The Development of Economic Doctrine: An Introductory Survey

CHAPTER XI

KARL MARX

IN a volume of ampler proportions than this, the early history of socialism might claim, and might deservedly receive, the tribute of an independent chapter, though doubtless it might be urged that these early socialists were dreamers and not economists. Here they must be content with such notice as is indispensable for a comprehension of the works of Marx. Socialism, according to taste, .begins with Plato, in virtue of his advocacy of communism; or with More’s Utopia, where the evils of private property are denounced and the doctrine of exploitation expounded. But viewed from the Marxian angle, the socialism which preceded Marx, and which earned his undisguised contempt, was that of the so-called Utopian socialists, whose writings date from the earlier part of the nineteenth century.

It is among these that we must look for the “ father of socialism,” though the number of claimants to paternity is embarrassingly large. Firstly, there is St. Simon (1760-1825)—not the writer of the memoirs—an eccentric nobleman who foresaw the coming of a new age which would be industrial in character, and who sought assiduously, in many pamphlets and what-nots, to discuss where spiritual leadership in this new and uncharted age was to be found. The mark of this new world, intent on the exploitation of the globe, was to be the abolition ol privileges. St. Simon’s socialism is of the weakest, if indeed it exists at all, but his followers, the propagators of a strange religion, extended his doctrine to include the abolition of the greatest of all privileges, that of inheritance, and thus, making the State the residuary legatee, they found a short cut to State socialism. Then there is Fourier (1772-1837), a man of a disordered mind, full of the disconcerting flashes which so frequently enlighten the deranged. His vision was of a reorganized world on the basis of the “phalanx,” a co-operative group, and with such phalanges the world would ultimately be covered to the number of 2,985,984. His is the socialism of co-operation, designed to replace the horrible waste and inefficiency, the divided and clashing interests of civilization, where all men profit by each other’s misfortunes. There is our own Robert Owen (1771-1858), a man greater in his earlier practical years, when he figured as the ideal employer, than in the adventures and the speculations of his later life. For him also the path of salvation lay in co-operation, and in the establishment of settlements more or less communistic in character, as evidenced in New Harmony. Fourthly (and lastly here), there was Louis Blanc (1813-1882), a transitional mind, pointing rather to later socialism and therefore scarcely Utopian. His idea likewise was to eliminate competition by association; but in his case, the State, the banker of the poor, was to be the agent to initiate the great scheme of reform, launching the co-operative bodies, which later were to drive the capitalist from the field.

Such were the Utopians, most of whom were also “ associationists.” They were Utopians because they believed that the realization of socialism was essentially an affair of getting someone to “ launch “ something, and thereafter the business would be done. They were ‘ associationists,” because in the main they visualized the coming of socialism through the formation and extension of groups living together on socialistic principles. Fourier, waiting at home for one hour a day for the unknown capitalist who should enable him to estabiish his first phalanx, is the pathetic symbol alike of the lovable-ness and ineffectiveness of the earlier socialists.

With Karl Marx1 (1818-1883) all this changes. Socialism now definitely enters the main current of economic doctrine because, with Marx, socialism becomes a body of doctrine relying on the support of economic arguments—also, in Marx’s case at least, a body of prophecy resting on the interpretation of recent and current economic phenomena. Herein lies the significance of the transition of socialism from the former type, somewhat contemptuously dubbed “ Utopian,” to that newer variety, rather vaingloriously branded as “ scientific.” To the new age the Utopian socialists appeared as dreamers, men who had touching faith in the power of an Act of Parliament to serve as the basis of an ideal commonwealth, who were even so childish as to believe that an appeal to justice, mercy and right had power to move the hearts of njen. The Utopian socialists might appeal to sentiment to prove the desirability and the aesthetic beauty of socialism; such a procedure would cut no ice. It was better policy to prove, by economic reasoning, the inevitability of socialism; to mingle together economic argument and an interpretation of history, and thereby to show that, things being as they are, their consequences will be what they will be; and that the only outcome, ineluctable and inescapable, is the establishment of the socialist state.

But Marx remains; and except for the antiquarian explorer into origins, Marx is to be identified with scientific socialism. Jealous, if misplaced patriotism may point out that he probably received a large measure of inspiration (and perhaps something more) from that remarkable early group of English socialists which comprised men like Hodgskin, Thompson and Bray; the disciples of Rodbertus may feel that their master has been shorn of his appropriate glory. These are trivial questions. Heaven may, or may not, deal justly in these matters The indubitable fact is that all subsequent socialism has been dominated by Marx; and that even when subsequent schools have disowned him, they have owed their existence to a reaction from Marx. It is therefore permissible to confine this chapter to Marx, and to Marx alone.

More than most writers, Marx requires to be read with some knowledge of his life and character. From the conclusion of his student days until the age of thirty he lived the life of a rebel and an intriguer, at war with all governments, editing papers which were promptly suppressed, and uneasily flitting from one country to another, according to the exigencies of the situation. But from the age of thirty, that is to say following the Revolution of 1848, there began in 1849 the second part of Marx’s life, the long period of his exile in London, which continued until his death in 1883. Though interrupted by occasional visits to the Continent, and though in part occupied with various revolutionary activities, Marx’s life during this long period was primarily that of a recluse, whose waking hours were spent in the British Museum in devouring blue-books. Add to such a morbid life all the cares, privations, hardships, jealousies and suspicions inseparable from the existence of a political exile and, on the materialistic conception of history, some progress may be made towards a comprehension of Marx and his writings.

With regard to. these writings, it is doubtful whether any man living has read, may read, or should read them all. For in the nature of things, Marx was a voluminous journalist and (horrid word) a publicist. In addition to his greater piéces de résistance (and the resisting power is great) he is therefore responsible for a copious pamphlet literature. And there is his correspondence. But for the ordinary man and the intelligent woman, three publications are sufficient, even if of these the whole may not be necessary. There is, first of all, The Critique of Political Economy, dating from 1859, which is rather by way of being a preliminary draft for Capital. Vastly more important, dating from 1848, is the Communist Manifesto, written in conjunction with the faithful Engels, which is of interest as showing how completely, apart from the pseudo-economic and scientific frills, the main elements of the Marxian system had been outlined by that date. Thirdly, there is Capital, the complete and overwhelming statement of the Marxian system, of which the first volume appeared in 1864. The second and third volumes did not appear in Marx’s lifetime, but were edited by Engels, whose function it was to glue together the fragments and chips of the Marxian workshop. Everyone has a duty to endeavour to read the first volume of Capital; no one need be ashamed to admit defeat at the hands of Volumes II and III. .

As an aid to a comprehension of the essential doctrines of Marx, it may be convenient (even at the risk of repetition) to endeavour to reduce his theories to a number of propositions. The greater the complexity of a country, the more is a preliminary study of a map a wise precaution. Leaving aside obiter dicta regarding the organization of society after the coming revolution (a topic on which Marx shows restraint) as being concerned with politics rather than with economics, and therefore outside our sphere, Marx’s doctrines may essentially be described as a theory of value and of profit-making (exploitation), rooted in a certain view of the march of history, and pointing forward to the subversion of the existing capitalistic system. Putting aside, therefore, doctrines regarding the dictatorship of the proletariat as lying outside the immediate purpose of this chapter, Marx may, accordingly, be summarized without injustice in six propositions, or—since the propositional form is hardlv necessary—in six catchwords, two relating to the interpretation of history, two being economic in character, relating to value and inferences therefrom, and two being rather of the nature of prophecy.

Firstly, there is the so-called materialistic conception of history, by which is meant that the dominating and determining factor in all history is economic in character.

Secondly, this materialistic conception of history finds its expression in an unintermittent class struggle. History is merely a record of class struggles; as soon as one is resolved, another is engendered. The materialistic conception of history and the class struggle furnish the sociological basis of the Marxian structure.

Thirdly, and coming now to economics, there is the Marxian theory of value; that is to say, the value of any commodity is merely the amount of labour, that is, of socially necessary labour, congealed in it.

Fourthly, applying this, we get the notion of surplus value. The workman sells his labour power, which produces more than it is necessary to give the worker in the form of wages. The difference is surplus value, which is pocketed by the capitalist and constitutes the exploitation of labour. Herein lies the impulse to the class struggle between the capitalist and the proletariat. These two last propositions together form the economic kernel of Marxism.

Fifthly, and approaching prophecy, the uncontrollable thirst of capital to increase the surplus value in every possible way leads, and will lead, to increasing misery and degradation of the working classes, and to the formation of an increasingly large Industrial Reserve Army of unemployed and under-employed.

Sixthly, and lastly, there is the Law of Capitalistic Accumulation. The large capitalist devours the smaller, so that the means of production become concentrated in ever fewer hands. Society becomes increasingly rent by commercial crises until the auspicious moment when the expropriators will be expropriated and the proletariat will enter into their heritage.

While an elementary discussion of Marx may be con fined to an elucidation of what is involved in these six propositions, it is perhaps wise to preface a more detailed consideration by noting three points of more general interest. Firstly, as to the nature of Marx’s masterpiece; Capital, viewed merely as a book, is surely one of the most bewildering of human productions. It is safe to say—indeed it is obvious from the Communist Manifesto—that the conclusions to be arrived at were firmly implanted in Marx’s mind before he began to evolve his reasons. This in itself would be quite proper, if nevertheless an open mind were kept throughout. But in reading Marx, one feels that he was so convinced of the truth of his conclusions that he became careless as to the arguments used, and in some of the argumentative passages it is difficult to resist the impression that he is intent on befogging rather than enlightening the reader. The pedantic parade of learning, the display of rather puerile mathematical formulae, the dexterous skating on thin ice, the subtlety approaching at times perilously near to sophistry, produce on the unsophisticated reader the impression that he is confronted with a juggler or a necromancer who could without difficulty elicit from the most unpromising hat a teeming progeny of rabbits. In a book which, after all, attains the reasonable spaciousness of approximately 2,500 pages, an author ought to have room to turn round and make his meaning clear; yet despite this, there are chapters, and these among the most crucial, where condensation is carried to the extreme limit of unintelligibility. As an economic argument, the whole array of these three volumes depends on the proof of the labour theory of value which is contained in the first fifteen pages or so of the first volume. Yet nowhere is there in print such a miracle of confusion, such a supreme example of how not to reason. If at the end of these fifteen pages, Marx has gained the assent of his readers, it is assuredly the assent of despair and weariness, and not the assent of enlightenment.

The second point relates to the influence of Hegel, the hero of the young men of Marx’s youth. Marx doubtless outgrew his Hegelian period, and could even claim that his dialectic method was the direct opposite of the Hegelian, turning right side up what he had found “standing on its head.”2 These are forbidden pastures; it is sufficient to note that he never outgrew the Hegelian phraseology and its implications. Fundamental to Hegel is the idea of development. Every positive calls forth its negative, which again creates the negation of the negation, which, however, is not the original positive but something which unites the original positive and its negative. Otherwise expressed, there is firstly the thesis which calls forth its antithesis, which again leads to the synthesis, in which both thesis and antithesis are combined. Traces of philosophic phraseology do no one any harm, but a reperusal of the essential parts of Capital is apt to countenance the suggestion that, with Marx, the philosophic formula came first, and that the world was interpreted in accordance therewith. The class struggle is but the thesis begetting and wrestling with the antithesis; when the dominant class is engulfed, then we have the synthesis, a new starting point in development. Despite Marx’s affected omniscience, Capital reveals very little real knowledge of the world, as indeed Marx, throughout life, was singularly obtuse with regard to the feelings of his fellow-men. He was too much in the British Museum, and too little on the Epsom Downs on Derby Day; and the more one reads Capital, the more one feels that these things which he calls the capitalist and the proletariat are anaemic abstractions who, with as little vitality as Tweedledum and Tweedledee, fight out their battle to its appointed end in order that a philosophical formula may be fulfilled.

The third general point is Marx’s relation to the classical economists, in particular to Adam Smith and Ricardo. The finest flower of Marx’s contempt is reserved for what he calls “vulgar economy”; yet there is truth in the jest which describes Marx as the last of the classical economists. Smith and Ricardo had groped, with hesitations and limitations, towards a labour theory of value. Marx accepted the doctrine without hesitations and, greatly daring, added a proof of his own. In other respects also, as in regard to the theory of wages, it has already been noted how generous Ricardo had been in furnishing bricks for the construction of the edifice of scientific socialism. Not the least entertaining aspect of the great Marxian riddle is to observe Marx railing at the vulgar economists while he is meanwhile complacently arraying himself in their discarded rags and outgrown garments.

The Manifesto of the Communist Party has been so pre-eminently the most influential of the writings of Marx that a slight consideration of this brief pamphlet is desirable, if only to indicate how far the leading Marxian positions had been reached by 1848. It differs from Capital above all in its terseness, its twenty-two fiery pages comparing most favourably with the interminable dreariness of its bigger brother. Of its four sections,3 it is the first, dealing with “Bourgeois and Proletarians,” that is most relevant to the question of Marxian doctrine. It begins by striking a characteristic note: “The history of all hitherto existing society is the history of class struggles.” And in amplification:

“ Freeman and slave, patrician and plebeian, baron and serf, guildmaster and journeyman, in one word, oppressor and oppressed, standing constantly in opposition to each other, carried on an uninterrupted warfare, now open, now concealed; a warfare which always ended either in a revolutionary transformation of the whole of society or in the common ruin of the contending classes.”

This is followed by an analysis of the existing situation and the process which has led to it, and above all a discussion of what has been done by the bourgeoisie. Despite its brutality, the bourgeoisie has not been useless, having indeed played its appointed part in history in destroying feudalism. It has given a cosmopolitan character to the production and consumption of all countries. “To the despair of reactionaries,” as the manifesto says, it has cut from under the feet of industry its national basis, so that national narrowness and exclusiveness have become daily more and more impossible. Further (a characteristic note), it has rescued a great part of the population from the idiocy of country life. But just as feudal relations became so many fetters on production and had to be burst asunder, so also the day of the bourgeoisie is past:

“The weapons with which the bourgeoisie conquered feudalism are now turned against the bourgeoisie itself.

But the bourgeoisie has not only forged the weapons that bring death to itself; it has also produced the men who will wield these weapons—the modern workers, the PROLETARIANS.”

In the next passage the manifesto approaches the question of exploitation, without, however, relying on later refinements as to labour-power, value and surplus value. “These workers, forced to sell themselves piecemeal, are a commodity like every other article of commerce....The cost of production of the worker is in consequence reduced almost entirely to the means of subsistence that he requires for his maintenance and for the propagation of his race.” The price of a commodity, and therefore of labour, is at this stage equated to its cost of production. Exploitation consists in the worker receiving “his bare money wage,” and the burden of labour is increased (as is later, in Capital, the degree of exploitation) by prolongation of the working hours, increased speed of machinery, and the employment of women and children.

The increasing separation of society into two opposing camps is also a cardinal point in the manifesto:

“The little middle class, the small shopkeepers, tradespeople, peasant proprietors, handicraftsmen and peasants, all these classes sink into the proletariat, partly because their small capital is not sufficient for modern industry and is crushed out in the competition with the large capitalists, and partly because their specialized skill is depreciated by the new methods of production. Thus is the proletariat recruited from all classes of the population.”

The increasing misery of the working classes is likewise more comprehensible here than in Capital:

“The modern worker, on the contrary, instead of rising with the progress of industry, sinks ever deeper beneath the social conditions of his own class. The labourer becomes the pauper, and pauperism increases even more rapidly than population and wealth.”

This means that the bourgeoisie can no longer assure existence in slavery to its own slaves, and that therefore society can exist no longer under its rule. In the celebrated phrase: “it produces its own grave-diggers.”

Enough, and perhaps too much of the Communist Manifesto. Its significance lies in the fact that in a few brief pages it enables the reader to grasp the leading ideas of Marx, free from the mathematical and economic obfuscations which too frequently mar Capital. Here, in 1848, supreme emphasis is already laid on the continuity of the class struggle; there is the sharp differentiation into two classes, into the lower of which all but a few are inevitably thrust; there is the idea of the exploitation of the worker, though the conception may lack precision of definition; and lastly there is implied the inevitable march of history, so that the capitalistic system engenders within itself the seeds of its own destruction. All these are pure Marxism, and except for some pseudo-scientific elaboration (particularly with regard to value and surplus-value), Marxism is little else.

Having seen how far the essential Marxian positions are already enunciated in the Communist Manifesto, it may be convenient to consider in slightly more detail the series of propositions on page 299, wherein an attempt was made to reduce Marx to tabloid form. The first two—the materialistic conception of history and the class struggle-may be taken together; and inasmuch as they are scarcely, if at all, matters of economic doctrine, they may be disposed of summarily. Although it is customary to regard the materialistic conception of history as of the essence of Marx’s doctrine, the beginner may nevertheless search diligently in Marx’s better-known works and find no clear explanation of what the great principle involves. It is, apart from a few occasional passages, rather a pervading assumption, and for a relatively clear statement one must turn to Engels rather than to Marx. Perhaps the most definite statement in Marx’s own writings is contained in the preface to the Critique of Political Economy, in which the most crucial sentences are these:

“The mode of production in material life determines the general character of the social, political and spiritual processes of life. It is not the consciousness of men that determines their existence, but, on the contrary, their social existence determines their consciousness.”4

In its original form, if one may appropriate a phrase from Engels, this meant that “the final causes of all social changes and political revolutions are to be sought, not in men’s brains, not in men’s better insight into eternal truth and justice, but in changes in the modes of production and exchange.”5 It is not the philosophy, but the economics, of each particular epoch that provides the essential cause of change. In consequence, art, religion, law and all the rest of it do not mould economic conditions; on the contrary, they are the outcome of these conditions. The far-fetched illustrations of the materialistic conception of history, which were at one time put forward, need not detain us. It is sufficient that in its original form the doctrine was untenable, and was not indeed maintained by Engels without devastating modifications. That history, to be comprehensible, must take account of the kitchen larder, is a truth which few would deny; but equally, there is a great deal more in history than the economic factor. Man does not wholly or exclusively crawl on his belly; there are all manner of enthusiasms, loyalties, inspirations spurring men to action, which are nevertheless entirely uneconomic but which may yet react on economic conditions. Above all, the action of mind on mind which, with its remoter consequences, is one of the greatest of all influences in the world, eludes economic explanation. Assuming that it may be possible to explain how Dante, Mahomet, Calvin, Marx, Mr. Lloyd George and Mr. George Robey could only have occurred when they did in fact occur, there remains the much more difficult question of explaining how or why they occurred at all. It is even more difficult to explain how the great man finds his “sounding-board” which may carry his influence erratically to different parts of the world; for Calvin might not have found his Knox; Marx might have had no Lenin. In interpreting history it is well to be humble and perhaps even agnostic, realizing that the history of man is moulded by many factors, of which the economic is merely one, and that perhaps not necessarily the most important.

The class struggle is likewise merely an unjustifiable generalization of a very partial truth. In the true Marxian statement, the existence of the class struggle is linked to the materialistic conception of history by a “consequently”(as in Engels). But it is surely the most inconsequent consequence. The economic factor (and it is not to be underrated) may manifest itself otherwise than in the class struggle. Moreover, one could only postulate the ubiquitous existence of the class struggle if men were everywhere, predominantly if not exclusively, moved by economic motives, and were moreover conscious where their economic interests lay. In more orthodox and hackneyed phrase, they should be moved by enlightened self-interest. But, on the contrary, men are moved by all sorts of ideas—patriotism, religion, fanaticism and love of liberty—which may conflict with their interest, or the interest of their “class,” whatever a class may be. But indeed, waiving the wider point, the whole idea of a class struggle is perhaps a petitio principii. The dividing lines in society are many, but men do not feel themselves to be a group or a class until they have acted as a group or a class. The consciousness of solidarity is not the cause of common action, but is rather the consequence of such common action. Whenever men act together with any measure of continuity, then there will emerge a feeling of solidarity, which will continue so long as in fact they act together. Nor need the bond connecting them be economic in character. But the idea of an inevitable, universal, all-embracing solidarity of the working classes is the merest delusion. There may be conflict of interests between different grades in the same industry; between different industries in the same country; between the workers in different countries.

The fundamental error in the Marxian statement of the class struggle has two aspects. Firstly, Marx visualized the proletariat as an idealized worker, and he was therefore able to invest the proletariat with a unity which it does not in fact possess. Secondly, he regarded this unified “proletariat”as being endowed with the peculiar properties of the “economic man.” It is curious once again to observe how, when that anaemic ghost the “economic man “was falling into disrepute, Marx seized on the remnants of the classical school, and produced not one, but a whole race of economic men. The final trumpet-call of the Communist Manifesto provides a curious commentary on all this interpretation of history. For there should be no need to summon, with the aid of the largest capitals, the workers of all lands to unite, unless in fact they had been previously disunited. But if previously disunited, one is tempted to inquire whether their disunion had by any chance been caused by conflicting interests, or to ideal causes such as patriotism and religion.

Turning to the economic kernel, we are confronted with the Marxian theory of value, which makes value merely the expression of the amount of labour embodied in a commodity. Up to a certain point this is merely a transplantation from Ricardo; but whereas Ricardo allowed for modifications, and was obviously increasingly beset with doubts, Marx pushed to its rigid and universal extreme the doctrine that all value springs from, and is, labour—impelled thereto, doubtless, by the necessity of proving the central doctrine of exploitation. Further, whereas Ricardo did not really attempt to prove the proposition, Marx, more courageous, essayed to give a rigorous and exact demonstration; and indeed on this demonstration rests the whole vast superincumbent weight of the three volumes of Capital.

The demonstration, such as it is, meets the reader in the first section of the first chapter of Capital, and it may have proved a contributory cause in deterring many readers from faring further. Briefly—very briefly—the argument is that wealth is an immense accumulation of commodities, a commodity being a thing that satisfies human wants. Every useful thing is an assemblage of many properties, and may therefore be of use in various ways. If a thing has utility, it is a use-value; but commodities are also the depositories of exchange-value. Approach now the question of exchange-value, which at first appears as a quantitative relation. If a number of things—x blacking, y silk, z gold—exchange for each other, then each as an exchange-value must be replaceable by any of the others. If we take, then, an equation representing equality of exchange (e.g., i quarter corn=x cwt. iron), then we may infer that in I quarter of corn and in x cwt. iron there exists in equal quantities something which is common to both; and to this third thing, which is neither of them, both must be reducible.

What, then, is this mysterious property which lies concealed in equal quantities in a shilling’s worth of fresh butter and a shilling’s worth of tin-tacks? Firstly and obviously, it is not the geometrical or chemical or physical properties. These only engage our attention so far as they affect the utilities of the commodities. Nor has the undetected common property anything to do with the utilities of the things. As Marx somewhat pedantically expresses it, “the exchange of commodities is evidently an act characterized by a total abstraction from use-value.” It is indeed just because things have different use-values that they are exchanged, and it is certainly true that a wise man will not confuse the uses of butter and tin-tacks. Then, says Marx, taking a mighty leap, the commodities represented in our equation “have only one common property left, that of being products of labour.” If things are of equal exchange-value, this merely means that each contains, congealed in it, the same amount of human labour.6

Such, leaving aside a good deal of unnecessary mystification, is the essence of Marx’s proof of the labour theory of value. Certain points at once strike even the most befogged reader. In the first place, Marx assumes that everything that has value is the product of human labour; at the crucial point of the argument, it is found that this is the only quality common to two things of equal exchange-value. “Virgin soil, natural meadows,” Marx allows to have use-value, but not value.7 This, however, is too obviously to shut one’s eyes to half the problem. Whether we like it or not, things which are not the product of human labour may, and do in fact have, exchange-value; but all such things are inferentially excluded before Marx begins his winnowing process in search of the meaning and cause of value. In Böhm-Bawerk’s famous phrase, he acts like one who, urgently desiring to bring a white ball out of the urn, takes care to secure this result by putting in white balls only.

The second noticeable peculiarity of the Marxian demonstration is that it rests on the perfectly legitimate, but highly dangerous, method of exclusion. There is no direct proof that value expresses the amount of labour congealed in a commodity; this conclusion, at best, merely emerges from the purported exclusion of every other possible solution. But a generation familiar with detective literature should know that this is the kind of proof on which a well-advised jury will convict, only with the utmost hesitation. You dare not hang the heroine merely because everyone else supposed to have been on the premises on the fatal night can show a clean pair of hands. You never can tell. A closer inspection might have revealed the butler behind the curtain or the pantry-boy under the sofa. In the present case, Marx turned a blind eye to a whole regiment of pantry-boys who, so far from being concealed, were sitting ostentatiously in the most conspicuous chairs. In particular, there is the important element of scarcity in relation to human desire, the fact that things may have value in proportion to the desires of men to possess them. Otherwise expressed, Marx, here as elsewhere, neglects the whole side of human demand. He approaches value solely from the side of supply. His demonstration is fallacious because, resting on exhaustion, it obviously does not exhaust.

Thirdly, Marx’s attempt at the outset to side-track the element of utility is again little more than mystification. It may be true that the use-value of blacking is different from that of silk, and that exchange only takes place because these articles serve different purposes. But the fact that each of these commodities has utility is assuredly not ignored in the process of exchange. Nor indeed does Marx for any length of time maintain the contrary. The idea of utility is an inconvenient thing to have about the premises while he is establishing his main proposition; so he incontinently bundles it out at the front door. But when his labour theory of value has been proved, he gently opens the back door for its readmission. “Lastly,” he says at the end of the section, “nothing can have value without being an object of utility.”8 Here, then, after the fair is over, is one overlooked factor common to things which have value.

The objection that identical commodities may represent different amounts of labour Marx meets, quite legitimately, by the contention that it is not the labour of this or that, worker (which may vary according to his resources and his industry) which determines value. What is decisive is the labour time socially necessary to produce an article, and this implies the normal conditions of production at the time, as also the average degree of skill and intensity of labour.9 If articles continue to be produced by antiquated methods, the amount of labour so involved will not determine value, since in this case an amount of labour greater than is socially necessary will have been expended. More open to objection are the further refinements necessary to make the theory fit the facts. It has been shown that utility was grudgingly admitted to be essential to value; if the thing turns out to be useless, so also was the labour involved.10 As Marx imperturbably puts it, “the labour does not count as labour”—though there might be difficulty in persuading the worker to accept on pay-day the consequences of this point of view. So also a glut proves the expenditure of more time than was socially necessary; generally speaking, labour spent on anything “counts effectively only in so far as it is spent in a form that is useful for others.”11 Somewhat similar is Marx’s treatment of the difference between skilled and unskilled labour, and between labour of different qualities. For Marx all labour is reducible to what he calls “human labour in the abstract,” or “simple average labour”—a curious fiction which implies that there is labour which is neither the labour of the tailor, nor the weaver, nor of any other specific worker. But if, as is admittedly the case, there are different qualities of labour, how are they to be expressed in terms of that underlying jelly to which labour is ultimately reducible? Marx’s explanation is illuminating:

“Skilled labour counts only as simple labour intensified, or rather, as multiplied simple labour, a given quantity of skilled being considered equal to a greater quantity of simple labour. Experience shows that this reduction is constantly being made....The different proportions in which different sorts of labour are reduced to unskilled labour as their standard, are established by a social process that goes on behind the backs of the producers, and, consequently, appear to be fixed by custom.”12

This, clearly, is to argue in the most vicious of circles; for this mysterious social process that goes on behind the backs of the producers is nothing else than the rude determination of the market-place. The world’s coarse thumb and finger determine that the products of A and B shall exchange in the ratio of 5:4, and Marx thereupon says that B’s labour “counts” as [[11/4]] times as much as that of A. When the ratio as so determined in the market changes to 10:9, there will be a consequent change in the ratio in which the labour of the workers is “counted.” But a theory designed to explain what takes place in the market cannot appeal to the market to provide a varying formula which, when applied to the theory, will make the theory tally with the facts. But this is what Marx does throughout. Labour determines value; but to the extent to which it is misapplied or applied in excess, it “does not count as labour,” or requires to be graded down. Different kinds of labour are to be regarded as simple labour multiplied: if you would know to what extent any kind of labour must be multiplied in order to yield the right answer, all that is necessary is to look at the right answer as supplied by the market, and deduce therefrom the necessary multiplicator. Thus by ignoring labour where necessary, by grading it up or down as the situation requires, it ought to be possible to secure that the facts and the theory are happily mated.

The analysis of surplus value is enveloped in a considerable mass of metaphysical subtlety; but the essence of the idea is not obscure. The problem, putting it popularly, is to ascertain wherein lies the secret source of the increase of capital. Marx makes much play with the two formulae representing the circulation of commodities, C-M-C (where a commodity is exchanged for money, and subsequently reconverted into a commodity), and the alternative circuit, M-C-M (in which money purchases a commodity which is again transmuted into money), or since the capitalist is marked by a boundless greed after riches, the formula should more properly be M-C-M1 (where M1 = M + δM). The wise reader will waive aside the three points in which the formulae are similar and the nine in which they are dissimilar. In the first formula (C-M-C) there can be no increase, because equivalents are exchanged for equivalents; in a sentence which sums up the perverseness of the Marxian theory of value, at least as expounded in Volume I, “the value of a commodity is expressed in its price before it goes into circulation, and is therefore a precedent condition of circulation, not its result.”13 Nor can a surplus emerge from circulation of commodities merely by selling them above their value; for in that case what one gains another loses. After further refinements, Marx concludes that the source of increase of wealth must be sought in the first portion of M-C-M, though not in the value of the commodity bought, which is indeed paid for at its full value.14 The source must lie in its use-value. There must be somewhere in the market a mysterious commodity “whose use-value possesses the peculiar property of being a source of value, whose actual consumption, therefore, is itself an embodiment of labour and, consequently, a creation of value.”15 This mysterious commodity is labour-power, which, as he elsewhere expresses it, is a “source not only of value, but of more value than it has itself.”16

Divested of its wrappings, the doctrine of surplus value becomes clear. Labour-power, like everything else, has its value; it is (we are back at the unrefined Ricardo) “the value of the means of subsistence necessary for the maintenance of the labourer.”17 But when put to use, labour-power will produce more than this. If five hours’ labour are sufficient to produce what is required for the maintenance of the labourer, and if the worker, having sold his labour-power for the day, is required to work ten hours, these five additional hours, representing surplus labour, will yield surplus value. The Marxian doctrine on this point may be summed up in the two contentions, firstly, that all value springs from labour; but, secondly, that labour in return receives merely the means of subsistence. The difference is the exploitation effected by capital.

That all value comes from labour is further accentuated by a point on which Marx lays much emphasis, and which ultimately leads to the undermining of the Marxian edifice. This is the important distinction between constant capital and variable capital.18 By constant capital is meant the means of production, the instruments of labour, etc.—loosely, we may say machinery. By variable capital is meant that part of capital represented by labour-power—in effect, wages. Capital may therefore be of different organic composition (high or low) according as the ratio of constant to variable capital changes. Now it is of the essence of the Marxian theory that the whole of the surplus value comes from the variable capital. Whatever be the longevity of a machine, its total value will be gradually transferred to the product during the years of its working period.19 “In the value of the product, there is a reappearance of the value of the means of production,”20 but no more. Even more tersely, “machinery, like every other component of constant capital, creates no new value, but yields up its own value to the product that it serves to beget.”21 The consequences of this doctrine, that all surplus value (i.e., all profits) springs from variable capital, and from variable capital alone, will call for consideration later.

Such, then, is surplus value, but inasmuch as “capital nas one single life impulse, the tendency to create value and surplus value,”22 the capitalist machine, once it has begun to grind, will strive to make the surplus value a maximum. The obvious method is to extend the hours of labour.

If AB is the “necessary labour time,” then a prolongation of the working hours from AC to AC1 will increase the surplus value; so likewise will a curtailment of the necessary labour time from AB to AB1. To this latter is to be ascribed the immanent tendency in capital “to heighten the productiveness of labour, in order to cheapen commodities, and by such cheapening to cheapen the labourer himself.”23 Surplus value will also be increased by “nibbling at meal-times,” by day and night work, by the relay system, by roping in the labour of women and children. All these represent the “vampire thirst for the living blood of labour.”24

The defects of the foregoing analysis are sufficiently patent. It is common to observe that Marx, in the first place, entirely omits the element of time, and that his doctrines therefore imply the illegitimacy of interest. His discussion of interest, when it comes (Volume III), is wholly inadequate; in the place where a discussion would be in point, he tells us that “interest is a mere fragment of surplus value.”25 For Marx, money is still barren, and his objection to the public debt is that “it endows barren money with the power of breeding, and thus turns it into capital.”26 So also the importance of directive and managerial functions is almost unmentioned.27 Yet it is a well-known fact that of two businesses, with apparently similar advantages, one may prosper and the other may head determinedly for the bankruptcy court, even though the labour-power exerted in the two cases may be identical. But apart from these difficulties, the Marxian explanation suffers from two inner inherent contradictions (or two aspects of the same contradiction) from which it never escaped, and on which it finally made shipwreck in the third volume. In the first place, if all profit springs from variable capital and none from machinery, then it is the height of folly ever to introduce machinery, and it is a poor explanation to suggest that the capitalist does not know what he is doing. Marx realizes the difficulties of this “contradiction which is immanent”28 in the application of machinery, but his observations leave it barking for solution in the minds of all readers. On the Marxian theory, with every progress of capital to a higher proportion of constant capital, there will be a diminution of profits, since profits come solely from labour, which admittedly represents a continually smaller proportion of total capital. With every step forward which the capitalist makes, he thus more deeply cuts his own throat. Surplus value calls for, and can only arise from, the existence of vast masses of workers; the Marxian analysis shows an increasing army of unemployed, displaced by machinery which can yield no profit.

The other flaw is a variant of this, and is in a sense even more fatal. If profit springs only from the labour employed, and in no wise from the constant capital, then the rate of profit in different industries will vary according as the proportion of variable capital is high or low. When there is much variable capital (i.e., in more primitive and undeveloped industries) the rate of profit will be high; in industries which have had extensive resort to machinery, the rate of profit will be low. Marx admitted with praiseworthy frankness that the observed facts were in glaring contradiction with the law so ascertained:

“This law clearly contradicts all experience based on appearance. Everyone knows that a cotton spinner, who, reckoning the percentage on the whole of his applied capital, employs much constant and little variable capital. does not, on account of this, pocket less profit or surplus value than a baker, who relatively sets in motion much variable and little constant capital. For the solution of this apparent contradiction, many intermediate terms are as yet wanted, as from the standpoint of elementary algebra many intermediate terms are wanted to understand that o/o may represent an actual magnitude.”29

The subsequent history of this conundrum furnishes one of the few comedies of economic literature. The promised solution did not appear in Volume II, but references to it figure largely in the preface written by Engels, above all in the form of a challenge addressed to the followers of Rodbertus. For if, as was claimed, Marx had plagiarized Rodbertus, now (and that right early, before the publication of Volume III) was the time for those who had championed Rodbertus to vindicate his claims by producing the correct solution of the riddle. The odd thing is that many socialists and economists did in fact respond, and took part in the competition to the extent of speculating as to what the Marxian solution was to be. But indeed it ought to have been clear a priori that there could be no solution, since irreconcilables cannot be reconciled, nor can harmony be established between two contradictory propositions—unless by the simple expedient of dropping one of them overboard. Contemplating the “Russian campaign of disaster” organized by Engels, Loria, an enthusiastic admirer of Marx, even suggests that the procrastinations of Marx in getting on with Volumes II and III were due to a realization of the impending ruination of his life’s work: “Is there any reason for surprise at Marx’s hesitation to publish this so-called defence; need we wonder that his hand trembled, that his spirit quailed, before the inexorable act of destruction?”30

The solution offered to the undiscerning in the third volume in explanation of the existence of a uniform rate of profit is embedded in a good deal of arithmetical illustration. Briefly, it amounts to this. Employers are not to be viewed in isolation. A group of enterprises, with different proportions of variable and constant capital, should be replaced by an imaginary enterprise, comprising the total of all the capitals of the members of the group. As this process of averaging cannot be limited, it means that all employers are to be regarded as one group, in which the surplus value gained by all is distributed among all. The possibility of a uniform rate of profit thus emerges; but it is on condition that some things sell above and some below their value.31 This uniform rate of profit is arrived at by competition, and capital everywhere looks for the average profit. Thus, there emerges a difference between value and price; and henceforth it will only be on rare occasions, indeed only by accident, that the surplus value really produced in any given branch of industry will correspond to the profit contained in the selling price of the commodity—the accidental case arising where the composition of the capital (as between constant and variable) is exactly the average of the sum total of all capitals.32 Elsewhere the products of industries, with a proportion of constant capital above the average, will sell at a price above their value, while in the contrary case they will sell below their value. Thus the desired uniform rate of profit is established, but at the cost of sacrificing the whole of the first volume of Capital; for the inspired doctrine of the first volume, that things exchange in accordance with the congealed labour they contain, is ignominiously tossed overboard. This is the “solemn mystification” of which Loria speaks. In fact, Marx has replaced Volume I by a mere cost-of-production theory such as a vulgar economist like Adam Smith might have evolved in his most vulgar and least enligL.ened moments. Things exchange according to their cost of production (which includes a normal rate of profit).33 It is true that they still have a “value” which differs in general from the price; but in a “value” which is an abstract metaphysical conception, and which is uniformly ignored in the market-place, few of us have any lively interest.

The remaining parts of Marx—relating to the Industrial Reserve Army and the Law of the Concentration of Capital—are perhaps in the field of vaticination rather than of economic analysis, and may therefore be dealt with more summarily. The existence of the Industrial Reserve Army is, above all, due to the progressive use of machinery; and all that Marx says on this subject is in a sense vitiated by the flaw which he openly admits, that as no profit can arise from machinery, the progressive introduction of machinery must lead to a curtailment of surplus value. Accepting, however, the were-wolf greed of capital for surplus value, it is clear that surplus value may be increased either by increasing the amount of labour exacted, or by diminishing the number of hours during which the worker must labour to provide his necessary maintenance34 (the distinction between absolute and relative surplus value). Herein, as has been noted, lies the interest of capital in increasing the productivity of labour; it makes the worker cheaper. Hence also the significance of division of labour, which calls for production on a considerable scale, and therefore requires that the minimum amount of capital should be constantly increasing.35 But once introduced, machinery clamours to be increasingly used. It is to the interest of the employer that the machinery be used as long each day as possible;36 apart from prolongation of hours, there is a similar impulse to intensification by increasing the speed of the machinery and by requiring the worker to tend more machines. But all this means the displacement of the worker: “the workman becomes unsaleable, like paper money thrown out of currency by legal enactment.”37

Putting the point in technical Marxian phraseology, the advance of accumulation connotes an increasing proportion of constant to variable capital; in other words, the demand for labour must fall progressively.38 There is thus a relative surplus population produced, which forms a “disposable Industrial Reserve Army,” which still belongs to capital, and which is retained to provide “the possibility of throwing great masses of men suddenly on the decisive points without injury to the scale of production in other spheres.”39 The Industrial Reserve Army plays a quite peculiar part in Marxian theory. Its expansion and contraction is implicit in the explanation of “crises”; the general movements of wages are explained by what happens to the Industrial Reserve Army. In periods of stagnation it weighs down the active labour army, while in times of activity it keeps its pretensions in check.40

To complete the picture, it is necessary to bear in mind what is happening at the other end, in the Law of Capitalist Accumulation. “One capitalist always kills many.”41 Marx here has implicit faith in the big battalions. The battle of competition is fought by cheapness, but cheapness depends on productiveness, and productiveness on the scale of production. “Therefore the larger capitals beat the smaller. . . .Competition . . . always ends in the ruin of many small capitalists, whose capitals partly pass into the hands of their conquerors, partly vanish.”42 Such, then, is the diagnosis of the natural trend of events. At one end, the larger capitalists devour each other like monstrous pike in a pond, growing ever larger in size, ever fewer in number: at the other end there is a vast Industrial Reserve Army of unemployed and intermittently employed sunk in increasing misery—at one pole accumulation of wealth; at the other, accumulation of misery, agony of toil, slavery, ignorance, brutality, mental degradation. So increasingly, until the final catastrophe, which can be fittingly presented only in the words of Marx himself:

“Along with the constantly diminishing number of the magnates of capital, who usurp and monopolize all advantages of this process of transformation, grows the mass of misery, oppression, slavery, degradation, exploitation; but with this too grows the revolt of the working-class, a class always increasing in numbers, and disciplined, united, organized by the very mechanism of the process of capitalist production itself. The monopoly of capital becomes a fetter upon the mode of production, which has sprung up and flourished along with, and under it. Centralization of the means of production and socialization of labour at last reach a point where they become incompatible with their capitalist integument. The integument is burst asunder. The knell of capitalist private property sounds. The expropriators are expropriated.”43

It is unnecessary to consider how far Marx in these matters has proved a prophet of repute, or by what glosses it may be possible to make him appear as such. To the doctrine of the Industrial Reserve Army—in the sense in which Marx used the term—subsequent history has given no support; with regard to the increasing degradation of the working classes, he is equally at sea. In extenuation, it should be borne in mind that all Marx’s ideas were formed before 1848, and that his subsequent reading was very largely devoted to a study of the more repellent aspects of the Industrial Revolution in the halcyon days of unrestrained laissez-faire. The functions of trade unions, the possibly beneficent activity of the State were outside the scope of Marx’s vision. A better case can be made in justification of the law of capitalistic concentration. Concentration there certainly has been; but it has been concentration of control, not of ownership, and the whole Marxian thesis demands concentration of ownership as of the essence of the doctrine. So likewise, between the two extremes, the Marxian prophecy has found no fulfilment. The population has not been thrust ruthlessly into two opposing camps; there is still an intermediate grade which somehow contrives to pay its taxes and survive.

But quite apart from the minor question of the justice of the Marxian prophecy, the state of society visualized by Marx is in itself sufficiently curious to provoke wonder. A society consisting largely of an army of unemployed (and that in pre-Insurance Act days), leavened by a few remaining capitalists relying increasingly on the use of machinery (which on the Marxian theory yields no profits), is in itse! a bundle of glaring contradictions. For whom, under these conditions, are the dark satanic mills supposed to grind out goods? Obviously not the Industrial Reserve Army, whose home is the workhouse, and who have no purchasing power. As before, Marx entirely overlooks the side of demand. Production cannot go on unless there is a market for the goods, and in reading Marx and in contemplating the population drifting into the Industrial Reserve Army and sunk in increasing misery, one inevitably wonders where the market is to be found.

Marx remains, and probably always will remain, one of the riddles of the nineteenth century. He set out to be “scientific,” to produce what the reviewers would call a cogent piece of reasoning; and, undoubtedly, the whole system is extraordinarily closely knit together; the various points are admirably dove-tailed. Yet no system of thought has suffered such complete bankruptcy as the Marxian. His philosophy of history was to all intents disowned by Engels; the fallacies of his economic doctrine have been so ruthlessly and frequently exposed, that they scarcely any longer furnish even satisfactory examination questions; his prophecies have perversely refused to be fulfilled. All this, moreover, is acknowledged even by those who honour him most. Take, for instance, Mr. Beer, who says that Marx’s theory of value and surplus value have rather the significance of a political and social slogan than of an economic truth;44 or take Mr. Laski, who dismisses the theory of value as one that has not stood the test of criticism, as out of harmony with the facts, and as far from self-consistent.45 Yet, despite this bankruptcy, Marx continues to live and to be a vital force. Indeed, Marx is one of those writers in whose case refutation is a singularly futile exercise. He is a legend; he is, in the Sorelian sense, a promulgator of “myths” where truth is a secondary consideration, so long as the myth embodies what one wishes to believe, and so long as the belief has power to inspire action. This point of view is admirably, if somewhat unblushingry, put by Mr. Beer, who, having dismissed the Marxian economics as a “political slogan,” adds that “such militant philosophies need not in themselves be true, only they must accord with the sentiments of the struggling mass”; and (a page later) the doctrines of Marx “will for long have the force of truth for the masses, and will continue to move them.”46 This is somewhat too blatantly to reduce Marx to a sacred lie, whose falsity is known to the elect, but which serves its purpose so long as it misleads others.

An entirely different line of defence is, however, possible. It consists in arguing that Marx has been completely misunderstood, that he was not, in fact, discussing the market-places of the world and the employers and the employed who elbow each other there, but an abstract world of his own thought and his own creation. Here, for instance, is Croce:

“The capitalist society studied by Marx, is not this or that society, historically existing, in France or in England, nor the modern society of the most civilized nations, that of Western Europe and America. It is an ideal and formal society, deduced from certain hypotheses which could indeed never have occurred as actual facts in the course of history.”47

It is interesting to observe that Croce prefaces his remarks by saying that it does not appear that Marx himself always realized fully the peculiar character of his investigation. Whatever contortions may have resulted from the conflict between the first and third volumes, it is indeed abundantly evident that Marx would have been genuinely surprised had he been told that he was discussing a state of society which could never have existed in the course of history;48 and it is also obvious that those with whom Marx has had most influence, have in fact shared his failure to realize the peculiar character of his investigations.

Whatever may be thought of the riddle of Marx, it remains beyond question that he has been the dominant force in the whole of the subsequent development of socialism. Whether that influence has been a beneficial one may perhaps be doubted, and there are at last some indications of a tardy realization of the fact that Marx, shifting the car of socialism on to the wrong lines, has had a degrading effect on the whole socialist movement.

Délivrons-nous du Marxisme is the significant title of a recent French volume, and Mr. de Man’s thoughtful work49 is a reasoned statement, from the socialist point of view, against the assumptions of Marxism. What Marx did for socialism may be seen by contrasting his spirit and that of his despised predecessors, and a socialist indictment of Marx would probably concentrate on three points. In the first place, in putting forward a “scientific” type of socialism, he deliberately and ostentatiously eliminated the moral basis of socialism and the appeal to justice. Marx cared for none of these things; the coming of socialism was to be scientifically demonstrated. But after the moral appeal had been thrown aside as mawkish sentimentality, the scientific proof, which was to take its place, has collapsed. Socialism can only regain its moral basis by being delivered from Marxism. The second main criticism was urged long ago by Mazzini in a frequently quoted phrase: “Hatred,” he said of Marx, “outweighs love in his heart.” The early socialists had been inspired by a large-hearted love; the gospel of Marx is a gospel of hatred and envy and malevolence, setting the class struggle in the centre of things, and appealing to all the ignobler passions. Consistently he looks downwards and not upwards. The third point of criticism is akin to this. It is that with Marx, socialism definitely becomes sectional. There is a grand catholicity about the early socialist visions; theirs was a paradise into which all might enter. But the Marxian heaven rests on a strict separation of the elect from those fore-ordained to damnation. Such has been the legacy of Marx to the socialist movement; he has shorn it of its idealism, and to the utmost of his influence made it sordid; he has infused into it a leaven of hatred and intolerance; he has deprived it of its universality. Sufficient reason indeed for the devout socialist to pray to be delivered from Marxism! How far these baser elements were the reflection of Marx’s warped and cankered personal character would furnish material for an interesting, but perhaps an irrelevant, study. Those who desire enlightenment may find instruction in the biography recently written by that enthusiastic Marxian, Mr. W. Rühle.

 

________________

50 Born at Trier, 1818. Studied at Bonn and Berlin. Engaged in journalism on the Rheinische Zeitung (1842). Obliged to move about continually between Germany, France, Belgium and England until 1848. Thereafter, with few interruptions, he remained in London until his death in 1883. He played a leading part in the formation of the First International in 1864, and its subsequent proceedings; but in the main his life in London was devoted to reading and writing. The first volume of Capital appeared in 1867; the second and third appeared, after his death, in 1885 and 1894 respectively.

51 Capital, Preface, Vol. I, p. 25 (Kerr).

52 Section 1, “Bourgeois and Proletarians,” contains most of the essence of Marxism; section 2, “Proletarians and Communists,” leads up to the programme of the communists; section 3, “Socialist and Communist Literature,” is an entirely unfair attack on previous socialist literature; section 4 is little more than peroration: “The proletarians have nothing to lose but their chains, Thev have a world to win.”

53 p. 11. Still better known as a locus classicus is the passage in the preface to the Communist Manifesto, written by Engels after Marx’s death: “The pervading and basic thought of the manifesto is: that in every historical epoch, the prevailing mode of economic production and exchange, and the social organization necessarily following from it, form the basis upon which is built up, and from which alone can be explained, the political and intellectual history of that epoch; that consequently the whole history of mankind . . . has been a history of class struggles.”

54 Socialism, Utopian and Scientific, p. 45.

55 Capital, Vol. I, chap, i, sec. i, pp. 41-44. (Edition published bv Kerr, Chicago, but the pagination is not uniform in all editions.)

56 Ibid., Vol. I, p. 47.

57 Ibid., Vol. I, p. 48.

58 Ibid., Vol. I, p. 46.

59 Ibid., Vol. I, p. 48.

60 Ibid., Vol. I, pp. 97-98.

61 Ibid., Vol. I, pp. 51-52

62 Ibid., Vol. I, pp. 175-176.

63 Ibid., Vol. I, p. 185.

64 Ibid., Vol. I, p. 186.

65 Ibid., Vol. I, p. 216.

66 Ibid., Vol. I, p. 190.

67 Ibid., Vol. I, chap. 8, especially pp. 232-233.

68 Ibid., Vol. I, pp. 226-227.

69 Ibid., Vol. I, p. 231.

70 Ibid., Vol. I, p. 423.

71 Ibid., Vol. I, p. 257.

72 Ibid., Vol. I, p. 351.

73 Ibid., Vol. I, p. 282. It is perhaps worth while to quote one of the purple passages with which Marx studs his volume: “But in its blind unrestrainable passion, its were-wolf hunger for surplus labour, capital oversteps not only the moral, but even the merely physical maximum bounds of the working day. It usurps the time for growth, development, and healthy maintenance of the body. It steals the time required for the consumption of fresh air and sunlight. It higgles over a meal-time, incorporating it where possible with the process of production itself, so that food is given to the labourer as to a mere means of production, as coal is supplied to the boiler, grease and oil to the machinery. It reduces the sound sleep needed for the restoration, reparation, refreshment of the bodily powers to just so many hours of torpor as the revival of an organism, absolutely exhausted, renders essential. It is not the normal maintenance of the labour-power which is to determine the limits of the working day; it is the greatest possible daily expenditure of labour-power, no matter how diseased, compulsory, and painful it may be, which is to determine the limits of the labourers’ period of repose. Capital cares nothing for the length of life of labour-power. All that concerns it is simply and solely the maximum of labour-power that can be rendered fluent in a working day. It attains this end by shortening the extent’ of the labourer’s life, as a greedy farmer snatches increased produce from the soil by robbing it of its fertility” (Vol. I, pp. 291-292).

74 Ibid., Vol. I, p. 644.

75 Ibid., Vol. I, p. 827.

76 Possibly the only reference is in the chapter on Co-operation, where it is argued that wage-labourers cannot co-operate unless they are employed simultaneously by the same capitalist, and therefore, “that a capitalist should command on the field of production, is now as indispensable as that a general should command on the field of battle” (Vol. I, pp. 362-363). This says nothing, and what is said rather sounds as if Marx’s tongue were in his cheek.

77 Ibid., Vol. I, p. 445.

78 Ibid., Vol. I, p. 335.

79 Loria, Marx, p. 78.

80 Capital, Vol. III, p. 186.

81 Ibid., Vol. III, p. 198

82 “That price of any commodity, which is equal to its cost price plus that share of average profit on the total capital invested . . . in its production . . . is called its price of production” (Vol. Ill, p. 186).

83 Ibid., Vol. I, p. 351.

84 Ibid., Vol. I, p. 395.

85 Ibid., Vol. I, p. 441.

86 Ibid., Vol. I, p. 470.

87 Ibid., Vol. I. p. 690.

88 Ibid., Vol. I, p. 694.

89 Ibid., Vol. I, pp. 699-701.

90 Ibid., Vol. I, p. 836.

91 Ibid., Vol, I, pp. 686-687.

92 Ibid., Vol. I, p. 837.

93 Beer, The Life and Teaching of Karl Marx, p. 129.

94 Mr. Hearnshaw’s Survey of Socialism contains an interesting nosegay of socialist utterances on Marx in a similar sense.

95 Beer, op. cit., pp. 130-131.

96 Croce, Historical Materialism, p. 50.

97 So also a perusal of the little book by the Master of Balliol would probably have caused Marx to raise his eyebrows. Marx of all men, would have objected to being explained away.

98 Translated as The Psychology of Socialism.

• 1So far as economic theory is concerned, it is in Plato that Greek thought advances beyond the level of such wise saws as may be extracted from Hesiod and others, and arrives at some consecutiveness. Yet Plato is the supreme example of the classical tendency to regard economics as a minor subsection of ethics and politics. It is above all in The Republic, and to a lesser extent in The Laws, where he indulges in “an old man’s game,” that Plato turns to economic questions. The former is primarily a discussion on Justice, and it is because the essential nature of Justice may perhaps be most easily discerned in the State—since for the short-sighted the larger letters may be more easily read—that the disputants turn aside in the second book to discuss the State and its origin, and are thus led to construct from the foundation an ideal polity. It is noticeable that the origin of the State is attributed wholly to economic considerations: “A state arises out of the needs of mankind; no one is self-sufficing, but all of us have many wants,” and moreover, Plato indicates that no other origin of a state can be imagined. This line of argument, after a consideration of the essential needs of mankind, leads to Plato’s discussion of division of labour, which has so often been compared with the famous chapter in Adam Smith. The essential needs of mankind are food, dwelling and clothing, so that the barest notion of a state must include four or five men—a husbandman, a builder, a weaver, and perhaps a shoemaker or a representative of some other similar occupation. Each of these is, moreover, to confine himself to his own calling. The governing considerations in the application of the principle of division of labour, as conceived by Plato, are then, firstly, that there are “diversities of natures among us which are adapted to different occupations,” and secondly, and as a consequence of this, that “all things are produced more plentifully and easily, and of a better quality, when one man does one thing which is natural to him and does it at the right time, and leaves other things.” It is in order that this principle may be satisfied that Plato then extends his State to include a considerable diversity of other crafts—sailors, traders, retailers and others.
• 2Thus we arrive at the guardians, who practise an art which is not to be combined with any other occupation, since one man cannot practise many arts with success. The guardians require careful selection; likewise very careful education. They must combine apparently contradictory qualities, inasmuch as they must be dangerous to their enemies and gentle to their friends. We are not here concerned with the lengthy discussion of the education of the guardians, nor with the subsequent distinction between “guardians in the fullest sense” (the real rulers) and the auxiliaries, but the words in which communism is enacted are of importance in specifying both the scope and the purpose of the communism prescribed. The guardians are to look round for a spot where they can best suppress insurrections within and defend the State from enemies without, and they are to encamp there. Further, in order to ward off the danger that they may become enemies instead of friends of the citizens, their whole mode of life is to be such that they will not be tempted to prey upon the other citizens. Consequently they are devoted to an ascetic method of life; they are to have no property beyond what is necessary; they are to receive a fixed rate of pay, sufficient to meet expenses and no more: “Should they ever acquire homes or lands or moneys of their own, they will become housekeepers and husbandmen instead of guardians, enemies and tyrants instead of allies of the other citizens.”
• 3The Republic, Jowett’s translation, p. 154.
• 4The Laws, Jowett’s translation, p. 121.
• 5Beer, Social Struggles in Antiquity, p. 97.
• 6Ibid., p. 230.
• 7Politics, Book II, chap. 3, Welldon’s translation, p. 43.
• 8Ibid., Book II, chap. 5, p. 49.
• 9Ibid., p. 127.
• 10Ibid., Book I, chap. 6, Welldon, p. 13.
• 11Ibid., p. 87.
• 12Ibid., p. 124.
• 13Ibid., Book I, chap. 9.
• 14Ibid., Book II, chap. 5, p. 48.
• 15Ibid., Book I, chaps. 5 and 6.
• 16Ibid., p. 401.
• 17Laistner, Greek Economics, p. 16; Ways and Means, etc.
• 18Ethics, Book V, chap. 5, Welldon’s translation, p. 149.
• 19Ibid., Book I, chaps. 3 and 8.
• 20Ibid., p. 517.
• 21Ibid., p. 92.
• 22Politics, Book III, chap. 5, Welldon, p. 113.
• 23Ibid., Book I, chap. 8.
• 24Ad Helviam Matrem de Consolatione, chap. 9.
• 25Loeb translation, pp. 367, 409.
• 26Ibid., p. 153.
• 27Pliny, Book XVIII, chap. 7.
• 28Printed in Laistner, Greek Economics.
• 29“For just as all other arts are developed to superior excellence in large cities, in that same way the food at the king’s palace is also elaborately prepared with superior excellence. For in small towns the same workman makes chairs and doors and ploughs and tables, and often this same artisan builds houses, and even so he is thankful if he can only find employment to support him. And it is, of course, impossible for a man of many trades to be proficient in all of them. In large cities, on the other hand, inasmuch as many people have demands to make upon each branch of industry, one trade alone, and very often even less than a whole trade, is enough to support a man: one man, for instance, makes shoes for men, and another for women; and there are places even where one man earns a living by only stitching shoes, another by cutting them out, another by sewing the uppers together, while there is another who performs none of these operations but only assembles the parts. It follows, therefore, as a matter of course, that he who devotes himself to a very specialized line of work is bound to do it in the best possible manner. Exactly the same thing holds true in reference to the kitchen; in any establishment where one and the same man arranges the dining couches, lays the table, bakes the bread, prepares now one sort of dish and now another, he must necessarily have things go as they may; but where it is all one man can do to stew meats and another to roast them, for one man to boil fish and another to bake them, for another to bake bread and not every sort at that, but where it suffices if he makes one kind that has a high reputation—everything that is prepared in such a kitchen will, I think, necessarily be worked out with superior excellence.” (Cyropœdia, Book VIII, ii, 5-6; Loeb translation, PP- 333-335.)
• 30Ecclesiasticus xxxviii. v. 32, 33. The corresponding passage on the same subject in Xenophon (Œconomicus IV, 2, 3) is interesting, inasmuch as the writer assigns reasons for the contempt of the illiberal arts: “They utterly ruin the bodies of workers and managers alike, compelling men, as they do, to lead sedentary lives and huddle indoors, or in some cases to spend the day before a fire. Then as men’s bodies become enervated, so their souls grow sicklier. And these vulgar crafts involve complete absence of leisure and hinder men from social and civic life; consequently men such as these are bad friends and indifferent defenders of their country. Moreover, in some states, particularly in those accounted warlike, no full citizen is permitted to practise the vulgar arts.” (As translated in Laistner’s Greek Economics, pp. 39, 40. See also Loeb edition, P. 391).
• 31Laistner, op. cit., p. 41.
• 32Ibid., p. 405.
• 33“Now in regard to trades and other means of livelihood, which ones are to be considered becoming to a gentleman and which ones are vulgar, we have been taught, in general, as follows: First, those means of livelihood are rejected as undesirable which incur people’s ill-will, as those of tax-gatherers and usurers. Unbecoming to a gentleman, too, and vulgar, are the means of livelihood of all hired workmen whom we pay for mere manual labour, not for artistic skill; for in their case the very wages they receive is a pledge of their slavery. Vulgar we must consider those also who buy from wholesale merchants to retail immediately; for they would get no profits without a great deal of downright lying; and verily there is no action that is meaner than misrepresentation. And all mechanics are engaged in vulgar trades; for no workshop can have anything liberal about it. Least respectable of all are those trades which cater to sensual pleasures:
• 34De Ira, III, 32, 33.
• 35“Et cum ille, qui quæsierat, dixisset: ‘ Quid fænerari? ’, turn Cato: ‘ Quid hominem,’ inquit, ‘ occidere’” (De Officiis, Book II, xxv; Loeb, p. 266.)
• 36Pliny, Book XXXIII, chap. 19.
• 37Nos. 12 and 13 of the Maximes, attached to Grains, p. 239.
• 38Analyse du Tableau Économique, pp. 304-309.
• 39The reader who is beclouded by this brief summary should refer to the Réponse au Memoire de M.H., pp. 384-395, and the dialogue Sur les Travaux des Artisans, p. 256 et seq., where this point is discussed with much Physiocratic subtlety.
• 40Ibid., p. 484.
• 41In the main, then, the central point of this first work is to be found in Sismondi’s restatement of the harmony of interests, the necessity of laissez-faire and the folly of Government interference. When commerce is left free, he explains in one place, capital naturally takes the direction which is most advantageous to the nation which possesses it, and there is more than an echo of the invisible hand in his assertion that “all men, in seeking their own interest, incessantly tend to serve the national interest.” Thus we arrive at the glowing optimistic conclusion that “the capitalist, who consults his own interest, always works for that of the nation”; and the sans cesse and the toujours stand forth brazenly without modification. He thus quotes as a noble réponse, the alleged reply of the British business world to a Government anxious to help them that the only favour they desired was “la grâce de nous oublier.” All this savours of the clotted cream of laissez-faire; but there are pointers in the direction of the later Sismondi, as when he exclaims that “no man of sensibility can without grief see the most interesting class in the nation, that which supports the whole by the fruit of its labours, deprived of its enjoyments in order to share it with people who are a charge upon it.”
• 42Pliny, Book XXXIII, chaps. 3, 4.
• 43Second Probleme Économique, p. 706.
• 44Pliny, Book XVIII, chap. 7.
• 45Ibid., section 7.
• 46It will be seen how far-reaching are the implications of the Ricardian theory. Before any other claims are considered, a slice of the produce of the earth is assigned to the landlords in return for no service rendered, a slice, moreover, which grows progressively with the increase of population, so that there is scarcely (from the point of view of Ricardian theory) any limit to the proportion of the annual produce which may be absorbed in this way. So, too, there is a complete reversal of the Physiocratic point of view which not merely assigned to the landlords a place of conspicuous honour and usefulness, but viewed the existence of rent as proof of the motherly benevolence of a bountiful Nature. Nature has now become stepmotherly: “The labour of Nature is paid, not because she does much, but because she does little. In proportion as she becomes niggardly in her gifts she exacts a greater price for her works.” Gloom is settling down on the economic horizon.
• 47Even if little of the main Ricardian structure be left to-day, it nevertheless remains true that Ricardo was one of the dominant influences of the nineteenth century, and that, moreover, in directions which would have made Ricardo shiver to contemplate. His primary purpose was to elaborate the theory of distribution, and in particular to consider the incidence of various types of taxation. He did so on certain assumptions regarded as sacrosanct, and ruthlessly pushed on to certain logical . conclusions. There is no place in Ricardo for the waywardness of human action or for the multiplicity of causes of friction which place mere logic at a disadvantage in explaining the mechanism of society. Above all, competition—omnipresent, unrestrained and instantaneously operative—is assumed as the driving force of all action. It is not so now, nor indeed was it ever so. “Why should the manufacturer continue in the trade if his profits are below the general level?” He himself knows the answer, as he shows two chapters later, namely that people while losing money may continue in a trade for the very excellent reason that they cannot get out of it, that a shipbuilder overnight cannot turn his capital to agriculture. But such distracting knowledge of the real world has little influence on the march of Ricardo’s argument. Again, despite occasional sympathetic observations, his whole attitude to the working class is that they are merely a means to production. “Suppose the circumstances of the country to be such that the lowest labourers are not only called upon to continue their race, but to increase it; their wages would be regulated accordingly,” Marx’s Industrial Reserve Army does not more definitely set the workers aside as a separate race maintained for the high ends of enterprise. Again in another celebrated passage which very properly stuck in the throat of Sismondi, he argues against Smith for magnifying the advantages of a large gross income rather than a large net income. It is, says Ricardo, the net income that matters, and if the net income can be obtained with a smaller population, what purpose is served by the superfluity? His logic would lead to the desirability of the population being reduced to one, and that last remnant producing a vast net surplus with the aid of sorcery and mechanical contrivances. The repellant doctrine that man exists for the production of wealth, rather than that wealth exists for the use of man, here finds its classical utterance.
• 48What, then, is the natural price of labour? The answer is to be found in what later, following Lassalle, came to be known as the Iron or Brazen Law of Wages. If there be obloquy attaching to the authorship of this law, it must rest, not on Ricardo, but on many Others who expressed what was tending to become a commonplace view in the late eighteenth century. The very precise statement of Turgot has already been noted. According to Ricardo, “the natural price of labour is that price which is necessary to enable the labourers, one with another, to subsist and to perpetuate their race, without either increase or diminution.” According as the price of food and necessaries rises and falls, so will the natural price of labour rise and fall. The market price of labour will tend towards the natural price, because it obviously cannot remain below it without leading to a reduction in the volume of labour, while, if it rises above it, the population will increase, and with redundancy of labour the market price will again tend to fall. For Ricardo, a complete Malthusian, “no point is better established than that the supply of labourers will always ultimately be in proportion to the means of supporting them.” The natural price of labour, in short, is the minimum cost of producing men.
• 49Sismondi’s central theme is simple, and it is so omnipresent that he tends to be a man of one idea. That idea is to be found in his emphasis on the evils which flow from unrestrained competition, above all as evidenced in the excessive production of goods for which there is not, and cannot be, any demand. This over-production which so haunts Sismondi is, it will be observed, a general over-production of all commodities, and not merely overproduction of certain commodities relative to others. It is, in his view, a direct result of division of labour and large-scale production. In isolation, a man produces for himself and knows when to stop and “repose”; in society he is producing for others, and cannot know when enough has been produced. To the man in isolation there is therefore a clear limit to the extent to which he should amass. The purpose of accumulation is sub sequent enjoyment and rest, and it would be folly to accumulate in excess of the power to consume. With a complex society, the efforts of men are separated from their natural rewards, so that one man labours and another man rests. Yet, though thus obscured, it is as true of society as it is of the individual that there is a limit to the power of consumption. But as this limit is no longer obvious, men are urged on by the “zeal to produce which every writer stimulates and which every Government encourages.” Demand should precede production; but what, in fact, the producer considers is whether he is capable of producing more, not whether there will be a demand for the commodity when it is produced. Production, that is to say, is based on the extent of capital at the disposal of the producer. These evil consequences are accentuated by the fact (which has much later been no immaterial factor in the tendency to industrial combination) that it is always easier to expand than to contract, that it is indeed almost impossible, for a variety of reasons, to restrict the size of an undertaking or to close down. To Sismondi, looking around, the world everywhere presented the spectacle of overstocked markets, of production for which there were no consumers—the consequence of apportioning production not to demand but to available capital.
• 50The Republic, Jowett’s translation, p. 49.
• 51Ibid., Book III, p. 106.
• 52Then secondly, as to the purpose of the guardians’ communism, it is noticeable that Plato in his motives is poles asunder from other communistic dreamers. Elsewhere the cry for communism arises from an aggrieved sense of the injustice and monstrous inequality of the world. It is not so in Plato. For his guardians, communism is an act of ascetic renunciation; it is the condition on which alone they can efficiently discharge their duties. The work they have to do is so important that they may only do it properly on condition that they remain free of the snares and the entanglements of this world. In its motive therefore it is akin to the celibacy of the Roman Catholic priesthood. The object of Plato’s communism is in no way to establish a right to equal enjoyment; rather it is a part of the price that must be paid by a class on whom special responsibilities have been imposed. An interesting, if trivial sidelight, illustrative of the fact that the whole arrangements with regard to the guardians are designed to free them from the ordinary troubles of life, is furnished by the provision that when a woman guardian has a child, the process of suckling shall not be protracted too long: “the mothers will have no getting up at night or other trouble, but will hand over all this sort of thing to the nurses and attendants.”
• 53A slight glance at The Laws, as supplementing the teaching of The Republic, is almost essential. The Laws is the work of an old man whose fire is spent, and some have found in it the marks of the disillusionment of age. Yet here Plato still clings to the old ideal: “The first and highest form of the State and of the Government and of the Law is that in which there prevails most widely the ancient saying that ‘Friends have all things in common.’” But that is rather a State for gods and the sons of gods, and therefore he now outlines the State which “when created, will be nearest to immortality and the only one which takes the second place.”Such a state comprises 5,040 lots, since the city must not be too large and the citizens should be known to each other, and this figure is administratively convenient, as it is divisible by all numbers up to ten. There is no longer any question of communism, since “community of goods goes beyond their proposed origin, and nurture, and education.” The regulations throughout are to aim at a middle and contented condition of life, based on the doctrine that poverty is to be regarded as the increase of a man’s desires and not the diminution of his property. No one is to possess gold or silver except as coin for daily use, and the currency of the country is to be peculiar to it and not acceptable abroad. Inequality of condition cannot be avoided; but undue disparity, arising from extreme poverty or excessive wealth, is to be guarded against. For this purpose the population is to be divided into four classes, the limit of poverty being one lot which is to be guarded unimpaired, while the maximum possession is to be the equivalent of four lots, the surplus to be surrendered to the State. No money is to be lent at interest, and, more startling, there is to be no obligation to repay even the capital, a provision explicable on the ground that this is to be a society of half-brothers, if not of brothers, and that there is a definite restriction imposed on the amount of permissible wealth.
• 54Firstly, as to the scope of Plato’s communism, it is clear from the whole argument that it is prescribed only for the limited class of the guardians, who are indeed throughout to live a semi-military life. It is, in fact, the communism of the camp. The contrary view has been argued along lines which need not here be indicated, and one authority has contended that “a superficial reading of The Republic gives the impression . . . that Plato recommends communism solely for these upper sections.” It is almost sufficient to note that Aristotle himself is one of these superficial readers; it is entirely sufficient that Plato expressly describes the regulations as “appointed by us for the guardians,” and even more conclusive is his statement that if the guardians depart from their communistic life, they will become housekeepers and husbandmen.
• 55Among other points it is perhaps worthy of mention that the second best State is to enjoy free trade and complete immunity from import and export duties, subject only to the importation of unnecessary luxuries and the exportation of what is wanted in the country being prohibited. Retail trade is forbidden, and there is also a curious desire to preserve the virtues and the purity of the city by removing it to a safe distance from the sea, for “the sea is pleasant enough as a daily companion, but has indeed also a bitter and brackish quality; filling the streets with merchants and shopkeepers, and begetting in the souls of men uncertain and unfaithful ways.” But into the rather wearisome details of the State contemplated in The Laws, it is unnecessary here to enter.
• 56When we turn to Aristotle, we are confronted with a writer who, by his analytical frame of mind, went further than any other thinker in antiquity in the direction of detaching a separate science of economics. This is not the place to consider his political theories, but his starting point that man is by nature a political animal enthroned for him the science of politics, so that ethics and economics alike were viewed by him from a political angle. Two points are of peculiar interest to the economist. The first is his destructive criticism of Plato’s communism in the second book of the Politics, and the other is his analysis of the household, leading to a discussion of the economic bases of society. On the former point, with the arguments of all the ages ringing in our ears, Aristotle’s contentions may appear hackneyed. What he says about the snares inherent in community of wives need not detain us; it never has been, and is not now (it may be hoped) an urgent question. But his arguments on the general question of community of property might date from the present year of grace. It is still true that “people pay most attention to their own private property and less to that in which they have but a part interest”—as witness the carved hieroglyphics on the seats in any public park contrasted with the reverence paid to the domestic Chesterfield.
• 57Aristotle’s arguments, in the main, are of a highly practical character; in short, that a system of communism would not work, and that it violates natural human instincts. There would be disputes between those who get less and work more, and those who get much and work little—the old difficulty of distribution among frail, grudging and suspicious men. Unity built on communism is in fact a delusion; the common purse leads to quarrels arising out of trivial causes. Moreover there is an immense advantage in the sense of private property. It corresponds to natural instincts; “the love each individual bears to himself is not purposeless,” as he remarks in a phrase in which we seem to catch the tones of Adam Smith’s invisible hand. Again, in an argument which is still common, though of doubtful cogency, he urges that community of property would destroy the virtue of liberality. His own position is not, however, merely negative. As against reformers in a hurry in all ages, he contends that the evils are due, not to the institution which it is proposed to destroy (in this case private property), but to defects in human nature. Unless that is first amended, he would seem to say, there will be no advantage in abolishing something which in itself may be used for good or evil. “The existing system, if embellished by the moral tone of those who live under it and by a code of wise laws, would be far superior.” The ideal which Aristotle outlines is thus that of private possession with use in common, so far as that may be practicable—in modern language, private property mellowed by a sense of the responsibility of wealth, a position not so different from that of the Christian Socialists.
• 58A slight glance at The Laws, as supplementing the teaching of The Republic, is almost essential. The Laws is the work of an old man whose fire is spent, and some have found in it the marks of the disillusionment of age. Yet here Plato still clings to the old ideal: “The first and highest form of the State and of the Government and of the Law is that in which there prevails most widely the ancient saying that ‘Friends have all things in common.’” But that is rather a State for gods and the sons of gods, and therefore he now outlines the State which “when created, will be nearest to immortality and the only one which takes the second place.”Such a state comprises 5,040 lots, since the city must not be too large and the citizens should be known to each other, and this figure is administratively convenient, as it is divisible by all numbers up to ten. There is no longer any question of communism, since “community of goods goes beyond their proposed origin, and nurture, and education.” The regulations throughout are to aim at a middle and contented condition of life, based on the doctrine that poverty is to be regarded as the increase of a man’s desires and not the diminution of his property. No one is to possess gold or silver except as coin for daily use, and the currency of the country is to be peculiar to it and not acceptable abroad. Inequality of condition cannot be avoided; but undue disparity, arising from extreme poverty or excessive wealth, is to be guarded against. For this purpose the population is to be divided into four classes, the limit of poverty being one lot which is to be guarded unimpaired, while the maximum possession is to be the equivalent of four lots, the surplus to be surrendered to the State. No money is to be lent at interest, and, more startling, there is to be no obligation to repay even the capital, a provision explicable on the ground that this is to be a society of half-brothers, if not of brothers, and that there is a definite restriction imposed on the amount of permissible wealth.
• 59Under the section which deals with the relationship of master and slave occurs Aristotle’s celebrated defence of slavery, which sounds so oddly in modern ears. The principle of rule and subjection is, he says, inevitable and beneficent, and there are “natural slaves,” persons who are as far inferior to others as the body is to the soul, or a beast to a man. In these cases a life of slavish subjection is advantageous. Aristotle is not blind to the obvious objection that, as he puts it, it may happen “contrary to the intention of Nature that those who possess the bodies do not possess the souls of free men and vice versa” for even if there be those who are “slaves by nature,” it calls for supreme faith to believe that the accidents of life should at any time sort out the slaves and the non-slaves, in accordance with the definition of a “natural slave.” Hence he distinguishes between natural and legal slaves, and speaks of the law being a convention according to which all conquests in war are the property of the conqueror. The whole discussion is curious and unconvincing, and is perhaps best viewed as a reflection of the fact, not merely that many slaves were well-treated, but also that their position would have been worse but for the institution of slavery.
• 60Among other points it is perhaps worthy of mention that the second best State is to enjoy free trade and complete immunity from import and export duties, subject only to the importation of unnecessary luxuries and the exportation of what is wanted in the country being prohibited. Retail trade is forbidden, and there is also a curious desire to preserve the virtues and the purity of the city by removing it to a safe distance from the sea, for “the sea is pleasant enough as a daily companion, but has indeed also a bitter and brackish quality; filling the streets with merchants and shopkeepers, and begetting in the souls of men uncertain and unfaithful ways.” But into the rather wearisome details of the State contemplated in The Laws, it is unnecessary here to enter.
• 61A slight glance at The Laws, as supplementing the teaching of The Republic, is almost essential. The Laws is the work of an old man whose fire is spent, and some have found in it the marks of the disillusionment of age. Yet here Plato still clings to the old ideal: “The first and highest form of the State and of the Government and of the Law is that in which there prevails most widely the ancient saying that ‘Friends have all things in common.’” But that is rather a State for gods and the sons of gods, and therefore he now outlines the State which “when created, will be nearest to immortality and the only one which takes the second place.”Such a state comprises 5,040 lots, since the city must not be too large and the citizens should be known to each other, and this figure is administratively convenient, as it is divisible by all numbers up to ten. There is no longer any question of communism, since “community of goods goes beyond their proposed origin, and nurture, and education.” The regulations throughout are to aim at a middle and contented condition of life, based on the doctrine that poverty is to be regarded as the increase of a man’s desires and not the diminution of his property. No one is to possess gold or silver except as coin for daily use, and the currency of the country is to be peculiar to it and not acceptable abroad. Inequality of condition cannot be avoided; but undue disparity, arising from extreme poverty or excessive wealth, is to be guarded against. For this purpose the population is to be divided into four classes, the limit of poverty being one lot which is to be guarded unimpaired, while the maximum possession is to be the equivalent of four lots, the surplus to be surrendered to the State. No money is to be lent at interest, and, more startling, there is to be no obligation to repay even the capital, a provision explicable on the ground that this is to be a society of half-brothers, if not of brothers, and that there is a definite restriction imposed on the amount of permissible wealth.
• 62As against this, there is another kind of finance, which does not have a natural existence and which is ultimately based on the distinction, familiar long afterwards as that between value in use and value in exchange. Every object has two uses; the shoe has a use as a covering for the feet; it has also a use as an article of exchange. So long as we are in the region of primitive barter, we are still concerned with what is natural, but this has ceased when we come to retail trading, where exchange is “carried beyond the point of satisfying mere requirements.” Out of mere simple barter to satisfy a real need, the evil art of finance—retail trading—develops as a natural consequence after the introduction of a system of currency, the successive stages of which are noted with a fair approximation to the discussion in Jevons’s textbook. Finance, in the natural sense, is a part of Domestic Economy. Unnatural finance is not; it produces money merely by means of exchange, and here wealth is unlimited. The one, the healthy, might be described as the acquisition of the means of living, the securing of the “pre-requisites which Nature ought to provide”; the other is merely money-making. The one is laudable; the other enriches one party at the expense of the other. But of all evil forms of finance, the worst is usury, since here money produces the gain itself, and is diverted from the purpose for which it was devised.
• 63Aristotle’s arguments, in the main, are of a highly practical character; in short, that a system of communism would not work, and that it violates natural human instincts. There would be disputes between those who get less and work more, and those who get much and work little—the old difficulty of distribution among frail, grudging and suspicious men. Unity built on communism is in fact a delusion; the common purse leads to quarrels arising out of trivial causes. Moreover there is an immense advantage in the sense of private property. It corresponds to natural instincts; “the love each individual bears to himself is not purposeless,” as he remarks in a phrase in which we seem to catch the tones of Adam Smith’s invisible hand. Again, in an argument which is still common, though of doubtful cogency, he urges that community of property would destroy the virtue of liberality. His own position is not, however, merely negative. As against reformers in a hurry in all ages, he contends that the evils are due, not to the institution which it is proposed to destroy (in this case private property), but to defects in human nature. Unless that is first amended, he would seem to say, there will be no advantage in abolishing something which in itself may be used for good or evil. “The existing system, if embellished by the moral tone of those who live under it and by a code of wise laws, would be far superior.” The ideal which Aristotle outlines is thus that of private possession with use in common, so far as that may be practicable—in modern language, private property mellowed by a sense of the responsibility of wealth, a position not so different from that of the Christian Socialists.
• 64Under the section which deals with the relationship of master and slave occurs Aristotle’s celebrated defence of slavery, which sounds so oddly in modern ears. The principle of rule and subjection is, he says, inevitable and beneficent, and there are “natural slaves,” persons who are as far inferior to others as the body is to the soul, or a beast to a man. In these cases a life of slavish subjection is advantageous. Aristotle is not blind to the obvious objection that, as he puts it, it may happen “contrary to the intention of Nature that those who possess the bodies do not possess the souls of free men and vice versa” for even if there be those who are “slaves by nature,” it calls for supreme faith to believe that the accidents of life should at any time sort out the slaves and the non-slaves, in accordance with the definition of a “natural slave.” Hence he distinguishes between natural and legal slaves, and speaks of the law being a convention according to which all conquests in war are the property of the conqueror. The whole discussion is curious and unconvincing, and is perhaps best viewed as a reflection of the fact, not merely that many slaves were well-treated, but also that their position would have been worse but for the institution of slavery.
• 65The third Greek writer to contribute certain embryonic elements to an economic science is Xenophon, who approaches matters throughout in an entirely practical spirit. His achievement is perhaps greater than has generally been admitted, and even where his speculation is confused, it may at least be pleaded on his behalf that the man who gives a wrong answer to a question has at least made some progress, insofar as he realizes that a question exists. The pleasantly innocuous dialogue Œconomicus, devoted to a discussion of the principles of estate management, opens with an analysis of wealth in the manner of Ruskin. Wealth is only wealth to him who can use it, or, more epigrammatically, useful things are those things which one knows how to use; so also, even money is not wealth to him who does not know how to use it. Further, wealth is to be interpreted in relation to needs: the man of simple tastes and little substance is wealthy in comparison with the man of great possessions on whom excessive claims rest. All this is the stuff of which proverbial philosophy and the home-spun poetry of contentment are woven. Primarily, Xenophon is an agricultural writer, and it is of interest to note that he furnishes the motto to Quesnay and the Physiocratic school many centuries later: “When husbandry flourishes, all the other arts are in good fettle; but whenever the land is compelled to lie waste, the other arts of landsmen and mariners alike wellnigh perish.” His praise of agriculture is indeed of Physiocratic excess. It is the easiest of all things to learn; none gives quicker returns (to a careful man); it is the giver of all things; no art is “dearer to servants, or pleasanter to a wife, or more delightful to children, or more agreeable to friends.” Moreover, on Xenophon has been fathered an approach to the familiar agents of production, two—land and labour—being recognized; for though agriculture or the land supplies good things in abundance, “she suffers them not to be won without toil.” So also in a fumbling way he approaches, or seems to approach, the Law of Diminishing Returns: “the landowners could all tell you how many teams and how many labourers are required for their estates. If anyone employs hands in excess of requirements, it is reckoned as a loss.”
• 66The third Greek writer to contribute certain embryonic elements to an economic science is Xenophon, who approaches matters throughout in an entirely practical spirit. His achievement is perhaps greater than has generally been admitted, and even where his speculation is confused, it may at least be pleaded on his behalf that the man who gives a wrong answer to a question has at least made some progress, insofar as he realizes that a question exists. The pleasantly innocuous dialogue Œconomicus, devoted to a discussion of the principles of estate management, opens with an analysis of wealth in the manner of Ruskin. Wealth is only wealth to him who can use it, or, more epigrammatically, useful things are those things which one knows how to use; so also, even money is not wealth to him who does not know how to use it. Further, wealth is to be interpreted in relation to needs: the man of simple tastes and little substance is wealthy in comparison with the man of great possessions on whom excessive claims rest. All this is the stuff of which proverbial philosophy and the home-spun poetry of contentment are woven. Primarily, Xenophon is an agricultural writer, and it is of interest to note that he furnishes the motto to Quesnay and the Physiocratic school many centuries later: “When husbandry flourishes, all the other arts are in good fettle; but whenever the land is compelled to lie waste, the other arts of landsmen and mariners alike wellnigh perish.” His praise of agriculture is indeed of Physiocratic excess. It is the easiest of all things to learn; none gives quicker returns (to a careful man); it is the giver of all things; no art is “dearer to servants, or pleasanter to a wife, or more delightful to children, or more agreeable to friends.” Moreover, on Xenophon has been fathered an approach to the familiar agents of production, two—land and labour—being recognized; for though agriculture or the land supplies good things in abundance, “she suffers them not to be won without toil.” So also in a fumbling way he approaches, or seems to approach, the Law of Diminishing Returns: “the landowners could all tell you how many teams and how many labourers are required for their estates. If anyone employs hands in excess of requirements, it is reckoned as a loss.”
• 67Apart from the Politics, there is also a passage in the Nicomachcean Ethics (Book V, chaps. 7 and 8) which is of some economic interest. Aristotle is there concerned with justice in private dealings. Discarding the mathematical theory of proportion in which his doctrine is embedded, the central point of his teaching is that “when people get as the result of exchange exactly what they had at the beginning, neither more nor less, they are said to have what belongs to them and to be neither losers nor gainers.” How is this principle to be carried out? That things may be exchanged, they must in some sense be comparable, and hence money is invented. It measures all things, and consequently, in the case taken, that of a cobbler and a builder, it measures the number of shoes which are equivalent to a house. “As a builder then is to a cobbler, so must so many shoes be to a house or a meal.” It is the demand for mutual services which binds society together, and money is the recognized representative of this demand. Money, Aristotle says in this passage, has not a natural but a conventional (vóμω) existence, and for this reason it is called money (vóμlσμα): it is within our power to change it and make it useless, a doctrine which would seem to possess kinship with Knapp’s theory that money is a creature of the law. Money, he adds, is serviceable for future exchanges; it is a guarantee that if we do not desire a thing now, we shall be able to get it when we do want it. Though the value of money is not always the same, it tends to have a more constant value than anything else. Aristotle was obviously not unfamiliar with certain orthodox views regarding the nature and the functions of money.
• 68Apart from the dispute regarding communism, the main part of Aristotle’s economic teaching is to be found in the first book of the Politics. The place which this discussion occupies in his general treatment flows from his general theory of the State. The State has in all cases a natural existence; it is the complete development of the earlier associations, the household and the village, and Aristotle accordingly proceeds to consider, as the logical first step, the economy of the household. Here there are three fundamental relationships to be borne in mind, that of master and slave, of husband and wife, and of parent and children. The fourth and last of the parts of Domestic Economy is the art of finance, which is not to be confused with Domestic Economy, since it is the business of finance to provide and of Domestic Economy to use that which is provided.
• 69The third Greek writer to contribute certain embryonic elements to an economic science is Xenophon, who approaches matters throughout in an entirely practical spirit. His achievement is perhaps greater than has generally been admitted, and even where his speculation is confused, it may at least be pleaded on his behalf that the man who gives a wrong answer to a question has at least made some progress, insofar as he realizes that a question exists. The pleasantly innocuous dialogue Œconomicus, devoted to a discussion of the principles of estate management, opens with an analysis of wealth in the manner of Ruskin. Wealth is only wealth to him who can use it, or, more epigrammatically, useful things are those things which one knows how to use; so also, even money is not wealth to him who does not know how to use it. Further, wealth is to be interpreted in relation to needs: the man of simple tastes and little substance is wealthy in comparison with the man of great possessions on whom excessive claims rest. All this is the stuff of which proverbial philosophy and the home-spun poetry of contentment are woven. Primarily, Xenophon is an agricultural writer, and it is of interest to note that he furnishes the motto to Quesnay and the Physiocratic school many centuries later: “When husbandry flourishes, all the other arts are in good fettle; but whenever the land is compelled to lie waste, the other arts of landsmen and mariners alike wellnigh perish.” His praise of agriculture is indeed of Physiocratic excess. It is the easiest of all things to learn; none gives quicker returns (to a careful man); it is the giver of all things; no art is “dearer to servants, or pleasanter to a wife, or more delightful to children, or more agreeable to friends.” Moreover, on Xenophon has been fathered an approach to the familiar agents of production, two—land and labour—being recognized; for though agriculture or the land supplies good things in abundance, “she suffers them not to be won without toil.” So also in a fumbling way he approaches, or seems to approach, the Law of Diminishing Returns: “the landowners could all tell you how many teams and how many labourers are required for their estates. If anyone employs hands in excess of requirements, it is reckoned as a loss.”
• 70For Monchrétien, the foreigner is in the main a person given to fraud and guile. Specifically “whatever is foreign corrupts us.” In particular, foreign books “poison our spirits and corrupt our manners,” and therefore their importation should be prohibited. Indeed Montchrétien approves of a vigorous all-round national exclusiveness, hinting at a divine ordinance which has assigned to the inhabitants of any area the use of the elements and the goods which it produces. Further, he cites with admiration the example of Lyons, which acted on the principle that “each town should have something particular and in reserve for its own children, in order that it may help them.” Montchrétien is thus a stout defender of the maxim which enjoins upon us the expediency of rendering to our own sea-maws their ancient and prescriptive dues.
• 71One last point worthy of passing mention is that Aristotle’s attitude towards “mechanics” and their share in the State is in line with that of most writers in antiquity. It is summed up in the general statement that all who are indispensable to the existence of the State cannot be regarded as citizens, and that in the best State (whatever may happen elsewhere) citizenship will not be conferred upon any mechanic. There is here a striking similarity to the passage in the Book of Ecclesiasticus in praise of artificers: “Without these cannot a city be inhabited”; yet “they shall not be sought for in publick counsel.”
• 72Coming to the question of acquisition or wealth-getting,Aristotle is concerned to show how far it is or is not a part of Domestic Economy. Clearly part of wealth-getting must belong to Domestic Economy, since the household requires to be supplied with what is necessary, if this is not already provided. This leads to the rather curious distinction between true or genuine wealth to which there is a limit, and another unnatural kind of acquisition (finance in the bad sense) to which there is no limit. Nature supplies men with the means of subsistence which are gathered in various ways, so that men’s lives may be classified as those of the nomad, the husbandman, the brigand, the fisherman and the hunter. Property which so arises is “assigned by Nature,” and such property and such alone constitutes genuine wealth. Apart from the odd appearance of the brigand in this galley, this is merely, in the main, an anticipation of Physiocratic thought. Here also, so far as concerns real wealth, that is to say the acquisition of the means of subsistence, there is a definite limit assigned, since wealth in this sense must be limited by the needs and the purpose of the household and the State.
• 73Seneca’s views on economic matters are not in the main of great interest. Money (and not merely the love of money) is emphatically the root of most evils. Envy and greed are the sources of all injustice. But in the midst of much in this train of thought which, even if true and well-expressed, has ill-founded claims to originality, there is one thought that is significant, namely that the various quarters of the earth have been differently endowed in such a manner that the peoples of the world would appear to have been called to enter into intercourse with each other for the mutual satisfaction of their needs.
• 74The third Greek writer to contribute certain embryonic elements to an economic science is Xenophon, who approaches matters throughout in an entirely practical spirit. His achievement is perhaps greater than has generally been admitted, and even where his speculation is confused, it may at least be pleaded on his behalf that the man who gives a wrong answer to a question has at least made some progress, insofar as he realizes that a question exists. The pleasantly innocuous dialogue Œconomicus, devoted to a discussion of the principles of estate management, opens with an analysis of wealth in the manner of Ruskin. Wealth is only wealth to him who can use it, or, more epigrammatically, useful things are those things which one knows how to use; so also, even money is not wealth to him who does not know how to use it. Further, wealth is to be interpreted in relation to needs: the man of simple tastes and little substance is wealthy in comparison with the man of great possessions on whom excessive claims rest. All this is the stuff of which proverbial philosophy and the home-spun poetry of contentment are woven. Primarily, Xenophon is an agricultural writer, and it is of interest to note that he furnishes the motto to Quesnay and the Physiocratic school many centuries later: “When husbandry flourishes, all the other arts are in good fettle; but whenever the land is compelled to lie waste, the other arts of landsmen and mariners alike wellnigh perish.” His praise of agriculture is indeed of Physiocratic excess. It is the easiest of all things to learn; none gives quicker returns (to a careful man); it is the giver of all things; no art is “dearer to servants, or pleasanter to a wife, or more delightful to children, or more agreeable to friends.” Moreover, on Xenophon has been fathered an approach to the familiar agents of production, two—land and labour—being recognized; for though agriculture or the land supplies good things in abundance, “she suffers them not to be won without toil.” So also in a fumbling way he approaches, or seems to approach, the Law of Diminishing Returns: “the landowners could all tell you how many teams and how many labourers are required for their estates. If anyone employs hands in excess of requirements, it is reckoned as a loss.”
• 75Apart from the Politics, there is also a passage in the Nicomachcean Ethics (Book V, chaps. 7 and 8) which is of some economic interest. Aristotle is there concerned with justice in private dealings. Discarding the mathematical theory of proportion in which his doctrine is embedded, the central point of his teaching is that “when people get as the result of exchange exactly what they had at the beginning, neither more nor less, they are said to have what belongs to them and to be neither losers nor gainers.” How is this principle to be carried out? That things may be exchanged, they must in some sense be comparable, and hence money is invented. It measures all things, and consequently, in the case taken, that of a cobbler and a builder, it measures the number of shoes which are equivalent to a house. “As a builder then is to a cobbler, so must so many shoes be to a house or a meal.” It is the demand for mutual services which binds society together, and money is the recognized representative of this demand. Money, Aristotle says in this passage, has not a natural but a conventional (vóμω) existence, and for this reason it is called money (vóμlσμα): it is within our power to change it and make it useless, a doctrine which would seem to possess kinship with Knapp’s theory that money is a creature of the law. Money, he adds, is serviceable for future exchanges; it is a guarantee that if we do not desire a thing now, we shall be able to get it when we do want it. Though the value of money is not always the same, it tends to have a more constant value than anything else. Aristotle was obviously not unfamiliar with certain orthodox views regarding the nature and the functions of money.
• 76In the tangled mass of Pliny’s Natural History there are certain interesting passages relating to money. There is more than a touch of Rousseau in his assertion that the worst crime against mankind was committed by him who was the first to put a ring (of gold) upon his finger. There is much vitriolic denunciation of gold “discovered only for the ruin of mankind.” How much more happy the age when things were bartered for one another! Yet despite this, he explains, not unreasonably, the causes which led to the pre-eminence of gold, as that it suffers no damage through fire, that it wears the least of all the metals by use, that no material is more malleable, that it is not subject to rust and so on. The other passage in Pliny which has been so frequently quoted is that which relates to the extent of the farm. He refers with approval to Vergil’s maxim “to praise a large farm, but cultivate a small one,” and adds in a celebrated and ominous phrase that the widespread domains had been the ruin of Italy: “latifundia Italiam perdidere.”
• 77It is, however, in the short essay on The Ways and Means to Increase the Revenues of Athens that Xenophon is most interesting, most enlightened and perhaps also most confused. Here he is concerned with finding a “remedy for the poverty of our citizens,” and the tract therefore resolves itself into an elementary discussion of public finance. Throughout, a more liberal view than customary is manifested. The foreign residents are seen as a source of revenue, and Xenophon argues for the abolition of all regulations that inflict disabilities on this class. He is indeed anxious to attract “more and better class foreigners to settle at Athens,” and in pursuance of this policy he would show favour to merchants—by free seats at festivals and invitations to banquets. No less significant is his suggestion to raise a capital sum to provide accommodation for merchants and shops and houses for retail dealers. Equally enlightened is his contention that it is the cities which have been longest at peace that have been most prosperous; despite the booty of war, it is in peace that wealth is accumulated; it is in war-time that it is spent.
• 78Even a brief survey of Xenophon would be incomplete without reference to a passage in the Cyropœdia which, being quoted by Marx and others, has become one of the curiosities of economic literature. It represents division of labour as applied to the kitchen, run mad, with one man to boil fish and another to bake them. Here, surely, the centuries have shown retrogression.
• 79One last point worthy of passing mention is that Aristotle’s attitude towards “mechanics” and their share in the State is in line with that of most writers in antiquity. It is summed up in the general statement that all who are indispensable to the existence of the State cannot be regarded as citizens, and that in the best State (whatever may happen elsewhere) citizenship will not be conferred upon any mechanic. There is here a striking similarity to the passage in the Book of Ecclesiasticus in praise of artificers: “Without these cannot a city be inhabited”; yet “they shall not be sought for in publick counsel.”
• 80Apart from these three main representatives of Greek thought, a passing reference is perhaps due to the dialogue called Eryxias, which is of interest as being devoted wholly to an analysis of wealth, and which clearly distinguishes between material and immaterial wealth, so that “in exchange for their art” men may obtain the necessaries of life; and to Aristophanes’ wholly diverting play Ecclesiazusœ, a skit on communism (not neglecting votes for women) which is full of the most modern thrusts.
• 81The third Greek writer to contribute certain embryonic elements to an economic science is Xenophon, who approaches matters throughout in an entirely practical spirit. His achievement is perhaps greater than has generally been admitted, and even where his speculation is confused, it may at least be pleaded on his behalf that the man who gives a wrong answer to a question has at least made some progress, insofar as he realizes that a question exists. The pleasantly innocuous dialogue Œconomicus, devoted to a discussion of the principles of estate management, opens with an analysis of wealth in the manner of Ruskin. Wealth is only wealth to him who can use it, or, more epigrammatically, useful things are those things which one knows how to use; so also, even money is not wealth to him who does not know how to use it. Further, wealth is to be interpreted in relation to needs: the man of simple tastes and little substance is wealthy in comparison with the man of great possessions on whom excessive claims rest. All this is the stuff of which proverbial philosophy and the home-spun poetry of contentment are woven. Primarily, Xenophon is an agricultural writer, and it is of interest to note that he furnishes the motto to Quesnay and the Physiocratic school many centuries later: “When husbandry flourishes, all the other arts are in good fettle; but whenever the land is compelled to lie waste, the other arts of landsmen and mariners alike wellnigh perish.” His praise of agriculture is indeed of Physiocratic excess. It is the easiest of all things to learn; none gives quicker returns (to a careful man); it is the giver of all things; no art is “dearer to servants, or pleasanter to a wife, or more delightful to children, or more agreeable to friends.” Moreover, on Xenophon has been fathered an approach to the familiar agents of production, two—land and labour—being recognized; for though agriculture or the land supplies good things in abundance, “she suffers them not to be won without toil.” So also in a fumbling way he approaches, or seems to approach, the Law of Diminishing Returns: “the landowners could all tell you how many teams and how many labourers are required for their estates. If anyone employs hands in excess of requirements, it is reckoned as a loss.”
• 82Of the philosophers (of whom Cicero, Seneca and Pliny may be taken as typical) it may be suggested that in so far as they merely censure luxury, or emphasize the beauty of simplicity and the right uses of wealth, they are primarily moral rather than economic teachers. To a considerable extent this exhausts their content. On other questions there is little that is new. One of the most illuminating passages in Cicero’s De Officiis is that in praise of agriculture, which is also and even more emphatically in dispraise of all other occupations. In itself this passage indicates why the spirit of antiquity could scarcely be expected to evolve a body of economic doctrine. As has been properly observed, Cicero is here concerned with the respectability of various occupations, not with their productiveness. Notable is his comparative tolerance towards wholesale trade, especially if it leads to a country estate. Usury naturally is condemned, in this passage on the feeble ground that it incurs people’s ill-will; but it is also to Cicero that we owe Cato’s terse comment: “How about murder?” to one who inquired: “How about money-lending?”
• 83Seneca’s views on economic matters are not in the main of great interest. Money (and not merely the love of money) is emphatically the root of most evils. Envy and greed are the sources of all injustice. But in the midst of much in this train of thought which, even if true and well-expressed, has ill-founded claims to originality, there is one thought that is significant, namely that the various quarters of the earth have been differently endowed in such a manner that the peoples of the world would appear to have been called to enter into intercourse with each other for the mutual satisfaction of their needs.
• 84Of the philosophers (of whom Cicero, Seneca and Pliny may be taken as typical) it may be suggested that in so far as they merely censure luxury, or emphasize the beauty of simplicity and the right uses of wealth, they are primarily moral rather than economic teachers. To a considerable extent this exhausts their content. On other questions there is little that is new. One of the most illuminating passages in Cicero’s De Officiis is that in praise of agriculture, which is also and even more emphatically in dispraise of all other occupations. In itself this passage indicates why the spirit of antiquity could scarcely be expected to evolve a body of economic doctrine. As has been properly observed, Cicero is here concerned with the respectability of various occupations, not with their productiveness. Notable is his comparative tolerance towards wholesale trade, especially if it leads to a country estate. Usury naturally is condemned, in this passage on the feeble ground that it incurs people’s ill-will; but it is also to Cicero that we owe Cato’s terse comment: “How about murder?” to one who inquired: “How about money-lending?”
• 85In the tangled mass of Pliny’s Natural History there are certain interesting passages relating to money. There is more than a touch of Rousseau in his assertion that the worst crime against mankind was committed by him who was the first to put a ring (of gold) upon his finger. There is much vitriolic denunciation of gold “discovered only for the ruin of mankind.” How much more happy the age when things were bartered for one another! Yet despite this, he explains, not unreasonably, the causes which led to the pre-eminence of gold, as that it suffers no damage through fire, that it wears the least of all the metals by use, that no material is more malleable, that it is not subject to rust and so on. The other passage in Pliny which has been so frequently quoted is that which relates to the extent of the farm. He refers with approval to Vergil’s maxim “to praise a large farm, but cultivate a small one,” and adds in a celebrated and ominous phrase that the widespread domains had been the ruin of Italy: “latifundia Italiam perdidere.”
• 86It would, however, be a mistake to consider that the Physiocratic advocacy of Free Trade was rooted in any importance attached to foreign trade as such. On the contrary, foreign trade, like all trade, is for the Physiocrats essentially unproductive. As Quesnay specifically puts it, it is only possible to buy from the foreigner as much as one sells to him; and the consequence is that in a state of free competition in foreign trade, there can only be an exchange of value for equal value, without gain or loss on one side or the other. Reverting to Quesnay’s distinction between the two nations—agricultural and commercial—combined in a mixed kingdom, the expenses of the second, even if necessary, are to be regarded as an “onerous expense,” laid on the revenues of the landed proprietor. Foreign trade is thus primarily a liability rather than an asset. The whole tendency of Physiocratic thought is to depreciate the importance of foreign trade. It is above all by the condition of internal commerce that the wealth of a country must be judged; a nation that is making the best use of its soil and its men has no occasion to be envious of the commerce of its neighbours. It is curious that the first school in modern times to proclaim Free Trade did so, not from any belief in the advantages of foreign trade, but on general principles of a quasi-philosophical and religious nature.
• 87The distinction between agriculture on the one hand and industry and commerce on the other, is further revealed by the fact that in the former there is a surplus, while the others merely pay their way. This surplus is the famous “produit net,” the token of Nature’s superior bounty in agricultural operations. On Quesnay’s theory, agriculture is carried on by advances of various kinds (avances foncières, avances primitives, avances annuelles), some of these falling on the proprietor and some on the cultivator. But when all expenses have been met, and the cultivators have taken all that is required to maintain themselves and reimburse them in respect of their annual advances, there still remains something over, a “produit net” (a rent) which is payable to the proprietor. This “ produit net” is in fact the real revenue of the nation, and it is this which, in one form or another, supports the manufacturing and commercial classes. Thus we get the triple division of classes, so dear to the Physiocrats. There is, firstly, the class of proprietors, to whom the “produit net” is paid, whose services consist in making the avances foncières, and also in the more general and social duties which fall upon them; there is, secondly, the productive class, who cultivate the soil; and thirdly, there are all those who are lumped together under a title, which, despite all apologetics, has in it something wounding and depreciatory, the “unproductive” or sterile class. Strictly speaking, there is a fourth class, the wage-earners, but they do not occupy a large place in Physiocratic classification.
• 88With regard to the industrial and manufacturing classes the argument is similar, though inevitably it seems more forced and unnatural. The common value of a commodity Is merely the value of the original material and of the cost of maintenance of the worker during the time he has been engaged. If the work of the artisan were “productive,” it would be desirable to increase the amount ot work necessary for a job. In fact, however, such labour cannot increase the wealth which the nation spends annually, because the labour is limited by the amount of this wealth, and this can only be increased by agriculture, and in no way by the expense involved in the work of the artisans (a question-begging argument; but he means for what it is worth, that to increase the number of cobblers, e.g., there must first be an increase in the number of cow hides). The product of the artisan then is merely worth the expense involved; he merely acquires a right to share in the consumption of wealth produced by the cultivator. But in contradistinction to agriculture, there is no surplus. In his own language, which happens to be correct, the worker speaks of “earning his keep”; he does not say that he produces it: “il dit qu’il gagne sa subsistance, et ne dit pas qu’il la produit.” Thus by arguments which appear thin and unconvincing, as is inevitable in the defender of a confused cause, Quesnay demonstrated that the artisan, the industrial worker, is an unproductive labourer.
• 89It is, however, when Quesnay advocates Free Trade and analyses the assumptions of the mercantilists, that he most clearly speaks with the voice of Adam Smith. Money is supposed to be wealth, because with money one can buy what one has need of. But money is not obtained for nothing; it also costs as much as it is worth to the buyer, and nations will always be able to obtain as much money as they require, if they have things to give in exchange for it. Wealth consists in the sum total of things necessary for life and in the annual reproduction of these things, and the quantity of money may diminish without these things being affected, since in a rich country, with freedom of commerce, there are means of supplying the place of money. The opulence of a state must not therefore be judged by the greater or less supply of money it possesses. Money is therefore but a richesse sterile, the only utility of which consists in its employment in effecting purchases and sales. Further, buying and selling are but two aspects of the same operation; every purchase is a sale, and every sale is a purchase. It follows that the central idea of the mercantilists, that of a nation selling more than it buys, is not merely erroneous but absurd: “Instead of saying that you wish our sales to exceed our purchases, which is physically impossible, you ought merely to say that you wish to purchase money with your productions.”In an effective phrase, selling more than is bought is merely a “commerce commencé,” an incomplete transaction. The argument resting on the greater durability of metal is admirably disposed of by a reductio ad absurdum, that if the contention be valid, then in logic it leads to the conclusion that any quantity of the metals, however small (being durable), is worth more than any quantity of commodities however large (being perishable). The doctrine of the balance of trade is thus reduced to “nothing and perhaps less than nothing.” Commerce not to be regarded as a state of war against an enemy; the only interest a nation has is to leave trade entirely free, in order that the greatest possible competition of buyers and sellers may guarantee the highest possible price for the sale of its products and the lowest price for the purchase of what may be necessary. Commerce cannot be conducted at the expense of other nations, for a good and a just God has decreed that commerce shall always be “le fruit d’un avantage évidemment reciproque.” All this and much more may strike the rétentive student as strangely familiar, and as an echo of certain classic passages in the fourth book of Adam Smith.
• 90Ibid.. Vol. II, p. 143.
• 91In the tangled mass of Pliny’s Natural History there are certain interesting passages relating to money. There is more than a touch of Rousseau in his assertion that the worst crime against mankind was committed by him who was the first to put a ring (of gold) upon his finger. There is much vitriolic denunciation of gold “discovered only for the ruin of mankind.” How much more happy the age when things were bartered for one another! Yet despite this, he explains, not unreasonably, the causes which led to the pre-eminence of gold, as that it suffers no damage through fire, that it wears the least of all the metals by use, that no material is more malleable, that it is not subject to rust and so on. The other passage in Pliny which has been so frequently quoted is that which relates to the extent of the farm. He refers with approval to Vergil’s maxim “to praise a large farm, but cultivate a small one,” and adds in a celebrated and ominous phrase that the widespread domains had been the ruin of Italy: “latifundia Italiam perdidere.”
• 92The second point is more fundamental. Since there is only one source of national wealth, all taxation must ultimately fall there, and therefore all taxation should be imposed at once where the burden will ultimately fall. Quesnay, in short, advocates a single direct tax falling on the “produit net.” In this he is wholly logical on Physiocratic assumptions. Sooner or later a tax is bound to be shifted on to the “produit net,” if the “produit net” is what Quesnay considers he has shown it to be; and therefore the simplest and least onerous way of raising a revenue is to divert directly to the State a part of what is the only real national revenue. Quesnay in various places devotes considerable attention to proving the inconvenience and loss, and the detriment to the State which would result from any other method of taxation; and in particular, in The Second Economic Problem, he proves (at least to his own satisfaction) that though the landowner might imagine that he would be advantaged by some other form of taxation, yet in the end, owing to the shifting of the tax, the burden—and moreover an increased burden, owing to the inevitable incidental frictions and losses—will fall upon him. It is interesting to note, in passing, that in the course of his discussion of the incidence of taxation, Quesnay enunciates what a later generation has come to know as the Iron Law of Wages: “Wages, and in consequence the enjoyments which wage-earners can obtain, are fixed and reduced to the lowest level by the extreme competition which is among them.”
• 93Apart from dithyrambic praise of agriculture, as, for instance, when Columella says that husbandry is next to and near akin to wisdom, it is notable that the writers of this group condemn slave-labour as inefficient. Pliny may be taken as typical: “It is the very worst plan of all to have land tilled by slaves let loose from the house of correction, as indeed is the case with all work entrusted to men who live without hope.” Certain sayings of Cato, as on the superiority of an agricultural population, and his dictum that he has been a useful member of society who leaves more at his death than he inherited, passed into current wisdom. But in the main these writers are concerned with tips for the landowner (and his wife): hints on the pruning of trees, where to buy tunics, the medicinal effects of cabbage, the salting of gammon and the like.
• 94The Réflexions are arranged in a hundred short paragraphs, and may be taken as a summarized statement of economic doctrine, as apprehended by one Physiocrat. In this brief treatise—written, it is said, for the instruction of two Chinese students—there are many acute and ingenious observations embedded in a dogmatic statement of the more untenable portions of Physiocratic theory. The superiority of agriculture is here in its full glory, and the iron law of wages, as applied to the worker who has only his arms and his industry, is one of the consequences of this superiority. The simple labourer is beaten down in his negotiations with a master who has a choice among many workers. It is different with the worker on the soil: “Nature does not bargain with him to oblige him to be content with the absolutely necessary.” The happy position of the agriculturist is that he receives, over and above his subsistence, a “richesse independente et dis-ponible” which he has not bought and which he sells. The land is therefore the unique source of all wealth, and that part which it gives as a pure gift (en pur don) is the net product. There is something excessively naïve in this touching faith in the bounty of Nature which few farmers—at least in Buchan—could share. Of other points in the Réflexions, it must suffice to note Turgot’s zealous plea for the abolition of all restraints on the fixing of the rate of interest; the payment of interest, being to the advantage of both parties concerned, should be determined solely by the course of trade. On this point, which Turgot also discusses elsewhere, he reveals the logic of laissez-faire in its most cogent form.
• 95Ibid., chap. 2, footnote, p. 39.
• 96Ibid., chap. 16, p. 143.
• 97See above, p. 116.
• 98Ibid., Vol. I, p. 68.