The Principles of Political Economy

Henry Sidgwick

Book III

Chapter VII


§4. There is somewhat more difficulty in defining in accordance with usage the wider terms Socialism and Socialistic; since any movement for substituting governmental for private and competitive management in any department of industry is liable to be called Socialistic: while at the same time it would seem paradoxical to apply the term to such established institutions as the Post-Office, or the Mint. And even if we agree to restrict the term to those kinds of governmental intervention which not merely increase production but also equalize distribution, we still do not obtain any broad line of demarcation. For any considerable extension of the sphere of government that is really successful from the point of view of production, tends pro tanto to bring about the results aimed at by the advocates of more economic distribution; so far as it tends to increase the stock of capital owned by the community, and to reduce the field of employment for private capital.

This tendency may perhaps be most easily exhibited by making an extreme supposition. Suppose that, in civilized countries generally, governmental administration of all kinds of business were shewn to be economically superior, in a marked degree, to the present competitive management: it is obvious that the state might gradually buy up the land and fixed capital of different industries, paying for them out of the increased proceeds of its superior management; and the process, when once commenced, would go forward with continually increasing rapidity. The field of investment thus becoming gradually more and more limited, the return to private capital---supposing saving to continue as at present---would probably begin to fall. `Spending' would then increase at the expense of saving, and private capital would gradually diminish from being eaten up. It would be important that the State should purchase the land of the community, and other permanent instruments of production tending to rise in value---if there be any---at an early stage of this process: not merely to gain the unearned increment, but because, as interest sinks towards zero, the selling value of land at a given rent tends to rise proportionally. The process might conceivably go on until the payment for the use of capital, as distinct from insurance against risk, became nearly evanescent; so that only such an amount of private capital would be kept up as men would be willing to keep for security of future use and enjoyment, without any view to profit. And finally when the instruments and materials of all industries had become the property of the government, the aggregate of private savings---leaving out of account the non-usurious lending and borrowing among private persons that might still go on---could only be in the form of `consumers capital', i.e. houses, gardens, furniture, jewels, pictures, &c. Suppose further that, at the same time, by a comprehensive system of free education, elementary, technical and professional, the present scarcity-values of the higher grades of labour had been deduced, so that all such skill as average persons can acquire by training was remunerated by merely a fair return for the additional outlay or sustenance during the period of education. We should thus have arrived at something very like the ideal of economic distribution which German Socialists have put forward, without any sudden shock to the expectations formed by the present system of private property. Society would voluntarily have converted its private capital into consumers' wealth; and, through the agency of its government, would have produced for itself the public capital used in its place. The income of all individual members of the community would be entirely derived from labour of some kind,---or, in the current phrase of the Socialists, labour would obtain its ``full product'' of consumable commodities (subtracting only whatever additional public capital had to be provided for the increase of its future produce).

I need hardly say that any such increase in social production through governmental administration as we have above imagined is beyond the limits of any rational forecast of the future development of society: it is, I suppose, even beyond the dreams of the most sanguine Socialist. My aim in imagining it has chiefly been to shew how any effective occupation by government of a portion of the present field of employment of private capital is a step toward the goal at which Socialists aim; i.e. it tends to bring with it whatever advantages attach to the reduction of existing inequalities of distribution. And it is only such mild and gentle steps towards the realization of the Socialistic ideal that I can regard as at all acceptable, in the present condition of our knowledge of man and society. I have made clear in the preceding chapter that I do not hold the proposal, that the community should prohibit interest and compulsorily purchase with terminable annuities the land and instruments of production now in private ownership, to be beyond the pale of theoretical discussion as immoral; but I think that, considering the perils of so vast a revolution, we ought to have much more conclusive evidence than has yet been offered of the advantages to be derived from it after the struggle is over, before it can be even worth while to discuss it seriously from a practical point of view. At the same time, as I have already explained, I see no reason to regard unqualified laisser faire as tending to realize the most economical production any more than the best possible distribution of wealth: and it seems to me quite possible that a considerable extension of the industrial functions of government might be on the whole advantageous, without any Utopian degree of moral or political improvement in human society. But at any rate to be successful such extension must, I think, be gradual; and the first experiments in this direction ought to be made in departments in which the defects of private enterprise, and the advantages of unitary administration, have been shewn to be greatest,---e.g. in departments where there is a manifest tendency to the establishment of monopolies in the hands either of single individuals or of associations. And, moreover, it ought to be an object in any such extension to maintain as far as possible in the governmental organization of industry an effective stimulus to individual exertion, and to allow scope for invention and improvement of methods.

This leads me to a point which many writers have regarded as the most fundamental objection to Socialism; the difficulty, namely, of distributing the produce of joint labour so as to apportion remuneration to desert. In the preceding chapter I have tried to shew that we can only hope to realize a remote approximation to this ideal of distributive justice, by getting rid of all removable differences in remuneration that are due to causes other than the voluntary exertions of the labourers. An important part of this result might, I conceive, be brought about through the assumption by government of the main industrial functions now performed by private capitalists, without any fundamental change in the principle of remuneration now adopted in respect of governmental officials, if at the same time the means of training for the higher kinds of work were effectually brought within the reach of all classes, by a well organized system of free education, liberally supported by exhibitions for the children of the poor. For as the instruments of production would be mainly the property of the nation, all the inequalities of income that now result from the payment of interest to private capitalists as such, or of profit to employing capitalists, would, speaking broadly, have ceased to exist; and though it would be impossible, without intolerable constraint on the freedom of action of individuals, to prevent the children of persons earning larger incomes or owning accumulated wealth from having a somewhat better start in life than the rest, still this advantage might be reduced to a minimum by such an educational system as I have suggested. But it is clear that in a completely Socialistic community, the remuneration of superior qualities of labour could not be determined by reference to the `market price' of such labour, as there would be no market outside the service of government, by which its price could be fixed: the `fair' wages of such superior labourers would have to depend entirely on a governmental estimate of the value of their work. I do not, however, see that the influence of competition need be excluded altogether; there might be competition between one locality and another for the best workers,---or even, to some extent, between different departments of a central government: and through such competition a tolerable estimate of the amount necessary to stimulate adequately to the acquisition of the required qualifications, and to compensate for any special outlay or sacrifices involved in such acquisition, might be gradually determined on the basis of experience. And for remuneration of special services---e.g. useful inventions---special rewards, pecuniary or honorific, might be added. Still, such a system, at its best, could hardly be as stimulating as the present open competition to persons with great gifts for business, or mechanical invention, or any special art or profession: our experience of governmental work affords slender ground for the belief that it would generally either give due play to the special talents of such persons, or---even if it did---would allot to the gifted individuals any adequate compensation for the additional utility which they would produce for the community.

The question remains, whether the need of organizing new checks to population---which we have seen to be incident to Communism---would also arise under such a Socialistic system as I have just sketched. There is no positive necessity that any particular department of a Socialistic government should be bound to find work for any applicant: individuals might be left to find for themselves where their services were wanted, relief being provided for the unemployed under some such deterrent conditions as those of our existing poor-law. Still, in a community in which all, or the most important branches, of production were carried on by the government, the unemployed would naturally throw on the government the whole responsibility for their situation; and if their number became at any time considerable, a strong demand would arise, very difficult to resist, that the State should provide work and adequate wages for all applicants. It does not, however, appear to me clear that this provision, in a community successfully organized on a Socialistic basis, would necessarily give a dangerous stimulus to population. If we suppose a community in which the aggregate remuneration of labour is increased by most of the share that now forms interest on individuals' capital, while the emoluments and dignities attached to the higher kinds of labour are brought within the hopes of all classes, by a system of education which at the same time makes general such a degree of foresight and intelligence as is now possessed by the higher grade of artisans---it seems quite possible that in such a community a minimum of wages might be guaranteed to all who were unable to find employment for themselves, without drawing an ever increasing crowd of applicants to claim the guaranteed minimum, and without a serious deficit arising from the inefficient work of such as did apply.

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