Preface
The goods and services that constitute our national income are valued severally and collectively with a fair amount of accuracy in terms of money. For a gold standard, though by no means perfect for the work of monetary measurement, is stable and has a single definite meaning to all men. By means of it we can estimate the rates of growth or decline in our industry, as an aggregate or in its several departments, and the quantities of output and consumption of the various products. We can compare the growth of our national wealth with that of other nations.
But how far can these measurements of concrete wealth furnish reliable information regarding the vital values, the human welfare, which all economic processes are designed to yield? Though it will be generally admitted that every increase of economic wealth is in some measure conducive to welfare, every decrease to illfare, nobody will pretend even approximately to declare what that measure is, or to lay down any explicit rules relating wealth to welfare, either for an individual or a nation. Indeed, even the general assumption that every growth of wealth enhances welfare cannot be admitted without qualification. An injurious excess of income is possible for an individual, perhaps for a nation, and the national welfare which an increased volume of wealth seems capable of yielding might be more than cancelled by a distribution which bestowed upon a few an increased share of the larger wealth, or by an aggravation of the toil of the producers.
Such obvious considerations drive us to seek some intelligible and consistent method of human valuation for economic goods and processes. To find a standard of human welfare as stable and as generally acceptable as the monetary standard is manifestly impossible. Indeed, the difficulties attending any sort of calculus of vital values might appear insuperable, were it not for one reflection. Every statesman, social reformer, philan-
v vi PREFACE
thropist, every public-spirited citizen, does possess and apply to the conduct of affairs some such standard or criterion as we are seeking. Some notion or idea, more or less clear and explicit, of the general welfare, crossed and blurred no doubt by other interests and passions, is an operative and directive influence in his policy. Moreover, though idiosyncrasies will everywhere affect this operative ideal, there will be found among persons of widely different minds and dispositions a substantial body of agreement in their meaning of human welfare. The common social environment partly evokes, partly imposes, this agreement. In fact, all cooperative work for social progress implies the existence of some such standard as we are seeking. The complex image of human values which it contains is always slowly changing, and varies somewhat among different sorts and conditions of men. But for the interpretation of economic goods and processes it has, at any time, a real validity. For it. is anchored to certain solid foundations of human nature, the needs and functions to which, alike in the individual and in the society, we give the term 'organic'
Only by considering the organic nature of man and of human society can we trace an intelligible order in the evolution of industry. The wants of man, and therefore the economic operations serving them must be treated as organic processes. This term, borrowed from biology, must be extended so as to cover the entire physical and spiritual structure of human society, for no other term is so well fitted to describe the nature of the federal unity which society presents. The standard of values thus set up is the current estimate of 'organic welfare.'
The justification of these terms and of this mode of human valuation is to be found in their application to the task before us. These tools will be found to do the work better than any others that are available.
In seeking to translate economic values into human by reference to such a standard of organic welfare, I take as the aptest material for experiment the aggregate of goods and services that constitute the real income of the British nation. In order to reduce that income to terms of human welfare, I first examine separately the economic costs of production and the economic utilities of consumption which meet in this concrete wealth,
PREFACE vii
analysing them into human cost and human utility, the debit and credit sides of the account of welfare. Analysis of the productive processes will, of course, disclose the fact that not all 'economic' costs have human costs attached to them, but that human utilities of varying value inhere in many sorts of productive work. Surveying the different orders of productive energy, from the finest arts to the lowest modes of routine toil, we discover that any two bodies of economic wealth, possessing the same pecuniary value, may differ enormously in the quantity of human cost they carry. For that cost will depend upon the nature of the work, the nature of the workers, and the distribution of the work among the workers. This line of enquiry opens out, in form at any rate, a complete criticism of current English industry, from the humanist standpoint. A similar analysis applied on the consumption side resolves the economic utility of the goods and services into human utility. Here again out of economic utilities much human cost emerges, just as out of economic costs much human utility. Equal quantities of income yield in their consumption widely diverse quantities of human utility or welfare.
Piecing together the two sides of our enquiry into the production and consumption of the income, we perceive, as might be expected, that a sound human economy conforms to the organic law of distribution, 'from each according to his power, to each according to his needs,' and that, precisely so far as the current processes of economic distribution of work and of its product contravene this organic law, waste accrues and illfare displaces welfare. The economic distinction between costs and unearned surplus 1 furnishes in effect a faithful measure of the extent and forms of divergence between the economic and the human 'law' of distribution. For when this surplus income is traced, backward to the human costs involved in its production, forward to the human injuries inflicted by the excessive and bad consumption it sustains, it is seen to be the direct efficient cause of all the human defects in our economic system. Growing in magnitude with the development of the modern arts of industry and commerce, it is the concrete embodiment of the social-economic
1 This distinction is elaborated in my work, The Industrial System (Longmans).
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problem. The absorption and utilisation of the surplus for the betterment of the working-classes and the enrichment of public life are essential conditions for the humanisation of industry.
The first half of the book is occupied with the general exposition and illustration of this method of human valuation. The second part applies the humanist principles thus established, to the discussion of some of the great practical issues of social-economic reconstruction in the fields of business and politics. The medley of overlapping conflicts between capital and labour, producer and consumer, competition and combination, the individual and society, is sifted so as to discover lines of industrial reformation based upon a conception of organic harmony. The reconstruction of the business, so as adequately to represent in its operation the respective interests of capital, ability, labour and the consumer, is seen to be the first desideratum of reform. Here, as in the wider oppositions between business and business, trade and trade, nation and nation (misconceived as economic units), the more rational standpoint of a humanist valuation suggests modes of reconcilement following an evolution of economic structure in which the corporate or codperative spirit finds clearer and stronger expression. The most debated question, how far ordinary human nature can yield economic motives to social service strong and reliable enough to enable society to dispense with some of the incentives of competitive greed, hitherto deemed indispensable supports to industry, is discussed in several of the later chapters. The practicable limits of industrial reformation are found to depend upon the reality and importance assigned to 'the social will' as a power operative for industrial purposes, in other words upon the strength of the spiritual unity of society. A final chapter is given to a discussion of the limitations of the scientific and quantitative methods in the interpretation and direction of social-economic life. It is contended that the art of social as of individual conduct must always defy exact scientific guidance, the methods of science being incompetent closely to predict or direct the creative element in organic processes.
The processes of human valuation and judgment, therefore, whether applied to industry or to other activities and achieveth ^s mi
PREFACE ix
ments, must ultimately belong to the art rather than to the sdence of society, the statesman and the citizen absorbing and assimilating the history of the past which science presents in its facts and laws, but using his free constructive faculty to make
e history of the future. The failures of the individual statesman or citizen in the performance of this artistic work are due to the fact that a larger artist, whose performance the most enlightened individual can but slightly apprehend, viz. society itself, takes an over-ruling part in the process.
This brief presentation of the argument, dwelling unavoidably upon intellectual method, may possibly have failed to convey the intensely practical purpose which I have kept in mind throughout the preparation of the book. That purpose is to present a full and formal exposure of the inhumanity and vital waste of modern industry by the close application of the best-approved formulas of individual and social welfare, and to indicate the most hopeful measures of remedy for a society sufficiently intelligent, courageous and self-governing to apply them.
Such a work evidently presents a large frontfor hostile criticism. Its scope has often compelled a rigorous compression in the discussion of important controversial topics, and has precluded all entrance upon the more detailed issues in the policy of reconstruction. But I venture to hope that many readers, who may disagree with the particular valuations and interpretations offered in these chapters, will be led to accept the broader outlines of the method of human valuation here proposed, and will recognise the importance of a better application of this method in the solutions of the practical problems of economic reform.
J. A. Hobson.
Hampstead,
January, 1914.
Table Of Contents
CHAPTER I pAGE
The Human Standard of Value i
§ i. The need for a human survey. § 2. The attitude of economic science towards the industrial system. § 3. The monetary standard of values. § 4. Some inherent defects of Political Economy for human valuation. § 5. The humanist standpoint of Ruskin. § 6. Ruskin's strength and weakness. § 7. Organic welfare as a standard. § 8. Society as an organism or an organisation? § 9. Defence of the organic concept.
Chapter II
§ 1. Industry emerging from organic processes. §2. The beginnings of a rational economy. § 3. Utility and self-expression in work. § 4. The severance of economic from other human motives.
Chapter III
§ 1. The humanist attitude towards income. §2. The meaning of national income. § 3. Failure of pecuniary measurement. § 4. Standard of the humanly desirable. § 5. Human problems of production and consumption. § 6. The analysis of cost and utility. § 7. Economic versus human costs. § 8. The Business as a human structure. § 9. Creation and imitation. § 10. Merits and defects of the distinction. §11. Its provisional acceptance.
Chapter IV
§ 1. Creation in the fine arts. § 2. Commercialism in art. § 3. Interpretative and executive art. § 4. Discovery and invention in the ' useful ' arts. § 5. The economy of the creative faculty. § 6. Professional ability. § 7. Human costs of professional and
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PAGE official work. § 8. Psychology of the financier and the 'business man '. § 9. Risk-taking as a personal cost.
CHAPTER V Human Costs of Industry 60
§ 1 . Repetition and routine the essential qualities of labour. § 2. The physiology of fatigue. § 3. Nervous fatigue. § 4. Accidents and disorders from fatigue. § 5. Ennui and painful efforts. § 6. Human costs of conforming to routine.
Chapter VI
§ 1. Cooperation of Labour and Machinery. § 2. Limits to the reign of machinery. § 3. Direct and indirect influences of the machine. § 4. Has machinery lightened or aggravated net human costs?
Chapter VII
§ 1. Apportionment of labour according to age, sex, personal capacity. § 2. Human waste from labour of the old, the young, the weak. § 3. Natural and artificial restrictions on woman's work. § 4. Costs do not always vary with routine. § 5. Summary of physical costs. § 6. Moral costs of labour.
CHAPTER VIH
§ 1. Risk-taking as a physical and psychical cost. § 2. Risks involved in all productive work. § 3. Costly and costless saving. §4. Efforts of abstinence and postponement. §5. Distribution of expenditure over time. § 6. The possibility of costless capital. § 7. Automatic saving of the rich. § 8. Motives in the saving of the thrifty. § 9. Human costs and utilities of thrift. § 10. The heavy costs of working-class saving.
Chapter IX
§ 1. The human valuation of economic utilities, Wealth and 'Illth*. § 2. How far the arts of production and consumption
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PAGE
correspond. § 3. Slow evolution of consumptive arts. § 4. Production for profit endangers consumption. § 5. Instinct and reason in the evolution of wants. § 6. Organic safeguards against waste. § 7. Growing waste with rising standards of consumption.
Chapter X
§ 1. Physical environment as a factor in class standards. § 2. Industrial conditions affecting standards. § 3. Conventional elements in consumption. § 4. Risks in 'Novelties ' under individual choice. § 5. Imitation as a maker of 'conventions'. § 6 . How commercial interests damage conventional consumption. § 7. Human values in conventional and routine elements. § 8. The play of imitative forces. § 9. The modus operandi of prestige. § 10. Theory of a leisure class. §11. Futile expenditure.
Chapter XI
§ 1. Sport -activities and survival value. § 2. The exploitation of biological utility. § 3. Degradation of the sporting life. Its prestige. § 4. Intellectual recreations. Decorative culture. § 5. Ethics of the sporting life. § 6. Parody of the lower leisureclass. § 7. Race exploitation displacing class exploitation.
Chapter XII
§ 1. Human costs and utilities in Production and Consumption. § 2. The same laws of valuation applicable on each side. § 3. Statement of the human law. § 4. Income according to needs. § 5. Identity and diversity of needs. § 6. Laissez-faire as a law of human distribution. § 7. The new doctrine of Marginalism. § 8. Its logical and practical defects. § 9. Fundamental divergence of the economic and human laws. The surplus. § 10. Origins and nature of the surplus. § n. Rent element in surplus. § 12. Other contributory sources. § 13. Claims of 'Ability' to the surplus. § 14. Theory of prizes and blanks. § 15. Summary of injuries and wastes from the surplus.
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Chapter XIII Page
§ 1. The Labour Movement's basis of remuneration. §2. Ethics and economics of the piece-wage system. §3. Growth of the salary system. § 4. The minimum wage policy. 5. Limitation of output. § 6. Public supplements to wages.
Chapter XIV
§ 1. Science applied to business organization. § 2. Experimental study of tools, work and workers. § 3. The intensification of labour. § 4. Relation of economic to human costs. § 5. Applied psychology. Munsterberg's experiments. § 6. Selection and adjustment of men to jobs. § 7. Will workers gain in wages? § 8. The mechanisation of labour. § 9. Reactions on the progress of the industrial arts and standards of life. § 10. Science applied to consumption. § 11. Dietaries in relation to work. § 12. Eugenics and education, for work or life? § 13. The science of human industry.
Chapter XV
§ 1. The upper and lower leisured classes. § 2. Under and overemployment. § 3. The demand for an Eight Hours Day. § 4. Shorter hours in relation to spare energy. § 4. Double injury of long work-day, to producer and consumer. § 6. Leisure as the opportunity of opportunities. § 7. Leisure as condition of education. § 8. Leisure and invention. § 9. Non-economic values of leisure. § 10. The place of leisure in class standards of life. § n. Leisure as a social requisite.
Chapter XVI
§ 1. Realisation of the social meaning of labour. § 2. Competition in trades, businesses and workers. Its dehumanising effects. § 3. Harmony and discord between capital and labour. § 4. Experiments in new business structure. § 5. Cooperation of Capital and Labour. § 6. The opposition of producer and consumer. § 7. The cooperative movement as a mode of settlement. § 8. The workers' claim for a share in business control. § 9. The
TABLE OF CONTENTS rv
PAGE balance of interests in business structure. § 10. The syndicalist idea. § n. Dangers of bureaucracy.
CHAPTER XVII The Nation and the World 272
§ 1. Nations misconceived as economic units. § 2. The idea of an economic world-state. § 3. Need for a conscious recognition of world industry.
Chapter XVIII
§ 1. Growing harmony within the Business. § 2. Organisation versus competition in the Trade. § 3. States in relation to monopolies and combines. § 4. The need for international regulation of Industry.
Chapter XIX
§ 1. The spiritual assumptions of humanist reforms. § 2. Stimulation of industrial motives. § 3. Less 'costly' production required. § 4. Limitations of the claims of industry on life. § 5. The scope of individualism and private enterprise. § 6. Moral and social significance of 'the Surplus.' § 7. Theory of Property as a social trust. The test of Charity. § 8. Property set upon a 'proper' basis. § 9. Beneficial reactions of sound property upon other functions.
Chapter XX
§ 1. Early stages of reconstruction may involve some economic loss. § 2. Esprit de Corps or common consciousness as an economic incentive. § 3. Wholesome interaction of better social consciousness and better social environment. § 4. Ultimate reason for socialisation of routine industries. § 5. Social life justifies the routine work of individuals. § 6. The cells' imperfect realisation of the organism.
Chapter XXI
§ 1. The organic law as basis of personal efficiency for production. § 2. Personal efficiency for consumption. § 3. Organic xvi TABLE OF CONTENTS
PAGE union of production and consumption. § 4. Will society enslave the individual? § 5. Quantity and quality of work. § 6. The relations between material and non-material wealth. § 7. Quantity and quality of life.
Chapter XXII
§ 1. 'Enlightened common sense' as a human standard. § 2. Limitation of a quantitative calculus. § 3. Quantitative and qualitative facts. § 4. The reduction of qualitative to quantitative differences. § 5. Scientific politics. § 6. The case of art -values. § 7. Analysis of utility of income. § 8. How mutations and novelty limit science. § 9. Use and abuse of averages. § 10. Summary of uses of a scientific calculus. § 11. The services of science to human arts. § 12. Final futility of 'marginalism.' The incalculable. § 13. Scientific calculus as guide to conduct. § 14. Organic unity imposes values. § 15. Two meanings of social will and social value. § 16. Collective instincts in Democracy. § 17. General will in instinct and reason. § 18. Creative power in collective man. § 19. The evolution of a rational social will.
Chapter I
§ i. In an age when human problems of a distinctively economic character, relating to wages, hours of labour, housing, employment, taxation, insurance and kindred subjects, are pressing for separate consideration and solution, it is particularly important to enforce the need of a general survey of our economic system from the standpoint of human values. Social students, of course, are justified by considerations of intellectual economy in isolating these several problems for certain purposes of detailed enquiry. But the broader human setting, demanded for the judgment or the policy of a statesman or reformer, can never be obtained by this separatist treatment. For the interactions which relate these issues to one another are numerous and intimate. Taking as the most familiar example the groups of questions relating to the working-classes, we recognise at once how the wages, hours, regularity of employment and other considerations of labour, overlap and intertwine, while, again, the questions relating to conditions of living, such as housing, food, drink, education, recreation, facilities of transit, have similar inter-relations as factors in a standard of comfort. Nor is it less evident that conditions of labour and conditions of living, taken severally and in the aggregate, interact in ways that affect the efficiency and well-being of the people.
The special and separate studies of these various problems must then, in order to be socially serviceable, be subject to the guidance and direction of some general conception which shall have regard to all sorts of economic factors and operations, assessing them by reference to some single standard of the humanly desirable. This general survey and the application of this single standard of valuation are necessary alike to a scientific interpretation of the economic or industrial world and to a conscious art of social-economic progress. They must exert a control over the division of intellectual labour on the one hand, and over the utilisation of such labour for social policy upon the other. The notion that, by setting groups of students to work at gathering, testing, measuring and tabulating crude facts, relating, say, to infant mortality, expenditure on drink, or wages in women's industries, valuable truths of wide application will somehow be spontaneously generated, and that by a purely inductive process there will come to light general laws authoritative for social policy, is entirely destitute of foundation. The humblest grubber among 'facts' must approach them with some equipment of questions, hypotheses, and methods of classification, all of which imply the acceptance of principles derived from a wider field of thought. The same holds again of the next higher grade of students, the intellectual middlemen who utilise the ' facts ' got by the detailed workers 'at the face.' They too must bring wider principles to correlate and to interpret the results got by the humbler workers.
So at each stage of the inductive process, laws and standards derived from a higher intellectual stage are brought to bear. Even if such studies were prompted entirely by a disinterested desire for knowledge, it is evident that their success implies the inspiration and application of some general ideas, which in relation to these studies are a priori. But regarding these studies as designed primarily to assist the art of social policy, we must recognise that the inner prompting motive of every question that is put at each stage of such enquiries, the inner regulative principle of the division of labour and of the correlation of the results, is the desire to realise some more or less clear conception of general human well-being. It must, of course, be admitted that this procedure rests upon a sort of paradox. The general conception of human well-being is itself vague and unsubstantial, until it has acquired and assimilated the very sorts of knowledge the collection of which it is here assumed to be able to direct. This paradox, however, is familiar to all who reflect upon the progress of knowledge in any department and for any purpose. I only name it here in order to anticipate the objection of those disposed to question the validity of assuming any sort of standard of human welfare, and to insist upon testing each economic issue upon what they call 'its own merits.' The application of a general survey and a general standard of values is none the less a logically valid and a practically useful procedure, because the new facts which its application discloses afford more fulness and exactitude to the survey, while the standard is itself made clearer and more effective thereby.
Assuming it to be admitted, then, that a human valuation of economic processes is possible and desirable, both for the enlargement of knowledge and for purposes of social policy, the questions next arise, 'How shall we conceive and describe the standard of human valuation, and how shall we apply it to the interpretation of the present economic system?'
§ 2. Before facing these questions, however, it will be well to have before our minds a clear outline picture of this economic system which we seek to value. It consists of two complex operations, constantly interacting, known as Production and Consumption of wealth. By wealth is understood all sorts of vendible goods and services. So far as material wealth is concerned, it is ' produced ' by a series of processes which convert raw materials into finished goods of various sorts and sizes and dispose them in such quantities as are required, for the satisfaction of consumers or as instruments in some further process of production. Similarly, in the case of professional, official, domestic, industrial, commercial, and other personal services, which also rank as wealth,1 a variety of productive processes go to prepare them and to place them at the disposal of consumers. The processes of production may thus be classified as extractive, manufacturing, artistic, transport, commercial, professional, domestic. Thus it is seen that the work of 'distribution' and 'exchange,' 2 sometimes distinguished from the work of production, is here included in that category.
1 Labour employed in productive work of industry is usually excluded from the category of national 'wealth', though it is sometimes regarded as 'personal wealth'. But there is no sufficient reason for this exclusion. Any increase of the efficiency oi the labour of a nation is evidently as much an increase of its total vendible resources as an increase in its instrumental capital would be.
2 Exchange is simply an ordinary branch of production, mainly consisting of
Now, the first difficulty confronting us in our search for a human valuation of this economic system consists in the obscurity in which half this system lies. For though there is everywhere a formal recognition that consumption is the end or goal of industry, there is no admission that the arts of consumption are equally important with the arts of production and are de- / serving of as much attention by students or reformers of our 'economic system/ On the contrary, so absorbing are the productive processes in their claims upon the physical and mental energies of mankind, that the economic system, alike for practitioners and theorists, has almost come to be identified with these processes. This depreciation and neglect of Consumption no doubt has been natural enough. So much more conscious energy of thought and feeling, and so much more expenditure of time and effort have gone into the discovery, development and practice of the productive arts. Their practice has involved so much more publicity, so much wider and more varied intercourse, . and therefore so much more organisation. Consumption, on the V other hand, has been so much more passive in its character, so private and individual in the acts which comprise it, so little associated with sequences of thought or purpose, that it has hardly come to be regarded as an art. Hence, even in the more elaborate civilisations where much detailed skill and attention are devoted to the use and enjoyment of goods and services, the neglect of consumptive processes by economic science remains almost unimpaired. The arts of production remain so much more exacting in their demands upon our attention.
The early influence of this dominance of the productive standpoint in economic science has had effects upon the terminology and structure of that science which are serious obstacles to the human interpretation of industry. Unconsciously, but consistently, the early structure of the science was built with exclusive regard to the industrial or productive processes. The art out of which the science grew was concerned with the progress of agricul-
wholesale and retail trade. Distribution has, of course, another and an important economic signification, being applied to the laws determining the apportionment of the product.
ture, manufacture, and commerce, or with problems of money, taxation, and population, regarded mainly or wholly from the productive standpoint. The underlying assumption everywhere was the question, 'How will this or that policy affect the quantity of wealth produced in the country? ' always with an important corollary to the effect, 'How will it affect the quantity of wealth, passing as rents, profits, interest, or wages to the several classes of the nation?' But nowhere was there any direct consideration of the arts of consumption, with one particularly instructive exception. The only bit of attention paid by our early classical economists to processes of consumption was to distinguish 'productive' from 'unproductive' consumption, v^ that is, to suggest a valuation of consumption based entirely upon its subordination to future purposes of production. Their condemnation of luxurious expenditure and waste, alike in the wealthy and the working-classes, was not primarily directed against the loss of real enjoyment, or human well-being, or the moral degradation involved in such abuse of spending power, but against the damage to the further processes of making wealth by reducing the rate of saving or by impairing the working efficiency of labour. Though occasional considerations of a more distinctively humane or moral character entered into the tirades against luxury, or the dietetic advice offered by these economic teachers, the main trend of their reflections on the use of wealth was quite evidently dominated by considerations of increased production.
This tendency further impressed itself upon the central concept of economic science, that of value, which was treated by these early makers of Political Economy exclusively from the productive standpoint of 'costs.' When, however, later theorists, beginning with Jevons in this country, sought to convert the formal goal of consumption into the real goal, by substituting 'utility' for 'cost' as the determinant of value, it might have been supposed that they would have been impelled, passing through the gateway of utility into consumption, to open up that hitherto neglected country. But no such thing has happened. While an elaborate division of intellectual labour has been applied, both to the study of the objective structure of industry, and to the psychology of the various agents of production, no corresponding studies of consumption have been made. When the products of industry pass over the retail counter, economic science almost entirely loses count of them. They pass from sight into the mysterious maw of 'the Consumer.' It has never occurred to the economist that it is just as important to have a clear and close knowledge of what happens to products when they have become consumer's goods, as it is to trace their history in the productive stages. It would, of course, be untrue to say that modern economists completely ignore methods and motives of consumption. Their studies of value and of markets compel them to direct equal attention to forces regulating Supply and Demand, and many of them assign a formal superiority to the demand for final commodities which issues from Consumers, as the regulator of the whole industrial system. But while this has evoked some interesting enquiries into quantities and modes of consumption, the main interest of these enquiries has lain, not in the light they shed upon the use and enjoyment got from consumption, but in the effects of that consumption upon demand as a factor in problems of price and of production. In a word, the economic arts of consumption still run in subordination to the arts of production, and the very nature of the interest taken in them attests their secondary place. Half of the field of economic survey important from the standpoint of human welfare thus stands unexplored or ill-explored.
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