to practical applications without taking account of the intermediate links and making allowance for change of time and place—considerations which abstract theory rightly avoids. List’s merit lies in his having emphasised this truth, especially in the region of international trade, and in his doing it just at that particular moment.
V. PROUDHON AND THE SOCIALISM OF 1848
Proudhon comes next, though his place in the history of economic doctrines is not easily defined. Like all socialists he begins with a criticism of the rights of property. The economists had carefully avoided discussing them, and political economy had become a mere résumé of the results of private property. Proudhon regarded these rights as the very basis of the present social system and the real cause of every injustice. Accordingly he starts with a criticism of property in opposition to the economists who defended it.
But how can we reform the present system or replace it by a better? Herein lies the difficulty. Born twenty years earlier, Proudhon, like many others, would perhaps have invented a Utopia. But what was possible in 1820 was no longer so twenty years later. Public opinion was already satiated with schemes of reform. Owen, Saint-Simon, Fourier, Cabet, and Louis Blanc had each in his turn proposed a remedy. The fancy of reformers had roamed at will over the whole wide expanse of possible reforms. Proudhon was well acquainted with all these efforts, and had come to the conclusion that they were all equally useless. Hence he turns out to be a critic of the socialists as well as of the economists.
Proudhon attempts the correction of the vices of private property without becoming a party to what he calls the “crass stupidity of socialism.” Every Utopian scheme is instinctively rejected. He cares nothing for those who view society as they do machinery and think that an ingenious trick is all that is needed to correct all anomalies and to reset the machine in motion. To him social life means perpetual progress.[619] He knows that time is required for the conciliation of those social forces that are warring against one another. He was engrossed with his attempt to find a solution for this difficult problem when the Revolution of 1848 broke out, and Proudhon, suddenly thrown into action, finds himself forced to express his ideas in a concrete form, such that all could understand. The critic has to try his hand at construction, and almost despite himself he outlines another Utopia in his Exchange Bank.
Other writers had sought a solution in the complete overthrow of the present methods of production and distribution. But Proudhon thought it lay in improved circulation. It was an ingenious idea, and it deserves mention in a history of economic doctrines because of the truth, mingled with error, which it contains, and because it has become the type of a series of similar projects. It is upon this conception that we wish to dilate here. Leaving aside his other ideas, which are no whit less interesting, we shall treat of Proudhon the philosopher, moralist, and political theorist only in so far as these have influenced Proudhon the economist.[620]
I: CRITICISM OF PRIVATE PROPERTY AND SOCIALISM
The work that first brought Proudhon to the notice of the public was a book published in 1840 entitled Qu’est-ce que la Propriété? Proudhon was then thirty-one years of age.[621] Born at Besançon, he was the son of a brewer,[622] and was forced to earn his living at an early age. He first became a proof-corrector, and then set up as a printer on his own account. Despite hard work he became a diligent reader, his only guide being his insatiable thirst for knowledge. The sight of social injustice had sent the iron into his soul. Economic questions were faced with all the ardour of youth, with all the enthusiasm of a man of the people speaking on behalf of his brothers, and with all the confidence of one who believes in the convincing force of logic and common sense. All this is very evident in his brilliantly imaginative work. Mingled with it is a good deal of that provoking swagger which was noted by Sainte-Beuve as one of his characteristics, and which appears in all his writings.
Throughout this treatise from first page to last there periodically flashes one telling phrase which sums up his whole argument, “Property is theft.”[623]
The question then arises as to whether Proudhon regards all property as theft. Does he condemn appropriation, or is it the mere fact of possession that he is inveighing against? This is how the public at large have viewed it, and it would be useless to deny that Proudhon owes a great deal to this interpretation, and the consequent consternation of the bourgeoisie. But his meaning is quite different. Private property in the sense of the free disposal of the fruits of labour and saving is in his opinion of the very essence of liberty. At bottom this is nothing more than man’s control over himself.[624] But why attack property, then? Property is attacked because it gives to the proprietor a right to an income for which he has not worked. It is not property as such, but the right of escheat, that forms the butt of Proudhon’s attack; and following the lead of Owen and other English socialists, as well as the Saint-Simonians, he directs his charges against that right of escheat which, according to circumstances and the character of the revenue, is variously known as rent, discount, money interest, agricultural privilege, sinecure, etc.[625]
Like every socialist, Proudhon considered that labour alone was productive.[626] Land and capital without labour were useless. Hence the demand of the proprietor for a share of the produce as a return for the service which his capital has yielded is radically false. It is based upon the supposition that capital by itself is productive, whereas the capitalist in taking payment for it literally receives something for nothing.[627]
All this is simply theft. His own definition of property is, “The right to enjoy the fruits of industry, or of the labour of others, or to dispose of those fruits to others by will.”[628]
The theme is not new, and the line of thought will be resumed—by Rodbertus among others. The originality of the work consists not so much in the idea as in the brilliance of the exposition, the vehemence of the style, and the verve of the polemics hurled against the old arguments which based property upon labour, upon natural right, or upon occupation. A German writer[629] has said that, published in Germany or in England, the book would have passed unnoticed, because in both those countries the defence of property had been much more scientific than in France.[630]
The whole force of the work lies, not in itself, but in the weakness of the opposing arguments, and this fact is quite sufficient to give it a certain permanent value. The treatise sent an echo through the whole world, and its author may be said to have done for French socialism what Lassalle did for German. The ideas set forth are not new, but they are expressed in phrases of wonderful penetration.
There is also a wealth of ingenious remarks, which, if not, perhaps, true, deserve retention because of their originality. How such spoliation on the part of capitalists and proprietors can continue without a revolt of the working men is a question which has been asked by every writer on theoretical socialism, without its full import ever being realised. Is there not something very improbable in this? The problem is a curious one, indeed, and requires much ingenuity for its solution. Marx disposed of it by his theory of surplus value. Rodbertus in a simpler fashion showed the opposition between economic distribution as realised in exchange and the social distribution which lurks behind it. Proudhon has his own solution. There is, says he, between master and men continual miscalculation.[631] The master pays each workman in proportion to the value of his own individual labour, but reserves for himself the product which results from the collective force of all—a product which is altogether superior to that yielded by the sum of their individual efforts. This excessive product represents profits. “It is said that the capitalist pays his workmen by the day. But to be more exact we ought to say that he pays a per diem wage multiplied by the number of workmen employed each day—which is not the same thing. For that immense force which results from union and from the harmonious combination of simultaneous efforts he has paid nothing. Two hundred grenadiers can deck the base of the Louqsor statue in a few hours, a task which would be quite impossible for one man though he worked two hundred days. According to the capitalist reckoning the wages paid in both cases would be the same.”[632] “And so the worker is led to believe that he is paid for his work, whereas in reality he is only partly paid for it. Even after receiving his wage he still retains a right of property in the things which he has produced.”[633] His explanation, though very subtle, is none the less erroneous.
The appearance of the pamphlet made Proudhon famous, not merely in the eyes of the public, who knew little of him beyond his famous formula, but also in the opinion of the economists. Blanqui and Garnier, among others, interested themselves in his work. “It is impossible to have a higher opinion of anyone than I have of you,” writes the former.[634] Blanqui by his favourable report to the Academy of Moral Sciences was instrumental in thwarting the legal proceedings which the Minister of the Interior was anxious to take against Proudhon. And it was upon Garnier’s advice that the publisher Guillaumin, although a strong adherent of orthodox economics, consented to issue a new work by Proudhon in 1846. The book was entitled Les Contradictions économiques, and Guillaumin was not a little startled by it.[635]
The sympathy of the economists is easily explained. They realised from the first that Proudhon was a vigorous opponent of their views, but it was not long before they discovered that he was an equally resolute critic of socialism. Let us briefly examine his attitude with regard to the latter.
No one has ever referred to socialists in harsher terms. “The Saint-Simonians have vanished like a masquerade.”[636] “Fourier’s system is the greatest mystification of our time.”[637] To the communists he writes as follows: “Hence, communists! Your presence is a stench in my nostrils and the sight of you disgusts me.” Elsewhere he says: “Socialism is a mere nothing. It never has been and never will be anything.”[638] The violence of his attitude towards his predecessors springs from a fear of being confused with them. The procedure is intended to put the reader on his guard against all equivocation, and to afford him valuable preparation for appreciating Proudhon’s solutions by showing how utterly impossible the other solutions are.
His attack upon the socialists roughly amounts to a charge of failure to realise that the destruction of the present régime would involve taking a course in the opposite direction. The difficult problem which he set out to solve was not merely the suppression of existing economic forces, but also their equilibration.[639] He never contemplated “the extinction of such economic forces as division of labour, collective effort, competition, credit, property, or even economic liberty.”[640] His chief concern was to preserve them, but at the same time to suppress the conflict that exists between them. The socialists aim merely at destruction. For competition they would substitute an associative organisation of labour; instead of private property they would set up community of goods[641] or collectivism; instead of the free play of personal interest they would, according to Fourier, substitute love, or love and devotion, as the Saint-Simonians put it, or the fraternity of Cabet. But none of these satisfies Proudhon.
He dismisses association and organisation as being detrimental to the liberty of the worker.[642] Labour’s power is just the result of “collective force and division of labour.” Liberty is the economic force par excellence. “Economic perfection lies in the absolute independence of the workers, just as political perfection consists in the absolute independence of the citizens.”[643] “Liberty,” he remarks in an address delivered to the electors of the department of the Seine in 1848, “is the sum total of my system—liberty of conscience, freedom of the press, freedom of labour, of commerce, and of teaching, the free disposal of the products of labour and industry—liberty, infinite, absolute, everywhere and for ever.” He adds that his is “the system of ’89,” and that he is preaching the doctrines of Quesnay, of Turgot, and of Say. Indeed, it would not be difficult to imagine ourselves reading the Classical rhapsodies concerning the advantages of Free Trade over again.[644]
Communism as a juridical system is rejected no less energetically. There is no suggestion of suppressing private property, which is the necessary stimulant of labour, the basis of family life, and indispensable to all true progress. His chief concern is to make it harmless and to place it at the disposal of everyone.[645] “Communism is merely an inverted form of private property. Communism gives rise to inequalities, but of a different character from those of property. Property is the exploitation of the weak by the strong, communism of the strong by the weak.”[646] It is still robbery. “Communism,” he exclaims, “is the religion of misery.”[647] “Between the institution of private property and communism there is a world of difference.”[648]
Racial devotion or fraternity as possible motives for action are not recognised. They imply the sacrifice and the subordination of one man to another. All men have equal rights, and the freer exercise of those rights is a matter of justice, not of fraternity. Proudhon thinks the axiom so very evident that he takes no trouble to explain it, but merely gives us a definition of justice. In his first Mémoire it is defined as “a kind of respect spontaneously felt and reciprocally guaranteed to human dignity in any person and under all circumstances, even though the discharge of that feeling exposes us to some risk.”[649]
His justice is tantamount to equality. If we apply the definition to the economic links which bind men together, we find that the principle of mutual respect is transformed into the principle of reciprocal service.[650] Men must be made to realise this need for reciprocal service. It is the only way in which equality can be respected. “Do unto others as you would that others do unto you”—this principle of justice is the ethical counterpart of the economic precept of mutual service.[651] Reciprocal service must be the new principle which must guide us in rearranging the economic links of society.
And so a criticism of socialism helps Proudhon to define the positive basis of his own system. The terms of the social problem as it presents itself to him can now be clearly followed. On the one hand there is the suppression of the unearned income derived from property—a revenue which is in direct opposition to the principle of reciprocal service. On the other hand, property itself must be preserved, liberty of work and right of exchange must be secured. In other words, the fundamental attribute of property must be removed without damaging the institution of property itself or endangering the principle of liberty.[652]
It is the old problem of how to square the circle. The extinction of unearned incomes must involve the communal ownership of the instruments of production, although Proudhon did not seem to think so. Hitherto the reform of property had been attempted by attacking the production and distribution of wealth. No attention was ever paid to exchange. But Proudhon thought that in the act of exchange inequality creeps in and a new method of exchange is needed. Towards the end of the Contradictions économiques he gives us an obscure hint of the kind of reform to be aimed at. After declaring that nothing now remains to be done except “to sum up all contradictions in one general equation,” he proceeds to ask what particular form that equation is to take. We have already, he remarks, been permitted a glimpse of it. “It must be a law of exchange based upon a theory of mutual help. This theory of mutualism—that is, of natural exchange—is from the collective point of view a synthesis of two ideas—that of property and that of communism.”[653] No further definition is attempted. In a letter written after the publication of the Contradictions he still refers to himself as a simple seeker, and states that he has a new book in preparation, in which these propositions are to be further developed.
About the same time he had laid out his plans for active propaganda in the press. But the Revolution of 1848 threw him into the mêlée of party politics and hastened the publication of his theories.
In order to give a better idea of the place occupied by Proudhon’s ideas, and to show how they were connected with the socialist experiments of the time, we must say a few words about the Revolution itself.
II: THE REVOLUTION OF 1848 AND THE DISCREDIT OF SOCIALISM
Socialists of all shades of opinion, who from 1830 to 1840 had been advocating radical reforms, were given a unique opportunity of putting their theories to the test during the Revolution of 1848. During the four months (February to June) which preceded the terrible ruin of the socialist Republic by the bourgeoisie projects of all kinds which for many years had been discussed in books and newspapers appeared to be on the point of bearing fruit. For a number of weeks nothing seemed impossible. “The right to work,” “organisation of labour,” and “association,” instead of being so many formulas, were by a mere stroke of the magic wand to be translated into realities.
Enthusiasts were not wanting to attempt this task of transformation, but, alas! only to find every scheme tumble into ruins. Every formula, when put to the test, was found to be void. The malevolence of some people, the impatience of others, the awkwardness and haste of the promoters even, made the experiments odious and ridiculous. Public opinion was at last thoroughly wearied and all the reformers were indiscriminately condemned.
The year 1848 is accordingly a memorable one in the history of social ideas. The idealistic socialism of Louis Blanc, of Fourier, and of Saint-Simon was definitely discredited. Bourgeois writers thought that it was utterly destroyed. Reybaud, who contributed the article on Socialism to the Dictionnaire d’Économie politique (edited by Coquelin and Guillaumin) in 1852, writes as follows: “To speak of socialism nowadays is to deliver a funeral oration. It has exhausted itself. The vein is worked out. Should the human mind in its vertigo ever take it up again it will be in a different form and under the influence of other illusions.”
It fared scarcely better at the hands of subsequent socialists. Marx referred to all his predecessors under the rather misleading title of Utopians, and against their fantastic dreams he set up the “scientific socialism” of Das Kapital. Between the two epochs lies a distinct cleavage, marked by the Revolution of 1848. We must briefly see how this was brought about, and rapidly review the more important experiments that were made.
First of all there is “the right to work.” Fourier’s formula, which was developed by Considérant and adopted by Louis Blanc and other democrats, became extremely popular during the reign of Louis Phillipe. Proudhon speaks of it as the only true formula of the February Revolution. “Give me the right to work,” he declares, “and I will give you the right of property.”[654]
Workmen thought that the first duty of the Provisional Government was to give effect to this formula. On February 25 a small group of Parisian workmen came to the Hôtel de Ville to urge their claims, and the Government hastened to recognise them. The decree drawn up by Louis Blanc was as follows: “The Provisional Government of the French Republic undertakes to guarantee the existence of every worker by means of his labour. It further undertakes to give work to all its citizens.” The following day another decree announced the immediate establishment of national workshops with a view to putting the new principle into practice. All that was necessary to gain admission was to have one’s name inscribed in one of the Parisian municipal offices.
Louis Blanc in his book of 1841 had demanded the establishment of “social” workshops. Public opinion, misled by the similarity of names, and encouraged to persist in its error by the enemies of socialism, thought that the national workshops were the creation of Louis Blanc. Nothing could be more incorrect. The “social” workshops, as we know, were to engage in co-operative production, whereas the national workshops were to provide employment for idlers. Similar institutions had been established during every crisis between 1790 and 1830, generally under the name of “charity works.” Moreover, it was Marie, the Minister of Public Works, and not Louis Blanc, who organised them. Far from providing work as the socialists had hoped, the Government soon realised that the workshops afforded an admirable opportunity for binding the workmen together into brigades which might act as a check upon the socialistic tendencies of the Luxembourg Commission, then presided over by Louis Blanc. The workshops were placed under the management of Émile Thomas, the engineer, who was an avowed opponent of the scheme. In his Histoire des Ateliers nationaux, written in 1849, he tells us how they were controlled by him in accordance with the wishes of the anti-socialist majority of the Provisional Government.[655]
But they were mistaken in their calculations. Those who thought that the national workshops could be used for their own political ends were soon undeceived. The Revolution greatly increased the number of idlers, already fairly considerable as the result of the economic crisis of 1847. Moreover, the opening of the workshops brought the workmen from the provinces into Paris. Instead of the estimated 10,000, 21,000 had been enrolled by the end of March, and by the end of April there were 99,400. They were paid two francs a day while at work, and a franc when there was no work for them. In a very short time it became impossible to find employment for so many. The majority of them, whatever their trade, were employed upon useless earthworks, and even these soon proved inadequate. Discontent soon became rife among this army of unfortunate workers, humiliated by the nature of the ridiculous labour upon which they were employed, and scarcely satisfied with the moderate salary which they received. The wages paid, however, were more than enough for the kind of work that was being done. The workshops became centres of political agitation, and the Government, thoroughly alarmed, and acting under pressure from the National Assembly, was constrained to abandon them.
Suddenly, on June 21, a summons was executed upon all men between seventeen and twenty-five enrolled in the shops, ordering them to join the army or to leave for the country, where more digging awaited them. The exasperated workmen rose in revolt. Rioting broke out on June 23, but it was crushed in three days. Hundreds of the workers died in the struggle, and the country was terrorised into reaction.
That simple logic which is always so characteristic of political parties held the principle of “the right to work” responsible for this disastrous experience, and it was definitely condemned. This is quite clear from the constitutional debates in the National Assembly. The constitutional plan laid down by Armand Marrast on June 19, a few days before the riots, recognised “the right to work.” “The Constitution,” says Article 2, “guarantees to every citizen liberty, equality, security, instruction, work, property, and public assistance.” But in the new plan of August 29—after the experience of June—the article disappeared. The right to relief only was recognised. In the discussion on the article an amendment re-establishing “the right to work” was proposed by Mathieu de la Drôme. A memorable debate followed, in which Thiers, Lamartine, and Tocqueville opposed the amendment, while the Radical Republicans Ledru-Rollin, Crémieux, and Mathieu de la Drôme defended it.[656] The socialists had become extinct. Louis Blanc was in exile, Considérant ill, while Proudhon was afraid of startling his opponents and of compromising his friends. Besides, the Assembly had already made up its mind. The amendment was defeated, and Article 8 of the preamble to the Constitution of 1848 runs as follows: “The Republic by means of friendly assistance should provide for its necessitous citizens, either by giving them work as far as it can, or by directly assisting those who are unable to work and have no one to help them.”
During the reign of the July Monarchy “the organisation of labour” was another phrase which divided the honours with “the right to work.” With the spread of the Revolution came a similar menacing demand for its realisation. By a strange coincidence the author of this formula was also a member of the Provisional Government. And so when on February 28, three days after the recognition of “the right to work,” the workers came in a body and claimed the creation of a Minister of Progress, the organisation of labour, and the abolition of all exploitation, Louis Blanc immediately seized the opportunity to urge his unwilling colleagues to accede to their demands. He himself had pressed the Government to take the initiative in social reform, and now that the Revolution had made him a member of the Government how could he escape his responsibility? After some difficulty his colleagues succeeded in persuading him to accept the alternative of a Government commission on labour, of which he was to be president. The commission was entrusted with the task of drawing up the proposed reforms, which were afterwards to be submitted to the National Assembly. To mark the contrast between the old and the new régime the commission carried on its deliberations in the Palais du Luxembourg, where the Chambre des Paris formerly sat.
The Luxembourg commission was composed of representatives elected by workmen and masters, three for each industry. The representatives met in a general assembly to discuss the reports prepared by a permanent committee of ten workers and an equal number of masters, to which Louis Blanc had added a few Liberal economists and socialists, such as Le Play, Dupont-White, Wolowski, Considérant, Pecqueur, and Vidal. Proudhon was also invited, but refused to join. As a matter of fact, only the workers took part in the sittings.
The commission, although it possessed no executive power, might have been of some service. But Louis Blanc, as he himself confessed, regarded it as “a golden opportunity where socialism had at its disposal a tribunal from which it could address the whole of Europe.”[657] He still kept up his rôle of orator and writer, and devoted most of the sittings to an eloquent appeal for the theories already outlined in his Organisation of Labour.[658] Vidal and Pecqueur undertook the task of elaborating the more definite proposals. In a lengthy report which appeared in the Moniteur[659] they outlined a plan of State Socialism, with workshops and agricultural colonies, with State depots and bazaars as places of sale. Money in the form of warrants was to be borrowed on the security of goods, and a State system of insurance—excepting life policies—was to be established. Finally, the Bank of France was to be transformed into a State bank. This was to extend the operation of credit, and to reduce the rate of discount simply to insurance against risk. Vidal and not Pecqueur is obviously the author of the report, for it contains some of the projects that had already appeared in his book De la Répartition des Richesses.
None of the projects was even discussed by the National Assembly. The only positive piece of work accomplished by Louis Blanc’s commission was done under pressure from the workmen. This was the famous decree of March 2, abolishing piece-work and reducing the working day to ten hours in Paris and eleven hours in the provinces. This decree, though it was never put into operation, marks the first rudiments of French labour legislation. Louis Blanc was forced to grant it because the working-class element on the commission refused to take part in its proceedings until they were satisfied on this point. The commission must also be credited with several successful attempts at conciliation.
Not only did the commission fail to do anything permanent, but its degeneracy into a mere political club thoroughly alarmed the public. It became involved in elections, and even intervened in street riots. It finally took a part in the demonstration of May 15, which, under pretext of demanding intervention in favour of Poland, resulted in an invasion of the National Assembly by the mob. Louis Blanc had already retired. Since the reunion of the National Assembly the Government had been replaced by an executive commission, and Blanc, no longer a supporter of the Government, sent in his resignation on May 13. After that the commission was at an end, and, like the national workshops, it all resulted in nothing save a general discredit of socialist opinion.
There still remained the “working men’s associations.” Every socialist writer of the early nineteenth century was agreed on this principle of association. Every reformer, with the exception of Proudhon,[660] who always pursued a path of his own, regarded it as the one method of emancipation. It was quite natural that it should be put to the test.
In its declaration of February 26 the Provisional Government stated that besides securing the right to work, the workers must combine together before they could secure the full benefit of their labour. The moment Louis Blanc attained to power he sought to guide the energies of the commission in this direction. The “Association” was to be of the nature of a co-operative productive society, supported by the State. Under the influence of Buchez, an old Saint-Simonian, a Republican Catholic and the founder of the newspaper called L’Atelier, there had been formed in 1834 an association of jewellers and goldsmiths.[661] But it was a solitary exception.
Louis Blanc was more fortunate. He successively founded associations of tailors, of saddlers, of spinners and lace-makers, and he secured Government orders for tunics, saddles, and epaulettes for them. Other associations followed, and by July 5 the National Assembly was sufficiently interested in these experiments to vote the sum of three millions to their credit. A good portion of this sum passed into the hands of mixed associations of masters and men formed with the sole purpose of benefiting by the Government’s liberality. The workmen’s associations pure and simple, however, received more than a million, and there was not a sou of it left by 1849.
The first co-operative movement inspired by the ideas of Louis Blanc was of short duration. The National Assembly took good care to place the new societies under Ministerial control by appointing a Conseil d’Encouragement, nominated by the Ministry to fix the conditions under which loans should be granted. The Conseil hastened to publish model regulations which left the associations little scope for internal organisation. So stringent were the rules that several of them were immediately jeopardised, and every society which failed to conform to one of the three models outlined in Article 19 of the Commercial Code was obliged to dissolve. This meant every society which was not nominally a collective society, a joint stock or a limited liability company. By 1855, according to the testimony of Reybaud, there remained only nine out of those subsidised in 1848. Consumers’ co-operative societies, that is, the societies which aimed at securing cheap commodities, established at Paris, Lille, Nantes, and Grenoble, were also dissolved.
And so all these experiments—the only ones that had not already brought reformers into discredit—were destined to fail in their turn. Their extinction was partly due to political causes, partly to their founders, who had not yet been trained in the difficult task of building up such associations.
The social experiments of 1848 one after another foundered, bringing a distrust of theories in their train. There still remained one other experiment connected with Proudhon’s name—that of free credit. But it also was destined to fail like the rest.
III: THE EXCHANGE BANK THEORY
The Revolution of 1848 did not take Proudhon quite unawares, although he considered the outbreak was rather sudden. He was soon convinced that the real problem to be determined was economic rather than political, but he also realised that the education of the masses was too backward to permit of a peaceful solution. Proudhon, in this matter at one with his French confrères, had hoped for such a solution.[662] He thought the February Revolution was a child prematurely born.[663] In a striking article in the columns of Le Peuple he gave wistful expression to his fears as he foresaw the Revolution impending. Its solution had been delivered to none and its interpretation baffled the ingenuity of all.
“I have wept over the poor workman, whose daily bread is already sufficiently uncertain and who has now suffered misery for many years. I have undertaken his defence, but I find that I am powerless to succour him. I have mourned over the bourgeois, whose ruin I have witnessed and who has been driven to bankruptcy and goaded to opposition of the proletariat. My personal inclination is to sympathise with the bourgeois, but a natural antagonism to his ideas and the play of circumstance have made me his opponent. I have gone in mourning and paid penance for the spirit of the old Republic long before there were any signs of its offspring. This Revolution which was to restore the public order merely marks the beginning of a new departure in social revolution which no one understands.”[664]
But the Revolution having once begun, Proudhon did not feel himself justified in being behindhand. He had been a most severe critic of the existing régime, and he felt that he was bound to attempt a solution of the practical problems which suddenly came to the front. He became a journalist and threw himself whole-heartedly into the struggle. Hitherto he had been content with vague suggestions as to where the evil lay. But now he was anxious to make reform practicable and to fill in the details of the scheme; and so he invented the Exchange Bank.
Proudhon’s exposition of the scheme is contained in a number of pamphlets, in newspapers, and in his books.[665] The explanations do not always tally, and he is not always happy in stating exactly what he thinks. This explains why he has been so often misunderstood. We shall try to give a résumé of his ideas before proceeding to criticise them and to compare them with analogous projects formulated both before and after his time. This will help us to understand where the originality of the scheme lay.
The fundamental principle on which the whole scheme rests is somewhat as follows: Of all the forms of capital which allow of a right of escheat to the product of the worker, whether in the form of rent, of interest, or of discount, the most important is money, for it is only in the form of money that these dues are actually paid.[666] If we could suppress the right of escheat in the case of this universal form of capital—in other words, if interest were abolished—the right of escheat in every other case would soon disappear.
Let us suppose that by means of some organisation or other money required for the purchase of land, machinery, and buildings for industrial purposes could be procured without interest. Were this the case the required capital would then be obtained in that way instead of by payment of interest or rent as is the case to-day. The suppression of money interest would enable the worker to borrow capital gratuitously, and would give him immediate control over all useful capital instead of renting it. All attempts to hold up capital for the sake of receiving interest without labour would thus be frustrated. The right of property would be reduced to mere possession. Exchange would be reciprocal, and the worker would secure all the produce of his labour without having to share it with others. In short, economic justice would be secured.
This is all very well, but how can the necessary money be obtained without paying interest? Everything depends upon that.
Proudhon invites us to consider what money really is. It is a mere medium of exchange which is designed to facilitate the circulation of goods. Proudhon, who had hitherto regarded money as capital par excellence, now treats it as a mere instrument of exchange. “Money by itself is of no use to me. I merely take it in order to part with it. I can neither consume it nor cultivate it.”[667] It is a mere medium of exchange, and the interest paid merely covers this cost of circulation.[668] But paper money will fulfil this function quite as well and much more cheaply. Banks advance money in exchange for commodities or supply bills which are immediately transferable into cash. In exchange for this service the banker receives a discount which goes to remunerate the shareholders who have supplied the capital. Why not establish a bank without any capital which, like the Bank of France, will discount goods with bills—either circulation or exchange notes? The bills would be inconvertible, and consequently would cost scarcely anything, and there would be no capital to remunerate.
The service given would be equal to that given by the banks, but would cost a great deal less. All that would be required to ensure the circulation of the bills would be an understanding on the part of the clientèle of the new bank that they would accept them as payment for goods. The bearer would thus be certain that they were always immediately exchangeable, just as if they were cash. The clients would lose nothing by accepting them, for the statutes would decree that the bank should never trade in anything except goods actually delivered or under promise of delivery. The notes in circulation would never exceed the demands of commerce. They would always represent goods already produced and actually sold, but not yet paid for.[669] Following the example of other banks, the bank would advance to the seller of the goods a sum of money which it would subsequently recover from the buyer. The merchants and manufacturers would obtain not only their circulating capital without payment of interest, but also the fixed capital necessary for the founding of new industries. These advances obtained without interest would enable them to buy and not merely to rent the instruments of production which they needed.[670]
The consequences of a reform of this kind cannot be easily enumerated. Not only would capital be freely placed at the disposal of everyone, but every class distinction would disappear[671] as soon as the worker ceased selling his products at cost price[672] and government itself would become useless. The aim of all government is to check the oppression of the weak by the strong.[673] But the moment fair exchange becomes possible, free contract is sufficient to secure this; there is no longer anyone who is oppressed. All are equally favoured, for the cause of contention has been removed. “Once capital and labour are identified, society will subsist of its own accord, and there will no longer be any need for government.” Government has “its origin and its whole being immersed in the economic system.” Proudhon’s system means anarchy—the absence of government.[674]
Such is Proudhon’s plan, and such its consequences. To understand its full significance we must inquire whether (1) the substitution of exchange notes for bank-notes payable at sight is practicable, and, (2) supposing it to be practicable, if it is likely to have the effects anticipated by its author.
Proudhon states that his system merely involves the universal adoption of exchange notes.[675] The Exchange Bank would merely append the manager’s signature against the particular commodity discounted. But the issue of bank-notes at the present time involves nothing more than this. Instead of the bill of exchange which it now buys, and which enjoys only a limited circulation because the signatories have only a very limited credit, it is proposed that the Bank of France should substitute a note bearing its own signature, which is universally known and testifies to an illimitable amount of credit. In what respects, then, does Proudhon’s circulating medium differ from a bank-note? It differs simply in the fact that the signature of the Bank of France involves a promise of reimbursement in metallic money, a commodity universally accepted and demanded, while Proudhon’s Exchange Bank enters into no such definite agreement, but merely undertakes to accept it in lieu of payment.
Theoretically, perhaps, the difference may appear insignificant, since the signatures are the only guarantee of the solvency of the notes of the Bank of France and the Exchange Bank alike. But in practice it is enormous. The certainty that the note can be exchanged for money gives it a wide currency and makes it acceptable to many people who rely implicitly upon their confidence in the bank. They need give no thought to the question of its solvency. A mere circulating medium, on the other hand, in addition to transferring a claim to certain goods belonging to clients of the bank, involves a certain amount of confidence in the solvency of those clients—a confidence not always easily justified. A note of this kind will only circulate among the bank’s clientèle. It will never reach the general public as the bank-note actually does. The clients themselves will keep their engagements just so long as the bank continues to discount goods that have actually been delivered and never refuses payment when it falls due. Failing this, the exchange notes, instead of regularly returning to the bank, will remain in circulation. A slight crisis or a little tension, and many of the clients will become insolvent. The total nominal value of the exchange notes will quickly surpass the actual value of the goods which they represent. There will be a rapid depreciation, and clients even will refuse to take them.
It is just possible to conceive of the circulation of such exchange notes, but the area of circulation will be a very limited one, and it will be utterly impossible if all the clients are not perfectly solvent.
Let us, however, suppose that the practical difficulties have been overcome, and that the exchange notes are already in circulation. Interest will not disappear even then, and herein lies the essential weakness of the system.
Why does the Bank of France charge a discount? Is it, as Proudhon suggests, because it supplies cash in return for a bill of exchange, so that “the seigneurial right of discount”[676] would disappear with the adoption of a non-metallic currency? The bank charges discount simply because it gives a certain quantity of merchandise immediately exchangeable in return for a bill of exchange falling due some months hence. It gives a tangible commodity in exchange for a promise—a present good for a future. What the bank takes is the difference between the present value of the bill of exchange and its value when it falls due. It is not the mere whim of the banker or the employment of a particular kind of money that gives rise to discount. It belongs to the very nature of things. Proudhon notwithstanding, a sale for cash and a sale with future payment must remain two different operations,[677] at least as long as the actual possession of a good is judged to be more advantageous than its future possession.
This difference, even in the case of the Exchange Bank, would very soon reappear. The exchange notes would represent goods which were to be sold at a certain date. Although the Bank may refuse to discount, this will not lessen the advantage enjoyed by those merchants who are paid in cash. In order to secure this advantage they will enter into agreement with those buyers who pay cash either in the form of goods or of precious metals (which are, after all, commodities), granting a slight rebate on the paper price. There would thus be two sets of prices, the paper prices of goods sold for future payment and the money price of goods sold for cash. The first would be higher than the second, and the difference—refused by the banks—would be pocketed by the sellers. Money interest would then reappear under a new form.
To this Proudhon would reply that the clients of the bank, under the terms of their agreement, are debarred from taking any such premiums. Of course, if they remained faithful to their promises interest or discount would be suppressed; but this would result, not from the organisation of the Exchange Bank, but because of mutual agreement. This would be a purely moral reform requiring no banking contrivance to aid it, but one in which progress must inevitably be very slow.
The Bank of Exchange failing to suppress discount, or to check the right of escheat in general, Proudhon’s other conclusions fall to the ground.
His theoretical error consists in his treating money at one moment as capital par excellence, at another as a mere medium of exchange having no value. He forgets that money is desired not merely for purposes of exchange, but also as a store of value, as the proper instrument for hoarding and saving; and although the exchange notes may replace it in one respect, they fail in another. We may increase the circulating media at pleasure, but we cannot multiply our capital. Money may be replaced by goods, but this will not add a single franc to the capital which already exists in society, of which money itself is a part. Nor will it lessen the superior value of present as compared with future goods—a superiority which gives rise to the phenomenon of interest. The only result of multiplying the exchange notes without increasing the amount of social capital would be to raise prices as a whole, the price of land, houses, and machinery as well as the price of consumption goods. Capital would be lent as before, and being less plentiful the high rate of interest or rent would tend to maintain the high level of prices, and these would in turn be still further increased—a strange outcome of a reform intended to lower them! Proudhon, having exaggerated the evil effects of gold, now accepts Say’s formula too literally. J. B. Say allowed himself to be led into error by his own formula that “Goods exchange for goods,” and it is interesting to note that the Exchange Bank is the logical, though somewhat paradoxical, outcome of the reaction against the Mercantilist ideas concerning money which can be traced to Adam Smith and the Physiocrats.
This does not imply that Proudhon’s idea is devoid of truth. The false ideal of free credit contains the germ of a true ideal, namely, mutual credit. The Bank of France is a society of capitalists whose credit is established by the public who accept their notes. They really deal in public credit. Proudhon saw clearly enough that their notes are ultimately guaranteed by the public. The public are the true signatories of these commercial goods. Were the public insolvent the bank would never recover its advances, which really constitute the security for the bills. The shareholders’ capital is only a supplementary guarantee. The Comte Mollien, the Financial Minister of Napoleon I, declared that in theory a bank of issue should be able to operate without any capital. The public lends money to itself through the intermediary, the bank. Why not operate without the intermediary? Why not eliminate the entrepreneur of credit just as the industrial or commercial entrepreneur is eliminated in the case of the co-operative society? Discount would not disappear altogether, perhaps, but the rate of discount for borrowers would be diminished in proportion to the extent to which they stood to gain as lenders. This is the principle of the mutual credit society, where the initial capital is almost entirely superseded, its place being taken by the joint liability of the co-operators. Proudhon’s initial conception seems to be reducible to this very simple idea.[678]
It seems that Proudhon was merely following the idea of a co-operative credit bank, just as in other parts of the work he copies other forms of co-operation without ever showing much sympathy for the principle itself.[679]
In addition to a correct conception of the value of mutual credit, there runs throughout his whole system a more fundamental idea which helps to distinguish it from other forms of official socialism which arose either before or after his time. This is his profound belief in individual liberty as the indispensable motive of economic activity in industrial societies. He realised better than any of his predecessors that economic liberty is a definite acquisition of modern societies, and that every true reform must be based on liberty. He has estimated the strength of spontaneous economic forces more clearly than anyone else. He has demonstrated their pernicious effects, but at the same time he has recognised, as Adam Smith had done, that this was the most powerful lever of progress. His passionate love of justice explains his hatred of private property, and his jealous belief in liberty aroused his hostility to socialism. Despite his famous formula, Destruam et ædificabo, he destroyed more than he built. His liberalism rested on his profound hold of economic realities, and the social problem of to-day, as Proudhon clearly saw, is how to combine justice with liberty.
Proudhon’s project for an Exchange Bank must not be confused with analogous schemes that have appeared either before or after his day. All these schemes have a common basis in a reform of exchange as a remedy for social inequalities. Apart from this one idea the resemblance is frequently superficial, and the economic bases differ considerably.
(1) Proudhon’s idea has often been contrasted with Robert Owen’s labour notes, and with the scheme prepared by Mr. Bray in 1839, in a work entitled Labour’s Wrongs and Labour’s Remedy,[680] as well as with the later system outlined by Rodbertus. Proudhon’s circulating notes have nothing in common with the labour notes described by these writers. The circulating notes represent commercial goods produced for the purpose of private exchange. Prices are freely fixed by buyer and seller, and they bear no relation to the labour time, as is the case with the labour notes. The final result, doubtless, was expected to be the same. Proudhon hoped that in this way the price of goods, now that it was no longer burdened with interest on capital, would equal cost of production. This result was to be obtained indirectly. The economic errors in the two cases are also different. Proudhon’s error lay in his failure to realise that metallic money is a merchandise as well as an instrument of circulation. The error of Owen, of Bray, and of Rodbertus consisted of a failure to see that the price of goods includes something more than the mere amount of labour which they have cost to produce—an error which Proudhon at any rate did not commit.
(2) Proudhon’s bank has also been confused with other banks of exchange which are really quite different. The ideas underlying such schemes had become prominent before Proudhon’s days, and numerous practical experiments had been attempted along the lines indicated. These banks aimed, not at the suppression of interest, but at a gradual rapprochement between producer and consumer, the goods offered for sale being bought by the bank, and paid for in exchange notes upon an agreed basis of calculation. Buyers in their turn would come to the bank to obtain the necessaries of life, paying for them in exchange notes. An experiment of this kind was made by a certain Fulcrand Mazel in 1829.[681] In this case the bank was merely an entrepôt which facilitated the marketing of the goods produced. Such a system is open to the objection that the value of the notes issued in payment for goods would necessarily vary with the fluctuations in the value of these goods during the interval which would elapse between the time they are taken in by the bank and their eventual purchase by consumers. Proudhon’s plan was to discount the goods already bought or actually delivered. The bank would only advance what was actually promised, but would make no charge for accommodation. Depreciation could only arise if the buyer were insolvent. It could never result from a fall in price as a result of a diminished demand for the product. Proudhon renounced all dealings with solidarity when he dismissed Mazel’s project.[682]
(3) M. Solvay, a Belgian entrepreneur, has recently elaborated a scheme of “social accounting.” He also proposes the suppression of metallic money and the introduction of a perfect system of payment. Here, however, the analogy ends.
What Solvay proposed was the replacement of metallic money, not by bank-notes, but by a system of cheques and clearing-houses. His plan owes its inspiration to the modern development of the clearing-house system. Solvay thought that the system might be so extended as to make the employment of money entirely unnecessary. To every such clearing-house the State would hand over a cheque-book, covering a sum varying with the amount of real or personal property which the house possessed. This cheque-book was to have two columns, one for receipts, the other for expenditure. Whenever any commodity was sold, the liquidation of debt would be effected by the buyer’s stamping the book on the receipt side and the seller’s stamping it on the expenditure side. As soon as the total value of these transactions equalled the initial sum which the cheque-book was supposed to represent the book would be returned to the State bureau, where each individual account would be made up. “In this way everybody’s receipts and expenditure will always be known with absolute clearness.”[683]
The advantage of such a system would in the first place consist in the economy of metallic money. In the second place it would furnish the State with information as to the extent of everybody’s fortune. The State would then be in possession of the information necessary for setting up an equable scheme of succession duties which would gradually suppress the hereditary transmission of acquired fortune. Such gradual suppression would result in the total extinction of the fundamental injustice of modern society, namely, the inequality of opportunity.[684] It would also help the application of that other principle of distributive justice, namely, “to each according as he produces.” The idea is Saint-Simon’s rather than Proudhon’s.
The scope of the proposed reform is quite clear. Social accounting, according to Solvay, is a mere element in a more general conception, that of “productivism,” which in various ways is to result in increasing productivity to its maximum.[685]
In all this it is impossible to see anything of Proudhon’s ideas. With the exception of the suggestion of suppressing metallic money the fundamental conceptions are utterly different. M. Solvay makes no pretence to ability to suppress interest, and he never imagines that money is the cause of interest. The cheque and clearing system is a mere device for facilitating cash payment. It has nothing in common with the Proudhonian system, whereby circulating notes are supposed to place credit sales and cash payments on an equal footing.[686]
The most serious objection to Solvay’s system lies in the fact that the suppression of money as a circulating medium must also involve its suppression as a measure of value. It seems difficult to imagine that the universal cheque bank with no monetary support would not result in a rapid inflation of prices because of the superabundance of paper. But although the particular process advocated by Solvay is open to criticism there can be no objection to his desire to diminish the quantity of metallic money or to further the ideal of equal opportunity for all.
The project was never successfully put into practice. Like the cognate ideas of “the right to work,” “the organisation of labour,” and “working men’s associations,” the idea of “free credit” has left behind it a mere memory of a sudden check.
On January 31, 1849, Proudhon, in the presence of a notary, set up a society known as the People’s Bank, with a view to showing the practicability of free credit. The actual organisation differs considerably from the theoretical outline of the Exchange Bank. The Exchange Bank was to have no capital: the People’s Bank had a capital of 5,000,000 francs, divided into shares of the value of 5 francs each. The Exchange Bank was to suppress metallic money: the People’s Bank had to be content with issuing notes against certain kinds of commercial goods only. The Exchange Bank was to suppress interest: the People’s Bank fixed it at 2 per cent., expecting that it could be reduced to a minimum of ¼ per cent.
Despite these important changes the bank would not work. At the end of three months the subscribed capital was only 18,000 francs, although the number of subscribers was almost 12,000. Just at that moment—March 25, 1849—Proudhon was brought before the Seine Assize Court to answer for two articles published on January 16 and 27, 1849, containing an attack on Louis Bonaparte. He was sentenced to three years’ imprisonment and fined 3000 francs. On April 11 he announced that the experiment would be discontinued, and that “events had already proved too strong for it,” which seemed to suggest that he had lost faith in the scheme.
From that moment free credit falls into the background, and political and social considerations obtain first place in his later works.
IV: PROUDHON’S INFLUENCE AFTER 1848
It is extremely difficult to follow the influence of Proudhon’s thought after 1848.
Karl Marx, who was almost unknown in 1848, became by the publication of his Kapital in 1867 practically the sole representative of theoretical socialism. Marx’s Misère de la Philosophie,[687] published in 1847, is a bitter criticism of the Contradictions économiques, and shows how violently he was opposed to Proudhon’s ideas. To the champion of collectivism the advocate of peasant proprietorship is scarcely comprehensible; the theorist of class war can hardly be expected to sympathise with the advocate of class fusion, the revolutionary with the pacificist.[688] The success of Marx’s ideas after 1867 cast all previous social systems into the shade. Proudhon, he thought, was a mere petit bourgeois. When the celebrated International Working Men’s Association was being founded in London in 1864 the Parisian workmen who took part in it seemed to be entirely under the influence of Proudhon. At the first International Congress, held at Geneva in 1866, a memorial was presented which bore clear indications of Proudhon’s influence, and its recommendations were adopted. At the following Congress, in 1867, Proudhon’s ideas met with a more determined resistance, and by the time of the Congress of Brussels (1868), and that of Basle (1869), Marx’s influence had become predominant.
One might even doubt whether the Proudhonian ideas defended by the Parisian workmen in 1866 were really those of the Proudhon of 1848. They seemed much more akin to the thesis of his last work, La Capacité politique des Classes ouvrières, published in 1865. This book was itself written under the inspiration of a working men’s movement which had arisen in Paris after 1862 as the result of a manifesto signed by sixty Parisian workmen. This manifesto had been submitted to Proudhon as the best known representative of French socialism. The attitude of the French workmen at the opening of the “International,” then, was the effect of a revival of Proudhonism as the outcome of the publication of this new volume rather than a persistence of the ideas of 1848.[689]
The revival was of short duration. Since then, however, the Marxian ideas have been submitted to very thorough criticism, and certain recent writers have displayed an entirely new interest in Proudhon’s ideas. These writers, chief among whom is M. Georges Sorel, combine a great admiration for Marx with a no less real respect for Proudhon. But even in this case it is difficult to speak of the movement as a revival of Proudhon’s ideas. It is rather a new current which owes its inspiration to syndicalism and combines French anarchy and German collectivism. In any case, it is so recent that we cannot yet determine its full import.
III. LIBERALISM
It is time we returned to the Classical writers. Now that the combat had grown fierce among its critics, we are anxious to know what the Classical school itself was doing to repel the onslaughts of the enemy. Its apparent quiescence must not mislead us into the belief that it was already extinct. Although the great works of Ricardo, Malthus, and Say were produced early in the century, it cannot be said that economic literature even after that period, especially in England, had remained at a standstill. But no work worthy of comparison with the writings of the first masters or their eloquent critics had as yet appeared. Now, however, the science was to captivate the public ear a second time, and for a short period at least to unite its many votaries.
But the union was no true one. The Classical school itself was about to break up into two camps, the English and the French. In no sense can they be regarded as rivals, for they are defenders of the same cause. They are both champions of the twin principles of Liberalism and Individualism. But while the first, with John Stuart Mill as its leader, lent a sympathetic ear to the vigorous criticism now rampant everywhere, which claimed that the older theories ought to yield place to the new, the French school, on the other hand, with Bastiat as its chief, struggled against all innovation, and reaffirmed its faith in the “natural order” and laissez-faire.
This divergence really belongs to the origin of the science. Traces of it may be discovered if we compare the Physiocrats with Adam Smith, or J. B. Say with Ricardo; but it was now accentuated, for reasons that we shall presently indicate.
Our third Book naturally divides itself into two parts, the one devoted to the French Liberal school, the other to the English.
I. THE OPTIMISTS
The previous Book has shown us the unsettled state of economic science. It has also indicated how the science was turned from its original course by reverses suffered at the hands of criticism, socialism, and interventionism, which were now vigorous everywhere. The time had come for an attempt to bring economic science back into its true path and to its old allegiance to the “natural order,” a position which it had renounced since the days of the Physiocrats and Adam Smith. This was the task more especially undertaken by the French economists.
The attitude of the French school is not difficult to explain, for the French economists found themselves faced by both socialism and Protection. We must never forget that France is the classic land of socialism.[690] The influence exercised in England by Owen and in Germany by Weitling or Schuster is unworthy of comparison with the exalted rôle played by Saint-Simon, Fourier, or Proudhon in France. The latter writers wielded a veritable charm, not merely over working men, but also over the intellectuals, and on that account were all the more dangerous, in the opinion of economists.
French Protection was never represented by such a prominent champion as Germany had in List, but it was none the less active. Protection in England succumbed after a feeble resistance to the repeal movement led by Cobden, but in France it was powerful enough to resist the campaign inaugurated by Bastiat. It is true that Napoleon III suppressed it, but it soon reappeared, as vigorous as ever.
The French school had thus to meet two adversaries, disguised as one; for Protection was but a counterfeit of socialism, and all the more hateful because it claimed to increase the happiness of proprietors and manufacturers—of the wealthy; while socialists did at least aim at increasing the happiness of the workers—of the poor. Protection was also more injurious, for being in operation its ravages were already felt, whereas the other, happily, was still at the Utopian stage. But in hitting at both adversaries at once the French school discovered that it possessed this advantage: it was free from the reproach that it was serving the interests of a particular class, and could confidently reply that it was fighting for the common good.
A war of a hundred years can scarcely fail to leave a mark upon the nation which bears the brunt of it, and we think that this affords some explanation of the apologetic tendencies and of the normative and finalistic hypotheses for which the French school has so often been reproached.
It is necessary that we should try to understand the line of argument adopted by the French writers in defending the optimistic doctrines which they so easily mistook for the science itself. They argued somewhat as follows:
“Pessimism is the great source of evil. The sombre prophecies of the pessimists have destroyed all belief in ‘natural’ laws and in the spontaneous organisation of society, and men have been driven to seek for better fortune in artificial organisation. What is especially needed to refute the attacks of the critics, both socialists and Protectionists, is to free the science from the compromising attitude adopted by Malthus and Ricardo, and to show that their so-called ‘laws’ have no real foundation. We must strive to show that natural laws lead, not to evil, but to good, although the path thither be sometimes by way of evil; that individual interests are at bottom one, and only superficially antagonistic; that, as Bastiat put it, if everyone would only follow his own interest he would unwittingly find that he was advancing the interests of all.” In a word, if pessimism is to be refuted it can only be by the establishment of optimism.
It is true that the French school protests against the adjective “optimistic,” and refuses to be called “orthodox.” Its protests would be justified if optimism implied quietism—that selfish contentment of the well-to-do bourgeois who feels that everything is for the best in this best of all worlds—or the attenuated humanitarianism of those who think that they can allay suffering by kind words or good deeds. It is nothing of the kind. We have already protested against interpreting laissez-faire as a mere negation of all activity. It ought to be accepted in the English sense of fair play and of keeping a clear field for the combatants. The economists both of the past and of the present have always been indefatigable wranglers and controversialists of the first order, and they have never hesitated to denounce abuses. But their optimism is based upon the belief that the prevalence of evil in the economic structure is due to the imperfect realisation of liberty. The best remedy for these defects is greater and more perfect liberty;[691] hence the title “Liberal,” to which the school lays claim. The liberty of the worker is the best guarantee against the exploitation of his labour and the reduction of wages. M. Émile Ollivier, the author of the law which suppressed combination fines, declared that freedom of combination would put an end to strikes. Free loans would cause the disappearance of usury. Freedom of trade would put an end to the adulteration of goods and the reign of trusts. Competition would everywhere secure cheap production and just distribution.[692]
This optimism, strengthened and intensified, deepened their distrust of every kind of social reform undertaken with a view to protecting the weak, whether by the masters themselves or through the intervention of the State. Liberty, so they thought, would finally remedy the evils which it seemed to create, while State intervention merely aggravated the evils it sought to correct.[693]
What seems still more singular is their scant respect for “associationism” as outlined in our previous chapter. It found just as little favour as State control. They did not display quite the same contempt for it as was shown by the Revolutionists. It was no longer actually condemned, and they put forward a formal plea for the right of combination, in politics, in religion, industry, commerce, and labour. But they always interpreted it as a mere right of coalition or association with a view to protecting or strengthening individual activity. Association as an instrument of social transformation that would set up co-operation in place of competition, and which in the name of solidarity demanded certain sacrifices from the individual for the sake of the community, was not to the liking of the Liberal Individualist school. Even the less ambitious and less complete forms, such as the co-operative and the mutual aid society, seemed to them to be full of illusions and deceptions, if not actually vicious.[694]
The most striking characteristic of the French school is its unbounded faith in individual liberty. This distinctive trait has never been lacking throughout the century and a half that separates us from the time of the Physiocrats. Its most eminent representatives, while spurning the title Orthodox or Classical, have repeatedly declared that they wish for no other name than Liberal.[695]
It is also marked by a certain want of sympathy with the masses in their sufferings. Science, doubtless, does not make for sympathy. But what we merely wish to note is the presence of a certain tendency—already very pronounced in Malthus—to believe that people’s misfortunes result from their vices or their improvident habits.[696] The Liberal school was quite prepared to extend an enthusiastic welcome to the teaching of Darwin. He pointed out that a necessary condition of progress was the natural selection of the best by the elimination of the incapable, and that the price paid is not a bit too high. Belief in the virtue of competition led to the glorification of the struggle for life.
But the Liberal school failed to demonstrate the goodness of all natural laws; neither did it succeed in arresting the progress of either socialism or Protection. The end of the nineteenth century found it submerged beneath the waters of both currents. Yet it never once lost confidence. Its fidelity to principle, its continuity of doctrine, its resolute, noble disdain of unpopularity, have won for it a unique position; and it deserves better than the summary judgment of foreign economists, who describe it as devoid of all originality, or at best as only a pale reflection of the doctrine of Adam Smith.
In this chapter we are to study the period when Liberalism and Optimism were at the height of their fame. It runs from 1830 to 1850. It was during this epoch that the union of political and economic liberty took place. Henceforth they are combined in a single cult known as Liberalism. Economic liberty—that is, the free choice of vocation and the free exchange of the fruits of one’s toil—no longer figured in the category of necessary liberties, alongside of liberty of conscience or freedom of the press. Like the others it was one of the successes already achieved by democracy or civilisation, and to attempt to suppress it was as vain as to try to make a river flow backward. It was just a part of the wider movement towards freedom from all servitude.
The appearance of political economy at the time when the old régime was showing signs of disintegration is not without significance. The Physiocrats, who were the first Liberal Optimists, were unjustly ignored and neglected by their own descendants, not because of their economic errors so much as because of their political doctrines, especially their acceptance of legal despotism, which seemed to the Liberals of 1830, if not an actual monstrosity, at least a sufficiently typical survival of the old régime to discredit the whole Physiocratic system.[697]
Charles Dunoyer’s book, which appeared in 1845,[698] and which bears the significant title of De la Liberté du Travail, ou simple Exposé des Conditions dans lesquelles les Forces humaines s’exercent avec le plus de Puissance, exactly marks this era of politico-economic Liberalism. But although Dunoyer’s book is a eulogy of liberty in all its forms, especially its competitive aspects, the optimistic note is not so marked as it is in another much more celebrated work which appeared about the same date—Les Harmonies économiques of Bastiat (1850). The Harmonies and the other works of Bastiat contain all the essential traits of the Liberal doctrine. His extreme optimism and his belief in final causes have been disavowed by a great many of the Liberal economists, but he remains the best known figure of the Optimistic Liberal group, and possibly of the whole French school.
Another economist whose name is inseparably linked with the Optimistic doctrine, and of whom we have already made some mention, is the American Carey.[699] In many respects Carey ought to be given first place, were it only because of his priority as a writer, and especially, perhaps, since he accuses Bastiat of plagiarism. In his treatment of certain aspects of the subject, such as the question of method, in the logical consistency of his argument, and in the scope of his discussion of such a problem as that of rent, he displays a marked superiority. In our exposition of Bastiat’s doctrine we shall give to Carey’s the attention which it deserves. Our decision to give Bastiat and not Carey the central position in this chapter is due in the first place to the consideration that we are writing primarily for French students, who will be more frequently called upon to read Bastiat than Carey; and in the second place to the fact that the works of the American economist appeared at a time when economic instruction scarcely existed in the United States, and consequently his writings never exercised the same influence as those of the French economist, which appeared just when the war of ideas was at its fiercest. Finally, Carey’s doctrine is lacking in the beautiful unity of conception of the Harmonies, so that alongside of the advocacy of free competition among individuals is presented an outline of national Protection. Thus we have been forced to divide our treatment of Carey into two sections. The heterogeneous, not to say contradictory, character of his doctrines accounts for his appearing in two different chapters.
Bastiat,[700] both at home and abroad, has always been regarded as the very incarnation of bourgeois political economy. Proudhon, Lassalle in his famous pamphlet Bastiat Schulze-Delitzsch, Cairnes, Sidgwick, Marshall, and Böhm-Bawerk all think of him as the advocate of the existing order. None of them considers him a scientific writer. They treat his writings as a kind of amplification of Franklin’s Poor Richard’s Almanac, where apologues take the place of demonstration and a much-vaunted transparency of style is simply due to absence of thought.
Bastiat deserves a juster estimate. The man who wrote that “if capital merely exists for the advantage of the capitalist I am prepared to become a socialist,” or who declared that “one important service that still requires to be done for political economy is to write the history of spoliation,” was not a mere well-to-do bourgeois. It is true that he carried the “isms” of the French school to absurd lengths. An unkind fate decreed that his contribution should mark the culminating-point of the doctrine, to be followed by the inevitable reaction. To the force of that reaction he had to bow, and his whole work was demolished.
Bastiat’s arguments against socialism are somewhat antiquated, but so are the peculiar forms of socialist organisation which he had in view when writing. This is not true of the arguments dealing with Protection. These have not been entirely useless. Though they failed to check the policy of Protection, they definitely invalidated some of its arguments. If modern Protectionists no longer speak of the “inundation of a country” or of an “invasion of foreign goods,” and if the old and celebrated argument concerning national labour is less frequently invoked as a kind of final appeal, we too often forget that all this is due to the small but admirable pamphlets written by Bastiat. Such were The Petition of the Candle-makers and The Complaint of the Left Hand against the Right. No one could more scornfully show the laughable inconsistency of tunnelling the mountains which divide countries, with a view to facilitating exchange, while at the same time setting up a customs barrier at each end; or expose the patent contradiction involved in guaranteeing a minimum revenue to the landed proprietors and capitalists by the establishment of protective rights, while refusing a minimum wage to the worker. No one has better emphasised the difficulty of justifying an import duty as compared with an ordinary tax, for a tax is levied upon the individual for the benefit of all, while a duty is levied upon all for the benefit of the few.
He has not been quite so happy in his exposition of individualism. The problem has been over-simplified: individual and international exchange have been treated as if they were on all fours. Analogies, more amusing than solid, are employed to show that the advantages of international trade are greater if a country has an unfavourable balance against it, and that international exchange benefits poor countries most.[701]
The thesis of the constructive portion of his work is as follows: “The general laws of the social world are in harmony with one another, and in every way tend to the perfection of humanity.” A priori, however, are we not confronted with rank disorder everywhere? To that he replies in his well-known apologue, “Things are not what they seem,” pointing out that we cannot always trust what we see, and that what is not seen is very often true. Apparent antagonisms on closer view often reveal harmonious elements. But man’s freedom sometimes breaks the harmony and destroys the liberty of others. Especially is this the case with spoliation, which Bastiat never attempts to justify, but denounces whenever he has the chance. But around man and within him are diverse forces which must lead him the way of the good, deviate he never so often, and which will finally and automatically re-establish the harmony. “My belief is that evil, far from being antagonistic to the good, in some mysterious way promotes it, while the good can never end in evil. In the final reckoning the good must surely triumph.”[702]
It is quite evident that this doctrine goes far beyond the conception of “natural laws,” and implies a belief in a Providential order. Bastiat never shrinks from this position. He never misses an opportunity of declaring his faith in language much clearer than that of the Physiocrats. “God,” he writes, “has placed within each individual an irresistible impulse towards the good, and a never-failing light which enables him to discern it.”[703]
Auguste Comte has delivered an eloquent protest against the vain and irrational disposition to think that only the spontaneous can be regarded as conforming to the “order” of nature. Were this the case any practical difficulty “that presented itself in the course of industrial development could only be met with a kind of solemn resignation under the express sanction of political economy.”[704]
Even as an exposition of the Providential order Bastiat’s faith is not easy to justify. It by no means agrees with the Christian teaching on the point. For we cannot forget that although Scripture teaches us that both man and nature were declared good when first created by God, it also teaches that both have been entirely perverted by man’s iniquity, and that never will they become good of their own accord, since there is no natural means of salvation.[705] Christian people are exhorted to kill the natural man within them and to foster the growth of the new man. Christianity promises a new heaven and a new earth—an infinitely more revolutionary doctrine than that of the economic Optimists. Bastiat’s God is, after all, just “Le Dieu des bonnes gens” whose praises are sung by Béranger.
What are the facts of this pre-established harmony? What are its laws, and where are they operative? They are in evidence everywhere, Bastiat thinks—in value and exchange, in the institution of private property, in competition, production and consumption, etc. We shall content ourselves with a consideration of the circumstances under which Bastiat thought it was most clearly seen.
I: THE THEORY OF SERVICE-VALUE
First of all we have the law of value, “which is to political economy what numbers are to arithmetic.”[706]
Ricardo taught that value was determined by the quantity of labour necessary for production. This theory is entirely at one with Bastiat’s, and he would have felt no compunction about inserting it in the Harmonies, for a theory of value which showed that every form of property is really based upon labour seemed to accord with the requirements of justice. But although Bastiat’s method was almost exclusively deductive, and as little realistic as possible, he could never content himself with an explanation which was all too clearly in conflict with the facts. Such a theory could never explain why the value of a pearl accidentally discovered should equal the value of another laboriously brought from the depths of the sea. Accordingly he sought another explanation, juster, and more in accordance with facts, than Ricardo’s.
Carey effected just the needed correction of the Ricardian theory, by propounding another ingenious explanation, namely, that value is determined, not by the quantity of labour actually employed in production, but by the quantity of labour saved. This would account for those facts that refused to fit in with the Ricardian theory, and the chance pearl was no longer a stumbling-block. Bastiat was evidently attracted by this theory.[707] But his satisfaction was by no means complete, for it is not quite clear how a value which is proportional to the amount of labour saved—that is, to labour which never has been and never will be undertaken—can be considered as an economic harmony. But a ray of light illumines the darkness. The labour saved is a kind of service rendered to the person who acquires the commodity. The long-sought explanation is found at last! “Value is the ratio between two exchanged services.”[708] And, seeing that individual property and private fortunes represent sums of values, we might say that a person’s property is merely the sum of the services rendered by him. Herein lies the harmony. Nothing better could be wished for, and Bastiat exults in his discovery. Everything becomes quite clear, every contradiction is removed, every difficulty solved, if we take for our starting-point the crux of economic theory—namely, why diamonds are considered more valuable than water. The diamond is more valuable simply because the person who gives it to me is rendering me a greater service than he who merely gives me a glass of water. This was not the case on the Medusan raft, but even in that instance, seeing that the service rendered was incalculable, the value must have been immense.
Every solution propounded by economists—utility, scarcity, difficulty of acquisition, cost of production, labour—is included within this conception of service, and “economists of all shades of opinion ought to feel satisfied.” “My decision is favourable to every one of them, for they have all seen some aspect of the truth; error being on the other side of the shield.”[709] Moreover, the word “service” has the advantage of including, besides value properly so called (that is, the price of goods), the price of all productive services such as appear under the heads of loans, rent, discount, and interest—in short, “everything that can be said to render a service.”[710]
One cannot help smiling at Bastiat’s naïve exultation, for he never realises that his formula is so comprehensive and includes everything within itself simply because it is an empty form—a mere passe-partout. It really amounts to saying that value depends upon desirability, and we are not so much farther on after all.[711] On closer view, it even lacks that apologetic tone which evidently attracted Bastiat to it. It legitimises neither value nor property, and even if it did it would simply be by the help of a hypocritical formula, for the word “service” gives rise to the belief that all value implies a benefit for those who receive it and a virtue in those who give it. But very frequently it is nothing of the kind. The owner of a house or of a piece of land in the city of London which is let or sold at a fabulous price, the capitalist who lends money to a needy borrower at a usurious rate, or the politician even who in return for an enormous bribe secures some financial concession, cannot be said to be rendering any real service, for all these have either been solicited or demanded, or perhaps even extorted under pressure. Such abnormal rates of discount, interest, or rent can find no place in Bastiat’s formula. From a moral and ethical point of view it is equally futile. It is a mere mask which affords protection as well to the worst exploiter as to the honest tradesman: all are thrown promiscuously into the “universal harmony.”[712]
Despite the justness of these criticisms, and although Bastiat’s attempt to explain value by employing the term “service” must be regarded as futile, the word has not remained a mere ingenious epithet. On the contrary, it has won for itself a permanent place in economic terminology. We shall again meet with it in the vocabulary of that school which prides itself upon the exactness of its method, namely, the Hedonistic and Mathematical school. These later writers constantly make use of the term “productive services,” and would find it hard to discover another word having a sufficiently wide connotation.[713] It is true that the word “service” with all the noble associations of unselfish interest and professional honour which cling to it (compare the phrase “his Majesty’s service”), may lead us astray as to the economic arrangements of society, and that a recollection of the less distinguished uses of the term may cause us to doubt the wisdom of Bastiat’s choice. Still, it is the best that we can imagine when speaking of the society of the future. It is employed in the same sense as Auguste Comte used the term “social function,” or as the equivalent of Marshall’s “economic chivalry.”[714] In attempting to present to ourselves the society of the future, or at least the society of our dreams, we must hope that the present incentive to economic activity, which is merely the desire for profit, will gradually give place to the idea of social service. When that day dawns a statue ought to be erected to the memory of Bastiat.
II: THE LAW OF FREE UTILITY AND RENT
Ricardo’s law of rent was the optimist’s nightmare. Should it by any chance prove true, then the institution of property must be abandoned altogether, and victory must lie with the socialists, whom the economists regarded as somewhat of a social nuisance. It was necessary, then, at all costs, to show that this law had in reality no foundation, and with this end in view Bastiat attempts to defend the paradox that nature or land gratuitously gives its products to all men. But must we really say that corn and coal, the products of soil and mine, literally do not pay for the trouble of getting them? In other words, have they no value? Bastiat replies that they doubtless possess some value, but that the price paid for them does not cover the natural utility of those products. It merely covers cost of production, and is only just sufficient to reimburse the proprietor for the expense incurred.
Every product contains two layers of superimposed utilities. The one is begot of onerous toil and must be paid for. It constitutes what we call value. The other, which is thrown into the bargain, is a gift of nature, and as such is never paid for. This lower stratum, though it is of considerable importance, is ignored simply because it is not revealed in price. It is invisible because it is free.
But whenever a commodity is free, like air, light, or running water, it is the common possession of everybody. The same idea may be expressed by saying that below the apparent layer of value which constitutes individual property there lies an invisible layer of common property which benefits everybody alike. “What Providence decreed should be common has remained so throughout the whole history of human transactions.”
“This,” says Bastiat, “is the essential law of social harmony.” The proprietor, who in the Ricardian theory figures as a kind of dragon, jealously guarding the treasures of national wealth, which can only be enjoyed on payment of a fine, or who in Proudhon’s passionate invectives is denounced as an interceptor of the gifts of God, appears to Bastiat as a mere intermediary between nature and consumer. He is like a good servant who draws water from a common fount, and receives payment, not for the water drawn, but solely for the trouble of drawing it.[715]
But there is a still greater degree of harmony. Of the two elements—the onerous and the gratuitous—which enter into the composition of all forms of wealth, the former gradually tends to lose its importance relatively to the latter. It is a general law of industry that as invention progresses the human effort necessary to obtain the same satisfaction diminishes. New labour is almost always more productive than old, and this is true with regard to all products, whether corn or coal, steel or cotton. It is true not only of the products of the land, but also of the land itself. The cost of clearing new land is diminishing, just as the expense of making new machinery is decreasing. The natural utility, on the contrary, is never diminished. Corn has to-day exactly the same utility as it had on the morrow of the Deluge.
Property being nothing more than a sum of values, every diminution of value must be interpreted as a constant restriction of the rights of property.
Hence this result, “which reveals a most important fact for the science, a fact, if I mistake not, as yet unperceived,”[716] namely, that in every progressive society common or gratuitous utility never stops growing, while the more arduous portion, which is usually appropriated, gradually contracts. Present society is already communistic, and is becoming more so every day.
The idea is indeed an attractive one. Individual property is like a number of islands surrounded by a vast communal sea which is continually rising, fretting their coasts and reducing their areas. When labour has become all-powerful and when science has dispensed with effort the last islet of property will sink beneath the wave of free utility. And so Bastiat triumphantly exclaims: “You communists dream of a future communism. Here you have the actual thing. All utilities are freely given by the present social order provided we facilitate exchange.”[717]
Bastiat, usually so logical, seems inclined to be sophistical here. If we seek beneath this brilliant demonstration we shall merely find the statement that rent is non-existent because the value of commodities—including all natural products—can never exceed cost of production. This cost of production is being continually lowered, and so the value of goods must be falling.
But the statement requires proof. There is nothing to show how the price of natural goods under the influence of competition would tend to fall to the level of cost of production—still less to the minimum level. There is no refutation either of the differential or monopolistic theory of rent. There is doubtless this much truth in it: nature does not create value, nor does it demand payment for it. No one would to-day say that a single cent of the price of corn or coal was meant as payment for the alimentary properties of the one or the calorific capacity of the other. But although it is true that nature asks nothing in return, it is not correct to say that the landowner demands nothing except payment for trouble and expenditure incurred. And this extra gain he never relinquishes unless under pressure of competition. But this very seldom happens, and economic theorists have to be content merely with showing how the sale price usually exceeds the cost of production, and how this excess is variously known as rent, profits, or surplus value.
Bastiat was fully conscious of the weakness of his argument. He saw quite clearly that possession of a suitable piece of land in the Champs-Élysées would earn something more than mere payment for labour and outgoings. It is then that he takes refuge in his theory of value, and attempts to show that the proprietor will never draw more than the price of the service rendered. This may be true. But the mere fact of possessing a natural source of wealth permits of the raising of the price of these goods a great deal, and then what becomes of community of interests, and of the theory that the goods are handed on by the proprietor free of any charge?
How superior is Carey’s theory, both in its scientific value and in its social import! Carey follows Ricardo step by step, whereas it seems that Bastiat had only a very imperfect acquaintance with the Ricardian theory.[718] In reply to the statement that the value of corn rises progressively because the more fertile lands are occupied first, and the less fertile have to be utilised afterwards, Carey points out that, on the contrary, cultivation begins with the poorer land first, and that the richest is the last to be cultivated. The consequence is just the reverse of what Ricardo predicted. As production increases, the price of corn will be lowered. The process of reasoning by which this reversal of the order of cultivation is demonstrated is very interesting. The domestication of land, if the phrase be permissible, like the utilisation of all natural forces, takes place according to the inverted order of their strength. Animals are domesticated before man harnesses wind or water, and water and wind are employed before there is any thought of vapour or electricity. The same is true of land. Fertile land in its natural state is either overrun with vegetation, which must be grubbed up, or is covered with water, which must be drained off. “Rich land is the terror of the emigrant.”[719] Its virgin forests must be felled, its wild animals destroyed, its marshes drained, and its pestilential miasmas rendered innocuous if it is not to become a mere graveyard. And not until several generations have given of their toil will it be of much use. Rather than undertake the task the earliest emigrant seeks the lighter soils of the hill-side, which are better adapted to his feeble means, as well as safer and more easily defended.
That this theory is well founded may be very clearly seen if we watch the progress of cultivation or the colonisation of new lands, or glance at the general history of civilisation. Men group themselves in villages on the higher levels or build their castles on the slopes of the hills, and only descend slowly and carefully into the lower plains. How many are the localities in France where the new town may be seen overspreading the plain close to the old city which still crests the hill! The various national gods—Hercules, for example, who stifled the hydra of Lerna in his arms and shot the birds of Stymphalus’s pool with his arrows—are in all probability just the men who first dared break up the alluvial soils.
This theory, again, is open to the same objection as Ricardo’s. It applies to some cases only, and under certain conditions. Ricardo’s theory explained the facts relative to England, where population presses heavily upon the limited area of a small island already well occupied. Carey’s theory is equally well adapted to an immense continent, with a thinly scattered population, occupying only a few cultivated islets amid the vast ocean of virgin forest and prairie. The two theories are not contradictory. They apply to two different sets of conditions, or to successive phases of economic evolution. And seeing that Ricardo’s applies to the more advanced stage of civilisation, it certainly ought to have the last word. If Carey were writing now he would probably express himself somewhat differently, for it is no longer true even of the United States that the more fertile lands are still awaiting cultivation. Only the poorer and the more arid plains remain uncultivated, and here dry farming has to be resorted to. So that even in the “Far West” Ricardo’s theory is closer to the facts than Carey’s. Rents are rising everywhere, and not a few American millionaires owe their fortunes to this fact.[720]
It is just possible that Bastiat had some knowledge of Carey’s theory, for the theory is outlined in The Past, the Present, and the Future, published by Carey a little before Bastiat’s death, as well as in his Social Science, which appeared ten years later. At any rate, let us render thanks to both of them for the suggestive thought that as human power over nature increases, effort, difficulty, and value, which is the outcome of difficulty, will disappear, and that, consequently, the sum total of real wealth at the disposal of everyone will increase, but that the poor will be those who will benefit most.[721]
III: THE RELATION OF PROFITS TO WAGES
The law of rent was not the only discordant note. That other law which stated that profits vary inversely with wages was also dissonant and needed refuting. Bastiat emphasises the contrast between it and his new law of harmony, according to which the interests of capital and labour are one, their respective shares increase together, and the proportion given to labour grows more rapidly even than capital’s.[722]
That is the conclusion which Bastiat wishes to illustrate by means of the following table:
Total Product Capital’s Share Labour’s Share First period 1000 500 (50 per cent.) 500 (50 per cent.) Second period 2000 800 (40 ” ) 1200 (60 ” ) Third period 3000 1050 (35 ” ) 1950 (65 ” ) Fourth period 4000 1200 (30 ” ) 2800 (70 ” )
This law he speaks of as “the great, admirable, comforting, necessary, and inflexible law of capital.”
The proof is very simple—too simple, perhaps. It rests entirely upon the law concerning the lowering of the rate of interest, noted by Turgot and other economists long before Bastiat’s time. If capital, instead of asking 5 per cent., only demands 3 per cent., then its share is diminished, and any further diminution of its share must mean an increase of the proportion available for labour.
But a relative diminution of this kind will not prevent capital drawing an absolutely greater share, provided the total produce goes on increasing, as is the case in every progressive community. Its total share, though on the increase, may be decreasing relatively to the share which goes to labour. For example, the total product may be tripled, capital’s share having doubled in the meantime, while labour’s portion is quadrupled. Unfortunately this is a purely sophistical argument. The figures given in the table are simply invented to meet the needs of the case. Even the universality of the law concerning the lowering of the rate of interest is open to dispute. Economic history seems to point to a series of periodic oscillations of the rate, and quite recently it has risen very considerably.
The so-called “law” becomes more than doubtful if, following Bastiat, we include under the term interest, not merely net interest, but also profits and dividends and all kinds of returns from capital.
But, even admitting that such a law is thoroughly established, does that prove that capital’s share is decreasing? A lowering of the rate of interest cannot affect the capital already invested in factories, mines, railways, State funds, etc. The latter will not draw a penny less, and a fall in the rate of interest will increase the value of all old capital. Every capitalist knows this and speculates on the chance of its happening.[723]
Only in the case of new capital, then, will a lower rate of interest reduce the capitalist’s share. If by any chance this new capital should prove less productive than the old it may then happen that the reduced rate of interest will mean an equal or even a greater rise in the remuneration of labour. This is quite a probable contingency, and the proof advanced by economists who believe in a gradual lowering of the rate of interest is just this very fact that new capital is generally less productive than old.
In short, the problem presented by the rate of interest, implying as it does a certain connection between the value of the capital and the value of the revenue, is entirely different from the question as to what share of the produce will eventually fall to the lot of the capitalist and what to the workers.[724]
Not only is the demonstration which Bastiat thought he had given false, but the thesis itself is very doubtful when tested by the facts. Statistics seem to show quite clearly—Bastiat’s law notwithstanding, and not depreciating the influence of other powerful factors, such as trade unions, strikes, and State intervention—that during the course of the nineteenth century the share of the social revenue which falls to the lot of capital has increased more rapidly than labour’s.[725]
IV: THE SUBORDINATION OF PRODUCER TO CONSUMER
Bastiat laid considerable stress upon this principle, but it is not easy to realise its harmonic significance.
The subordination of producer to consumer is nothing less than the subordination of private to general interest. Producers always consult their own interests, and are continually in search of profits. Still, everything invented with a view to increasing profits results in lowering prices, so that the consumer is the person who finally benefits by it.[726] And so economic laws, the law of competition and of value, constrain the producer who really wishes to be selfish to be altruistic, even despite himself. The laws outwit him, but his undoing benefits everyone else. While working for a maximum profit he is really toiling to satisfy the needs of others in the most economical fashion, and therein lies the harmony.
In all difficult economic problems the criterion should be this: What solution will prove most advantageous to consumers? Never ought we ask what will be most profitable for producers, although, unfortunately, this is the more usual question. In matters of international trade, when the interest of the producer is uppermost, Protection is established. If we only consulted the interest of consumers, Free Trade would become an immediate necessity. Or take the case of public or private expenditure. The producer can bring himself to excuse or even to approve of breaking windows or wasting powder,[727] but the consumer unceremoniously condemns all such destruction of wealth as useless consumption.
But Bastiat is not content with giving the consumer mere economic pre-eminence. He is equally anxious to demonstrate his moral superiority. “If humanity is to be perfected, it must be by the conversion of consumers, and not by the moralising of producers,”[728] and so, he holds consumers responsible for the production of unnecessary or worthless commodities, such as alcohol.[729] Bastiat’s contribution to this subject is quite first-class, and may possibly be his best claim to a place among the great economists. He was not far wrong when on his death-bed he delivered to his disciples as his last instructions—his novissima verba, “Political economy should be studied from the consumer’s standpoint.” This distinguishes him from his famous antagonist, Proudhon, who always had the producer’s interest at heart.
The only things with which we can reproach Bastiat are a too persistent faith in natural harmonies and a belief in the efficacy of ordinary economic laws to bring about the supremacy of the consumer. In fact, the consumer’s reign has not yet come, and the economic mechanism is becoming more and more the tool of the profit-maker. The consumer has had to seek in organisation a method of defending his own interests and those of the public, with whose interests his own are often confused. This is why we have institutions like the co-operative society and the consumers’ league. His moralisation, moreover, is not entirely his own affair. Before the consumer realises the full measure of his responsibility and the extent of his duties a great deal of work will be necessary on the part of buyers’ social leagues, temperance leagues, etc.
Strangely enough, economists of the Liberal Individualist school view such institutions with a somewhat critical eye.[730]
V: THE LAW OF SOLIDARITY
We must not forget, as most writers on the subject seem to have done, that Bastiat was the first to give the law of solidarity—so popular in the economics of to-day—a position of honour within the science of political economy.[731] One of the unfinished chapters of the Harmonies, entitled “Solidarity,” was meant to expound the thesis that “society is just a collection of solidarities woven together.”[732]
The name is deceptive, however, and his conception of solidarity is quite different from the one current to-day, while the conclusions drawn are by no means similar.
The fundamental doctrine upon which the Solidarists of to-day would base a new morality is briefly this: Every individual owes all the good with which he is endowed, and all the evil with which he is encumbered, to others. So whether he is wealthy or poor, virtuous or vicious, it is his duty to share with those who are worse off, and he has a right to demand a share from those who are better off. Only in this way can we justify legal assistance, insurance, Factory Acts, education, and taxation. The doctrine is a negation, or at the very least a modification, of the strict principle of individual responsibility.
But Bastiat views it differently. He has no desire to weaken individual responsibility, for responsibility must be the indispensable corrective of liberty. And solidarity, because of the feeling of interdependence to which it gives rise, is so bewildering that Bastiat anxiously asks whether solidarity is actually necessary “in order to hasten or to secure the just retribution of deeds done.” A closer survey reconciles him to the prospect, for he sees in it a means of extending and deepening individual responsibility. Seeing that the results of good and bad deeds react upon everyone, everybody must be interested in furthering every good deed and in repressing the bad, especially since every deed reacts upon its author with its original force multiplied a thousand, and perhaps a million times.[733] The harmony just consists in that. Bastiat’s solidarity aims, not at the development of fraternity, but at the strengthening of justice. It does not urge upon society the duty of permitting no differences among its members, but it does emphasise the importance of handling the scourge or bestowing the palm with greater impartiality. And Bastiat, despite his law of solidarity—nay, possibly because of that very law—definitely rejects all legal assistance, even in the case of deserted children! National insurance, old age pensions, profit-sharing, free education, everything that is comprised under the term “social solidarity” is cast aside.[734]
It is a terribly individualistic conception of solidarity. Comparison with Carey’s ideas is again interesting. Carey may seem to ignore it altogether, inasmuch as he never mentions the name. But if the name was unknown to him he gave a good description of the principle itself when he referred to it as “the power of association.” And he was also probably the first to put the double character of solidarity, as we know it to-day, in a clear light:
(1) As the differences among mankind increase in number and intensity the more perfect will solidarity become.
(2) Individuality, instead of being weakened by it, is strengthened and intensified.[735]
Someone may perhaps point out that in our treatment of the Optimists’ attack upon the great Classical laws no mention has been made of that terribly discordant theme, Malthus’s law of population, which ascribes all vice and misery to the operation of a natural instinct. On this particular point Bastiat’s treatment is lacking in both vigour and originality. His reply merely amounts to showing that the preventive obstacles, such as shame and continence, religious feeling and the desire for equality, all of which limit the number of children, are equally natural, so that nature has placed a remedy alongside of the evil.
A more solid argument, borrowed from Carey, attempts to show how a growing density of population allows of a growth of production, so that the production of commodities may develop pari passu with the growth of population, or may even exceed it. Carey relied upon his own observations. All over the vast American continent, especially on the immense plains of the Mississippi, he noticed that the few encampments of the poor tribes that dwelt there were being rapidly replaced by large industrial centres. Such an increase of population in immediate contiguity naturally resulted in a great amassing of wealth.
We have already noted the fact that the growth of wealth in the United States has outstripped the increase in its population. The simultaneous development of Germany, both in numbers and wealth, is still more striking.
But Carey’s population theory is open to the same criticism as was urged against his theory of rent. Up to a certain degree of density it is undoubtedly true, but there is no ground for believing that it holds good beyond this.
* * * * *
Bastiat’s name is frequently linked with Dunoyer’s, to whom we have already had occasion to refer.[736] Dunoyer was one of the most militant of the politico-economic Liberals, and fully shared their belief that free competition was a sufficient solution for every social problem.[737] The obvious drawbacks of free competition, he thought, were due to its imperfect character. No one was more opposed to State Socialism and to intervention of every kind. He was opposed to labour legislation, to Protection, to the regulation of the rights of property, and even to the State management of forests. As we have already remarked, he was against every kind of combination, because it stood as an obstacle in the path of free competition.
Logically enough he was in favour of the free disposal of land, and would not even make any reservations in favour of heirs. He refuses to recognise the right of entail because the exercise of the testator’s liberty necessarily involves the curtailment of the liberty of his successors.[738]
Some of the arguments which he employs in support of free exchange are quite novel. The following is one of the most interesting. Admitting that it is not to the advantage of a poor country to trade with another which is wealthier or industrially superior, the same thing must apply to the poorer districts of a country in their dealings with other provinces that have suddenly become rich, or with rich provinces recently acquired by conquest. But “as soon as they are annexed their superiority presumably disappears.” The argument is amusing, but not very solid. It is not impossible that free exchange, even within the bounds of the same country, may have the effect of drawing capital and labour from the poorer districts towards the richer, from Creuse or Corsica to Paris. This is just what does happen. It is not, perhaps, a very serious evil, because what France loses on the one hand she gains on the other; but if Creuse or Corsica were independent states, anxious to preserve their individuality, we could understand their taking measures to prevent this drainage. It is true that it is not easy to see how protective rights could accomplish this—a point which Dunoyer might well have emphasised.
We cannot speak of Dunoyer without saying a word about his theory of production. Labour with him is everything. Nature and raw material are nothing. He stands at the opposite pole to the Physiocrats,[739] and supplied a handle to those socialists who before Marx’s day had thought that labour was the only source of wealth, and that consequently all wealth should belong to the worker. But he pays no very great attention to this idea. His chief concern is with production, and not with distribution.
From this view of production he draws several interesting conclusions.
In the first place, it matters little to him whether labour is applied to material objects or not. That makes no difference, so far as its character or productivity is concerned, for in both cases what is produced is an immaterial thing called utility. What the baker produces is not bread, but the wherewithal to satisfy a certain desire. This is exactly what the prima donna produces. The so-called liberal professions are placed in the same category as manual work, and in this respect again Dunoyer takes up a position opposed to that of the Physiocrats.[740]
Contrary to what might have been expected, this large extension of the concept production fails to include commerce. Dunoyer applies the title productive to the singer, but refuses it to the merchant, and by this strange reversal he arrives once again at the Physiocratic position. Exchange is not productive[741] because buying and selling does not involve any work, and where there is no work there is no production. Exchange creates utilities, and it is not easy to understand what more Dunoyer expects from it, seeing he admits that labour can do nothing more. Exchange, he thought, was a purely legal transaction, and he was loath to admit that any act of a “corporate will” without labour or physical effort could create wealth, just as the Physiocrats found it impossible to think of wealth other than as a product of the soil.