The Principles of Political Economy

Henry Sidgwick

Book III

Chapter VI


§4. If it be admitted that `fair wages' may be defined, for practical purposes, as `market wages as they would be under the condition of the least possible inequality of opportunities', it remains to consider how such a condition is to be secured. Now it has certainly been the firm and long-cherished belief of many adherents of the traditional Political Economy, that unrestricted freedom of action and contract would tend to reduce the actually inevitable inequality of economic opportunities to the lowest attainable minimum---so soon at any rate as enlightenment should be sufficiently diffused by means of elementary education and the spread of cheap means of obtaining information by newspapers, &c. They have believed that labour thus becoming mobile would flow where the demand for it---or its final utility---was greatest, nearly as easily and rapidly as water finds its own level; so that no considerable class of persons would for any length of time obtain, as remuneration for their labour, materially more or less than the market-price of the most useful services that nature and their own or others' labour and care had qualified them to render. They have admitted that very great inequalities of income, due to inheritance, would probably continue to exist; but they have thought it not unjust that A's income should be augmented by the results of his ancestors' labour and care, whether in the form of material wealth or personal aptitudes---assuming, of course, that such augmentation did not tend to make B's income less than it would otherwise have been.

Those who hold, on the other hand, that this view of the tendencies of laisser faire is far too optimistic, urge chiefly the following objections. In the first place, it is impossible to prevent the effects of monopoly, especially monopoly resulting from combination, from modifying and disturbing to an indefinite extent the effects of free competition, without placing the freedom of exchange and association under restraints of a kind that the advocates of laisser faire could not consistently recommend. And we may add that the attempt to impose such restraints, even if made in the style of the most despotic of modern Governments, could never have more than a very imperfect and unsatisfactory kind of success. It could at most only prevent express and open combination; but, as we have before observed, the effects of monopoly may be largely brought about by tacit combination, which is obviously easier to the rich few than to the many poor, and which, therefore, it would be highly objectionable and invidious to favour indirectly by suppressing the only force that could effectively counteract it. On the other hand no advocate of laisser faire has ever supposed that a struggle among different combinations of producers, each aiming at its own sectional interest, can have any general tendency to bring about a just distribution of produce, according to any recognised view of justice.

There is, indeed, one way in which the State may effectually prevent the disadvantageous results of monopoly without vexatious and inquisitorial legislation; viz. by taking into its own hands a business that would otherwise fall into the hands of private monopolists; since it is thus enabled both to manage the business in the interests of the community, and to secure to the public purse whatever profit it is possible and expedient to make out of it. In preceding chapters we have seen that the absence of any general coincidence between the interest of the monopolist and that of the community, as regards the extent and quality of the commodities supplied by the former, constitutes a strong argument for this kind of governmental interference from the point of view of production; we have now to note that it is also to be recommended as tending to remove an important source of unmerited inequality in distribution. On the other side we have, of course, to weigh carefully the general drawbacks of governmental as compared with private management; as these, in certain cases, might be so great as to render the loss to the community through deteriorated production more important than the gain in equity of distribution. I conceive, however that no general practical conclusion can be safely drawn from a comparison of these opposing considerations, as its results are likely to vary very much both as regards different countries and different businesses in the same country.

But further, the critics of laisser faire also lay stress on the growing element of fluctuation and uncertainty in the relations of demand and supply of commodities, in consequence of the more extensive organization of industry through international exchange. In this way, they maintain, the complexity of the causes affecting any worker's remuneration tends to increase in a far greater ratio than his intellectual resources for forecasting their effects; so that the element of `desert' in his gains and losses of income tends to become continually less instead of greater. The facts at present appear to bear out this view; though we have hardly grounds for predicting the continued increase of this fluctuation and uncertainty---rather it would seem reasonable to regard this increase as probably itself fluctuating and uncertain. But sudden and considerable changes in the earnings of particular classes of producers, due to unforeseen changes in the demand for (or supply of) their commodity, must be admitted to be a probably frequent incident of the world-wide extension of trade. From this point of view we must admit that there is some force in what has been urged by Protectionists as regards the tendency of Protection to keep the conditions of production more stable, and prevent the great fluctuations in local demands for labour which the changes of widely extended trade are liable to cause. On the other hand it must be admitted that the same extension of trade tends to minimize such fluctuations in supply and price of commodities as are due to unfavourable seasons or other natural causes: and if, in order to retain this advantage, Protection were limited to articles which are either but little exposed to such calamities, or are not necessaries of life or industry, the security against unmerited fluctuations in earnings would be correspondingly partial: and, in any case, they would still be liable to occur from internal developments of trade and industry. And if any Government were to attempt the extensive interference that would be required to make the security against unmerited fluctuations approximately complete, it would, I conceive, find an insuperable difficulty in discriminating between losses really inevitable and those that could have been prevented or largely reduced by foresight, promptitude, and versatility in adapting action to changed circumstances; so that governmental interference, by checking this spontaneous adaptation of the industrial system to the conditions of its growth, would be liable to impair seriously its productive efficiency. Hence, though I think that a civilized community ought to be always prepared to give effective aid, through its Government, in any case of acute and widespread distress caused to any section of its members by changes in industry or trade, I hold that such intervention ought to be limited to these extreme cases; and could never be advantageously employed as a general remedy against the divergences from equity in the competitive distribution of produce, that such changes are continually liable to cause.

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