The Principles of Political Economy

Henry Sidgwick

Book 3

The Art of Political Economy

Chapter 2

The System of Natural Liberty Considered in Relation to Production

§8. So far I have left unquestioned the assumption fundamental in the system of natural liberty---that individuals are the best judges of the commodities that they require, and of the sources from which they should be obtained, provided that no wilful deception is practised; as I have thought it important to make quite clear that, even if this assumption be granted, what I have called the `scientific ideal' of economists---the political conditions of industry which they assume in abstract reasoning with a view to the explanation of economic phenomena---cannot legitimately be taken as the practical ideal of the Art of Political Economy; since it is shown by the same kind of abstract reasoning to be liable to fail, in various ways to realize the most economical and effective organization of industry. It may perhaps seem that these results are of merely speculative interest; since all but a few fanatics admit that the beings for whom complete laisser faire is adapted are at any rate not the members of any existing community. But I venture to think that the theoretical conclusion above reached has considerable, though indirect, practical importance. If it were demonstrably only from blind adhesion to custom and habit, or from want of adequate enlightenment, that the concurrence of self-interests could not actually be relied upon to produce the best aggregate result for the community, at any rate the direction of social progress would seem to be fixed and the goal clearly in view; the pace at which we ought to try to advance towards complete laisser faire would still be open to dispute, but the sense that every diminution of governmental interference was a step in the right direction, would be a strong inducement to take the step, if the immediate effects of taking it appeared to be mixed, and the balance of good and evil doubtful; while optimistic persons would be continually urging society to suffer a little present loss for the sake of the progress gained towards the individualistic ideal. But if, as I have tried to show, this is not the case; if on the contrary in a community where the members generally were as enlightened and alert in the pursuit of their interests as we can ever expect human beings to become, it might still be in various cases and on various grounds desirable to supplement or correct the defects of private enterprise by the action of the community in its collective capacity,---we shall view in a somewhat different light the practical questions of the present time as to the nature and limits of governmental interference. That is, in any case where the present inadequacy of laisser faire is admitted or strongly maintained, we shall examine carefully whether its defects are due to want of general enlightenment, or rather to one or other of the causes discussed in this chapter; and in the latter case shall regard governmental interference as not merely a temporary resource, but not improbably a normal element of the organization of industry.

It does not of course follow that wherever laisser faire falls short governmental interference is expedient; since the inevitable drawbacks and disadvantages of the latter may, in any particular case, be worse than the shortcomings of private industry. These drawbacks depend in part on such political considerations as lie beyond the scope of the present discussion, and vary very much with the constitution of the government in question, and the state of political morality in the country governed. Of this kind are (1) the danger of increasing the power and influence capable of being used by government for corrupt purposes, if we add to the valuable appointments at its disposal; (2) the danger, on the other hand, that the exercise of its economic functions will be hampered and perverted by the desire to gratify influential sections of the community---certain manufacturers, certain landlords, certain classes of manual labourers, or the inhabitants of certain localities; (3) the danger, again, of wasteful expenditure under the influence of popular sentiment---since the mass of a people, however impatient of taxation, are liable to be insufficiently conscious of the importance of thrift in all the details of national expenditure. Then, further, there is the danger of overburdening the governmental machinery with work---which can hardly be altogether removed, though it may be partly obviated, by careful organization; since the central and supreme organ of government must exercise a certain supervision over all subordinate departments, and every increase in the variety and complexity of the latter must make this supervision somewhat more laborious and difficult.

Other disadvantages, in part economic, in part purely political, attach to particular modes of governmental interference. Thus when the action of government requires funds raised by taxation, we have to reckon---besides the financial cost of collection and any loss to production caused by particular taxes---the political danger of adding to a burden already impatiently borne; where, again, it requires the prohibition of private industry, we must regard as an item on the wrong side of the account not only the immediate irksomeness of restraint, but the repression of energy and self-help that tends to follow from it; where, on the other hand, the interference takes the form of regulations imposed on private businesses, in addition to any detrimental effects on industrial processes that may inevitably accompany the observance of such regulations we may often have to calculate on a certain amount of economic and political evils. due to successful or unsuccessful attempts to evade them.

And, lastly, in all cases, the work of government has to be done by persons who---even with the best arrangements for effective supervision and promotion by merit---can have only a part of the stimulus to energetic industry that the independent worker feels, who may reasonably hope to gain by any well-directed extra exertion, intellectual or muscular, and must fear to lose by any indolence or neglect. The same, however, may be said of the hired labour used by private employers, to an extent which the development of industry has hitherto continually tended to increase; including even the specially important labour of management, in the case of businesses conducted by joint-stock companies. And, on the other hand, government can apply certain kinds of stimulus which private employers have either not at their command at all, or only in a less degree; it can reward conspicuous merit by honours and distinctions, and offer to faithful service a more complete security of continuous employment and provision for old age. Still the loss, in governmental service, of the enterprise and effort that is stimulated, and sustained by a fuller sense of self-dependence, must be set down as very serious; and, on the whole, there seems no doubt that even where the defects of laisser faire are palpable and grave, they may still be outweighed by the various disadvantages incident to governmental management of industry.

But, even so, it is important to observe, first, that these disadvantages are largely such as moral and political progress may be expected to diminish; so that even where we do not regard the intervention of government as at present desirable, we may yet look forward to it, and perhaps prepare the way for it. And, secondly, even where we reject governmental interference, we may yet recognise the expediency of supplementing or limiting in some way or other the results of private enterprise: we may point out a place for philanthropic effort---as in the case of educational foundations; or for associations of consumers to supply their needs otherwise than by the competition of independent producers---as in the case of the highly successful cooperative stores managed by artisans.

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