The desirability of such a thoroughgoing distribution of superfluous incomes appears to be refuted by the fact that a considerable part of the capital and organising ability that function in industry is dependent upon the possession of superfluous goods by the richer classes. That surplus of the larger incomes which is not consumed or given away by its receivers at present, constitutes no small portion of the whole supply of savings annually converted into capital. Were all of it to be withdrawn from industry and distributed among the needy, the process might involve more harm than good. Moreover, the very large industrial enterprises are initiated and carried on by men who have themselves provided a considerable share of the necessary funds. Without these large masses of personal capital, they would have much more difficulty in organising these great enterprises, and would be unable to exercise their present dominating control.
To the first part of this objection we may reply that the distribution of superfluous goods need not involve any considerable withdrawal of existing capital from industry. The giving of large amounts to institutions and organisations, as distinguished from needy individuals, might mean merely a transfer of capital from one holder to another; for example, the stocks and bonds of corporations. The capital would be left intact, the only change being in the persons that would thenceforth receive the interest. Smalldonations could come out of the possessor's income. Moreover, there is no reason why the whole of the distribution could not be made out of income rather than out of capital. While the givers would still remain possessed of superfluous wealth, they would have handed over to needy objects, persons, and causes the thing that in modern times constitutes the soul and essence of wealth; namely, its annual revenues.
Nevertheless, the distribution from income would apparently check the necessary increase of capital, lessen unduly the supply of capital for the future. Were all, or the greater part of superfluous incomes devoted to benevolent objects it would be used up for consumption goods; such as, food, clothing, housing, hospitals, churches, schools. Would not this check to the increase of capital cause serious injury to society?
New investment would not be diminished by an amount equal to the whole amount of income transferred to objects of benevolence. For the improved position of the poorer classes that had shared in the distribution would enable them to increase their productive power and their resources, and therefore to save money and convert it into capital. Again, their increased consuming power would augment the demand for goods, bring about a larger use of existing capital instruments, and therefore lead to an enlargement of the community's capacity for saving. Thus, the new saving and capital would, partially at least, take the place of that which was formerly provided by the possessors of surplus income. In so far as a net diminution occurred in the community's supply of capital, it would probably be more than offset, from the viewpoint of social welfare, by the better diffusion of goods and opportunities among the masses of the population.
The second difficulty noted above, that such a thorough distribution of superfluous goods would lessen considerablythe power of the captains of industry to organise and operate great enterprises, can be disposed of very briefly. Those who made the distribution from income rather than from invested wealth, would still retain control of large masses of capital. All, however, would have deprived themselves of the power to enlarge their business ventures by turning great quantities of their own income back into industry. But if their ability and character were such as to command the confidence of investors, they would be able to find sufficient capital elsewhere to equip and carry on any sound and necessary enterprise. In this case the process of accumulating the required funds would, indeed, be slower than when they used their own, but that would not be an unmixed disadvantage. When the business was finally established, it would probably be more stable, would respond to a more definite and considerable need, and would be more beneficial socially, inasmuch as it would include a larger proportion of the population among its proprietors. And the diminished authority and control exercised by the great capitalist, on account of his diminished ownership of the stock, would in the long run be a good thing for society. It would mean the curtailment of a species of power that is easily liable to abuse, wider opportunities of industrial leadership, and a more democratic and stable industrial system.
Only a comparatively small portion of the superfluous goods of the country could with advantage be immediately and directly distributed among needy individuals. The greater part would do more good if it were given to religious and benevolent institutions and enterprises. Churches, schools, scholarships, hospitals, asylums, housing projects, insurance against unemployment, sickness, and old age, and benevolent and scientific purposes generally,—constitute the best objects and agencies of effective distribution. By these means social and individual efficiencywould be so improved within a few years that the distress due to economic causes would for the most part have disappeared.
The proposition that men are under moral obligation to give away the greater portion of their superfluous goods or income is, indeed, a "hard saying." Not improbably it will strike the majority of persons who read these pages as extreme and fantastic. No Catholic, however, who knows the traditional teaching of the Church on the right use of wealth, and who considers patiently and seriously the magnitude and the meaning of human distress, will be able to refute the proposition by reasoned arguments. Indeed, no man can logically deny it who admits that men are intrinsically sacred, and essentially equal by nature and in their claims to a reasonable livelihood from the common heritage of the earth. The wants that a man supplies out of his superfluous goods are not necessary for rational existence. For the most part they bring him merely irrational enjoyment, greater social prestige, or increased domination over his fellows. Judged by any reasonable standard, these are surely less important than those needs of the neighbour which are connected with humane living. If any considerable part of the community rejects these propositions the explanation will be found not in a reasoned theory, but in the conventional assumption that a man may do what he likes with his own. This assumption is adopted without examination, without criticism, without any serious advertence to the great moral facts that ownership is stewardship, and that the Creator intended the earth for the reasonable support of all the children of men.
If all the present owners of superfluous goods were to carry out their own conception of the obligation, the amount distributed would be only a fraction of the realsuperabundance. Let us recall the definition of absolute superfluity as, that portion of individual or family income which is not required for the reasonable maintenance of life and social position. It allows, of course, a reasonable provision for the future. But the great majority of possessors, as well as perhaps the majority of others, do not interpret their needs, whether of life or social position, in any such strict fashion. Those who acquire a surplus over their present absolute and conventional needs, generally devote it to an expansion of social position. They move into larger and more expensive houses, thereby increasing their assumed requirements, not merely in the matter of housing, but as regards food, clothing, amusements, and the conventions of the social group with which they are affiliated. In this way the surplus which ought to have been distributed is all absorbed in the acquisition and maintenance of more expensive standards. All classes of possessors adopt and act upon an exaggerated conception of both the strict and the conventional necessities. In taking this course, they are merely subscribing to the current theory of life and welfare. It is commonly assumed that to be worth while life must include the continuous and indefinite increase of the number and variety of wants, and a corresponding growth and variation in the means of satisfying them. Very little endeavour is made to distinguish between kinds of wants, or to arrange them in any definite scale of moral importance. Desires for purely physical goods, such as, food, drink, adornment, and sense gratifications generally, are put on the same level with the demands of the spiritual, moral, and intellectual faculties. The value and importance of any and all wants is determined mainly by the criterion of enjoyment. In the great majority of cases this means a preference for the goods and experiences that minister to the senses. Since these satisfactions are susceptible of indefinite increase, variety, and cost, the believer in thistheory of life-values readily assumes that no practical limit can be set to the amount of goods or income that will be required to make life continuously and progressively worth living. Hence the question whether he has superfluous goods, how much of a surplus he has, or how much he is obliged to distribute, scarcely occurs to him at all. Everything that he possesses or is likely to possess, is included among the necessaries of life and social position. He adopts as his working theory of life those propositions which were condemned as "scandalous and pernicious" by Pope Innocent XI in 1679: "It is scarcely possible to find among people engaged in worldly pursuits, even among kings, goods that are superfluous to social position. Therefore, hardly any one is bound to give alms from this source."
The practical consequences of this false conception of welfare are naturally most conspicuous among the rich, especially the very rich, but they are also manifest among the comfortable and middle classes. In every social group above the limit of very moderate circumstances, too much money is spent for material goods and enjoyments, and too little for the intellectual, religious, and altruistic things of life.
This working creed of materialism is condemned by right reason, as well as by Christianity. The teaching of Christ on the worth of material goods is expressed substantially in the following texts: "Woe to you rich." "Blessed are you poor." "Lay not up for yourselves treasures on earth." "For a man's life consisteth not in the abundance of things that he possesseth." "Be not solicitous as to what you shall eat, or what you shall drink, or what you shall put on." "Seek ye first the kingdom of God and his justice, and all these things shall be added unto you." "You cannot serve God and Mammon.""If thou wouldst be perfect, go, sell what thou hast and give to the poor, and come follow me." Reason informs us that neither our faculties nor the goods that satisfy them are of equal moral worth or importance. The intellectual and spiritual faculties are essentially and intrinsically higher than the sense faculties. Only in so far as they promote, either negatively or positively, the development of the mind and soul have the senses any reasonable claim to satisfaction. They have no value in themselves; they are merely instruments to the welfare of the spirit, the intellect, and the disinterested will. Right life consists, not in the indefinite satisfaction of material wants, but in the progressive endeavour to know the best that is to be known, and to love the best that is to be loved; that is, God and His creatures in the order of their importance. The man who denies the intrinsic superiority of the soul to the senses, who puts sense gratifications on the same level of importance as the activities of mind, and spirit, and disinterested will, logically holds that the most degrading actions are equally good and commendable with those which mankind approves as the noblest. His moral standard does not differ from that of the pig, and he himself is on no higher moral level than the pig.
Those who accept the view of life and welfare taught by Christianity and reason cannot, if they take the trouble to consider the matter, avoid the conclusion that the amount of material goods which can be expended in the rational and justifiable satisfaction of the senses, is very much smaller than is to-day assumed by the great majority of persons. Somewhere between five and ten thousand dollars a year lies the maximum expenditure that any family can reasonably devote to its material wants. This is independent of the outlay for education, religion, and charity, and the things of the mind generally. In the overwhelming majority of cases in which more than five to ten thousand dollars are expended for the satisfaction of materialneeds, some injury is done to the higher life. The interests of health, intellect, spirit, or morals would be better promoted if the outlay for material things were kept below the specified limit.
The distribution advocated in this chapter is obviously no substitute for justice or the deeds of justice. Inasmuch, however, as complete justice is a long way from realisation, a serious attempt by the possessors of true superfluous goods to fulfil their obligations of distribution would greatly counteract and soften existing injustice, inequality, and suffering. Hence, benevolent giving deserves a place in any complete statement of proposals for a better distribution of wealth. Moreover, we are not likely to make great advances on the road of strict justice until we acquire saner conceptions of welfare, and a more effective notion of brotherly love. So long as men put the senses above the soul, they will be unable to see clearly what is justice, and unwilling to practise the little that they are able to see. Those who exaggerate the value of sense gratifications cannot be truly charitable, and those who are not truly charitable cannot perform adequate justice. The achievement of social justice requires not merely changes in the social mechanism, but a change in the social spirit, a reformation in men's hearts. To this end nothing could be more immediately helpful than a comprehensive recognition of the stewardship of wealth, and the duty of distributing superfluous goods.
REFERENCES ON SECTION III
Ely: Monopolies and Trusts. Macmillan; 1900.Van Hise: Concentration and Control. Macmillan; 1912.Stevens: Industrial Combinations and Trusts. Macmillan; 1913.Russell: Business, the Heart of the Nation. John Lane; 1911.Garriguet:Régime du Travail. Paris; 1909. The Social Value of the Gospel. St. Louis; 1911.Hobson: Work and Wealth, a Human Valuation. Macmillan; 1914.West: The Inheritance Tax. New York; 1908.Seligman: Progressive Taxation. Princeton; 1908. The Income Tax. New York; 1913.Bouquillon:De Virtutibus Theologicis. Brugis; 1890.Also, the works of Taussig, Devas, Hobson, Antoine, Pesch, Carver, Vermeersch, Nearing, and King which are cited in connection with the introductory chapter.
Ely: Monopolies and Trusts. Macmillan; 1900.
Van Hise: Concentration and Control. Macmillan; 1912.
Stevens: Industrial Combinations and Trusts. Macmillan; 1913.
Russell: Business, the Heart of the Nation. John Lane; 1911.
Garriguet:Régime du Travail. Paris; 1909. The Social Value of the Gospel. St. Louis; 1911.
Hobson: Work and Wealth, a Human Valuation. Macmillan; 1914.
West: The Inheritance Tax. New York; 1908.
Seligman: Progressive Taxation. Princeton; 1908. The Income Tax. New York; 1913.
Bouquillon:De Virtutibus Theologicis. Brugis; 1890.
Also, the works of Taussig, Devas, Hobson, Antoine, Pesch, Carver, Vermeersch, Nearing, and King which are cited in connection with the introductory chapter.
SECTION IVTHE MORAL ASPECT OF WAGES
"It may be that we are not merely chasing a will-o'-the-wisp when we are hunting for a reasonable wage, but we are at any rate seeking the unattainable."
Thus wrote Professor Frank Haight Dixon in a paper read at the twenty-seventh annual meeting of the American Economic Association, December, 1914. Whether he reflected the opinion of the majority of the economists, he at least gave expression to a thought that has frequently suggested itself to every one who has gone into the wage question free from prejudices and preconceived theories. One of the most palpable indications of the difficulty to which Professor Dixon refers is the number of doctrines concerning wage justice that have been laboriously built up during the Christian era, and that have failed to approve themselves to the majority of students and thinkers. In the present chapter the attempt is made to set forth some of the most important of these doctrines, and to show wherein they are defective. They can all be grouped under the following heads: The Prevailing-Rate Theory; Exchange-Equivalence Theories; and the Productivity Theories.
This is not so much a systematic doctrine as a rule of expediency devised to meet concrete situations in the absenceof any better guiding principle. Both its basis and its nature are well exemplified in the following extract from the "Report of the Board of Arbitration in the Matter of the Controversy Between the Eastern Railroads and the Brotherhood of Locomotive Engineers:"[213]"Possibly there should be some theoretical relation for a given branch of industry between the amount of the income that should go to labour and the amount that should go to capital; and if this question were decided, a scale of wages might be devised for the different classes of employés which would determine the amount rightly absorbed by labour.... Thus far, however, political economy is unable to furnish such a principle as that suggested. There is no generally accepted theory of the division between capital and labour....
"What, then, is the basis upon which a judgment may be passed as to whether the existing wage scale of the engineers in the Eastern District is fair and reasonable? It seems to the Board that the only practicable basis is to compare the rates and earnings of engineers in the Eastern District with those of engineers in the Western and Southern Districts, and with those of other classes of railway employés."
Six of the seven men composing this board of arbitration subscribed to this statement. Of the six one is the president of a great state university, another is a successful and large-minded merchant, the third is a great building contractor, the fourth is a distinguished lawyer, the fifth is a prominent magazine editor, and the sixth is a railway president. The dissenting member represented the employés. Since the majority could not find in any generally accepted theory a principle to determine the proper division of the product between capital and labour, they were perhaps justified in falling back upon the practical rule that they adopted.
From the viewpoint of justice, however, this rule or standard is utterly inadequate. It is susceptible of two interpretations. "Wages prevailing elsewhere," may mean either the highest rates or those most frequently occurring. According to the latter understanding, only those wages which were below the majority rates should be raised, while all those above that level ought to be lowered. In almost all cases this would mean a reduction of the highest wages, as these are usually paid only to a minority of the workers of any grade. The adoption of the highest existing rates as a standard would involve no positive losses, but it would set a rigid limit to all possible gains in the future. According to either interpretation of the prevailing rate, the increases in wages which a powerful labour union seeks to obtain are unjust until they have been established as the prevailing rates. Thus, the attorney for the street railways of Chicago dissented from the increases in wages awarded to the employés by the majority of the board of arbitration in the summer of 1915 because, "these men are already paid not only a fair wage but a liberal wage, when the wages in the same employment and the living conditions in other large cities are taken into consideration, or when comparison is made of these men's annual earnings with the earnings in any comparable line of work in the city of Chicago."[214]In other words, the dominant thing is always the right thing. Justice is determined by the preponderance of economic force. Now, a rule such as this, which condemns improvement until improvement has somehow become general, which puts a premium upon physical and intellectual strength, and which disregards entirely the moral claims of human needs, efforts, and sacrifices, is obviously not an adequate measure of either reason or justice. And we may welldoubt that it would be formally accepted as such by any competent and disinterested student of industrial relations.
According to these theories, the determining factor of wage justice is to be found in the wage contract. The basic idea is the idea of equality, inasmuch as equality is the fundamental element in the concept of justice. The principle of justice requires that equality should be maintained between what is owed to a person and what is returned to him, between the kinds of treatment accorded to different persons in the same circumstances. Similarly it requires that equality should obtain between the things that are exchanged in onerous contracts. An onerous contract is one in which both parties undergo some privation, and neither intends to confer a gratuity upon the other. Each exchanger desires to obtain the full equivalent of the thing that he transfers. Since each is equal in personal dignity an intrinsic worth to the other, each has a strict right to this full equivalent. Owing to the essential moral equality of all men, no man has a right to make of another a mere instrument to his own interests through physical force or through an onerous contract. Men have equal rights not only to subsist upon the earth, but to receive benefits from the exchange of goods.
The agreement between employer and employé is an onerous contract; hence it ought to be made in such terms that the things exchanged will be equal, that the remuneration will be equal to the labour. How can this equivalence be determined and ascertained? Not by a direct comparison of the two objects, work and pay, for their differences render them obviously incommensurable. Some third term, or standard, of comparison is requiredin which both objects can find expression. One such standard is individual net advantage. Inasmuch as the aim of the labour contract is reciprocal gain, it is natural to infer that the gains ought to be equal for the two parties. Net gain is ascertained by deducting in each case the utility transferred from the utility received; in other words, by deducting the privation from the gross return. The good received by the employer when diminished by or weighed against the amount that he pays in wages should be equal to the good received by the labourer when diminished by or weighed against the inconvenience that he undergoes through the expenditure of his time and energy. Hence the contract should bring to employer and employé equal amounts of net advantage or satisfaction.
Plausible as this rule may appear, it is impracticable, inequitable, and unjust. In the vast majority of labour contracts it is impossible to know whether both parties obtain the same quantity of net advantage. The gains of the employer can, indeed, be frequently measured in terms of money, being the difference between the wages paid to and the specific product turned out by the labourer. In the case of the labourer no such process of deduction is possible; for advantage and expenditure are incommensurable. We cannot subtract the labourer's privation, that is, his expenditure of time and energy, from his gross advantage, that is, his wages. How can we know or measure the net benefit obtained by a man who shovels sand ten hours for a wage of two dollars? How can we deduct his pain-cost from or weigh it against his compensation?
So far as the two sets of advantages are comparable at all, those of the employé would seem to be always greater than those of the employer. A wage of seventy-five cents a day enables the labourer to satisfy the most important wants of life. Weighed against this gross advantage, his pain-cost of toil is relatively insignificant. His net advantage is the greatest that a man can enjoy, the continuationof his existence. The net advantage received by the employer from such a wage contract is but a few cents, the equivalent of a cigar or two. Even if the wage be raised to the highest level yet reached by any wage earner, the net advantage to the labourer, namely, his livelihood, will be greater than the net advantage to the employer from that single contract. Moreover, the sum total of an employer's gains from all his labour contracts is less quantitatively than the sum total of the gains obtained by all his employés. The latter gains provide for many livelihoods, the former for only one. Again, no general rate of wages could be devised which would enable all the members of a labour group to gain equally. Differences in health, strength, and intelligence would cause differences in the pain-cost involved in a given amount of labour; while differences in desires, standards of living, and skill in spending would bring about differences in the satisfactions derived from the same compensation. Finally, various employers would obtain various money gains from the same wage outlay, and various advantages from the same money gains. Hence if the rule of equality of net advantages were practicable it would be inequitable.
It is also fundamentally unjust because it ignores the moral claims of needs, efforts, and sacrifices as regards the labourer. As we have seen in the chapter on profits in competitive conditions, and as we shall have occasion to recognise again in a later chapter, no canon or scheme of distributive justice is acceptable that does not give adequate consideration to these fundamental attributes of human personality.
Another form of the exchange equivalence theory would disregard the problem ofequalityof gains, and assume that justice is realised whenever the contract is free from force or fraud. In such circumstances both parties gainsomething, and presumably are satisfied; otherwise, they would not enter the contract. Probably the majority of employers regard this rule as the only available measure of practicable justice. The majority of economists likewise subscribed to it during the first half of the nineteenth century. In the words of Henry Sidgwick, "the teaching of the political economists pointed to the conclusion that a free exchange, without fraud or coercion, is also a fair exchange."[215]Apparently the economists based this teaching on the assumption that competition was free and general among both labourers and employers. In other words, the rule as understood by them was probably identical with the rule of the market rate, which we shall examine presently. It is not at all likely that the economists here referred to would have given their moral approval to those "free" contracts in which the employer pays starvation wages because he takes advantage of the ignorance of the labourer, or because he exercises the power of monopoly.
No matter by whom it is or has been held, the rule of free contract is unjust. In the first place, many labour contracts are not free in any genuine sense. When a labourer is compelled by dire necessity to accept a wage that is insufficient for a decent livelihood, his consent to the contract is free only in a limited and relative way. It is what the moralists call "voluntarium imperfectum." It is vitiated to a substantial extent by the element of fear, by the apprehension of a cruelly evil alternative. The labourer does not agree to this wage because he prefers it to any other, but merely because he prefers it to unemployment, hunger, and starvation. The agreement to which he submits in these circumstances is no more free than the contract by which the helpless wayfarer gives up his purse to escape the pistol of the robber. While thelatter action is free in the sense that it is chosen in preference to a violent death, it does not mean that the wayfarer gives, or intends to give, the robber the right of ownership in the purse. Neither should the labourer who from fear of a worse evil enters a contract to work for starvation wages, be regarded as transferring to the employer the full moral right to the services which he agrees to render. Like the wayfarer, he merely submits to superior force. The fact that the force imposed upon him is economic instead of physical does not affect the morality of the transaction.
To put the matter in another way, the equality which justice requires is wanting in an oppressive labour contract because of the inequality existing between the contracting parties. In the words of Professor Ely: "Free contract supposes equals behind the contract in order that it may produce equality."[216]
Again, the rule of free contract is unjust because it takes no account of the moral claims of needs. A man whose only source of livelihood is his labour does wrong if he accepts a starvation wage willingly. Such a contract, however free, is not according to justice because it disregards the requirements of reasonable life. No man has a right to do this, any more than he has a right to perpetrate self mutilation or suicide.
A third method of interpreting exchange equivalence is based upon the concept of value. Labour and compensation are thought to be equal when the value of one is equal to the value of the other. Then the contract is just and the compensation is just. The only objection to these propositions is that they are mere truisms. What does value mean, and how is it to be determined? If it is to receive an ethical signification; if the value of labour isto be understood as denoting not merely the value that labour will command in a market, but the value that labour ought to have,—the statement that wages should equal the value of labour becomes merely an identical proposition. All that it tells us is that wages ought to be what they ought to be.
In its simplest economic sense value denotes purchasing power, or importance in exchange. As such, it may be either individual or social; that is, it may mean the exchange importance attributed to a commodity by an individual, or that attributed by a social group. In a competitive society social value is formed through the higgling of the market, and is expressed in market price.
Now individual value is utterly impracticable as a measure of exchange equivalence in the wage contract. Since the value attributed to labour by the employer differs in the great majority of instances from that estimated by the labourer himself, it is impossible to determine which is the true value, and the proper measure of just wages.
The doctrine that the social value or market price of labour is also the ethical value or just price, is sometimes called the classical theory, inasmuch as it was held, at least implicitly, by the majority of the early economists of both France and England.[217]Under competitive conditions, said the Physiocrats, the price of labour as of all other things corresponds to the cost of production; that is, to the cost of subsistence for the labourer and his family. This is the natural law of wages, and being natural it is also just. Adam Smith likewise declared that competitive wages were natural wages, but he refrained from the explicit assertion that they were just wages. Nevertheless his abiding and oft-expressed faith in the theory that men's powers were substantially equal, and in the social beneficence of free competition, implied that conclusion. Although the great majority of his followers denied thateconomics had moral aspects, and sometimes asserted that there was no such thing as just or unjust wages, their teaching tended to convey the thought that competitively fixed wages were more or less in accordance with justice. As noted above, their belief in the efficacy of competition led them to the inference that a free contract is also a fair contract. By a free contract they meant for the most part one that is made in the open market, that is governed by the forces of supply and demand, and that, consequently, expresses the social economic value of the things exchanged.
All the objections that have been brought against the rule of the prevailing rate apply even more strongly to the doctrine of the market rate. The former takes as a standard the scale of wages most frequently paid in the market, while the latter approves any scale that obtains in any group of labourers or section of the market. Both accept as the ultimate determinant of wage justice the preponderance of economic force. Neither gives any consideration to the moral claims of needs, efforts, or sacrifices. Unless we are to identify justice with power, might with right, we must regard these objections as irrefutable, and the market value doctrine as untenable.
Another exchange-equivalence theory which turns upon the concept of value is that found in the pages of the mediæval canonists and theologians. But it interprets value in a different sense from that which we have just considered. As the measure of exchange equivalence the mediæval theory takes objective value, or true value. However, the proponents of this view did not formally apply it to wage contracts, nor did they discuss systematically the question of just wages. They were not called upon to do this; for they were not confronted by any considerable class of wage earners. In the country the numberof persons who got their living exclusively as employés was extremely small, while in the towns the working class was composed of independent producers who sold their wares instead of their labour.[218]The question of fair compensation for the town workers was, therefore, the question of a fair price for their products. The latter question was discussed by the mediæval writers formally, and in great detail. Things exchanged should have equal values, and commodities should always sell for the equivalent of their values. By what rule was equality to be measured and value determined? Not by the subjective appreciations of the exchangers, for these would sometimes sanction the most flagrant extortion. Were no other help available, the starving man would give all he possessed for a loaf of bread. The unscrupulous speculator could monopolise the supply of foodstuffs, and give them an exorbitantly high value which purchasers would accept and pay for rather than go hungry. Hence we find the mediæval writers seeking a standard ofobjectivevalue which should attach to the commodity itself, not to the varying opinions of buyers and sellers.
In the thirteenth century Albertus Magnus[219]and Thomas Aquinas[220]declared that the proper standard was to be found in labour. A house is worth as many shoes as the labour embodied in the latter is contained in the labour embodied in the former. It is worthy of note that the diagram which Albertus Magnus presents to illustrate this formula of value and exchange had been used centuries before by Aristotle. It is likewise noteworthy that this conception of ethical value bears a striking resemblance to the theory of economic value upheld by Marxian Socialists. However, neither Aristotle nor the Schoolmen asserted that all kinds of labour had equal value.
Now this mediæval labour-measure of value could be readily applied only to cases of barter, and even then only when the value of different kinds of labour had already been determined by some other standard. Accordingly we find the mediæval writers expounding and defending a more general interpretation of objective or true value.
This was the concept of normal value; that is, the average or medium amount of utility attributed to goods in the average conditions of life and exchange. On the one hand, it avoided the excesses and the arbitrariness of individual estimates; on the other hand, it did not attribute to value the characters of immutability and rigidity. Contrary to the assumptions of some modern writers, the Schoolmen never said that value was something as fixedly inherent in goods as physical and chemical qualities. When they spoke of "intrinsic" value, they had in mind merely the constant capacity of certain commodities to satisfy human wants. Even to-day bread has always the intrinsic potency of alleviating hunger, regardless of all the fluctuations of human appraisement. The objectivity that the mediæval writers ascribed to value was relative. It assumed normal conditions as against exceptional conditions. To say that value was objective merely meant that it was not wholly determined by the interplay of supply and demand, but was based upon the stable and universally recognised use-qualities of commodities in a society where desires, needs, and tastes were simple and fairly constant from one generation to another.
How or where was this relatively objective value of goods to find concrete expression? In the "communis aestimatio," or social estimate, declared the canonists. Objective value and just price would be ascertained practically through the judgment of upright and competent men, or preferably through legally fixed prices. But neither the social estimate nor the ordinances of lawmakerswere authorised to determine values and prices arbitrarily. They were obliged to take into account certain objective factors. In the thirteenth and fourteenth centuries, the factors universally recognised as determinative were the utility or use-qualities of goods, but especially their cost of production. Later on, in the sixteenth and seventeenth centuries, risk and scarcity were given considerable prominence as value determinants. Now cost of production in the Middle Ages was mainly labour cost; hence the standard of value was chiefly a labour standard. Moreover, this labour doctrine of true value and equality in exchanges was strongly reinforced by another mediæval principle, according to which labour was the supreme if not the only just title to rewards.
How was labour cost to be measured, and the different kinds of labour evaluated? By the necessary and customary expenditures of the class to which the labourer belonged. Mediæval society was composed of a few definite, easily recognised, and relatively fixed orders or grades, each of which had its own function in the social hierarchy, its own standard of living, and its moral right to a livelihood in accordance with that standard. Like the members of the other orders, the labourers were conceived as entitled to live in conformity with their customary class-requirements. From this it followed that the needs of the labourer became the main determinant of the cost of production, and of the value and just price of goods. Inasmuch as the standards of living of the various divisions of the workers were fixed by custom, and limited by the restricted possibilities of the time, they afforded a fairly definite measure of value and price,—much more definite than the standard of general utility. To Langenstein, vice chancellor of the University of Paris in the latter half of the fourteenth century, the matter seemed quite simple; for he declared that every one could determine for himselfthe just price of his wares by referring to the customary needs of his rank of life.[221]
Nevertheless, class needs are not and cannot be a standard of exchange-equivalence. They cannot become a criterion of equality, a common denominator, a third term of comparison, between labour and wages. When we say that a given amount of wages is equal to a given content of livelihood, we express a purely economic, positive, and mathematical relation: when we say that a given amount of labour is equal to a given content of livelihood, we are either talking nonsense or expressing a purely ethical relation; that is, declaring that this labourought toequal this livelihood. In other words, we are introducing a fourth term of comparison; namely, the moral worth or personal dignity of the labourer. Thus, we have not a single and common standard to measure both labour and wages, and to indicate a relation of equality between them. While class needs directly measure wages, they do not measure labour, either quantitatively, or qualitatively, or under any other aspect or category.
Aside from this purely theoretical defect, the canonist doctrine of wage justice was fairly satisfactory as applied to the conditions of the Middle Ages. It assured to the labourer of that day a certain rude comfort, and probably as large a proportion of the product of industry as was practically attainable. Nevertheless it is not a universally valid criterion of justice in the matter of wages; for it makes no provision for those labourers who deserve a wage in excess of the cost of living of their class; nor does it furnish a principle by which a whole class of workers can justify their advance to a higher standard of living. It is not sufficiently elastic and dynamic.
In spite of its fundamental impossibility, the concept of exchange-equivalence still haunts the minds of certain Catholic writers.[222]They still strive to get a formula to express equality between labour and remuneration. Perhaps the best known and least vulnerable of the attempts made along this line is that defended by Charles Antoine, S.J.[223]Justice, he declares, demands an objective equivalence between wages and labour; and objective equivalence is determined and measured by two factors. The remote factor is the cost of decent living for the labourer; the proximate factor is the economic value of his labour. The former describes theminimumto which the worker is entitled; the latter comprises perfect and adequate justice. In case of conflict between the two factors, the first is determinative of and morally superior to the second; that is to say, no matter how small the economic value of labour mayseemto be, it never can descend below the requisites of a decent livelihood.
Now, neither of these standards is in harmony with the principle of exchange-equivalence, nor capable of serving as a satisfactory criterion of wage justice. Father Antoine argues that labour is always the moral equivalent of a decent livelihood because the worker expends his energies, and gives out a part of his life in the service of his employer. Unless his wage enables the labourer to replace these energies and conserve his life, it is not the equivalent of the service. If the wage falls short of this standard the labourer gives more than he receives, and the contract is essentially unjust. In this conception of equivalence, energy expended, instead of cost of living, becomes the term of comparison and the common measure of labour and remuneration. Energy expended is, however,technically incapable of providing such a common standard; for it does not measure both related terms in the same way. The service rendered to the employer is theeffectrather than the equivalent of the energy expended; and the compensation is ameansto the replacement of this energy rather than its formal equivalent. Moreover, the formula does not even furnish an adequate rational basis for the claim to a decent minimum wage. A wage which is merely adequate to the replacement of expended energy and the maintenance of life, is really inadequate to a decent livelihood. Such compensation would cover only physical health and strength, leaving nothing for intellectual, spiritual, and moral needs. As Father Antoine himself admits and contends, the latter needs are among the elements of a decent livelihood, and a wage which does not make reasonable provision for them fails to comply with the minimum requirements of justice.
The second factor of "objective equivalence" is even more questionable than the first. To becompletelyjust, says Father Antoine, wages must be not merely adequate to a decent livelihood, but equivalent to the "economic value of the labour" ("la valeur économique du travail"). This "economic value" is determined objectively by the cost of production, the utility of the product, and the movement of supply and demand; subjectively, by the judgment of employers and employés. In case of conflict between these two measures of value, and in case of uncertainty concerning the objective measure, the decision of the subjective determinant must always prevail.
These statements are hopelessly ambiguous and confusing. If the objective measure of "economic value" is to be understood in a purely positive way, it merely means the wages that actually obtain in a competitive market. In the purely positive or economic sense, the utility of labour is measured by what it will command in the market, the movement of supply and demand is likewise reflectedin market wages, and the determining effect of cost of production is also seen in the share that the market awards to labour after the other factors of production have taken their portions of the product. In other words, the "economic value" of labour is simply its market value. This, however, is not Father Antoine's meaning; for he has already declared that the "economic value" of labour is never less than the equivalent of a decent livelihood, whereas we know that the market value often falls below that level. In his mind, therefore, "economic value" has an ethical signification. It indicates at least the requisites of decent living, and it embraces more than this in some cases. When? and how much more? Let us suppose a business so prosperous that it returns liberal profits to the employer and the prevailing rate of interest on the capital, and yet shows a surplus sufficient to give all the labourers ten dollars a day. Is "cost of production" to be interpreted here as allowing only the normal rate of profits and interest to the business man and the capitalist, leaving the residue to labour? Or is it to be understood as requiring that the surplus be divided among the three agents of production? In other words, is the "economic value" of labour in such cases to be determined by some ethical principle which tells beforehand how much the other agents than labour ought to receive? If so, what is this principle or formula?
None of these questions is satisfactorily answered in Father Antoine's pages. They are all to be solved by having recourse to the subjective determinant of "economic value"; namely, the judgment of employers and employés. Thus his proximate factor of justice in wages, his formula of complete as against minimum just wages, turns out to be something entirely subjective, and more or less arbitrary. It is in no sense a measure of the equivalence between work and pay.
Moreover, it is inadequate as a measure of justice.Should the majority of both employers and employés fix the "economic value" of the labour of carpenters at five dollars a day, there would be no certainty that this decision was correct, and that this figure represented just wages. Should they determine upon a rate of fifty dollars a day, we could not be sure that their decision was unjust. Undoubtedly the combined judgment of employers and employés will set a fairer wage than one fixed by either party alone, since it will be less one-sided; but there is no sufficient reason for concluding that it will be in all cases completely just. Undoubtedly employers and employés know what wages an industry can afford at prevailing prices, on the assumption that business ability and capital are to have a certain rate of return; but there is no certainty that the prevailing prices are fair, or that the assumed rates of profits and interest are fair. In a word, the device is too arbitrary.
To sum up the entire discussion of exchange-equivalence theories: Their underlying concept is fundamentally unsound and impracticable. All of them involve an attempt to compare two entities which are utterly incommensurate. There exists no third term, or standard, or objective fact, which will inform men whether any rate of wages is the equivalent of any quantity of labour.
The productivity concept of wage justice appears in a great variety of forms. The first of them that we shall consider is advocated mainly by the Socialists, and is usually referred to as the theory of the "right to the whole product of labour."[224]
We have seen that Adam Smith's belief in the normality and beneficence of free competition would have logically led him to the conclusion that competitive wages were just; and we know that this doctrine is implicit in his writings. On the other hand, his theory that all value is determined by labour would seem to involve the inference that all the value of the product belongs to the labourer. As a matter of fact, Smith restricted this conclusion to primitive and pre-capitalist societies. Apparently he, and his disciples in an even larger degree, was more interested in describing the supposed beneficence of competition than in justifying the distribution that resulted from the competitive process.
The early English Socialists were more consistent. In 1793 William Godwin, whom Anton Menger calls "the first scientific Socialist of modern times," laid down in substance the doctrine that the labourer has a right to the whole product.[225]In 1805 Charles Hall formulated and defended the doctrine with greater precision and consistency.[226]In 1824 the doctrine was stated more fundamentally, systematically, and completely by William Thompson.[227]He accepted the labour theory of value laid down by Adam Smith, and formally derived therefrom the ethical conclusion that the labourer has a right to the whole product. "Thompson and his followers are only original in so far as they consider rent and interest to beunjustdeductions, which violate the right of the labourer to the whole product of his labour."[228]He denounced the laws which empowered the land owner and the capitalist to appropriate value not created by them, and gave to thevalue thus appropriated the name, "surplus value." In the use of this term he anticipated Karl Marx by several years. His doctrines were adopted and defended by many other English Socialist writers, and were introduced into France by the followers of Saint-Simon. "From his works," says Menger, "the later Socialists, the Saint-Simonians, Proudhon, and above all, Marx and Rodbertus, have directly or indirectly drawn their opinions."[229]
Although Saint-Simon never accepted the doctrine of the labourer's right to the whole product, his disciples, particularly Enfantin and Bazard, taught it implicitly. In a just social state, they maintained, every one would be expected to labour according to his capacity, and would be rewarded according to his product.[230]
Perhaps the most theoretical and extreme statement of the theory that we are considering is found in the writings of P. J. Proudhon.[231]He maintained that the real value of products was determined by labour time, and that all kinds of labour should be regarded as equally effective in the value-creating process, and he advocated therefore equality of wages and salaries. For the realisation of this ideal he drew the outlines of a semi-anarchic social order, of which the main feature was gratuitous public credit. Neither his theories nor his proposals ever obtained any considerable number of adherents.
A milder and better reasoned form of the theory was set forth by Karl J. Rodbertus.[232]Professor Wagner calls him, "the first, the most original, and the boldest representative of scientific Socialism in Germany." Yet, as Menger points out, Rodbertus derived many of his doctrines from Proudhon and the Saint-Simonians. He admitted that in a capitalist society the value of commoditiesdoes not always correspond to the labour embodied in them, and that different kinds of labour are productive in different degrees. Therefore, he had recourse to the concept of a normal, or average, day's labour in any group, and would have the various members of the group remunerated with reference to this standard. This was to be brought about by a centralised organisation of industry in which the whole product would ultimately go to labour, and the share of the individual worker would be determined by his contribution of socially necessary labour.
Although Karl Marx adopted and formulated in his own terms the theory that value is determined by labour, he did not thence deduce the conclusion that labour has a right to the whole product.[233]Being a materialist, he consistently rejected conceptions of abstract justice or injustice, rights or wrongs. In opposition to the methods of his predecessors, he endeavoured to discover the historical and positive forces which determined the actual distribution, and to derive therefrom the laws that were necessarily preparing the way for a new social order. While he contended that rent receivers and interest receivers appropriated the surplus value created by labour, he refrained from stigmatising this process as morally wrong. It was merely a necessary element of the capitalist system. To call it unjust was in Marx' view to use language without meaning. As well might one speak of the injustice of a hurricane or an avalanche. Not the preaching of abstract justice, but the inevitable transformation of the capitalist into the collectivist organisation of industry, would enable labour to obtain its full product.
Nevertheless, it is probably true that a majority of the followers of Marx have drawn from his labour theory of value the inference that all the value of the product belongs by a moral right to the labourer. So deeply fixed in the human conscience is the conception of justice, andso general is the conviction of the labourer's right to his product, that most Socialists have not been able to maintain a position of consistent economic materialism. Indeed, Marx himself did not always succeed in evading the influence and the terminology of idealistic conceptions. He frequently thought and spoke of the Socialist régime as not only inevitable but as morally right, and of the capitalist system as morally wrong. Despite his rigid, materialistic theorising, his writings abound in passionate denunciation of existing industrial evils, and in many sorts of "unscientific" ethical judgments.[234]
In so far as the right to the whole product of labour has been based upon the labour theory of value, it may be summarily dismissed from consideration. The value of products is neither created nor adequately measured by labour; it is determined by utility and scarcity. Labour does, indeed, affect value, inasmuch as it increases utility and diminishes scarcity, but it is not the only factor that influences these categories. Natural resources, the desires and the purchasing power of consumers determine value quite as fundamentally as does labour, and cause it to vary out of proportion to the labour expended upon a commodity.
To-day there are probably not many adherents of the right-to-the-whole-product doctrine who attempt to base it upon any theory of value. The majority appeal to the simple and obvious fact that the labourers, together with the active directors of industry, are the only human beings who expend energy in the productive process. The only labour that the capitalist and the landowner perform in return for the interest and rent that they respectively receive, consists in choosing the particular goods in which their money is to be invested. As capitalist and landowner, they do not participate in the turning out of products. They are owners but not operators of the factorsof production. In the sense, therefore, of active agents the labourers and the business men are the only producers. Whether land and capital should be calledproductive, whether the product should be regarded asproducedby land and capital as well as by labour and undertaking activity, is mostly a matter of terminology. Inasmuch as they are instrumental in bringing forth the product, land and capital may properly be designated as productive, but not in the same sense as labour and business energy. The former are passive factors and instrumental causes of the product, while the latter are active factors and original causes. Moreover, the former are non-rational entities, while the latter are attributes of human beings.
As we have seen in former chapters, it is impossible to prove that mere ownership of a productive thing, such as a cow, a piece of land, or a machine, necessarily creates a right to either the concrete or the conventional product. The formula, "res fructificat domino," is not a self evident proposition. Nor are there any premises available from which the formula can be logically and necessarily deduced. On the other hand, we cannot prove conclusively that ownership of productive property doesnotgive a right to the product. Whence it follows that the owners of land and capital have at least a presumptive claim to take rent and interest from their possessions. Moreover, those owners of capital who would not have saved money without the hope of interest have a just claim thereto on account of their sacrifices in saving.
Would the State be justified in abolishing rent and interest, and thus enabling labour to obtain the whole product? Conceivably this result might be brought about under the present system of private ownership, or through the substitution of collectivism. Were the change made by the former method land and capital would no longer be sought or have value on account of their annual revenues, but only as receptacles of saving. They would bedesired solely as means of accumulating stores of goods which might be exchanged for articles of consumption some time in the future. While we cannot estimate even approximately the decline that would thus occur in the value of land and capital, we may safely assert that it would be considerable. Unless the proprietors received adequate compensation for this loss, they would be compelled to suffer obvious and grave injustice. Any attempt, however, to carry out such a scheme, either with or without compensation, would inevitably fail. Rent might be terminated through the Single Tax, but interest could not be abolished by any mere legal prohibition. Nor does Socialism afford a way out; for, as we have seen in a former chapter, it is an impracticable system. Consequently the theory of the right to the whole product of labour is confronted by the final objection that its realisation would involve greater evils and injustices than those which it seeks to abolish.
Finally, the theory is radically incomplete. It professes to describe the requirements of justice as between the landowners and capitalists on the one side, and the wage earners on the other; but it provides no rule for determining distributive justice as between different classes of labour. In none of its forms does it provide any comprehensive rule or principle to ascertain the difference between the products of different labourers, and to decide how the product belonging to any group of men as a whole should be divided among the individual members. Does the locomotive engineer produce more than the section hand, the bookkeeper more than the salesman, the ditch digger more than the teamster? These and countless similar questions are, from the nature of the productive process, unanswerable. Even if it were ethically acceptable, the doctrine of the right to the whole product is hopelessly inadequate.
As intimated above, the notion that if the labourer receives compensation according to his product he receivesjust compensation, is one of the most prevalent and fundamental concepts in the controversy about wage justice. Hence we find it in certain theories which reject the doctrine of the right to the whole product. According to these theories, not only the labourer but all the agents of production should be rewarded in proportion to their productive contributions. Instead of the whole product, the worker ought to receive that portion of it which corresponds to his specific productivity, that is, that portion of the product which represents his productive influence as compared with the productive efficacy of land, capital, and business energy.
One of the theories referred to in the last paragraph is that which has been elaborated in great detail and with great ingenuity by Professor John Bates Clark. As stated by himself in the opening sentence of the preface to his "Distribution of Wealth," its main tenet is, "that the distribution of the income of society is controlled by a natural law, and that this law, if it worked without friction, would give to every agent of production the amount of wealth which that agent creates." In a régime of perfect competition, therefore, the labourer would get, not the whole product of industry, but the whole product due to his own exertions.
It is impossible, and indeed unnecessary, to enter upon an extended examination of this contention. It will be sufficient to state in a summary way the most obvious and cogent objections. Without making any examination of Professor Clark's theory, we should expect to find it unconvincing. For the productive process is by analogy an organic process, in which every factor requires the co-operation of every other factor in order to turn out even the smallest portion of the product. Each factor is in its own order the cause of the whole product. Consequentlyno physical portion of the product can be set aside and designated as wholly due to any one factor. Can we not, however, distinguish theproportionate productive influenceexerted by each factor, and the proportion of the product which represents such productive influence? This is the question to which Professor Clark addresses himself with much ingenuity, subtlety, and labour, and to which he returns an affirmative answer.[235]
He contends that the amount of product added by the presence of the least productive labourer in a group or establishment describes the productivity of that and every other labourer for whom the man in question can be substituted. Nevertheless this marginal labourer had the use ofsomecapital, no matter how little or how poor; consequently the increment of product which follows his activity is partly due to capital. It represents something other than his own productive power. If his wage equals the value of this increment of product, he is receiving something more than his specific product.
In the second place, Professor Clark maintains that the difference between what a labourer produces when he uses the whole of a certain supply of capital and what he produces when he has shared that capital with another labourer, represents the specific productivity of the relinquished capital. Let us assume that in a given case the difference is ten units of product. When the first man had the whole capital to himself, the product was one hundred units; when he shares the use of it with another, the total product is one hundred and eighty units. As the two men are assumed to be equally productive, each has to his credit ninety units of product. Working with half the capital, the first man finds that the resulting product is ten units less than when he was using the whole capital. Hence these ten units represent the portion that the relinquished capital contributed to the product; and if theproductivity of half the capital is ten units, that of the whole capital must be twenty units. Nevertheless, the ten units by which the product was enlarged when the man had the whole capital, did not come into being without his co-operation; hence they cannot be entirely attributed to the one-half share of the capital. In other words, the productivity of the relinquished capital seems to be less than ten units. It also seems to be more than ten units; for we may assume that if each man were to use one-half the capital independently of the other, the resulting total product would be less than one hundred and eighty units, or less than ninety units for each. Consequently the difference between the product resulting from the first man's use of the whole capital and that resulting from his use of half the capital would be more than ten units; and this difference is specifically attributable to half the capital. Who can say which of these calculations is correct, or whether either of them is correct?
The method of ascertaining specific productivity which has been described in the last paragraph is thought by Professor Clark to receive confirmation from the fact that it leads to the same conclusion as the first and more direct method; namely, that the specific productivity of labour is expressed in the product of the marginal labourer. As a matter of fact, this conclusion is yielded by both methods; for the specific productivity of the first labourer appeared as eighty units, which was also the specific productivity of the second labourer, who was the marginal labourer. As we saw in the second last paragraph, however, the marginal product is not due to labour alone; hence the verification provided by the second method is in reality a refutation.
Apparently the majority of economists do not accept Professor Clark's theory; for of the nine who discussed certain applications of it at the nineteenth annual meeting of the American Economic Association only one approvedit, three were non-committal, and five expressed their dissent.[236]
Even if the theory were true its hypothetical character would deprive it of any practical value. It assumes a régime of perfect competition, but this assumption is so seldom realised that no rule based upon it can throw much light on the question of the productivity of present day labourers.
Even if it were exactly applicable to existing conditions, that is, if labourers were actually getting their specific products, the theory would not provide us with a doctrine of just wages. As we have seen in former chapters, productivity is neither the only nor the highest canon of justice, whether as regards the comparative claims of capital and labour, or as regards the claims of different labourers. The contention that capital ought to command interest because it aids in bringing forth the product, is neither self evident nor demonstrable by any process of reasoning. Even if we should concede that the capitalist has a right to interest by virtue of the productivity of his capital, we should not therefore conclude that this right is as cogent as the corresponding right of the labourer. In the former case the productive agency is not human nor active, but only material and passive; and the recipient of the product performs no labour as capitalist, but is left free to get a livelihood by personal activity. The productivity of labour differs in all these respects, and the difference is ethically sufficient to justify the claim that the labourer may sometimes have a right to a part of the specific product of capital. To sum up the matter in the words of Professor Wicker: "To have proved that the capitalist gets in interest what his capital produces is not to have proved that the capitalist gets what he has earned. To have proved that the landlord gets what his land produces is not to have proved that the landlord earns his distributiveshare.... Economics is not ethics; explanation is not justification."[237]
Indeed, Professor Clark nowhere explicitly asserts that productivity is an adequate rule of justice. "We might raise the question," he says, "whether a rule that gives to a man his product is in the highest sense just."[238]Scattered throughout his volume, however, are many expressions which might fairly be interpreted as answering this question in the affirmative. The statements that distribution according to product is a "natural law," and that if the labourer does not get his full specific product he is "despoiled," suggest if they do not imply that wages according to productivity is not merely the economic but the ethical norm. At any rate, the assumption of productivity as the adequate canon of wage justice, is very widely adopted, and is frequently brought forward to give sanction to insufficient rates of remuneration. Hence it has been thought well to show that the economic basis of the assumption, i.e., that the labourer gets what he produces, is unproved and unprovable.