'I can quite understand that,' I said. 'May I, in this connection, ask how you deal with the right of inheritance in general, and of inheritance of real property in particular? For here, in property in houses there seems to me to be a rock upon which your general principles as to property in land might be wrecked. It is one of the fundamental principles of your organisation that no one can have a right of property in land; but houses--if I have been rightly informed--are private property. How do you reconcile these things?'
'Everyone,' answered David, 'can dispose freely of his own property, at death as in life. The right of bequest is free and unqualified; but it must be noted that between husband and wife there is an absolute community of goods, whence it follows that only the survivor can definitively dispose of the common property. The right of property in the house, however, cannot be divided; and it is not allowable to build more than one dwelling-house upon a house-and-garden plot. Finally, the dwelling-house must be used by the owner, and cannot be let to another. If the house-plot be used for any other purpose than as the site of the owner's home, the breach of the law involves no punishment, and no force will be brought to bear upon the owner, but the owner at once loses his exclusive right as usufructuary of the plot. The plot becomes at once,ipso facto, ground to which no one has a special right, and to which everyone has an equal claim. For, according to our views, there is no right of property in land, and therefore not in the building-site of the house; and the right to appropriate such ground to one's own house is simply a right of usufruct for a special purpose. Just as, for example, the traveller by rail has a claim to the seat which he occupies, but only for the purpose of sitting there, and not for the purpose of unpacking his goods or of letting it to another, so I have the right to reserve for myself, merely for occupation, the spot of ground upon which I wish to fix my home; and no one has any more right to settle upon my building-site than he has to occupy my cushion in the railway, even if it should be possible to crowd two persons into the one seat. But neither am I at liberty to make room for a friend upon my seat; for my fellow-travellers are not likely to approve of the inconvenience thereby occasioned, and they may protest that the legs and elbows of the sharer of my seat crowd them too much, and that the air-space calculated for one pair of lungs is by my arbitrary action shared by two pair. Just so my house-neighbours are not likely to approve of having my walls and roof too near to theirs, and will resent the arbitrary act by which I fill the air-space of the town with more persons than the commonwealth allows.
'Now, in the exercise of my right of usufruct of a definite plot of ground, I have inseparably connected with this plot something over which I have not merely the right of usufruct, but also the right of property--namely, a house. Consequently my right of usufruct passes over to the person to whom--whether gratuitously or not--I transfer my right of property in the house. Therefore I can sell, or bequeath, or give away my house without being prevented from doing so by the fact that I have no right of property in the building-site.
'But if, through any circumstances independent of my labour or of the building cost, the site on which my house stands acquires a value above that of other building-sites, this increased value belongs not to me, but to those who have given rise to it, and that is, without exception, the community. Let us suppose that building-ground in Eden Vale has acquired such an exceptional value, while there are still sites available throughout Freeland for milliards of persons: this local increase of value can be attributed merely to the fact that the excellent streets, public grounds, splendid monuments, theatres, libraries--in short, the public institutions of Eden Vale--have made living in this town more desirable than in any other place in the country. But these public institutions are not my work--they are the work of the community; and I have no right to put into my pocket the increased ground-value derived from the common enjoyment of these institutions. All that I myself have expended upon the house and garden belongs to me, and on a change of ownership must be either made good to me or put to my credit; but the ground-price--and, indeed, the whole of it--belongs to the commonwealth; for building-sites which offer no advantages over any others are, in view of the still existing surplus of unoccupied ground, valueless. The commonwealth, therefore, has, strictly speaking, a right at any time to claim this value or an equivalent; and if the question were an important one, it would be advisable actually to exercise this right--that is, from time to time, or at least on a change of ownership, to assess the value of the sites of houses and gardens, and to appropriate the surplus of the sale-price to the public treasury.
'In reality, in view of our other arrangements, this question of the value of building-sites in Freeland is of no importance whatever. It must not be forgotten that our private houses are not lodging-houses, but merely family dwellings. As I have already said, every contract to let renders absolutely void the occupier's right of exclusive usufruct of the house-site. He who lets his house has, by the very act of doing so, made his plot masterless. A secret letting is prevented by our general constitution, and particularly by the central bank, which we will visit next. Thus the increased value which may be acquired by a building-plot cannot become a question of importance, and we are able to refrain altogether from interfering with free trade in houses. We buy, sell, bequeath, and give away our dwelling-houses, and no one troubles himself about it. I may remark, in passing, that up to the present there has been no noticeable increase in the prices of sites. A man pays for his house what the house itself is held to be worth, the trifling differences being due to the greater or less taste exhibited in the structure, the greater or less beauty of the garden, &c., &c. But that the Eden Vale plots, for example, as such, have a special value cannot be asserted, as there are still many thousands freely available to anyone, but which are not taken. The conveniences of life are pretty evenly distributed throughout Freeland, and no town can boast of attractions which are not balanced by attractions of other kinds in other towns. Eden Vale, for instance, possesses the most splendid buildings, and is distinguished by incomparable natural beauty; hence it is less adapted to industries, and has no agricultural colony in its neighbourhood. Dana City, on the other hand, which is specially suitable for industry, and is in the midst of agricultural land, is unattractive to many on account of its ceaseless and noisy business activity. And, in general, we Freelanders are not fond of large towns; we love to have woods and meadows as near us as possible, and those who are able to live in the country do it in preference to living in towns. Of course, there is not likely to be any lack of rural building-sites; hence there can never be any ground-price proper among us. If, however, building-ground should acquire a price, we are in any case protected by our way and manner of building and living from such prices as would give rise to any material derangement of our property relations. Whether a family residence has a higher or a lower value is, therefore, after all, only a question of subordinate interest, and it is not worth the trouble, in order to equalise the differences in value which arise, to bring into play an apparatus which, under the circumstances, might lead to chicanery.'
I agreed with him. Wishing, however, to understand this important matter in all its relations, I supposed a case in which the opportunity of gaining an extraordinarily high profit was connected with a certain definite locality, and asked what would happen then. 'Let us imagine that in a small valley surrounded by uninhabitable rocks or marshes, a mine of incalculable value is discovered, the exploitation of which would give twice or thrice as much profit as the average profit in Freeland at that time. Naturally everyone will labour at this mine until the influx of workers produces an equilibrium in the profits. If there were sufficient space round the mine for dwelling-houses, nothing would stand in the way of this equalisation of profits; but as, in the supposed case, the space is limited, only the first comers will be able to work at the mine; all later comers--unless they camp out--will be as effectually excluded from competing as if an insuperable barrier had been raised round the mine. The fortunate usufructuaries of the few building-sites will, therefore, be in the pleasant situation of permanently pocketing twice or thrice the average proceeds of labour--let us say, for example, £1,600 a year, whilst £600 is the average. Consequently their early occupation of the ground will be worth £1,000 a year to them, exactly the same as to a London house-owner the lucky circumstance that his ancestors set up their huts on that particular spot on the banks of the Thames is worth his £1,000 or more a year. That this is the rule and is the principal source of wealth, not only in London, but everywhere outside of Freeland, whilst in this country it would require an extraordinary concurrence of circumstances to produce similar phenomena, makes no difference in the fact itself that it can occur everywhere, and that, if you know of no means to prevent it, the ground-rent you have fortunately got rid of might revive among you. Nay, in this--I will admit extreme--case the Freeland institutions would prove themselves a hindrance to the national exploitation of such a highly profitable opportunity for labour, the most intense utilisation of which would evidently be to the general interest. If such a case occurred in Europe or America, the fortunate owners would surround the mines with large lodging-barracks, from which certainly they would without any trouble derive enormous profits, but which at the same time would make it possible to extract the rich treasures from the earth. Your Freeland house-right, on the contrary, would in such a case prevent the exploitation of the treasure of the earth, merely in order that an exceptional increase of the wealth of individuals should be avoided. And yet it is characteristic of your institutions as a whole to render labour more productive than is possible under an exploiting system of industry. A correct principle, however, must be correct under all circumstances.'
'That is also my view,' answered David; 'but in such cases even your Western law affords a means of help--namely, expropriation. Let it be assumed that we could by no means whatever make the neighbourhood of the mine accommodate a greater number of dwelling-houses; then, in the public interest, we would redeem the houses already existing at the mine, and in their place we would erect large lodging-houses after the pattern of our hotels. If that would not suffice to accommodate as many workers as were required in order to bring the profit of labour at the mine into equilibrium with the average profit of the country, we would proceed to the last resource and expropriate the mine for the benefit of the commonwealth. By no means would even such a very improbable contingency present any serious difficulties to the carrying out of our principles. For you will certainly admit that the undertaking of a really monopolist production by the commonwealth is not contrary to our principles. If you would deny it, you must go farther, and assert that in working the railways, the telegraphs, the post, nay, even in assuming the ultimate control of the community, there is to be found a violation of the principle of individual freedom.'
'You are only too right,' I answered, 'and I cannot defend myself from the charge of harbouring a doubt which would have been seen to be superfluous if I had only been unreservedly willing to admit that the people of Freeland, whatever might happen, would probably make the wisest and not the stupidest provision against such a contingency as I imagined. The ground of that inconceivable stubbornness with which we adherents of the old are apt to resist every new idea is, that we imagine difficulties, which exist only in our fancy, and most unnecessarily suppose that there is no other way of surmounting those imaginary difficulties than the stupidest imaginable. We then triumphantly believe we have reduced the new ideasad absurdum; whilst we should have done better to have been ashamed of our own absurdities.'
With this fierce self-accusation I will close my letter to-day; but not without telling you in confidence that in making it I was thinking less of myself than of--others.
----
Eden Vale: Aug. 6, ----
Yesterday, accompanied by the two English agents, we inspected the Freeland Central Bank. The comprehensive and--as a necessary consequence--exceedingly simple clearing system excited the highest admiration of the two experienced gentlemen. The remarkably small amount of cash required to adjust the accounts of the whole of the gigantic business transactions drew from Lord E---- the inquiry why Freeland retained gold as a measure of value. He thought that, as the Freelanders already made the value of a unit of labour-time the standard of calculation in their most important affairs, the simplest plan would be to universalise this method--that is, to declare the labour-hour to be the measure of value, the money-unit. This would, he thought, far better harmonise with the general social order of Freeland, in which labour is the source and basis of all value.
The director of the bank (Mr. Clark) replied: 'That is a view which has been repeatedly expressed by strangers; but it is based simply upon confounding themeasure of valuewith thesource of income. For labour alone is not the source of value, though most Socialists adopt this error of the so-called classical economists as the ground of their demands. If all value were derived from labour and from labour alone, then even among you in the old exploiting world everything would be in favour of the workers, for even there the workers have control over their working power. The misery among you is due to the fact that the workers have no control over the other things which are requisite for the creation of value, namely, the product of previous work--i.e.capital, and the forces and materials derived from nature. We in Freeland have guaranteed to labour the whole of what it assists to produce. But we do not base this right upon the erroneous proposition that labour is the sole source of the value of what it produces, but upon the proposition that the worker has the same claim to the use of those other factors requisite for the creation of value as he has to his working-power. But this is only by the way. Even if labour were the only source of and the only ingredient in value, it would still be in any case the worst conceivablemeasureof value; for it is of all things that possess value the one the value of which is most liable to variations. Its value rises with every advance in human dexterity and industry; that is, a labour-day or a labour hour is continuously being transformed into an increasing quantity of all imaginable other kinds of value. That the value of the product of labour differs as the labour-power is well or badly furnished with tools, well or badly applied, cannot be questioned, and never has been seriously questioned. Now, among us in Freelandalllabour-power is as well equipped and applied as possible, because the perfect and unlimited freedom of labour to apply itself at any time to whatever will then create the highest value brings about, if not an absolute, yet a relative equilibrium of values; but, in order that this may be brought about, there must exist an unchangeable and reliable standard by which the value of the things produced by labour can be measured. That the labour expended by us upon shoe goods and upon textile fabrics, upon cereals and turnery goods, possesses the same value is shown by the fact that these various kinds of wares produced in the same period of time possess the same value; but this fact can be shown, not by a comparison between the respective amounts of labour-time, but only by a comparison with something that has a constant value in itself. If we concluded that the things which required an equal time to produce were of equal value because they were produced in an equal time, we might soon find ourselves producing shoes which no one wanted, while we were suffering from a lack of textile fabrics; and we might see with unconcern the superfluity of turnery wares, the production of which was increasing, while perhaps all available hands were required in order to correct a disastrous lack of cereals. To make the labour-day the measure of value--if it were not, for other reasons, impossible--involves Communism, which, instead of leaving the adjustment of the relations between supply and demand to free commerce, fixes those relations by authority; doing this, of course, without asking anyone what he wishes to enjoy, or what he wishes to do, but authoritatively prescribing what everyone shall consume, and what he shall produce.
'But we in Freeland strive after what is the direct opposite of Communism--namely, absolute individual freedom. Consequently we, more imperatively than any other people, need a measure of value as accurate and reliable as possible--that is, one the exchange-power of which, with reference to all other things, is exposed to as little variation as possible. This best possible, most constant, standard the civilised world has hitherto found rightly in gold. There is no difference in value between two equal quantities of gold, whilst one labour-day may be very materially more valuable than another; and there is no means of ascertaining with certainty the difference in value of the two labour-days except by comparing them both with one and the same thing which possesses a really constant value. Yet this equality in value of equal quantities of gold is the least of the advantages possessed by gold over other measures of value. Two equal quantities of wheat are of nearly equal value. But the value of gold is exposed to lessvariationthan is the value of any other thing. Two equal quantities of wheat are of equal value at the same time; but to-morrow they may both be worth twice as much as to-day, or they may sink to half their present value; while gold can change its value but very little in a short time. If its exchange-relation to any commodity whatever alters suddenly and considerably, it can be at once and with certainty assumed that it is the value not of the gold, but of the other commodity, which has suddenly and considerably altered. And this is a necessary conclusion from that most unquestionable law of value according to which the price of everything is determined by supply and demand, if we connect with this law the equally unquestionable fact that the supply and demand of no other thing are exposed to so small a relative variation as are those of gold. This fact is not due to any mysterious quality in this metal, but to its peculiar durability, in consequence of which in the course of thousands of years there has been accumulated, and placed at the service of those who can demand it, a quantity of gold sufficient to make the greatest temporary variations in its production of no practical moment. Whilst a good or a bad wheat harvest makes an enormous difference in the supply of wheat for the time being, because the old stock of wheat is of very subordinate importance relatively to the results of the new harvest, the amount of gold in the world remains relatively unaltered by the variations, however great they may be, of even several years of gold-production, because the existing stock of gold is enormously greater than the greatest possible gold-production of any single year. If all the gold-mines in the world suddenly ceased to yield any gold, no material influence would be produced upon the quantity of available gold; whilst a single general failure in the cereal crop would at once and inevitably produce the most terrible corn-famine. This, then, is the reason why gold is the best possible, though by no means an absolutely perfect, measure of value. But labour-time would be the worst conceivable measure of value, for neither are two equal periods of labour necessarily of equal value, nor does labour-time in general possess an unalterable value, but its exchange-power in relation to all other things increases with every step forward in the methods of labour.'
We were all convinced, but Lord E---- could not refrain from remarking that the Freelanders did nevertheless estimate the value of many things in labour-equivalents. He at once received from my father the pertinent answer that, according to all they had yet heard, this happened only in cases in which an increase of payment had to run parallel with a rise in the value of labour. Salaries and maintenance-allowancesoughtto rise in proportion as the proceeds of labour and therewith the general consumption rose; and it was only when this relation had to be kept in view that the value of things could be estimated in labour-equivalents.
Mr. Clark now drew our attention to the comprehensive, transparent, and detailed publicity which marked all the pecuniary affairs of Freeland, in consequence of the entry in the bank books of all commercial and industrial relations. No one can deceive either himself or others as to his circumstances; and one of the most important social consequences of this is that no one has any desire to shine by extravagant spending. Extravagance is only too often prompted by a desire to make oneself appear in the eyes of the world richer than one really is; such an attempt in this country would only provoke a smile. And if anyone wished to spend in luxuries more than he earned, the bank would naturally refuse him credit for such a purpose; and without this credit the spendthrift would have to appeal to the liberality of his fellow-citizens before he could indulge in his extravagance. The amounts of all incomes and of all outgoings lie open to the day; all the world knows what everybody has and whence he gets it. And as everyone is free to engage in any branch of industry whatever, the difference of income can excite no one's envy.
But Lord E---- here asked whether the degree of authoritative arbitrariness inevitable in fixing salaries of different kinds--e.g.of officials--did not present some contradiction to the otherwise operative principle of unconditional freedom of choice of calling, and to the equilibrium in the proceeds of different kinds of labour which resulted from this freedom. 'When the profits of the woollen industry are higher than those of agriculture, fresh labour will be transferred to the former until an equilibrium has been established between the two profits; if a permanent excess of profit shows itself in one of these branches of production, it is evident under your institutions that this can be due solely to the fact that the labour in this more profitable industry is less agreeable, more exhausting, or demands a higher or rarer knowledge or skill. No one has the slightest ground to complain of injury; and so far the harmony produced by freedom is worthy of all admiration. But when it comes to appointments and salaries, this absolute freedom must cease. You, as the head of a department of the government, receive £1,400, your neighbour the hand-worker earns merely £600; how do you know that the latter does not feel that he is wronged thereby?'
'My lord,' said Mr. Clark, smiling, 'if you mean, how do I know whether my neighbour does not feel himself wrongedby naturebecause he is not able, like me, to earn £1,400 a year, I must answer that I can speak only from conjecture, and that I really possess no certain knowledge as to his feelings. But if you think that my neighbour, or anyone else in Freeland, could find in my higher salary an advantage conferred on me by an arbitrary exercise of authoritative power, or by the favour of the electors, or for any inadequate reason, I can certainly show that you are mistaken. For my salary is, in the last resort, as much the result of free competition as is the labour-profit of my neighbour. Whether I am the right man for my post is a question which is decided by the corporations by whom my election is made, and whose choice is controlled or superseded by no automatically working contrivance; with what salary my office must be endowed, in order that qualified men, or let us say men who are held to be qualified, may be obtained, this is regulated by exactly the same automatic laws as is the labour-profit of a weaver or an agriculturist. And this holds good of the salary of the youngest official up to that of the heads of the departments of the Freeland government. The fixing of the salaries in every case depends upon the free judgment of the presidents or of the electoral colleges; but these presidents or electoral colleges must fix the salaries at such sums as will at any time attract a sufficient number of qualified candidates. Of course, a pound more or less a year would make no difficulty--it is a recognised principle that the salaries should be high enough to attract rather a superfluity than a lack of candidates; but when the number of candidates is greater than a certain ratio, the salaries are reduced, whilst a threatened lack of candidates is met by an increase of salaries. I will add, that it is to be taken as a matter of course that in Freeland the unsuccessful candidates are not breadless aspirants. Success or failure is never therefore a question of a livelihood, but of the gratification of inclination and sometimes of vanity. A man gives up his office when more profitable or more agreeable occupation attracts him elsewhere. The public officials are not paid the same salaries in all the branches of the public service. Specially trying work, or work demanding special knowledge, obtains here higher profits, just as in the various industries. And whilst the labour-earnings of ordinary manual labour are the measure of the salaries of the lower officials, so do the salaries of the various association-managers exercise a regulative influence upon the salaries of the higher public officials. You, also, have often experienced that the attractions of positions connected with public activity have in no small degree brought down the salaries of government officials, professors, &c., below the level of the incomes of those who hold the chief posts in associations. As a rule, it is found that with a rise in the general level of intelligence there is arelative--by no means an absolute--sinking of the higher salaries. While the directors of several large associations receive as much as 5,000 hour-equivalents a year, the highest officials in the Freeland central government at the present time receive only 3,600 more, and that because our persistent assertion of the relative depreciation of the higher salaries is met by the parliaments with an equally persistent resistance, and the parliaments yield to our importunities only very slowly and very reluctantly. To be just, it should be added that the same game is repeated in the associations. The directors would often be satisfied with much lower salaries, for they often really do not know what to do with their incomes, which, in comparison with prices in Freeland, are in some cases exorbitant, and increase with every increase in the value of labour. Particularly during the last decade, since the value of the hour-equivalent has increased so much, proposals from above to reduce salaries have become a standing rule. I repeat, this reduction must be understood to be merely relative--that is, to refer merely to the number of hour-equivalents. The value of a labour-hour has quadrupled within the last twenty years; those of us, therefore--we public officials, for example--who receive twenty-eight per cent. fewer hour-equivalents than we did originally, still have incomes which, when reckoned in money, have been nearly tripled. As a rule, however, the associations will not hear of even such a reduction. Though their directors openly avow their willingness to accept lower salaries, the associations are afraid of offending some one or other of the competing societies which pay higher salaries; and as a few hundred pounds are not worth considering in view of the enormous sums which a great association annually turns over, the reduction of the salaries goes on but slowly. Nevertheless there is a gradual lessening of the difference between the maximum and the minimum earnings, plainly proving that even in this matter of salaries the law of supply and demand is in full operation.'
Lord E---- thanked him for this explanation. But now Sir B---- proposed a far weightier question. 'What struck me most,' said he, 'when I was examining the enormous operations of your central bank, and what I am not yet able to understand, is how it is possible, without arbitrary exercise of authority and communistic consequences, to accumulate the immense capital which you require, and yet neither pay nor reckon any interest. That interest is the necessary and just reward of the capitalist's self-denial I do not indeed believe; but I hold it to be the tribute which has to be paid to the saver for sparing the community, by his voluntary thrift, the necessity of making thrift compulsory. What I now wish to know is, what were your reasons for forbidding the payment of interest? Or are you in Freeland of opinion that it is unjust to give to the saver a share of the fruits of his saving?'
'We are not of that opinion,' answered the director. 'But first I must assure you that you have started from an erroneous assumption. Weforbidthe payment of interest as little as we "forbid" the undertaker's profit or the landlord's ground-rent. These three items of income do not exist here, simply because no one is under the necessity of paying them. If our workers needed an "undertaker" to organise and discipline them for highly productive activity, no power could prevent them from giving up to him what belonged to him--namely, the profit of the undertaking--and remaining satisfied themselves with a bare subsistence. Nothing in our constitution, and no one among us, would interfere with such an undertaker in the peaceable enjoyment of his share of the produce. If the land needed--'
'Pardon my interruption,' said Sir B----. '"If our workers needed an undertaker to organise and discipline them, no power could prevent them from giving up to him the whole of the produce"--these were your words. In the name of heaven, do not your workers need such a man? Do they need none over them to organise, discipline, guide, and overlook the process of production? And when I hear you so coolly and distinctly assert that such a man has a right to the produce, and that neither for God's sake nor in the name of justice need he leave to the worker more than a bare subsistence, I am compelled to ask myself whether you, an authority in Freeland, are pleased to jest, or whether what we have hitherto seen and heard here rests upon a mere delusion?'
'Forgive me for not having expressed myself more plainly,' answered the director to Sir B---- and to the rest of us who, like him, had shown our consternation at the apparent contradiction between the last words of our informant and the spirit of Freeland institutions. 'I said, "If our workers needed anundertaker": I beg you to lay emphasis upon the word "undertaker." A man or several men to arrange, organise, guide the work, they certainly need; but such a man is not an undertaker. The difference between our workers and others consists in the fact that the former allow themselves to be organised and disciplined by persons who are dependent upon them, instead of being their masters. The conductors of our associations are not the masters, but the officials--as well as shareholders--of the working fellowship, and have therefore as little right to the whole produce as their colleagues abroad. The latter are appointed and paid by the "owner" of what is produced; and in this country this owner is the whole body of workers as such. An undertaker in the sense of the old industrial system, on the other hand, is a something whose function consists in nothing but in being master of the process of production; he is by no means the actual organiser and manager, but simply the owner, who, as such, need not trouble himself about the process of production further than to condescend to pocket the profits. That the undertaker at the same time bears the risks attendant upon production has to be taken into account when we consider the individual undertaker, but not when we consider the institution as such, for we cannot speak of the risk of the body of undertakers as a whole, I called the undertaker, not a man, but a something, because in truth it need not be a man with flesh and blood. It may just as well be a scheme, a mere idea; if it does but appropriate the profits of production it admirably fulfils its duty as undertaker, for as such it is nothing more than the shibboleth of mastership. Let us not be misled by the fact that frequently--we will say, as a rule--the undertaker is at the same time the actual manager of the work of production; when he is, he unites two economic functions in one person, that of the--mental or physical--labour and that of the undertakership. Other functions can just as well be associated together in him: the undertaker can be also capitalist or landlord; nevertheless, the undertaker, as economic subject, has no other function than that of being master of other men's labour and of appropriating to himself the fruits of the process of production after subtracting the portions due to the other factors in production.
'And this master, whose function consists simply of an abstract mastership, is an inexorable necessity so long as the workers are servants who can be disciplined, not by their enlightened self-interest, but only by force. To throw the blame of this exclusively or only mainly upon "capital" was a fatal error, which for a long time prevented the clear perception of the real cause--the servile habits and opinions that had grown stronger and stronger during thousands of years of bondage. Capital is indispensable to a highly developed production, and the working masses of the outside world are mostly without capital; but they are without it only because they are powerless servants, and even when in exceptional cases they possess capital they do not know how to do anything with it without the aid of masters. Yet it is frequently the capital of the servants themselves by means of which--through the intervention of the savings-banks--the undertaker carries on the work of production; it none the less follows that he pockets the proceeds and leaves to the servants nothing but a bare subsistence over and above the interest. Or the servants club their savings together for the purpose of engaging in productive work on their own account; but as they are not able to conceive of discipline without servitude, cannot even understand how it is possible to work without a master who must be obeyed, because he can hire and discharge, pay and punish--in brief, because he is master; and as they would be unable to dispose of the produce, or to agree over the division of it, though this might be expected from them as possessors of the living labour-power,--they therefore set themselves in the character of a corporate capitalist as master over themselves in the character of workmen. In these productive associations, which the workers carry on with money they have saved by much self-denial or have involved themselves in worry and anxiety by borrowing, they remain as workers under a painful obligation to obey, and the slaves of wages; though certainly in their character of small capitalists they transform themselves into masters who have a right to command and to whom the proceeds of production belong--that is, into undertakers. The example of these productive associations shows, more plainly than anything else can, that it was nothing but the incapacity of the working masses to produce without masters that made the undertaker a necessity. We in Freeland have for the first time solved the problem of uniting ourselves for purposes of common production, of disciplining and organising ourselves, though the proceeds of production belonged to us in our character of workers and not of capitalists. And as the experiment succeeded, and when undertaken by intelligent men possessing some means must succeed, we have no further need of the undertaker.
'But undertakership is not forbidden in Freeland. No one would hinder you from opening a factory here and attempting to hire workers to carry it on for wages. But in the first place you would have to offer the workers at least as much as the average earnings of labour in Freeland; and in the second place it is questionable if you would find any who would place themselves under your orders. That, as a matter of fact, no such case has occurred for the past eighteen years--that even our greatest technical reformers, in possession of the most valuable inventions, have without exception preferred to act not as undertakers, but as organisers of free associations--this is due simply to the superiority of free over servile labour. It has been found that the same inventors are able to accomplish a great deal more with free workers who are stimulated by self-interest, than with wage-earners who, in spite of constant oversight, can only be induced to give a mechanical attention to their tasks. Moreover, the system of authoritative mastership was as repugnant to the feelings of the masters as to those of the men under them, and both parties found themselves uncomfortable in their unfamiliarrôles--as uncomfortable as formerly in therôlesof absolutely co-equal associates in production. So considerable was this mutual feeling of discomfort, and so evident was the inferiority of the servile form of organisation, that all such attempts were quickly given up, though no external obstacle of any kind had been placed in their way. Certainly it must not be overlooked that every undertaker who needs land for his business is in constant danger of having claims made by others upon the joint use of the land occupied by him, for, of course, we do not grant him a privilege in this respect; neither he nor anyone else in Freeland can exclude others from a co-enjoyment of the ground. Nevertheless, as we have plenty of space, it would have been long before the undertaker would have had to strike his sail on this account. That the few who in the early years of our history made such attempts quickly transformed themselves into directors of associations, was due to the fact that, in spite of any advantages which they might possess, they could not successfully compete with free labour. Three of these undertakers failed utterly; they could fulfil their obligations neither to their creditors nor to their workmen, and must have had to submit to the disgrace of bankruptcy if their workmen, distinctly perceiving the one defect from which the undertakings suffered, had not taken the matter in hand. Since the inventions and improvements for the introduction of which these three undertakers had founded their businesses, were valuable and genuine, and the masters had during their short time of mastership shown themselves to be energetic and--apart from their fancy for mastership--sensible men, the workers stepped into the breach, constituted themselves in each case an association, took upon themselves all the liabilities, and then, under the superintendence of the very men who had been on the brink of ruin, carried on the businesses so successfully that these three associations are now among the largest in Freeland. Four other several individuals--also notable industrial inventors--avoided a threatened catastrophe only by a timely change from the position of undertakers to that of superintendents of associations; and they stand at present at the head of works whose workers are numbered by thousands, and have since realised continuously increasing profits, high enough to satisfy all their reasonable expectations. Thus, as I have said, undertakership is not forbidden in Freeland; but it cannot successfully compete with free association.'
Sir B---- and the others declared themselves perfectly satisfied with this explanation, and begged the bank director to proceed with his account which they had interrupted. 'You were saying,' intimated my father, 'that in Freeland interest was no more forbidden than undertaker's gains and ground-rent. As to undertaker's gains we now understand you; but before you proceed to the main point of your exposition--to interest--I would like to ask for fuller details upon the question of ground-rent. How are we to understand that this is not forbidden in Freeland?'
'How you are to understand that,' was the answer, 'will best be made plain to you if I take up my train of thought where I left off. If, in order to labour productively, we required the undertaker, no power in heaven or earth could save us from giving up to him what was due to him as master of the process of production, while we contented ourselves with a bare subsistence--that is what I said. I would add that we should also be compelled to pay the tribute due to the landlord for the use of the ground, if we could not till the ground without having a landlord. For property in land was always based upon the supposition that unowned land could not be cultivated. Men did not understand how to plough and sow and reap without having the right to prevent others from ploughing and sowing and reaping upon the same land. Whether it was an individual, a community, a district, or a nation, that in this way acquired an exclusive right of ownership of the land, was immaterial: it was necessarily anexclusiveright, otherwise no one would put any labour into the land. Hence it happened, in course of time, that the individual owner of land acquired very considerable advantages in production over the many-headed owner; and the result was that common property in land gradually passed into individual ownership. But this distinction is not an essential one, and has very little to do with our institutions. With us, the land--so far as it is used as a means of production and not as sites for dwelling-houses--is absolutely masterless, free as air; it belongs neither to one nor to many: everyone who wishes to cultivate the soil is at liberty to do so where he pleases, and to appropriate his part of the produce. There is, therefore, no ground-rent, which is nothing else than the owner's interest for the use of the land; but a prohibition of it will be sought for in vain. In the fact that I have no right to prohibit anything to others lies no prohibition. It cannot even be said that I am prohibited from prohibiting anything, for I may do it without hindrance from anyone; but everybody will laugh at me, as much as if I had forbidden people to breathe and had asserted that the atmospheric air was my own property. Where there is no power to enforce such pretensions, it is not necessary to prohibit them; if they are not artificially called forth and upheld, they simply remain non-existent. In Freeland no one possesses this power because here no one need sequestrate the land in order that it may be tilled. But the magic which enables us to cultivate ownerless land without giving rise to disputes is the same that enables us to produce without undertakers--free association.
'Just as little do we forbid interest. No one in Freeland will prevent you from asking as high a rate of interest as you please; only you will find no one willing to pay it you, because everyone can get as much capital as he needs without interest. But you will ask whether, in this placing of the savings of the community at the disposal of those who need capital, there does not lie an injustice? Whether it is not Communism? And I will admit that here the question is not so simple as in the cases of the undertaker's gains and of ground-rent. Interest is charged for a real and tangible service essentially different from the service rendered by the undertaker and the landowner. Whilst, namely, the economic service of the two latter consists in nothing but the exercise of a relation of mastership, which becomes superfluous as soon as the working masses have transformed themselves from servants working under compulsion into freely associated men, the capitalist offers the worker an instrument which gives productiveness to his labour under all circumstances. And whilst it is evident that, with the establishment of industrial freedom, both undertaker and landowner become, not merely superfluous, but altogether objectless--ipso factocease to exist--with respect to the capitalist, the possessor of savings, it can even be asserted that society is dependent upon him in an infinitely higher degree when free than when enslaved, because it can and must employ much more capital in the former case than in the latter. Moreover, it is not true that service rendered by capital--the giving wings to production--is compensated for by the mere return of the capital. After a full repayment, there remains to the worker, in proportion as he has used the capital wisely--which is his affair and not the lender's--a profit which in certain circumstances may be very considerable, the increase of the proceeds of labour obtained by the aid of the capital. Why should it be considered unreasonable or unjust to hand over a part of this gain to the capitalist--to him, that is, to whose thrift the existence of the capital is due? The saver, so said the earlier Socialists, has no right to demand any return for the service which he has rendered the worker; it costs him nothing, since he receives back his property undiminished when and how he pleases (the premium for risk, which may have been charged as security against the possible bad faith or bankruptcy of the debtor, has nothing to do with the interest proper). Granted; but what right has the borrower, who at any rate derives advantage from the service rendered, to retain all the advantage himself? And what certainty has he of being able to obtain this service, even though it costs the saver nothing to render it, if he (the borrower) does not undertake to render any service in return? It is quite evident that the interest is paid in order to induce the saver to render such a friendly service. How could we, without communistic coercion, transfer capital from the hands of the saver into those of the capital-needing producer? For the community to save and to provide producers with capital from this source is a very simple way out of the difficulty, but the right to do this must be shown. No profound thinker will be satisfied with the communistic assertion that the capital drawn from the producers in one way is returned to them in another, for by this means there does not appear to be established any equilibrium between the burden and the gain of the individual producers. The tax for the accumulation of capital must be equally distributed among all the producers; the demand for capital, on the other hand, is a very unequal one. But how could we take the tax paid by persons who perhaps require but little capital, to endow the production of others who may happen to require much capital? What advantage do we offer to the former for their compulsory thrift?
'And yet the answer lies close at hand.It is true that in the exploiting system of society the creditor does not derive the slightest advantage from the increase in production which the debtor effects by means of the creditor's savings; on the other hand, in the system of society based upon social freedom and justice both creditor and debtor are equally advantaged.Where, as with us, every increase in production must be equably distributed among all, the problem as to how the saver profits from the employment of his capital solves itself. The machinist or the weaver, whose tax, for example, is applied to the purchase or improvement of agricultural machines, derives, with us, exactly the same advantage from this as does the agriculturist; for, thanks to our institutions, the increase of profit effected in any locality is immediately distributed over all localities and all kinds of production.
'If anyone would ask what right a community based upon the free self-control of the individual, and strongly antagonistic to Communism, has to coerce its members to exercise thrift, the answer is that such coercion is in reality not employed. The tax out of which the capitalisation is effected is paid by everyone only in proportion to the work he does. No one is coerced to labour, but in proportion as a man does labour he makes use of capital. What is required of him is merely an amount proportional to what he makes use of. Thus both justice and the right of self-control are satisfied in every point.
'You see, it is exactly the same with interest as with the undertaker's gains and with ground-rent: the guaranteed right of association saves the worker from the necessity of handing over a part of the proceeds of his production to a third person under any plea whatever. Interest disappears of itself, just like profit and rent, for the sole but sufficient reason that the freely associated worker is his own capitalist, as well as his own undertaker and landlord. Or, if one will put it so,interest, profit, and rent remain, but they are not separated from wages, with which they combine to form a single and indivisible return for labour.'
And with this, good-night for the present.
----
Eden Vale: Aug. 11, ----
What we learnt from the director of the Freeland Central Bank occupied the thoughts of my father and myself for a long time. As this high functionary, who was a frequent visitor at the house of the Neys, dined with our hosts the next day, the table-talk ran mainly upon the Freeland institutions. My father began by asking whether the circumstance that the rest of the world, from which Freeland did not--and, in fact, in this matter could not--isolate itself, paid interest for loans, did not induce Freeland savers to seek foreign investments for their money; or whether at least some artificial means had not to be adopted to prevent this.
'There is nothing, absolutely nothing,' answered Mr. Clark, 'to prevent Freeland savers from investing their capital abroad; in fact, at present--I have quite recently been referring to the statistics upon this point regularly published by our central bank--some two and a-half milliards (£2,500,000,000) are invested partly in the large foreign banks, partly in European and American bonds. For example, a good half of your Italian national debt is in the hands of Freelanders. But what are such figures in comparison with the gigantic amounts of our savings and capital? We cannot prevent, and have no reason whatever to prevent, many Freelanders from being induced by foreign interest to accumulate more capital than is needed here at home on the one hand, and more than they consider necessary to insure themselves against old age on the other. For what is required for these two purposes cannot go abroad.'
'And is not this last-mentioned fact a disadvantage to the Freeland saver?' I asked.
'A Freelander who thought so,' said Mr. Ney, 'must have a very imperfect knowledge of what is to his own advantage. The interest paid by foreign debtors can in no respect compare with the advantages offered by employment of the money in Freeland, those advantages being, as you know, equably distributed among all the members of our commonwealth. At the end of last year we had altogether thirty-four milliards sterling invested. The calculated profit of these investments amounted to seven milliards; therefore, more than twenty per cent. Moreover, thanks to these same investments, every Freelander enjoys gratuitously the electric light, warming, the use of railways and steamships, &c., advantages the total value of which would very nearly equal the remunerative production effected by our investments. Anyone can now calculate how much more profitable Freeland investments of capital are than foreign ones. Moreover, the two and a-half milliards, of which friend Clark spoke, is a large sum in European and American financial operations, and it has actually contributed towards very considerably lowering from time to time the rate of interest in all the foreign money-markets; but when this amount is compared with Freeland finances, the investment of it abroad is seen to be simply an insignificant and harmless whim. This large sum brings in, at the present rate of interest--you will understand that Freeland savers invest merely in the very best European or American bonds--about thirty-four millions sterling; that is, not quite the two-hundredth part of the national revenue of Freeland. And there can be no doubt that this whim will--for us--lose much of even its present importance as Freeland continues to grow; for the competition of our capital has already reduced the rate of discount of the Bank of England to one and a-quarter per cent., and raised the price of the One and a-Half per cent. Consols to 118; hence there can be no doubt that a large flow of Freeland savings to Europe and America must, in a near future, reduce the rate of interest to a merely nominal figure. That this whim of investing capital abroad will altogether vanish as soon as foreign countries adopt our institutions is self-evident.'
I now addressed to Mr. Clark the question in what way the Freeland commonwealth guarded against the danger ofcrises, which, in my opinion, must here be much more disastrous than in any other country.
'Crises of any kind,' was the answer, 'would certainly dissolve the whole complex of the Freeland institutions; but here they are impossible, for lack of the source from which they elsewhere spring. The cause of all crises, whether called production-crises or capital-crises, lies simply in over-production--that is, in the disproportion between production and consumption; and this disproportion does not exist among us. In fact, the starting-point of the Freeland social reform is the correct perception of the essential character of over-production arrived at twenty-six years ago by the International Free Society. Until then--and in the rest of the world it is still the case--the science of political economy found in this phenomenon an embarrassing enigma, with which it did not know how better to deal than to deny its existence. There was no real over-production--that is, no general non-consumption of products--so taught the orthodox political economists; for, they contended, men labour only when induced to do so to supply a need, and it is therefore impossible in the nature of things that more goods should be produced than can be consumed. And, on our supposition, to which I will refer presently, this is perfectly correct. Everyone will use what he produces to meet a certain need; he will either use his product himself or will exchange it for what another has produced. It matters not what that other product is, it is at any rate something that has been produced; the question never need be what kind of product, but only whether some product is asked for. Let us assume that an improvement has taken place in the production of wheat: it is possible that the demand for wheat will not increase in proportion to the possibility of increasing its production, for it is not necessary that the producers of wheat should use their increased earnings in a larger consumption of wheat. But then the demand for something else would correspondingly increase--for example, for clothing, or for tools; and if this were only known in time, and production were turned in that direction, there would never be a disturbance in the exchange-relations of the several kinds of goods. Thus the orthodox doctrine explains crises as due not to a surplus of products in general, not to a mere disproportion between production and consumption, but to a transient disturbance of the right relation between the several kinds of production; and it adds that it is simply paradoxical to talk of a deficient demand in view of the misery prevailing all over the world.
'In this, in other respects perfectly unassailable reasoning, onlyonething is forgotten--the fundamental constitution of the exploiting system of society. Certainly it is a cruel paradox to speak of a general lack of demand in view of boundless misery; but where an immense majority of men have no claim upon the fruits of their labour, this paradox becomes a horrible reality. What avails it to the suffering worker that he knows how to make right, good, and needful use of what he produces, if that which he produces does not belong to him? Let us confine ourselves to the example of the increased production of wheat by improved methods of cultivation. If the right of disposal of the increased quantity of grain belonged to the agricultural producers, they would certainly eat more or finer bread, and thus themselves consume a part of the increased production; with another part they would raise the demand for clothing, and with another the demand for implements, which would necessarily be required in order that more grain and clothing might be produced. In such a case it would really be merely a question of restoring the right relation between the production of wheat, of clothing, of implements, which had been disturbed by the increased production of one of these--wheat; and increased production, a condition of greater prosperity for all, would, after some transient disturbances, be the inevitable consequence. But since the increased proceeds of wheat-cultivation do not belong to the workers, since those workers receive in any case only a bare subsistence, the progress which has been made in their branch of production does not enable them to consume either more grain or more clothing, and therefore there can exist no increased demand for implements for the production of wheat and textile fabrics.'
'But,' I objected, 'though this increased product is withheld from the workers, it is not ownerless--it belongs to the undertakers; and these too are men who wish to use their gains to satisfy some want or other. The undertakers will now increase their consumption; and after all one might suppose it would be impossible that a general disproportion should exist between supply and demand. Certainly it would now be commodities of another kind, the production of which would be stimulated in order to restore an equilibrium between the several branches of labour. If the increase belonged to the workers, then would more grain, more ordinary clothing, and more implements be required; but since it belongs to a few undertakers there will be an increased demand only for luxuries--dainties, laces, equipages--and for the implements requisite to produce these luxuries.'
'Exactly!' said David, who here joined in the conversation. 'Only the undertakers are by no means inclined to apply, in any considerable degree, the surplus derived from increased production to an additional consumption of luxuries; but they capitalise most of it--that is, invest it in implements of production. Nay, in some circumstances--as we heard yesterday--the "undertaker" is no man at all possessing human wants, but a mere dummy that consumes nothing and capitalises everything.'
'So much the better,' I said, 'wealth will increase all the more rapidly; for rapidly growing capital means rapidly increasing production, and that is in itself identical with rapidly increasing wealth.'
'Splendid!' cried David. 'So, because the working masses cannot increase their consumption, and the undertakers will not correspondingly increase theirs, and consequently there can be no increased consumption of any commodity whatever, therefore the surplus power of production is utilised in multiplying the means of production. That is, in other words, no one needs more grain--so let us construct more ploughs; no one needs more textile material--so let us set up more spinning-mills and looms! Are you not yet able to measure the height of absurdity to which your doctrine leads?'
I think, Louis, you, like myself, will admit that there is simply no reply to reasoning so plain and convincing. An economic system which bars the products of human industry and invention from the only use to which they should finally be applied--namely, that of satisfying some human requirement--and which is then astonished that they cannot be consumed, narrowly escapes idiocy. But that such is the character of the system which prevails in Europe and America must in the end become clear to everyone.
'But, in heaven's name, what becomes of the productive power among us which thus remains unemployed?' I asked. 'We are, on the whole, as advanced in art, science, and technical skill as you are in Freeland; I must therefore suppose that we could become as rich, or nearly so, as you, if we could only find a use for all our production. But we do not actually possess a tenth of your wealth, and yet there is twice as much hard work done among us as there is here. For though among you everyone works, and among us there are several millions of persons of leisure who live simply upon the toil of others, yet this is counterbalanced by the circumstance that our working masses are kept at their toil ten hours or more daily, whilst here an average working day is only five hours. Certainly among us there are millions of unemployed workers; but that also is more than compensated for by the labour of women and children, which is unknown among you. Where then, I repeat, lies the immense difference between the utilisation of our powers of production and of yours?'
'In the equipment of labour,' was the answer. 'We Freelanders do not work so hard as you do, but we make full use of all the aids of science and technics, whilst you are able to do this only exceptionally, and in no case so completely as we do. All the inventions and discoveries of the greatest minds are as well known to you as to us; but as a rule they are taken advantage of only by us. Since your aristocratic institutions prevent you from enjoying the things the production of which is facilitated by those inventions, you are not able to take advantage of the inventions except in such small measure as your institutions permit.'
Even my father was profoundly moved by this crushing exposition of a system which he had always been accustomed to honour as the highest emanation of eternal wisdom. 'Incredible! shocking!' he murmured in a tone audible only to myself.
But Mr. Clark proceeded: 'Among us, on the contrary, the theorem of the so-called classical economics, that a general excess of production is impossible, has become a truth, for in Freeland consumption and production exactly tally. Here there can be over-production only temporarily and inisolatedkinds of goods--that is, the equilibrium between different kinds of production may be temporarily disturbed. But we have no need to be afraid of even this trifling danger. The intimate connection of all productive interests springing from the nature of our institutions is an antecedent guarantee of equilibrium between all branches of production. A careful examination will show that the whole of Freeland is one great productive society, whose individual members are independent of one another, and yet are connected in one respect--namely, in respect of the proceeds of their labour. Just because everyone can labour where and how he pleases, but everyone's labour is alike in aiming at the highest possible utility, so--apart from any incidental errors--it is impossible but that an equal amount of labour should result in an equal amount of utility. All our institutions tend towards this one point. At first, as long as our commonwealth was in its initial stages, it sometimes happened that considerable inequalities had to be subsequently balanced; the producers did not always know until the year's accounts were closed what one and the other had earned. But that was a period of childhood long since outlived. At present, every Freelander knows, to within such trifling variations as may be due to little unforeseen accidents, exactly what he and others have earned, and also what they have every prospect of earning in the near future. He does not wait for inequalities to arise and then set about rectifying them; but he takes care that inequalities shall not arise. Since our statistics always show with unerring accuracy what at the time is being produced in every branch of industry, and since the demand as well as its influence upon prices can be exactly estimated from a careful observation of past years, therefore the revenue not only of every branch of industry, but of every separate establishment, can be beforehand so reliably calculated that nothing short of natural catastrophes can cause errors worth notice. If such occur, then comes in the assistance of the reciprocal insurance. In fact, in this country, not only are there no crises, but not even any considerable variations in the different productions. Our Statistical Department publishes an unbroken series of exact comparative statistics, from which can at any time be seen where either fresh demand or excess of labour is likely to arise; our supply of labour is controlled by these returns, and that is sufficient--with rare exceptions--to preserve a perfect equilibrium in production. It frequently occurs that here or there a newly started establishment comes to grief, particularly in the mining industry. Such a failure must not, however, be regarded as a bankruptcy--how can undertakers become bankrupt when they have neither ground-rent, nor interest, nor wages to pay, and who in any case still possess their highly priced labour-power?--but at the worst as a case of disappointed expectations. And should the very rare circumstance occur, that the community or an association loses the loaned capital through the premature death of the borrower, of what importance is that in the face of the gigantic sums safely employed in our business? And if a guaranty (del credere) were insisted upon to cover such a loss, it would amount to scarcely a thousandth part of one per cent., and would not be worth the ink used in writing it.'
'And do not foreign crises sometimes disturb the calm course of your Freeland production? Are not your markets flooded, through foreign over-production, with goods for which there is no corresponding demand?' I asked.
'It certainly cannot be denied that we are considerably inconvenienced by the frequent and sudden changes of price in the markets of the world caused by the anarchic character of the exploiting system of production. We are thereby often compelled to diminish our production in certain directions, and divert the labour thus set free to other branches of industry, though there is no actual change in the cost of production or in the relative demand. These foreign, sudden, and incalculable influences sometimes make a diversion of labour from one production to another necessary in order to preserve an equilibrium in the profits, though the regular and automatic migration of labour from one industry to another is sufficient to correct the disturbance in the relations between supply and demand due to natural causes. But these spasmodic foreign occurrences cannot produce a serious convulsion in our industrial relations. Just as it is impossible to throw out of equilibrium a liquid which yields to every pressure or blow, so our industry is able to preserve its equilibrium by means of its absolutely free mobility. It may be thrown into fruitless agitation, but its natural gravity at once restores the harmony of its relations. But, as I have said, such a disturbance is produced only by a partial over-production abroad. That this brings about a superabundance of all commodities, we care but little. Since foreign countries do not send us their goods for nothing, but demand other goods in return, what those other goods shall be is their business, not ours. We have no interest-bearing bonds or saleable property in land; hence our export goods must be the produce of our labour. The fact that in Freeland every product must find a purchaser is therefore by no means affected by external trade.'
'That is very clear,' I admitted.
'But,' interposed my father,' why do you not protect yourselves against disturbance due to foreign fluctuations in production, by a total exclusion of foreign imports?'
'Because that would be to cut off one's hand in order to prevent it from being injured,' was Mr. Clark's drastic answer. 'We import only those goods which we cannot produce so cheaply ourselves. But since, as I have already taken the liberty of saying, the imported goods are not presented to us, but must be paid for by goods produced by us, it is of importance that we should be able to produce the goods with which we make the payment more cheaply--that is, with less expenditure of labour-power--than we could the imported goods. For instance, we manufacture scarcely any cotton goods, but get nearly all such goods from England and America. We could, certainly, manufacture cotton goods ourselves, but it is plain that we should have to expend upon their manufacture more labour-power than upon the production of the corn, gold, machinery, and tools with which we pay for the cotton goods that we require. If it were not so, we should manufacture cotton goods also, for there is no conceivable reason for not doing so but the one just mentioned. If, therefore, our legislature prohibited the importation of cotton goods, we should have to divert labour from other branches of industry for the sake of producinglessthan we do now. We should have either to put up with fewer goods, or to work more, to meet the same demand. Hence, in this country, to enact a protective duty would be held to be pure madness.'
'Then you hold,' said my father, 'that our European and American economists and statesmen who still in part adhere to the system of protection, are simply Bedlamites; and you believe that the only rational commercial policy is that of absolute free trade?'
'Allow me to say,' answered Mr. Clark,' that Europe and America are not Freeland. I certainly cannot regard protection even abroad as rational, for the assumptions from which it starts are under all circumstances false. But neither do I think the foreign free trader is essentially wiser than the protectionist, for he also starts from assumptions which are baseless in an exploiting country. The prohibitionists think they are encouraging production: they are doing the opposite, they are hindering and hampering production; and the free traders, in so far as they insist upon this fact, are perfectly correct. Both parties, however, fail to see that in an exploiting society, which is never able to utilise more than a small part of its power to produce, the influence of legislative interference with trade upon the good or the bad utilisation of productive power is a matter of very little importance. Of what advantage is it to the free traders that a nation under the domination of their commercial systemis ableto make the most prolific use of their industrial capacities, so long as the continuance of industrial servitude prevents this nation from enjoying more than enough to satisfy the barest necessities of life? More than is consumed cannot, under any circumstances, be produced; and consumption among you abroad is so infinitely small, that it is verily ridiculous to dispute over the question whether this or that commodity can be produced better at home or abroad.
'What alone interests us in this controversy among the foreign commercial politicians is that neither party has the slightest suspicion that what the free traders rightly reproach the protectionists with, and what the latter wrongly defend, is the very thing that gains so many adherents to protection--namely, the hindering and hampering of production. The protectionists have a right to boast that they compel their people to apply two day's labour or a double amount of capital to the production at home of a thing which, by means of external trade, might have been exchanged for things that are the product of merely half as much expenditure of home labour. We, who work in order to enjoy, would have a good right to treat as insane any persons among us who proposed such a course as an "encouragement of home labour"; but among you, where labour and enjoyment are completely dissevered, where millions cry for work as a favour--among you, the hampering of labour is felt to be a benefit because it makes more toil necessary in order to procure an equal amount of enjoyment. Among you it is also a somewhat dangerous narcotic, for protection has a Janus head: it not merely increases the toil, it at the same time still more diminishes the consumption by raising the price of the articles in demand, the rise in price never being followed immediately by a rise in wages; so that, in the end, in spite of the increased difficulty in production, no more labour and capital are employed than before. But the intimate relation between these things is as a book sealed with seven seals to both protectionists and free traders. Had it been otherwise, they must long since have seen that the cure for industrial evils must be looked for not in the domain of commercial politics, but in that of social politics.'
'Now I begin to understand,' I cried out, 'the widespread growth of economic reaction against which we Western Liberals are waging a ridiculous Quixotic war with all our apparently irrefutable arguments. We present to the people as an argument against protection exactly that after which they are--unconsciously, it is true--eagerly longing. Protective tariffs, trade guilds, and whatever else the ingenious devices of the last decades may be called, I now understand and recognise as desperate attempts made by men whose very existence is threatened by the ever growing disproportion between the power to produce and consumption--attempts to restore to some extent the true proportion by curbing and checking the power to produce. Whilst the protectionist is eager to put fetters upon the international division of labour, to keep at a distance the foreigner who might otherwise save him some of his toil, the advocate of trade-guilds fights for hand-labour against machine-labour and commerce. And when I look into the matter, I find all these people are in a certain sense wiser than we Liberals of the old school, who know no better cure for the malady of the time than that of shutting our eyes as firmly as possible. It is true, our intentions have been of the best; but since we have at length discovered how to attain what we wished for, we should at once throw off the fatal self-deception that political freedom would suffice to make men truly free and happy. Political freedom is an indispensable, but not the sole, condition of progress; whoever refuses to recognise this condemns mankind afresh to the night of reaction. For if, as our Liberal economics has taught, it were really contrary to the laws of nature to guarantee to all men a full participation in the benefits of progress, then not only would progress be the most superfluous thing imaginable, but we should have to agree with those who assert that the eternally disinherited masses can find happiness only in ignorant indifference. Now I realise that the material and mental reaction is the logically inevitable outcome of economic orthodoxy. If wealth and leisure are impossible for all, then it is strictly logical to promote material and mental reaction; whilst it is absurd to believe that men will perpetually promote a growth of culture without ever taking advantage of it. I now see with appalling distinctness that if our toiling masses had not been saved by their social hopes from sharing our economic pessimism, we Liberals would long since have found ourselves in the midst of a reaction of a fearful kind: it is not throughusthat modern civilisation has been spared the destruction which overwhelmed its predecessors.'
After dinner, Mr. Ney invited us to accompany him to the National Palace, where the Parliament for Public Works was about to hold an evening session in order to vote upon a great canal project. He thought the subject would interest us. We accepted the invitation with thanks.
The Parliament for Public Works consists of 120 members, most of whom, as David--who was one of the party--told me, are directors of large associations, particularly of associations connected with building; but among the members are also professors of technical universities, and other specialists. The body contains no laymen who are ignorant of public works; and the parliament may be said to contain the flower and quintessence of the technical science and skill of all Freeland.
The project before the house was one which had been advocated for above a year by the directors of the Water and Mountain-Cultivation Associations of Eden Vale, North Baringo, Ripon, and Strahl City, in connection with two professors of the technical university of Ripon. The project was nothing less than the construction of a canal navigable by ships of 2,000 tons burden, from Lake Tanganika, across the Mutanzige and Albert Nyanza, whence the Nile could be followed to the Mediterranean Sea; and from the mouth of the Congo, along the course of that river, across the Aruwhimi to the Albert lake; thence following several smaller streams to the Baringo lake, along the upper course of the Dana, and thence to the Indian Ocean. The project thus included two water-ways, one of which would connect the great lakes of Central Africa with the Mediterranean Sea, and the other, crossing the whole of the continent, would connect the Atlantic with the Indian Ocean. Since a part of the immense works involved in this project would have to be carried through foreign territories--those of the Congo State and of Egypt--negotiations had been opened with those States, and all the necessary powers had been obtained. The readiness of the foreign governments to accede to the wishes of the Eden Vale executive is explained by the fact that Freeland did not propose to exact any toll for the use of its canals, thus making its neighbours a free gift of these colossal works. In connection with this project, there was also another for the acquisition of the Suez Canal, which was to be doubled in breadth and depth and likewise thrown open gratuitously to the world. The English government, which owned the greater part of the Suez Canal shares, had met the Freelanders most liberally, transferring to them its shares at a very low price, so that the Freelanders had further to deal with only holders of a small number of shares, who certainly knew how to take advantage of the situation. The British government stipulated for the inalienable neutrality of the canal, and urged the Freelanders to prosecute the work with vigour.