Chapter IV: The Initial Success of the Capitalist System

We can imagine the impatience of some of our readers with the foregoing description of the evils accompanying modern industrialism. The enlightened upholder of capitalistic business enterprise will accuse us of the common fallacy of the agitator—the fallacy of concentrating attention on the black patches of an existing order, without taking account, either of its achievements, or of the fact that all qualities and all successes must have their defects and their shortcomings. The philosophical adherent of the dictatorship of the capitalist profit-maker will have felt that our criticisms center round what he may admit to be a regrettably unequal distribution of wealth, and an unscientific consumption of commodities and services. But he will retort that commodities and services have first to be produced. It is fair to argue that the poverty of the poor, the inequalities within capitalist communities in incomes and in personal freedom, the control over the environment and the coercive guidance of national policy exercised by the capitalist because of his status and his wealth, in so far as these are evils at all, are only incidental to a greater good;¹ that they may possibly be remediable by appropriate reforms within the capitalist system; but that in any case they are of trifling account in comparison with the benefit the community derives from the enormous increase in national wealth and national power directly attributable to the business enterprise of the capitalist profit-maker. To such a person what seems essential is the organization of the instruments of production in the manner that is continuously the most efficient in maximizing output. This continuous increase in the production of commodities and services is, it is claimed, what distinguishes a progressive from a stagnant or a decadent civilization. Such a continuous advance of wealth production, in quantity, quality, and variety, can be achieved, it is assumed, only by evoking in men continuous initiative, industry, persistence, courageous adventure and thrift, for which the one known stimulus is pecuniary gain; by securing to them unfettered freedom of enterprise, subject to the check of personal loss of wealth whenever they fail, for which there is only one known expedient: namely, private ownership of the instruments of production united with their organization and administration.

The Core of the Case

We shall not understand the clash of views, nor do justice to the position on each side, unless we realize that in this controversy the defenders of the capitalist system and the labor and socialist movement of the twentieth century join issue on the very core of the case. The modern controversy between the believers in a new order of social democracy and the most enlightened adherents of the capitalist system turns, in fact, on the efficacy or indispensability of the motive of profit-making and its defects; upon the relative advantages and disadvantages, to the community as a whole, of leaving the control of the nation's land, machinery, labor and brains to the profit-making manufacturer, merchant or financier.

The Nature of Profit-Making

What is profit-making, and what is the vocation of the profit-maker?

According to the economists, profit-making satisfies "a certain propensity in human nature, the propensity to truck, barter and exchange one thing for another." It is a natural development from the higgling that takes place in the primitive market between individual producers of different commodities or services. The producer of one article seeks, by the art of bargaining, not only to exchange the surplus of the commodity which he himself makes, for a commodity which he desires but is unable to produce, but to exchange it to the greatest advantage to himself so as to get the product of more labor for the product of less labor.² As Adam Smith rightly observes, the art of bargaining is a distinct advance on the animal's art of seizing without giving anything in return. "Nobody ever saw one animal," he writes, "by its gestures and natural cries, signifying to another 'this is mine, that yours: I am willing to give this for that.'" The dog seizes the bone from the other dog and runs away with it. The Western tourist, observing the chaffering of an Eastern bazaar, has some difficulty in distinguishing the art of bargaining from the art of cheating, that is to say the art of getting something for nothing by false pretenses and fraud, and not by force. The distinction seems to be more a matter of degree than of kind. The famous Hindu poet-philosopher of our own day, surveying the larger transactions of the capitalist profit maker in the money, stock, produce and labor markets of Western civilization, finds a similar "stop in his mind."³

The transaction of the capitalist profit-maker is distinguished from the bartering between individual producers by the fact that he exchanges the product, not merely or mainly of his own activity, but of that of countless other persons. Hence he conducts a double transaction: he first buys the labor, or the product of the labor, of other persons at the cheapest rate, and then sells the resultant commodity or service at the highest price. It is exactly this element in capitalist enterprise which is termed the "exploitation of labor," or, more recently, "profiteering." The capitalist's profit is found, essentially, in the margin between the price he gives for other men's services and the price which he gets in selling the product of these services in the markets of the world. The capitalist profit-maker may (and usually does) add to the function of profit-making some other function, such as that of organizing and sometimes directing the technical processes of agriculture, mining, manufacture, transport, banking, warehousing, or shop-keeping. But all these services can be and are increasingly performed, notably in the fully developed capitalist system, by salaried professionals who are not themselves profit-makers, but merely wage - laborers of a high grade, having no personal interest in the margin obtained between the act of buying and the act of selling.

How Profit-Making Arose

Now we must always remember that profit-making as a method of remunerating the directors of industry and commerce, was not adopted out of malice. It was not intended to produce masses of destitute persons. It was not designed to diminish personal freedom and to lead to class oppression. It was not even devised for the creation of an hereditary class which lives by owning. The economic institutions necessary to the vocation of profit-making—private property in the—instruments of production, and free enterprise in the use of such instruments were maintained and developed by British and American statesmen and legislators during the eighteenth and nineteenth centuries, with the approval of the economists, because these men honestly believed that unrestricted profit-making by manufacturers, traders and financiers was the most effective way of increasing the national wealth.⁴ There has never been, at any period of British history, a more unanimous verdict from the most intelligent and public-spirited leaders and instructors of the governing class than that which acclaimed the industrial revolution of the eighteenth and nineteenth centuries. The most learned philosophers, the most progressive politicians, the most enlightened authors, all repeated in their different ways the following series of dogmatic propositions, which seemed to them to constitute a train of reasoning, and which have, in the United States, become so axiomatic as to be taken habitually for granted. The happiness of the community depends on its wealth; the wealth of the nation depends on maintaining and increasing its annual product; the best way of doing this is by letting each citizen make himself as rich as he can in his own way; the quickest way to personal riches is profit-making in a free market; hence unrestricted profit-making by individual capitalists is the best way of securing the welfare and happiness of the nation.⁵

This plea of the capitalist had, at the time it was formulated, much to be said for it. Even to-day socialists are apt to ignore the cogency of the argument for the profit-maker as a factor in the production of wealth, and to concentrate their attack on the assumption that the welfare and happiness of the nation depends on an actual increase of the national product. Confronted with the actual results of the capitalist organization of industry in all parts of the world and under all conditions—the poverty of the poor and the gross inequality which it creates in "life, liberty and the pursuit of happiness"—the socialist finds it easy to argue that the welfare of a community depends only to a small extent on the amount of its annual product, and much more on the efficient distribution and efficient consumption of such commodities and services as are produced. There are, indeed, some socialists who have gone so far as to deny that any increase of productivity is required for an increase in human happiness. They maintain that the present national product of Britain or France, Australia or the United States, if equally distributed and efficiently consumed, is amply sufficient to secure all the consumption that is good for all the inhabitants of those countries. This is not our own view of the situation.

The Efficacy of the Profit-Making Motive

We think the present output of commodities and services, relatively to the efforts and sacrifices of those who coöperate in production, is disastrously small; and that, assuming that there is no overwork, and sufficient leisure for full citizenship, every increase in the production of commodities and services may mean, if fairly distributed and efficiently consumed, additional personal freedom for each individual citizen, as well as a progressive improvement of the race. But the socialist, when he asserts that increased productivity is not necessary or even desirable, is not squarely meeting the case against him. The capitalist retorts that, unless the organizers of industry are remunerated by the process of profit-making, and permitted to enjoy all the advantages that this involves, even the existing wealth of the nation will not be maintained; and that it may easily be so much diminished, and so rapidly, that the whole community will promptly come to the very brink of starvation. "Inequalities in wealth," sums up an American critic of socialism, "which correspond to differences in enterprise, in industry, in thrift, can be leveled only at the cost of paralyzing production, and plunging the whole of society into an equality of misery."⁶ "The making of profit," we are told by a great British capitalist, "decides whether labor has been wisely applied or material rightly used. Men will not pay for what they do not want, nor on the other hand continue to supply that by which they gain nothing. Thus we have in profit the final economic justification of expenditure in trade. Every transaction comes to be tried in the court of profit or loss, and no business enterprise, unless it be experimental or educational or philanthropic in its character, which does not respond to this guidance can be permanently either successful or useful."⁷

No competent observer of the business world will deny the efficacy of profit-making as a way of stimulating and canalizing the energies of those who practice it. Uncertainty as to the end to be pursued is perhaps the commonest cause of paralysis of will; it leads both to delay in the execution, and to a wavering uncertainty as to the direction of a given undertaking. We may admit that pecuniary gain—the fact of finding more money in your pocket at the conclusion than at the opening of a transaction—is an end that is understood by practically all human beings⁸ The motive of pecuniary gain is vividly felt by the common run of men; it is usually present, sometimes abnormally present, in the make-up of mental defectives and degenerates, and it may even be discovered in many popular artists and some men of science. Further, in the profession of profit-making, the test of success is identical with the end pursued. The successful profit-maker who becomes a millionaire adds, to his personal satisfaction with every increase of his gains, the high reputation which he comes to enjoy, exactly because of his wealth, among his fellow business men. "Good" business means big profits; "bad" business means small profits; whilst bankruptcy spells disgrace, however innocently it may have been incurred.⁹ We realize the truth of this analysis when we compare the business world with that of the learned professions. The great lawyer, the great surgeon or physician, or the great civil engineer may derive the most solid of his secret satisfactions from the magnitude of his income and the growth of his fortune. But among the members of his own profession his prestige will rest, not on the size of his banking account, but on the quality of his work, whether as counsel or as judge; in diagnosis or in treatment; in the complexity or the importance of the enterprise that he has engineered. It is exactly this simplicity and uniformity of the end pursued, and its acceptance by public opinion as the test of success, which transforms the profit-maker from a puzzled human being, grappling with ever new ends or aims, into an automaton working without friction on a repetition job. But this is not all. The process of profit-making calls to its aid all the more primitive and commoner passions of men: the instinct of acquisition, the instinct of fighting or domineering over other men, the instinct of obtaining for wife and children a position of security or privilege. Moreover, the combination of the process of profit-making with the law of inheritance brings into play one of the strongest of all civilized instincts: the desire to "found a family": that is, to secure to one's descendants the right for all time to live by owning, and thus be independent of the need for ability or industry. The adherents of the capitalist system are therefore justified in asserting that the process of profit-making is a sort of alchemy for getting the largest output in the way of continuous and concentrated effort from even the dullest intellect and the meanest character that can be brought into its crucible. No vocation that has ever existed has been so absorbing and so transforming to the man who practices it. All the common instincts, impulses and faculties of the "average sensual man" are, to use an American expression, "routed" to a given end. Through the intense concentration of the whole of their thought and feeling on this one narrow issue, men who would not otherwise be distinguished become prophets and seers, and develop an almost animal "smell of the market" which enables them to fore-tell with amazing exactitude what transactions, in all types of enterprise, among all races and throughout all continents, will, as they say, "pay." There is probably no efficiency so great as the efficiency of the successful profit-maker. Of all specialists he is the most perfect.

In justice to Adam Smith and his immediate followers, it is worth remembering that the efficacy of the process of profit-making was far greater in the first stages of the capitalist system than it is to-day. For a very good reason. Before the rise of joint - stock enterprise on a huge scale, still more before the rise of the modern amalgamation and trust, the profit-maker was a free agent, a man who called no man master. He was able to act quickly without waiting for the decision of any other mind. If he failed in intelligence or character he alone had himself to thank, and he knew it. If he succeeded, all the profits were his, and all the prestige. He worked day in and day out with this consciousness of the hell of penury on one side, and the paradise of huge possessions on the other. If we think of the life of the modern manager of the joint-stock bank or railway company, or the salaried agent of the typical world-wide trust, with his subordination to a board of directors, his obligation to fulfill his prescribed function according to definite rules laid down for him by Company Acts, by auditors' requirements, by the technique of whole series of experts, by arrangements with allied or amalgamated companies; and on the other hand, secured in his salary, and bearing none of the loss of failure, always able to leave one company and go to another, one realizes the superior incentive to the brain-worker, and the superior freedom of the entrepreneur, of the period of industrial revolution to that of established and developed capitalism.

To "Get Rich Quickly"

Thus, we must admit the accuracy of one among the series of propositions constituting the plea of the capitalist: namely, "that the quickest way to personal riches is profit-making." To which we may add that it is a way that is open to all, whether they be Fords or Fledgebys, who can pursue it single-mindedly, and are not so "unbusinesslike" as to allow themselves to be distracted by unselfish interests. And the efficiency of profit-making as a means to an end—a hard fact for the socialist—is proved, not only by observing the characteristics of the profit-maker, but also by the statistical result of the process. Those nations which have adopted the capitalist organization of industry in its most complete form have both the richest individuals and the largest class of persons who are rich enough to live by owning and not by working. If personal riches be the test of national wealth we are a long step forward towards accepting the plea of the capitalist.

But the profit-maker does not work in a vacuum. He is made by and he makes the political, social and economic environment in which he functions. It is to the character of this environment that we must now turn our attention.

The Capitalist Environment

There is no more fascinating historical study than to trace the emergence of a new type of human being in response to new circumstances; to watch the individuals of this incipient subspecies coalesce into a group with the common purpose of self-preservation against hostile conservative forces. If the group is successful in its defensive phase it presently becomes openly aggressive. Recognized as a reputable profession, it seeks to alter social and political institutions so as to give fresh scope for the exercise of the new vocation. For instance, we see the present medical profession in Great Britain originating in the humble apothecaries' and barber-surgeons' shops of medieval times; working in the seventeenth and eighteenth centuries through chartered colleges and companies towards corporate influence as a self-governing profession; gradually entrenching itself in the hospital system of the last quarter of the eighteenth century, and reaching its present position through the Medical Act and the General Medical Council of 1858, consolidated by the ever-widening development of public health and physical education, of medical registration and national insurance. To-day, it is not too much to say, the medical profession in Great Britain, relatively insignificant in numbers, exercises greater power in the machinery of administration and the counsels of the legislature than even the formally established Anglican Church: rivaling the equally influential legal profession in its implicit claim to direct the destinies of the community and the race.

The Coming of the Capitalist

But the rise to power of the medical profession—perhaps because it has not been accompanied, taking the profession as a whole, by any considerable acquisition of personal wealth—exhibits none of the revolutionary romance and political glamour, the mass and the momentum, of the rise, during the eighteenth and nineteenth centuries, of the class of capitalist entrepreneurs to a position of predominance in the modern industrial state. The unlicensed profit-maker, or "new capitalist," appears first as the rebel of his time, flying the flag of personal freedom as the arch-destroyer of existing conventions, institutions and creeds. The reason for his revolutionary fervor is plain. The vocation of the profit-maker, as we have already described, is always to buy in the cheapest and to sell in the dearest market. Clearly, his first requirement is free access to markets at home and abroad, whether for the purchase of raw materials, the hiring of labor, or the sale of his product. At the beginning of the eighteenth century in England, this freedom of enterprise was hampered and barred in all directions. Hence the incipient class of capitalist profit-makers, aided by their allies in Parliament, in the university lecture-room and in the press, proceeded ruthlessly to smash up the existing social institutions that stood in their way. We see them smashing up the Tudor and Stuart regulation of wages and prices; smashing up the manor, its courts and its common-fields; smashing up the chartered national companies with their monopolies of mining and manufacturing, or of foreign trade and overseas jurisdiction; smashing up the municipal corporations with their gilds, their systems of apprenticeship, and their prohibition of trade by the "foreigner" (who was only the immigrant from the next town or the adjacent countryside); smashing up the old Poor Law with its archaic system of settlement and its stagnant pools of rate-aided under-employed laborers; smashing up the home and the family, with its immemorial domestic manufactures, in order to scatter its members, women as well as men, children as well as adults, in the new factories in distant counties. They even smashed up, in 1832, the British Parliament, based on the pocket-boroughs of the Crown and the feudal lords, and the obsolete vocational franchise of the ancient municipalities. In fact the capitalist entrepreneurs were, for the better part of two centuries, the Bolshevists of their time, believing—to use the famous words of the petition of the Liverpool merchants of 1834—"that all in equal station should enjoy equal privileges,"¹⁰ and rigidly excluding from participation in the government of the country the property-less wage-earners who were driven into their employment. It is, indeed, scarcely too much to say that the government of Great Britain between 1799 and 1832, intoxicated by the growth of national wealth under the new capitalism, established a reign of terror over the manual workers. "The employers' law," to quote the historians of the working-class of these years, "was to be the public law. Workmen were to obey their master as they would obey the state, and the state was to enforce the master's commands as it would its own. This was the new policy behind the Combination Laws of 1799 and 1800. These two Acts, the second modifying the first, prohibiting all common action in defense of their common interests by workmen, remain the most unqualified surrender of the state to the discretion of a class in the history of England."¹¹ One only of the ancient institutions of the realm the capitalist oligarchy clung to and developed: the law of private property, with its adjunct in legally protected inheritance of wealth by the living from the dead.

The Ruthlessness of Capitalist Destruction

It is worth notice that the insurgent capitalist entrepreneurs, in the century of their exuberance, were in another respect analogous to Bakunin, the Anarchist, and Lenin, the Communist, who in the Russia of 1918-1919 had the opportunity of putting in practice so much of the spirit of Bakunin's teaching. They were absolutely ruthless in the clearance that they made of everything that stood in the way of the carrying out of their ideas of social reorganization—neither weighing in the balance the incidental advantages of the system that they considered obsolete, nor heeding the suffering that their revolution caused to individuals without number—and, what should never be forgotten, making no compensation whatsoever for the breach of legally "established expectations" to the uncounted multitude of innocent persons whose incomes were annihilated and whose very livelihood was destroyed by the revolution that they brought about. The craftsman who had gained his qualification by apprenticeship; the laborer who had a statutory right to be "set to work" by the Overseers of the Poor in the parish in which he possessed a legal settlement; the little copy-holder relying on his immemorial right of common pasture; the freeman of the ancient Municipal Corporation, who had a legal right to be protected against the "foreigner"; the member of the Craft Gild, enjoying a corporate monopoly of the trade, all enjoyed legally established vested interests, which formed as validly part of their personal estates as the forests and steppes of the Russian noble, and the factories and shops of the Russian "bourgeoisie."¹² To the British capitalist entrepreneurs of 1750-1850, as to the Russian Bolshevists of 1918-19, all these "legalisms" seemed but obsolete wreckage impeding the inauguration of a more profitable (or, as they chose to consider it, a more equitable) social order.

The Achievements of the Capitalist

Much is subsequently forgiven to a revolution which succeeds; or which, to the active spirits of the rising generation, appears to satisfy the national needs. It is therefore worth inquiring whether the dictatorship of the capitalist, which, in Britain, came to its zenith in the middle of the nineteenth century, fulfilled any wider purpose than its immediate one of enriching the proprietary class. We may say at once that, in our opinion, this dictatorship of the capitalist did, on the balance, in spite of the atrocious debit account for which Ruskin coined the word "illth," more good than evil; at any rate, from the latter part of the eighteenth to about the middle of the nineteenth century. During the latter part of the nineteenth century its success, on balance, was doubtful; and in the twentieth century, even in respect of the increase in national figures (we purposely, like Ruskin, hesitate to use the word "wealth"), its drawbacks outweigh its advantages.

There can be no doubt that, in the Britain of the latter part of the eighteenth and the beginning of the nineteenth century there was a sudden, an enormous and a continuous increase in production and productivity, whether measured in the quantity and range of the generally useful commodities consumed or in the amount of plant made available for their production. The very increase in population, which was so marked a feature of this period, in contrast with any previous century, and which was itself a direct result of the dislocation of domestic agriculture and manufacture, represented a great growth of productive power. The continuous expansion of the imports of raw materials and of the exports of manufactured goods meant a widening of the range and an increase in the amount of the consumable commodities that constituted the nation's income.

The Increase in Production

The extension of British trade to all countries, the growth of British shipping, the rise of British banking and insurance, in a world in which British capitalists found themselves in a position of commercial dominance with the very minimum of foreign competition, all coöperated to produce a golden stream of almost boundless profits, taking the form of constantly swelling incomes for the capitalist class, a heaping up of all the accompaniments of luxurious living, and a perpetual investment of the surplus in additional instruments of wealth production, from the sinking of more mines and the erection of new factories to the launching of ships, the building of railways, the multiplication of machinery and the opening up of ever-widening markets. And this unprecedented increase in production is not demonstrated only by the statistics. We can trace every stage in the process. The passing away of domestic manufacture and peasant cultivation, together with the silent abandonment of the habit of "living in" by the farm laborer, and the massing of individual factory operatives in crowded urban slums, produced a reckless unrestrained breeding, which placed at the capitalist's disposal a rapidly increasing and economically defenseless labor force. The autocratic power of those who could offer, in wages for the new processes, practically the only available means of subsistence, almost automatically set each man, woman and child to the tasks for which they were best fitted, for the longest possible hours, in return for the lowest possible wages. Presently, the substitution, for the laxity of the old Poor Law, of the ruthlessly deterrent workhouse system brought actual hunger to the fortifying of the power of the employer, and made the entry into his service as compulsory as it would have been under direct industrial conscription. If we think of human beings as merely instruments of production, there can be no hesitation in ascribing to the capitalist organization of Britain, at its most glorious period, an unprecedented success, in harnessing to production the greatest amount of labor-power at the least relative cost in maintenance, a success demonstrably superior to that of the most efficient system of chattel slavery and the slave trade that the world has known. Moreover, the capitalist system evoked and utilized a great increase of mental as well as of manual productivity. The shattering of the old order opened a career to acquisitively inventive brains of every grade and enlisted them in the new industrial organization. There were endless opportunities made for the capable and adventurous. Large numbers of craftsmen and peasants escaped from the common fate of being pressed down by under-employment and declining earnings to become foremen and managers, and eventually independent capitalist entrepreneurs. It may well be that it was at this period that the largest number and the greatest proportion of persons rose from the lower ranks into the governing class. The stimulus was as great as the opportunities were numerous; and if the selection was in some respects dysgenic, it was concentrated on the one quality of ability to increase production and diminish its cost. It was, above all, an age of mechanical contrivance, in which an unprecedented amount of mental energy was put into improving industrial processes. And the demand for commodities was boundless. The whole world was hungering for the textile fabrics, the hardware, the porcelain, the arms and ammunition, the clothing, the leather goods, that were being produced by the new processes at ever lower prices. Meanwhile the British manufacturers themselves were insatiable in their demand for ever-increasing quantities of raw materials from the ends of the earth to convert into the commodities of which the other countries seemed never to have had enough. The British profit-makers spent their days, not in devising means of competing successfully against each other, or with foreign rivals, but in coping with new demands; searching for new materials; creating new products; adventurously opening up new markets; risking fortune, and sometimes even life, in commercial ventures, from China to Peru, from the wilds of Western America to the primitive barbarism of the Antipodes. The prizes were, of course, colossal. "It was not five per cent or ten per cent," it has been observed, "but thousands per cent," that made the fortunes of the Britain of this glorious time.

It must, we repeat, be admitted that, despite all drawbacks, this enormous development of successful profit-making meant, at any rate for the time being, a vast increase in that part of the nation's earnings which may fairly be called its wealth. If wages were low, and the conditions of labor so bad as to be destructive of the people, the continual pressure for a cheapening of production—especially after the general removal of taxes upon commodities of common use—largely benefited the consumer. The profit-makers themselves found their greatest gains in increasing output and consumption by a continuous lowering of the price of commodities that every one consumed and of services that every one used. Combination among capitalists, in such a way as permanently to maintain prices above the cost of production, was practically unknown. The whole nation shared, through declining prices, combined with a reasonably stable currency and, on the whole, stable or even slightly rising rates of wages, in the ever-growing stream of commodities, and steadily widened the range and increased the quantity of its consumption.

To those who regard an immediate increase in national income as, if not the only, at least the main condition of social progress and well-being, it will seem fortunate that British capitalism for the time being attained its end, for there was, in the century of the Industrial Revolution, no available alternative. As has been remarked by Werner Sombart, "economic activities in the pre-capitalist period were regulated solely in accordance with the principle of a sufficiency for existence: and peasant and craftsman looked to their economic activities to provide them with their livelihood and nothing more."¹³ The vast majority of these independent producers had no ambition to heap up riches. They raised their crops and made their wares largely for their own use; and their strongest impulse was to live their own life in their own way, working when they liked, sleeping when they liked, eating when they liked, and playing when they liked. The best of them were inspired, not by the desire for gain but by the instinct of workmanship. It must, however, always be remembered that, with regard to their surplus output, the peasant cultivator and the master craftsman were as truly "profit-makers," with the shortcomings and defects of the profit-maker, as the capitalist entrepreneur. In many cases they were themselves exploiters " of other people's labor, of the labor of their apprentices and journeymen, and of their own families. Whatever may have been the virtues of such an order of society, it did not, as a matter of fact, develop either the large outlook or the self - control requisite for directing enterprise on a large scale. Nor did it produce either the spirit of association or the capacity for representative institutions, which lie together at the base of modern political and industrial democracy.¹⁴

The Absence of Alternative

Hence in the eighteenth and even in the early part of the nineteenth century, no public or collectivist organization was practicable in Britain. There was no supply of officials who were even moderately honest. The records of central departments and of such contemporary local government as existed in Britain show that it was impossible to get a class of civil servants who did not take bribes, directly or indirectly, or who could be depended on to do a day's work; whilst most minor officials were addicted to drink and did not scruple to steal the petty cash. Posts in the public service were spoken of and asked for as sinecures. There was no body of knowledge as to the processes or methods of administration on a large scale, no way of testing the abilities of the candidates for appointment, no system of professional training, so that every public position was either hereditary or inevitably jobbed, falling often to the least competent members of the governing class. The nascent professions of mining, of civil and mechanical engineering, of industrial chemistry, of architecture and building construction, of administration itself, proceeded only by "rule of thumb" and "trial and error." There was no efficient bookkeeping, no system of audit, even in its rudimentary form of an audit of cash accounts; and the very idea of "costing" was undreamt of. The intensity of the motive of profit-making as a means of personal gain supplied the only stimulus and test by which men could be selected, processes invented, management conducted, methods cheapened and markets discovered. And the capitalist system had, incidentally, the merit of training the nation in the science and art of coöperative working in manufacture, transport, commerce and finance. Even its oppressions and its frauds had their uses, in that they drove the proletariat of manual-working wage-earners which capitalism created, to combine in trade unions and coöperative societies, and to develop their own faculties for free association and industrial representative institutions. Profit-making was, in fact, at the opening of the nineteenth century, the world's substitute for qualities which did not at the time exist, for self-discipline, for professional technique, for scientific knowledge, for public service, for the spirit of free association, for common honesty itself.

Notes

1. It may be noted that the most skillful defenders of capitalist civilization argue in defense of the gains of the entrepreneur, organizer or director of industry; tacitly ignoring the tribute that mere ownership levies in rent and interest, and quietly assuming the very point at issue, by implying that in no other way than by extending the conception of private property to the instruments of production, can the services of the entrepreneur, organizer or director be obtained. Thus, an able American defender of the capitalist system remarks that "land, capital and labor are only productive factors in the sense of being the means by which those who assume the direction and responsibility of industry carry on production. The entrepreneur or enterpriser is the only real productive factor. Pure rent, pure interest, and pure wages are what the enterpriser has to pay to obtain the privilege of controlling and utilizing these three means. . . Just as there would be no advantage to the human body in diverting blood from the brain to some other part that receives only one-tenth as much blood as the brain, so there would result a loss rather than a gain from any such equalization of income as would deprive the more efficient members of society of the incentive to the utmost exercise of their productive power, or of the ability to fit themselves for, and perform successfully, the important duties that devolve upon them as the undertakers of enterprises, the discoverers and appropriators of opportunities, and the accumulators of capital" (Enterprise and the Productive Process, by Fred B. Hawley, 1907, pp. 85, 122-3).

   "Profit is acknowledged to be a peculiar form of income, differing essentially from rent, wages, or interest, and entitled to rank with them as a fundamental form of equal, but only equal, theoretic importances. It is also identified with the 'residue of the product,' after the fixed claims of land, labor, and capital are satisfied. And it is looked upon as the income peculiar to the entrepreneur, who is regarded as 'the coördinator of land, capital and labor, without furnishing either in his own capacity. . . The peculiar function of the economic entrepreneur is the assumption of responsibility in industrial undertakings.... Strictly speaking, a coördinator is not only the one who plans, but also the one who intelligently executes a plan, and the two may be, and usually are, different persons. The executant, in carrying out the original plan, has to adjust details, and this involves a certain amount of subsidiary planning on his part, but his function in the economic productive process is universally recognized as labor, and the income obtained by him as wages.... It is only when the coördinator subjects himself to the result of his own coördination, or of the coördination of others, that he becomes the recipient of profit. . . If the coördinator should be exclusively defined as the one who subjects himself to the results of coördination, the person at whose risk and for whose benefit coördination is effected, it would be synonymous with the term 'enterpriser' as I have employed it " (ibid., pp. 11-13).

   This, however, leaves undefended what John Stuart Mill described (Principles of Political Economy, p. 477 of edition of 1865) as the "enormous share which the possessors of the instruments of industry are able to take from the produce," in the rent and interest payable to function-less shareholders and landlords. ↩
2. In an address to Japanese students Sir Rabindranath Tagore gives us the criticism of an Eastern philosopher of Western commercialism. "You had your own industry in Japan; how scrupulously honest and true it was, you can see by its products—by their grace and strength, their conscientiousness in details, where they can hardly be observed. But the tidal wave of falsehood has swept over your land from that part of the world where business is business, and honesty is followed merely as the best policy. Have you never felt shame when you see the trade advertisements, not only plastering the whole town with lies and exaggerations, but invading the green fields, where the peasants do their honest labor, and the hill-tops, which greet the first pure light of the morning? . . . This commercialism with its barbarity of ugly decorations is a terrible menace to all humanity, because it is setting up the ideal of power over that of perfection. It is making the cult of self-seeking exult in its naked shamelessness. . . Its movements are violent, its noise is discordantly loud. It is carrying its own damnation because it is trampling into distortion the humanity upon which it stands. It is strenuously turning out money at the cost of happiness. . . The vital ambition of the present civilization of Europe is to have the exclusive possession of the devil" (Nationalism, pp. 85-86, 129, 128, 82). ↩
3. "The foremost truth of political economy," observes Nassau Senior, is "that every one desires to obtain individual wealth with as little sacrifice as possible." ↩
4. "The institutions of private property and individual competition are based, not on blind traditionalism or class oppression but on the experience which all the progressive races of mankind have attained of their social utility and their flexible adaptability to changing social needs" (Socialism: A Critical Analysis, by O. D. Skelton, 1911, p. 45). Note the inability or unwillingness to distinguish between "private property" and "private property in the instruments of production." Paradoxical as it may seem, one of the principal objects of the socialist is greatly to increase the amount of "private property," but to concentrate it entirely on the forms of wealth for which the institution is fitting. (See A Constitution for the Socialist Commonwealth of Great Britain, by S. and B. Webb, 1920, pp. 340-47.) ↩
5. "The question is still the same, 'How to make the nation as rich "as possible,"' but as the answer now is 'By letting each member of it make himself as rich as he can in his own way,' that portion of the old art of Political Economy which professed to teach a statesman how to 'provide a plentiful revenue or subsistence for the people' becomes almost evanescent" (The Principles of Political Economy, by H. Sidgwick, 1883, p. 18).↩
6. Socialism: A Critical Analysis, by O. D. Skelton, p. 58. ↩
7. Life and Labor of the People in London, by Charles Booth, second series; "Industry," vol. 5, 1903, p. 77. ↩
8. "The beginning and the end of capitalist economic activities is a sum of money. Consequently, calculation forms an important element in the capitalist spirit, and this was recognized quite early in the history of capitalism. By calculation I mean the tendency, the habit, perhaps more—the capacity, to think of the universe in terms of figures, and to transform these figures into a well-knit system of income and expenditure. The figures, I need hardly add, always express a value; and the whole system is intended to demonstrate whether a plus or a minus is the resultant, thus showing whether the undertaking is likely to bring profit or loss" (The Quintessence of Capitalism, by Werner Sombart, 1915, p. 125). ↩
9. "When do we speak of having accomplished a successful piece of business? Surely when the contract-making has ended well. But what is meant precisely by 'well'? It certainly has no reference to the quality or to the quantity of the goods or services given or received; it refers solely and only to the return of the sum of money expended, and to a surplus over and above it (profit). It is the aim of the undertaker so to manipulate the factors over which he has control as to bring about this surplus" (The Jews and Modern Capitalism, by Werner Sombart, 1913, p. 161). ↩
10. The Manor and the Borough, by S. and B. Webb, 1908, p. 701.↩
11. The Town Labourer, 1760-1832, by J. L. and Barbara Hammond, 1917, p. 113. ↩
12. To the peasant cultivator and master craftsman, "the original idea, essence and purpose of property" —to quote an American writer—"was to secure to a person or group of persons the use and control of the things which that person or group needed for his or its own subsistence and welfare" (American Socialism, by James Mackaye, pp. 34-5). To the individual producer of the pre-capitalist era, owning his instruments of production and pursuing his own vocation, the Industrial Revolution seemed wholly inconsistent with the rights of pro property, not only as he understood them, but also as they had been interpreted by Common Law and local custom from time immemorial. ↩
13. The Quintessence of Capitalism, by Werner Sombart, 1915, p. 172↩
14. The incapacity for democratic institutions—for the trade union or professional organization as well as for political democracy—is seen in the special liability to the disease of bureaucracy of countries like Japan, Russia, and even modern France - the explanation being, we think, that a community of individual producers is, through lack of large outlook and the capacity for association, ion, compelled to leave the government of such centralized institutions as are requisite in the modern world to a hierarchy of officials, whom they are alike unable and unwilling effectively to criticize and control. ↩