APPENDIX

Earlyin this year [1894] I published in theFortnightly Reviewtwo articles under the title of “Fabian Economics.” These articles were not written or published until some months after the first publication of the present volume. I wrote them then, because then, for the first time, I happened to see a volume from which previously I had seen some extracts only—a volume entitledFabian Essays,in which the doctrines of contemporary English Socialism are set forth; and my aim was to apply the general arguments embodied inLabour and the Popular Welfareto the position of the Socialists, as definitely stated by themselves. One of the Fabian Essayists—Mr. Bernard Shaw—came forward in theFortnightly Reviewto attach my arguments, with what success will be shown by the subjoined reply to him, which was originally published in the same Review, under the title of “A Socialist in a Corner.” A few paragraphs which would be here superfluous are omitted.

A SOCIALIST IN A CORNER

Fortnightly Review, May 1894

Magazinecontroversy on complicated and serious subjects, though it can never be exhaustive, mayyet be of great use, if it calls the attention of the public to the main points at issue, if it helps men to judge for themselves of the character and weight of the arguments which are capable of being employed on one side and the other; and, above all, if by elucidating the points on which opponents agree, the area of actual dispute be narrowed down and defined. For this reason it seems to me not useless to examine briefly the answer which, on behalf of a body of Socialists, Mr. Shaw has made to the criticisms which, in this Review and elsewhere, I have recently directed against the entire Socialistic position—and particularly against that position as expounded by himself and his colleagues.

Not only Mr. Shaw, but the other Fabian writers, are persons, at all events, of sufficient intelligence, sufficient knowledge, and sufficient literary skill, to render the way in which they put the case for Socialism a valuable indication of what the strength of that case is. It was for this reason that I thoughtFabian Essaysworth criticising; and for this reason I think Mr. Shaw’s answer worth criticising also. It is an indication not only of how Mr. Shaw can argue as an individual, but of what arguments are available in defence of the position which he occupies; and Mr. Shaw has taken trouble himself to make this view still more plausible, by the hints he gives that in the composition of his answer he has sought the advice and counsel of his faithful colleagues; so that his pages represent the wisdom of many, though presumably the wit of one.

I propose, then, to show, in as few words as possible, that Mr. Shaw has not only proved himself incapable of shaking a single one of the various arguments advanced by me, but that whilst flattering himself that, in his own phrase, he has been taking his opponent’s scalp, the scalp which he holds, and has really taken, is his own. His criticism divides itself into two main parts. One is an admission of the truth of one of the fundamental propositions on which I insisted. The second is a complete evasion of another, and the substitution for it of an ineptitude which is entirely of Mr. Shaw’s invention, and which he finds it so easy and so exciting to demolish, that he sets it up as often as he knocks it down, for the pleasure of displaying his prowess over again.

Here, then, are three propositions to be dealt with: First, the primary proposition on which I insisted, and the truth of which Mr. Shaw admits; secondly, a proposition on which Mr. Shaw declares that I insisted, but which is really an invention of his own; and thirdly, a proposition on which I did insist actually, but which Mr. Shaw never even states, much less attempts to meet. This third proposition I shall briefly state once again when I have dealt with the two others, and show how Fabian philosophy—indeed the philosophy of all Socialism—completely fails to meet it.

To begin, then, with the first. My primary object has been to exhibit the absolute falsehood of the Socialistic doctrine thatall wealth is due to labour, and to replace this by a demonstration thatunder modern conditions of production, labour is not only not the sole producer of wealth, but does not even produce the principal part of it. The principal producing agent, I have pointed out, is what I have called Industrial Ability—or the faculty which, whilst exercised by a few, directs the labour of the many; and if this truth is once accepted, it completely cuts away from Socialism the whole of its existing foundations, and renders absolutely meaningless the whole of its popular rhetoric. For the most powerful argumentative appeal which Socialism can make to the majority is merely some amplification of the statement, which is no doubt plausible, and is advanced by Socialists as an axiom, that the exertions of the majority—or, in other words, Labour—has produced all wealth, and that therefore the majority not only ought to possess it, but will be able to possess it by the simple process of retaining it. But the moment the productive functions of industrial ability are made clear, the doctrine which seemed an axiom is reduced to an absurdity; and what might before have seemed a paradox becomes a simple and intelligible truth—the doctrine, namely, that a comparatively few persons, with certain exceptional gifts, are capable of producing more wealth than all the rest of the community; and that whoever may produce the wealth which the rich classes possess, it is at all events not produced by the multitude, and might, under changed conditions, be no longer produced at all.

Now this doctrine of Ability Mr. Shaw accepts,and completely surrenders and throws overboard the Socialistic doctrine of Labour. He does indeed endeavour to make the surrender seem less complete than it is, partly by irrelevant comments on some minor points,[61]and partly by insisting on certain qualifications which are perfectly true, and to which I have myself often elsewhere alluded, but which, as I shall show presently, are, on his own admission, of small practical importance, and do not appreciably affect the main position. For instance Mr. Shaw argues that it is not always the most able man who, in any given business, is to be found directing it. This also is no doubt true. It merely means, however, that of industrial ability the same thing may be said, which has so truly been said of Government—that it is alwaysin, orpassing into, the hands of the most powerful section of the community.Businesses conducted by men of inferior Ability are gradually superseded by businesses conducted by men of superior Ability. Men’s actual positions may be a few years behind or before their capacities, but for all practical purposes they coincide with them and the utmost that Mr. Shaw’s contention could prove would be that some members of a minority are in places which should be occupied by other members of a minority; not that the majority could take the places of either.

But I merely mention these points in passing, and waste no pains in insisting on them or pressing them home, because their practical insignificance is admitted by Mr. Shaw himself. The great body of men—of men selected at random, even if they should enjoy the advantages of superior position and education—“could not,” he says, “invent a wheelbarrow, much less a locomotive.” He amplifies this admission by quoting the case of an acquaintance of his, whose exceptional Ability secured himfour thousand poundsa year, because without the assistance of that Ability his employer would have lost more than this sum. “Other men,” he proceeds, “have an eye for contracts, or what not, or are born captains of industry, in which case they go into business on their own account, and make ten, twenty, or two hundred per cent,where you or I should lose five.... All these people arerentiersof Ability.” Again he quotes with emphatic approval a passage from an American writer, whom he praises as a skilled economist; and using this passage as a text, endorses its meaning in thesewords of his own. “The able man, the actual organiser and employer, alone is able to find a use for mere manual deftness, or for that brute strength, and heavy bank balance, which any fool may possess.” “The capitalist and the labourer run helplessly to the able man.” “He is the only party in the transaction capable of the slightest initiative in production.”

I need not add anything to these admissions. They constitute, as I say, a complete surrender of the Socialistic doctrine of Labour, and an emphatic admission of the primary proposition I advanced as to the productive function of Ability. It is enough then to say, that so far as the question of Labour is concerned, Mr. Shaw throws over completely all the doctrines of the Gotha programme, the Erfurt programme, of Karl Marx and his disciples, of Mr. Hyndman and his Social Democrats—in fact the cardinal doctrine of Socialism as hitherto preached everywhere.

Having disposed then of the point as to which Mr. Shaw agrees with me, I will pass on to the point on which he supposes me to disagree with him; and this is the point to which he devotes the larger part of his article. Everything else is thrown in as a sort of by-play. This point is as follows. Speaking roughly, and adopting the following figures, not because I consider them accurate, but merely because they agree with Mr. Shaw’s, and are for the present purpose as good as any others, aboveseven hundred million poundsof the national income go to the non-labouring classes.Mr. Shaw, as I gather, would set down abouttwo hundred million poundsof this as the earnings or profits of Ability; whilst he contends that the remainder is the product neither of Ability nor Labour, but of capital or land. It represents the assistance which land and capital give to the two other productive agents; and it goes to those who possess this land and capital, simply on account of the rights which they possess as passive owners. This sum, which Mr. Shaw estimates at aboutfive hundred million pounds,[62]ought, he contends, still to go to the owners—in fact, it must always go to its owners; but the owners should be changed. They should be the whole nation instead of a small class.

Now Mr. Shaw says that my great mistake has relation to thesefive hundred million pounds. He says that, having argued rightly enough thattwohundred million poundsor so are the genuine product or rent of actual and indispensable Ability, I have committed the absurd mistake of confusing with this rent of ability, the rent of land, of houses, and above all, the interest on capital. “Mr. Mallock,” he says, “is an inconsiderate amateur, who does not know the difference between profits and earnings on the one hand, and rent and interest on the other.” And he summarises my views on the subject by saying, that I “see in every railway shareholder the inventor of the locomotive or the steam-engine,” and that I gravely maintain that thethree hundred thousand poundsa year which may form the income of one or two great urban landlords is produced by the exercise of some abnormal ability on their parts. This supposed doctrine of mine forms the main subject of Mr. Shaw’s attack. He is exuberantly witty on thesubject. He turns the doctrine this way and that, distorting its features into all sorts of expressions, laughing afresh each time he does so. He calls me his “brother” and his “son”; he quotes nursery rhymes at me. He alludes to my own income and the income of the Duke of Westminster, and intimates a desire to know whether the Duke being, so he says, many hundred times as rich as myself, I am many hundred times as big a fool as the Duke. In fact, he has recourse to every argumentative device which his private sense of humour and his excellent taste suggest.

The immediate answer to all this is very simple—namely, that I never gave utterance to any such absurdity as Mr. Shaw attributes to me, but that, on the contrary, I have insisted with the utmost emphasis on this very distinction between profits and earnings, and rent and interest, which he assures his readers I do not even perceive. Mr. Shaw, therefore, has devoted most of his time to trampling only on a misconception of his own. This is the immediate answer to him; but there is a further answer to come, relating to the conclusions I drew from nature of rent and interest, after I had pointed out their contrast to the direct receipts of Ability. Let me show the truth of the immediate answer first.

I do not think that in my two recent articles in this Review there is a single sentence that to any clear-headed man could form an excuse for such a misconception as Mr. Shaw’s, whereas there are pages which ought to have made it impossible.Indeed, a notice in theSpectatordisposes of Mr. Shaw by saying that he evades the real point raised by me, not meeting what I did say, and combating what I did not say. But, as I started with observing, magazine articles can rarely be exhaustive, and I will assume that some incompleteness or carelessness of expression on my part might have afforded, had these articles stood alone, some excuse for their critic. Mr. Shaw, however, is at pains to impress us that he has read other writings of mine on the same subject. He even remembers, after an interval of more than ten years, some letters I wrote to theSt. James’s Gazette. It might, therefore, have been not unreasonable to expect that he would have referred to my recent volume,Labour and the Popular Welfare, which I expressly referred to in my two articles, and in which I said I had stated my position more fully. As an answer to Mr. Shaw I will quote from that volume now.

The first Book deals with certain statistics as to production in this country, and the growth of the national income as related to the population. In the second Book I deal with the cause of this growth. I point out that the causes of production are not three, as generally stated—viz. Land, Labour, and Capital; but four—viz. Land, Labour, Capital, and Ability; and that the fourth is the sole source of thatincreasein production which is the distinguishing feature of modern industrial progress. In thus treating Capital as distinct from Ability, I point out—taking a pumping-engine as an example—that capital creates a product whichnecessarily goes to its owner,quâowner, whether the owner is an individual or the State. I then proceed to show that fixed capital—e.g.an engine—is the result of circulating capital fossilised; and that circulating capital is productive only in proportion as it is under the control of Ability. For this reason I said that whilst it isin process of being utilised, Capital is connected with Ability as the brain is connected with the mind, it being the material means through which Ability controls Labour; and that thus froma certain point of viewthe two are inseparable. I need not insist on this truth, because Mr. Shaw admits it. But Mr. Shaw will find a subsequent chapter (Book IV. chap. ii.) bearing the title,Of the Ownership of Capital as distinct from its Employment by Ability. From that chapter I quote the following passage:—

“In dealing with Capital and Ability, I first treated them separately, I then showed that, regarded as a productive agent, CapitalisAbility, and must be treated as identical with it. But it is necessary, now we are dealing with distribution, to dissociate them for a moment and treat them separately once more. For even though it be admitted that Ability, working by means of Capital, produces, as it has been shown to do, nearly two-thirds of the national income,[63]and though it may be admitted further that a large portion of this product should go to the able men who are actively engaged in producing it—the men whose Ability animates and vivifies Capital—it may be argued that a portion of it, which is very large indeed, goes as a fact to men who do not exert themselves at all, or who, at any rate, do not exert themselves in the production of wealth. These men, it will be said, live not on the products of Ability, but on the interest of Capital, which they have come accidentally to possess; and it will be asked on what ground Labour is interested in forbearing to touch the possessions of those who produce nothing?... Why should it not appropriate what goes to this wholly non-productive class.”

If Mr. Shaw or his readers are still in doubt as to the extent to which his criticism of myself is wide of the mark—if he still thinks that he is fighting any mistake but his own, when he attacks me as though I confused interest with the directearnings of Ability, let me add one passage more out of the same chapter:—

“Large profits must not be confounded with high interest. Large profits are a mixture of three things, as was pointed out by Mill, though he did not name two of them happily. He said that profits consisted of wages of superintendence, compensation for risk, and interest on Capital. If, instead of wages of superintendence we say the product of Ability, and instead of compensation for risk we say the reward of sagacity, which is itself a form of Ability, we shall have an accurate statement of the case.”

Again, two pages earlier Mr. Shaw will find this:—

“Interest is capable, under certain circumstances, of being reduced to a minimum without production being in any degree checked; and every pound which the man who employs Capital is thus relieved from paying to the man who owns it constitutes,other things being equal, a fund which may be appropriated by Labour.”

These quotations will be enough to show how the bulk of Mr. Shaw’s criticisms, which he thinks are directed against myself, are criticisms of an absurd error and confusion of thought, which I have myself done my utmost to expose, in order that I might put the real facts of the case more clearly.

Let me now briefly restate what I have actually said about these facts. Let me restate the points which Mr. Shaw hardly ventures even to glance at. I have said that Capital and Ability, as actually engaged in production, are united like mind and brain. There is, however, as I observed also, this difference. So far as this life is concerned, at allevents, brain and mind are inseparable. The organ and the function cannot be divided. But in the case of Ability and Capital they can be. The mind of one man has often to borrow from another man the matter through which alone it is able to operate in production. Thus though Ability and Capital, when viewed from the standpoint of Labour, are one thing, when viewed from the standpoint of their different processes they are two; and Capital is seen to produce a part of the product, as distinguished from the Ability whose tool and organ it is. Mr. Shaw says that the capital of the country at the present time producesfive hundred million poundsannually, and, for argument’s sake, I accept this figure. Thus far, then, Mr. Shaw and I agree. But what I have urged Mr. Shaw to consider, and what he does not venture even to think of, is the following question:—How did the capital of this country come into existence?

Even the soil of this country, as we know it now, is an artificial product. It did not exist in its present state two hundred years ago. Still it was there. But of the capital of the country, as it exists to-day, by far the larger part did not exist at all. Let us merely go back two generations—to the times of our own grandfathers; and we shall find that of theten thousand million poundsat which our present capital is estimated,eight thousand million poundshave been produced during the last eighty years. That is to say, four-fifths of our capital was non-existent at a time when the grandfathers of many of us were already grown men.How, then, was this capital produced? The ordinary Socialist will say that it was produced by Labour—that it is, as (I think) Lassalle called it, “fossil Labour.” Mr. Shaw, however, judging by what we have seen of his opinions, will agree with me that though a small part of it may be fossil Labour, by far the larger part is fossil Ability. It is, in fact, savings from the growing annual wealth which has been produced during the period in question by the activity of able men. But these able men did not produce it by accident. They produced it under the stimulus of some very strong motive. What was this motive? Mr. Shaw’s Socialistic friends and predecessors have been spouting and shouting an answer to this question for the past sixty years. They have been telling us that the main motive of the employing class was “greed.” Unlike most of their statements, this is entirely true. Nor, although the sound of it is offensive, is there anything offensive in its meaning. It means that in saving capital and in producing the surplus out of which they were able to save it, the motive of the producers was the desire to live on the interest of it when it was saved; and that if it had not been for the desire, the hope, the expectation of getting this interest, the capital most certainly would never have been produced at all, or, at all events, only a very minute fraction of it.

I asked in one of my articles in this Review whether Mr. Shaw thought that a man who received ten thousand a year as the product of his exceptionalability would value this sum as much if he were forbidden by the State to invest a penny of it—if the State, in fact, were an organised conspiracy to prevent his investing it so as to make an independent provision for his family, or for himself at any moment when he might wish to stop working—as he values it now when the State is organised so as to make his investments secure? And the sole indication in the whole of Mr. Shaw’s paper that he has ever realised the existence of the question here indicated is to be found in a casual sentence, in which he says that to think that the complete confiscation of all the capital created by the two past generations, and the avowed intention on the part of the State to confiscate all the capital that is now being created by the present—to think, in other words, that the annihilation of the strongest and fiercest hope that has ever nerved exceptional men to make exceptional industrial exertion, would in the smallest degree damp the energies of any able man—“is an extremely unhistoric apprehension,” and one as to which he “doubts whether the public will take the alarm.” And having said this, he endeavours to justify himself by an appeal to history. He asks if the men who built the Pyramids did not work just as hard “though they knew that Pharaoh was at the head of an organised conspiracy to take away the Pyramids from them as soon as they were made?”

This remarkable historical reference is the sole answer Mr. Shaw attempts to make to the real point raised by me. If it is necessary seriously toanswer it, let me refer Mr. Shaw toLabour and the Popular Welfare, pp. 124, 125, where his childish piece of reasoning—actually illustrated there by the example of Ancient Egypt—is anticipated and disposed of. As I there pointed out, these great buildings of the ancient world were the products not of Ability as it exists in the modern world, but of Labour; the difference between the two (so far as this point is concerned) being this:—that the labour an average man can perform is a known quantity, and wherever a dominant race enslaves an inferior one, the taskmasters of the former can coerce the latter into performing a required amount of service. But the existence of exceptional ability cannot be known or even suspected by others till the able individual voluntarily shows and exerts it. He cannot be driven; he must be induced and tempted. And not only is there no means of making him exert his talents, except by allowing these talents to secure for himself an exceptional reward; but in the absence of any such reward to fire his imagination and his passion, he will probably not be conscious of his own Ability himself. Pharaoh could flog the stupidest Israelite into laying so many bricks, but he could not have flogged Moses himself into a Brassey, a Bessemer, or an Edison.

This, however, is a point with which it is impossible to deal in a few sentences or a few pages. The great question of human motive, closely allied as it is with the question of family affection, the pleasures of social intercourse, the excitements andprizes of social rivalry, of love, of ambition, and all the philosophy of taste and manners—this great question of motive can be only touched upon here. But a few more words may be said to show the naïve ignorance of human nature and of the world betrayed by the Fabian champion.

Mr. Shaw, in order to prove how fully he understands the question of Ability, quotes the case of a friend of his, who, by his Ability, makesfour thousand poundsa year. This, says Mr. Shaw, is just as it should be: but if a man, like his friend, should saveone hundred thousand pounds, and desire to leave this to his son, invested for him at 3½ per cent, so that the son may receive an income whether he has any of his father’s ability or no—this, says Mr. Shaw, is what Socialism will not permit. The son must earn all he gets; and if he happens to have no exceptional ability, which may probably be the case, he will have to put up with the mere wages of manual labour. He will have to live on someeighty poundsa year instead offour thousand pounds. And Mr. Shaw says, that to introduce this arrangement into our social system will have no appreciable effect on the men who are now making, by their ability, theirfour thousand poundsa year. Let us suggest to him the following reflections. What good, in that case, would thefour thousand poundsa year be to the father, unless he were to eat and drink nearly the whole of it himself? For it would be absurd and cruel in him to bring up his children in luxury if the moment he died they would have to become scavengers.Wealth is mainly valuable, and sought for, not for the sake of the pleasures of sense which it secures for a man’s individual nervous system, but for the sake of theentourage—of the world—which it creates around him, which it peoples with companions for him brought up and refined in a certain way, and in which alone his mere personal pleasures can be fully enjoyed. Capitalism, as Mr. Shaw truly observes, produces many personal inequalities, which without it could not exist. He fails to understand that it is precisely the prospect of producing such inequalities that constitutes the main motive that urges able men to create Capital.

More than ten years ago I published a book calledSocial Equality, devoted to the exposition of these truths. I cannot dwell upon them now. In that book history is appealed to, and biography is appealed to; and the special case of literary and artistic production, of which Mr. Shaw makes so much, is considered in a chapter devoted to the subject, and Mr. Shaw’s precise arguments are disposed of in anticipation. But to a great extent the true doctrine of motive is one which cannot be established by mere formal argument. It must to a great extent be left to the verdict of the jury of general common sense, the judgment of men of experience and knowledge of the world—that knowledge which, of all others, Mr. Shaw and his friends appear to be most lacking in.

It will be enough, then, to turn from Mr. Shaw himself to ordinary sensible men, especially to the men of exceptional energy, capacity, shrewdness,strong will, and productive genius—the men who are making fortunes, or who have just made them, and without whose efforts all modern industry would be paralysed, and to tell such men that the sole answer of Fabianism to my attack on the Socialistic position is summed up in the following astounding statement:—That the complete confiscation of all the invested money in this country, and all the incomes derived from it—from the many thousands a year going to the great organiser of industry to the hundred a year belonging to the small retired tradesman—would have no effect whatever on the hopes and efforts of those who are now devoting their Ability to making money to invest (see Mr. Shaw’s article). Well—Bos locutus est: there is the quintessence of Mr. Shaw’s knowledge of human nature and of the world, and though it would be interesting and instructive to analyse the error of his view, no analysis could make its absurdity seem more complete than it will seem without analysis, to every practical man.

FOOTNOTES[1]Writers also from whom better things might have been expected make use of the same foolish language. “The proletarian, in accepting the highest bid, sells himself openly into bondage” (Fabian Essays, p. 12).[2]According to Professor Leone Levi, the actual sum would beone hundred and thirteen million pounds: but in dealing with estimates such as these, in which absolute accuracy is impossible, it is better, as well as more convenient, to use round numbers. More than nine-tenths of this sum belongs to the income of the classes that pay income-tax. Of the working-class income, not more than two per cent is counted twice over, according to Professor Leone Levi.[3]There is a general agreement amongst statisticians with regard to these figures.Cf.Messrs Giffen, Mulhall, and Leone Levipassim.[4]Out of anythousandinhabitants,two hundred and fifty-eightare under ten years of age; andthree hundred and sixty-sixout of everythousandare under fifteen.[5]Statistics in support of the above result might be indefinitely multiplied, both from European countries and America. So far as food is concerned, scientific authorities tell us that iftwentyrepresents the amount required by a man, a woman will requirefifteen, and a childeleven; but the total expenditures necessary are somewhat different in proportion.[6]The total imperial taxation in the United Kingdom is abouttwo pounds eight shillingsper head; and the total local taxation is aboutone pound four shillings. Thus the two together come tothree pounds twelve shillingsper head, which for every family of four and a half persons gives a total ofsixteen pounds four shillings.[7]The number of females over fifteen years of age is abouttwelve millions. Those who work for wages number less thanfive millions.[8]Mr. Giffen’s latest estimates show that not more than twenty-three per cent of the wage-earners in this country earn less thantwenty shillingsa week; whilst seventy-seven per cent earn this sum and upwards. Thirty-five per cent earn fromtwenty shillingstotwenty-five shillings; and forty-one per cent earn more thantwenty-five shillings. See evidence given by Mr. Giffen before the Labour Commission, 7th December 1892.[9]The reader must observe that I speak of therentof the land, not of the land itself, as the subject of the above calculation. I forbear to touch the question of any mere change in the occupancy or administration of the land, or even of any scheme of nationalising the land by purchasing it at its market price from the owners; for by none of these would the present owners be robbed pecuniarily, nor would the nation pecuniarily gain, except in so far as new conditions of tenure made agriculture more productive. All such schemes are subjects of legitimate controversy, or, in other words, are party questions; and I therefore abstain from touching them. I deal in the text with facts about which there can be no controversy.[10]It is also every year becoming more unimportant, in diametrical contradiction of the theories of Mr. H. George. This was pointed out some twelve years ago by Professor Leone Levi, who showed that whereas in 1814 the incomes of the landlord and farmer were fifty-six per cent of the total assessed to income-tax, in 1851 they were thirty-seven per cent, and in 1880 only twenty-four per cent. They are now only sixteen per cent.[11]See Local Government Board valuation of 1878.[12]Recent falls in rent make it impossible to give the figures with actual precision; but the returns in the New Doomsday Book, taken together with subsequent official information, enable us to arrive at the substantial facts of the case. In 1878 the rental of the owners of more thana thousandacres wastwenty-nine million pounds. The rental of the rural owners of smaller estates wasthirty-two million pounds; and the rental of small urban and suburban owners wasthirty-six million pounds. The suburban properties averagedthree and a halfacres, the average rent beingthirteen poundsper acre.[13]According to the Local Government Report of 1878, the rental of all the properties overfive hundredacres averagedthirty-six shillingsan acre; that of properties betweenfiftyanda hundredacres,forty-eight shillingsan acre; and that of properties betweentenandfiftyacres,a hundred and sixteen shillingsan acre. In Scotland, the rental of properties overfive hundredacres averagednine shillingsan acre: that of properties betweentenandfiftyacres,four hundred and thirteen shillings. With regard to the value of properties undertenacres, the following Scotch statistics are interesting. Four-fifths of the ground rental of Edinburgh is taken by owners of less than one acre, the rental of such owners being on an averageninety-nine pounds. Three-fourths of the ground rental of Glasgow is taken by owners of similar plots of ground; only there the rental of such owners isa hundred and seventy-one pounds. In the municipal borough of Kilmarnock, land owned in plots of less than an acre lets per acre atthirty-two pounds. The land of the few men who own larger plots lets for not more thantwenty pounds. Each one of theeleven thousandmen who own collectively four-fifths of Edinburgh, has in point of money as much stake in the soil as though he were the owner in Sutherland oftwo thousandacres: and each one of theten thousandmen who own collectively three-fourths of Glasgow, has as much stake in the soil as though he were the owner in Sutherland ofthree thousand four hundredacres.[14]This is Mr. Giffen’s estimate. Mr. Mulhall, who has made independent calculations, does not differ from Mr. Giffen by more than five per cent.[15]General merchandise is estimated by Mr. Mulhall atthree hundred and forty-three million pounds. For everyhundredinhabitants in the year 1877 there werefivehorses,twenty-eightcows,seventy-sixsheep, andtenpigs. In 1881 there were in Great Britainfive million four hundred and seventy-five thousandhouses. The rent of eighty-seven per cent of these was underthirty poundsa year, and the rental of more than a half averaged onlyten pounds. The total house-rental of Great Britain in that year wasone hundred and fourteen million pounds; and the aggregate total of houses overthirty poundsannual value wassixty million pounds; though in point of number these houses were only thirteen per cent of the whole.[16]This classification of houses may perhaps be objected to; but from the above point of view it is correct. Houses represent an annual income ofone hundred and thirty-five million pounds. Not more thanthirty-five million poundsare spent annually in building new houses; whilst the whole are counted as representing a newone hundred million poundsevery year. It is plain, therefore, that if we estimate the entire annual value as above, the sum in question stands not for the houses, but for the use of them. Even more clearly does the same reasoning apply to railways and shipping. Whether we send goods by these or are conveyed by them ourselves, all that we get from them is the mere service of transport. On transport and travelling by railway aboutseventy million poundsare spent annually: by ship aboutthirty million pounds; by trams abouttwo million pounds.[17]The total annual imports are aboutfour hundred and twenty million pounds. The amount retained for home consumption is aboutthree hundred and sixty-five million pounds.[18]The approximate value of the food consumed annually in the United Kingdom (exclusive of alcoholic drinks) istwo hundred and ninety million pounds. The total value of food imported is overone hundred and fifty million pounds.[19]The number of persons fed on home-grown meat wastwenty-three millions one hundred thousand. The number fed on imported meat wasfourteen millions seven hundred thousand. In other words, the number of persons who subsist on imported meat now is about equal to the entire population of the United Kingdom in 1801.[20]From the year 1843 to 1851, the annual income of the nation averagedfive hundred and fifteen million pounds, according to the calculations of Messrs. Leone Levi, Dudley Baxter, Mulhall, and Giffen.[21]The actual figures are as follows:—In 1887 the estimates of the value of agricultural products per each individual actually engaged in agriculture were: United Kingdom,ninety-eight pounds; France,seventy-one pounds; Belgium,fifty-six pounds; Germany,fifty-two pounds; Austria,thirty-one pounds; Italy,thirty-seven pounds.[22]It is understating the case to say that the British operative to-day works one hundred and eighty-nine hours less annually than his predecessor of forty or fifty years ago, and one hundred and eighty-nine hours = three weeks of nine hours a day. To this must be added at least a week of additional holidays.[23]The hours of labour in Switzerland are, on an average, sixty-six a week.[24]The agricultural population in France is abouteighteen millions; in this country, aboutsix millions. The produce of France is worth aboutfour hundred and fourteen million pounds; of this country,two hundred and twenty-six million pounds.[25]According to Eden it was aboutseventeen hundred million poundsat the beginning of the present century. Twenty-five years previously it was, according to Young’s estimate,eleven hundred million pounds.[26]I have not mentioned Profits. They consist, says Mill, of Interest on Capital and Wages of Superintendence; to which he adds compensation for risk—a most important item, but not requiring to be included here.[27]From 1716 to 1770 the cotton manufactured in this country annually averaged undertwo and a half million poundsweight. From 1771 to 1775 it wasfour million seven hundred thousand pounds. From 1781 to 1785 it waseleven million pounds. From 1791 to 1795 it wastwenty-six million pounds; and from 1795 to 1800 it wasthirty-seven million pounds.[28]Pitt estimated that the hands employed in spinning increased from forty thousand to eighty thousand between the years 1760 and 1790.[29]Were any confirmation of this conclusion needed, it is afforded us by the fact that in 1786 a spinner receivedten shillingsa pound for spinning cotton of a certain quality: in 1795 he had received onlyeightpence, or a fifteenth part of ten shillings; and yet in the course of a similar day’s labour, he made more money than he had been able to do under the former scale of payment. The price of spinning No. 100 wasten shillingsper pound in 1786; in 1793,two shillings and sixpence. The subsequent drop toeightpencecoincided with the application of machinery to the working of the mule.[30]Were this work a treatise on political economy, rather than a work on practical politics, in which only the simplest and most fundamental economic principles are insisted on, I should have here introduced a chapter on the special and peculiar part which fixed capital, other than machinery, plays in agriculture. I have not done so, however, for fear of interrupting the thread of the main argument; but it will be useful to call the reader’s attention to the subject in a note.It was explained in the last chapter that rent (to speak with strict accuracy) is not to be described as the product of superior soils, but rather as the product of the qualities which make such soils superior—qualities which are present in them and which in poorer soils are absent. Now in speaking of rent, we assumed these superior qualities to be natural. As a matter of fact, however, in highly cultivated countries, many of them are artificial. They have been added to the soil by human exertion—for instance by the process of draining; or they have been actually placed in the soil, as by the process of manuring. In this way land and capital merge and melt into one another, and illustrate each other’s functions as productive agents. It is impossible to imagine a more complete and beautiful example of the relation between the two. At this point the rent of Capital and the rent of Land become indistinguishable.[31]In a state where the employing class were physically the masters of the employed, Wage Capital would be unnecessary for the employer. A system of forced labour might take its place.[32]This was Pitt’s computation.SeeLecky,History of England during the Eighteenth Century, vol. vi. chap. xxiii.[33]The amount of land, formerly waste, that was added to the cultivable area during the last century, was in England and Wales not more than sixteen per cent of the total.[34]The rental of Great Britain in 1750 was aboutthirteen million five hundred thousand pounds, and in 1800 abouttwenty-nine million six hundred thousand pounds. According to the estimates of Arthur Young, the farmer’s income somewhat more. The wages of Agricultural Labour had not risen proportionately.[35]SeeEncyclopædia Britannica, first and earlier editions.[36]SeeEncyclopædia Britannica, first and earlier editions. The product of each smelting furnace in use in 1780 wastwo hundred and ninety-four tonsannually. In 1788, these same furnaces were producing, by the aid of new inventions,five hundred and ninety-four tons.[37]According to Arthur Young’s estimates, the earnings of an agricultural family, consisting of seven persons all capable of work, would be aboutfifty-one poundsannually. This gives a little overseven poundsa head; but when the children and others not capable of work are taken into account the average is considerably lower. The wages, however, of the artisan class being higher, the average amount per head taken by the whole working population would be aboutseven pounds.[38]About £1 12s. per head would have to be set down to land, were the land question being dealt with. But for the purpose of the above discussion, land may be ignored, as it does not affect the problem.[39]This fact has been commented on with much force by Mr. Gourlay in a paper contributed by him to theNational Review.[40]The matter may also be put in this way. There areninety-nine labourersengaged on a certain work at which there is room fora hundred. Theninety-nine menproduce every week value to the amount ofninety-nine pounds. There are two candidates for the hundredth place: one a labourer, John; and one, a man of ability, James. If John takes the vacant place, we havea hundred menproducinga hundred pounds. If James takes the vacant place, the productivity of labour by his action is (we will say) doubled, and we havea hundred menproducinga hundred and ninety-eight pounds. No amount of theory based on the fact that James could do nothing without theninety-nine labourerscan obscure or do away with the practical truth and importance of the fact that the exertion of James will produceninety-eight poundsmore than the exertion of John; and any person with whom the decision rested, which of these two men should take the hundredth place, would base their decision on this fact.[41]I saypracticallyas absurd, meaning absurd and practically meaningless in an economic argument. There are many points of view from which it would be philosophically true.[42]The examples given above might be multiplied indefinitely. Maudslay was brought up as a “powder-boy” at Woolwich. The inventors of the planing machine, Clements and Fox, were brought up, the one as a slater, the other as a domestic servant. Neilson, the inventor of the hot-blast, was a millwright. Roberts, the inventor of the self-acting mule and the slotting-machine, was a quarryman. The illustrious Bramah began life as a common farm-boy.[43]By labouring classes is meant all those families having incomes of less than ahundred and fifty poundsa year. The substantial accuracy of this rough classification has already been pointed out. No doubt they include many persons who are not manual labourers; but against this must be set the fact that, according to the latest evidence, there are at least ahundred and eighty thousandskilled manual labourers who earn more than ahundred and fifty pounds. And, at all events, whether the classes in question are manual labourers or not, they are, with very manifest exceptions, wage-earners—that is to say, for whatever money they receive they give work which is estimated at at least the same money value. A schoolmaster, for instance, who receives ahundred and forty poundsa year gives in return teaching which is valued at the same sum. School teaching is wealth just as much as a schoolhouse; it figures in all estimates as part of the national income; and therefore the schoolmaster is a producer just as much as the school builder.[44]This corresponds with Arthur Young’s estimate of wages for about the same period.[45]Statisticians estimate that in 1860 the working classes of the United Kingdom received in wagesfour hundred million pounds; the population then being about twice what it was at the close of the last century. In order to arrive at the receipts of British Labour, the receipts of Irish Labour must be deducted from this total. The latter are proportionately much lower than the former, and could not have reached the sum ofeighty million pounds. But assuming them to have reached that, and deductingeighty million poundsfromfour hundred million pounds, there is left for British Labourthree hundred and twenty million pounds, to be divided, roughly speaking, amongsttwenty millionpeople; which for eachten millionsyields ahundred and sixty million pounds.[46]According to the latest estimates, it exceedsseven hundred million pounds.[47]The entire population has risen from abouttwenty-seven million five hundred thousandtothirty-eight millions. But a large part of this increase has taken place amongst the classes who pay income-tax, and are expressly excluded from the above calculations. These classes have risen fromone million five hundred thousandtofive millions.[48]These considerations are so obvious, and have been so constantly dwelt upon by all economic writers, other than avowed Socialists, that it is quite unnecessary here to insist on these further. Even the Socialists themselves have recognised how much force there is in them, and have consequently been at pains to meet them by the following curious doctrine. They maintain that a man who makes or inherits a certain sum has a perfect right to possess it, to hoard it, or squander it on himself; but no right to any payment for the use made of it by others. They argue that if he puts it into a business he is simply having it preserved for him; for the larger part of the Capital at any time existing would dwindle and disappear if it were not renewed by being used. Let him put it into a business, say the Socialists, and draw it out as he wants it. Few things can show more clearly than this suggested arrangement the visionary character of the Socialistic mind; for it needs but little thought to show that such an arrangement would defeat its own objects and be altogether impracticable. The sole ground on which the Socialists recommend it, in preference to the arrangement which prevails at present, is that the interest which the owners of the Capital are forbidden to receive themselves would by some means or other be taken by the State instead and distributed amongst the labourers as an addition to their wages, and would thus be the means of supplying them with extra comforts. Now the interest if so applied would, it is needless to say, be not saved but consumed. But the owners of the Capital, who are thus deprived of their interest, are to have the privilege, according to the arrangement we are considering, of consuming their Capital in lieu of the interest that has been taken from them. Accordingly, whereas the interest is all that is consumed now, under this arrangement the Capital would be consumed as well. The tendency, in fact, of the arrangement would be neither more nor less than this: to increase the consumption of the nation at the expense of its savings, until at last all the savings had disappeared. It would be impracticable also for many other reasons, to discuss which here would simply be waste of time. It is enough to observe that the fact of its having been suggested is only a tribute to the insuperable nature of the difficulty it was designed to meet.[49]The part played in national progress by the mere business sagacity of investors, amounts practically to a constant criticism of inventions, discoveries, schemes, and enterprises of all kinds, and the selection of those that are valuable from amongst a mass of what is valueless and chimerical.[50]See Mr. Giffen’s Inaugural Address of the Fiftieth Session of the Statistical Society.[51]The gross amount assessed to income-tax in 1891 was nearlyseven hundred million pounds; now more thana hundred million poundswas exempt, as belonging to persons with incomes of less thana hundred and fifty poundsa year. Mr. Giffen maintains (see his evidence given before the Royal Commission on Labour, 7th December 1892) that there is an immense middle-class income not included amongst the wages of the labouring class. This, according to the classification adopted above, which divides the population into those with incomes above, and those with incomes belowa hundred and fifty pounds, would raise the collective incomes of the latter to overseven hundred million pounds.[52]See Mr. Giffen’s Address, as above.[53]If the number of employers does not increase, it is true that they, unlike the employed, will be richer in proportion to their numbers; but they will be poorer in proportion to the number of men employed by them.[54]Thus the old theory of the wage-fund, which has so often been attacked of late, has after all this great residuary truth, namely, that the amount of wealth that is spent and taken in wages is limited by the total amount of wealth producedin proportion to the numberof labourers who assist in its production. That theory, however, as commonly understood, is no doubt erroneous, though not for the reasons commonly advanced by its critics. The theory of a wage-fund as commonly understood means this—that if there were eight labourers and a capital offour hundred pounds, which would be spent in wages and replaced within a year, and if this were distributed in equal shares offifty pounds, it would be impossible to increase the share of one labourer without diminishing that of the others; or to employ more labourers without doing the same thing. But the truth is that if means were discovered by which the productivity of any one labourer could be doubled during the first six months, the wholefifty poundsdestined for his whole year’s subsistence might be paid to him during the first six months, and the fund would meanwhile have been created with which to pay him a similar sum for the next six months—the employer gaining in the same proportion as the labourer. So, too, with regard to an additional number of labourers—if ability could employ their labour to sufficient advantage, part of the sum destined to support the original labourer for the second six months of the year might be advanced to them, and before the second six months’ wages became due there might be enough to pay an increased wage to all.[55]This is true even of productive or distributive industries carried out by the State. The real Socialistic principle of production has never been applied by the State, or by any municipal authority; nor has any practical party so much as suggested that it should be. The manager of a State factory has just the same motive to save that an ordinary employer has: he can invest his money, and get interest on it. A State or a municipal business differs only from a private Capitalist’s business either in making no profits, as is the case in the building of ships of war; or of securing the services of Ability at a somewhat cheaper rate, and, in consequence, generally diminishing its efficacy. Of State business carried on at a profit, the Post Office offers the best example; and it is the example universally fixed on by contemporary English Socialists. It is an example, however, which disproves everything that they think it proves; and shows the necessary limitations of the principle involved, instead of the possibility of its extension. For, in the first place, the object aimed at—i.e.the delivery of letters—is one of exceptional simplicity. In the second place, all practical men agree that, could the postal service be carried out by private and competing firms, it would (at all events in towns) be carried out much better; only the advantages gained in this special and exceptional case from the entire service being under a single management, outweigh the disadvantages. And lastly, the business, as it stands, is a State business in the most superficial sense only. The railways and the steamers that carry the letters are all the creations of private enterprise, in which the principle of competition, and the motive force of the natural rewards of Ability, have had free play. Indeed the Post Office, as we now know it, if we can call it Socialistic at all, represents only a superficial layer of State Socialism resting on individualism, and only made possible by its developments. Real State Socialism would be merely the Capitalistic system minus the rewards of that Ability by which alone Capital is made productive.[56]Principles of Economics, by Alfred Marshall, book iv. chap. vii.[57]Though I have aimed at excluding from this volume all controversial matter, I may here hazard the opinion that the Socialistic principle is most properly applied to providing the labourers, not with things that they would buy if they were able to do so, but things that naturally they would not buy. Things procurable by money may be divided into three classes—things that are necessary, things that are superfluous, and things that are beneficial. Clothing is an example of the first class, finery of the second, and education of the third. If a man receives food from the State, otherwise than as a reward for a given amount of labour, his motive to labour will be lessened. If a factory girl, irrespective of her industry, was supplied by the State with fashionable hats and jackets, her motive to labour would be lessened also; for clothing and finery are amongst the special objects to procure which labour is undertaken. But desire to be able to pay for education does not constitute, for most men and women, a strong motive to labour; and therefore education may be supplied by the State, without the efficacy of their labour being interfered with.[58]In our imaginary community we have at first eight labourers, who producefifty poundsa year a-piece =four hundred pounds. Then we have eight labourers + one able man, who producefour hundred poundsa year for each labourer =three thousand two hundred pounds. Of this the able man takestwo thousand eight hundred pounds. Now, suppose the labourers strike for double wages, and succeed in getting them, their total wages areeight hundred poundsa year instead offour hundred pounds; and the employer’s income istwo thousand four hundred poundsinstead oftwo thousand eight hundred pounds. The labourers gain a hundred per cent; the employer loses little more than fourteen per cent. The labourers therefore have a stronger motive in demanding than the employer has in resisting. But let us suppose that, the total income of the community remaining unchanged, the labourers have succeeded in obtainingone thousand eight hundred pounds, thus leaving the employerone thousand four hundred pounds. The situation will now be changed. The labourers could not possibly now gain an increase of a hundred per cent, for the entire income available would not supply this; but let us suppose they strike for an increase oftwo hundred pounds. If they gained that, their income would betwo thousand pounds, and that of the employerone thousand two hundred pounds; but the former situation would be reversed. The employer now would lose more than the labourer would gain. The labourers would gain, in round numbers, only eleven per cent; and the employer would lose fourteen per cent. Therefore the employer would have a stronger motive in resisting than the labourers in demanding.[59]The possibility of such a result would depend upon two assumptions, which are not in accordance with reality, and for which allowance must be made. The first is the assumption that the labouring population is stationary; the second is that Ability can increase the productivity of Labour equally in all industries. In reality, however, as was noticed in the last chapter, the number of labourers increases constantly, and the improvements in different industries are very unequal; and, owing to these two causes, it often happens that the total value produced in some industries by Labour and Ability together is not so great as is the share that is taken by Labour in others. Thus the labourers employed in the inferior industries could by no possibility raise their wages to the amount received by the labourers employed in the superior ones. Their effort accordingly would be to obtain employment in the latter, and to do so by accepting wages higher indeed than what they receive at present, but lower than those received by the men whose positions they wish to take. Thus, under such circumstances, a union of industrial interests ceases to be any longer possible. By an irresistible and automatic process, there is produced an antagonism between them; and the labourers who enjoy the higher wages will do what is actually done by our Trade Unions: they will form a separate combination to protect their own interests, not only against the employers, but even more directly against other labourers. At a certain stage of their demands, the labourers may be able to combine more readily and more closely than the employers; but when a certain stage has been passed, the case will be the reverse. The employers will be forced more and more into unanimous action, whilst the labourers, by their diverging interests, are divided into groups whose action is mutually hostile.[60]The reader must always bear in mind the definition given of Labour, as that kind of industrial exertion which is applied to one task at a time only, and while so applied begins and ends with that task; as distinguished from Ability, which influences simultaneously an indefinite number of tasks.[61]Mr. Shaw, for instance, is at much pains to point out that Ability is not one definite thing, as the power of jumping is, and makes himself merry by asking if Wellington’s Ability could be compared with Cobden’s, or Napoleon’s with Beethoven’s. This is all beside the mark. I have been careful to define the sense in which I used the word Ability—to define it with the utmost exactness. I have said that I use it as meaning productive Ability—industrial Ability. That is to say, those faculties by which men, not labouring themselves, are capable of directing to the best advantage the labour of others, with a view to the production of economic commodities. In the Middle Ages I said that another kind of Ability was more important—i.e.Military Ability, instead of Economic; and the historical importance of this fact, which Mr. Shaw says I discovered only after I had written my first article on Fabian Economics, I insisted on, at much greater length, years ago, when criticising Karl Marx’s “Theory of Value,” in this [the Fortnightly] Review. Again, let Mr. Shaw turn toLabour and the Popular Welfare, p. 328, and he will find what he says put more clearly by myself than by him.[62]It is interesting to see the analysis which Mr. Shaw gives of the elements which make up thefive hundred million pounds(see page 482 of his article). It shows a curious want of sense of proportion, and reads much like a statement that a young man’s bankruptcy was due to theone hundred thousand poundshe has spent on the turf, thefifty thousand poundshe had spent on building a house, thefifty poundshe has spent on a fur coat, and the sixpence he gave last Saturday to the porter at Paddington Station. But there is in it a more serious error than this. Mr. Shaw says, and rightly, that a large part of the millions to which he alludes consists of payments to artists and other professional men (e.g.doctors), by very rich commonplace people competing for their services. But he entirely mistakes the meaning of this fact. I have pointed it out carefully inLabour and the Popular Welfare(Book I. chap. iii.) and have illustrated it by one of the exact cases Mr. Shaw has in view, viz. that of a doctor who gets a fee ofone thousand two hundred poundsfrom “a very rich commonplace person.” I pointed out that in the estimates, from which Mr. Shaw gets his figures offive hundred million pounds, all such payments are counted twice over. The “very rich commonplace person” and the doctor both pay income-tax on and are regarded as possessing the sameone thousand two hundred pounds. As matters stand this is right enough, for the patient receives either in good or fancied good an equivalent for his fee in the doctor’s services; but if the sum in question were to be divided up and distributed, there would for distribution be oneone thousand two hundred poundsonly. By reference to calculations of Professor Leone Levi, with whom I corresponded on these matters, I drew the conclusion that the sum thus counted twice over was aboutone hundred million poundsannually ten years ago. This would knock off twenty per cent at once from Mr. Shaw’sfive hundred million pounds; and I may again mention Mr. Giffen’s emphatic warning that, if we are thinking of any general redistribution, anothertwo hundred million poundswould have to be deducted from the sums which persons like Mr. Shaw imagine await their seizure.[63]The case may also be put in another way. Interest is the product of capitalquâcapital, as opposed to the product of ability as distinct from capital. But the bulk of modern capital is historically the creation of ability, which has miraculously multiplied the few loaves and fishes existing at the close of the last century. Interest may therefore be called the secondary or indirect product of ability, whilst earnings and profits may be called the direct product of ability. Any one who is living on interest at the present moment is almost sure to be living, not on his own ability, but on the products of the ability of some member of his own family who has added to the national wealth within the past two generations. Suppose a man who died in 1830 left a fortune oftwo hundred thousand pounds, which he made, as Salt did, by the invention and production of some new textile fabric; and suppose that this fortune is now in the hands of a foolish and feeble grandson, who enjoyseight thousand poundsa year. This is evidently not the product of the grandson’s ability; but it is the product of the ability of the grandfather. The truth of this may be easily seen by altering the supposition thus—by supposing that the original maker of the fortune, instead of dying in 1830, is alive now, but as imbecile as we supposed his grandson to be. He has, we will say, long retired from business, and lives on the interest of the capital he made when his faculties were in their vigour. Would any one say that he is not living on his own ability? The only difference is—and it is a difference which, from many points of view, is of the greatest importance—that formerly he was living on the direct product of his ability, and he is now living on its indirect product.

[1]Writers also from whom better things might have been expected make use of the same foolish language. “The proletarian, in accepting the highest bid, sells himself openly into bondage” (Fabian Essays, p. 12).

[2]According to Professor Leone Levi, the actual sum would beone hundred and thirteen million pounds: but in dealing with estimates such as these, in which absolute accuracy is impossible, it is better, as well as more convenient, to use round numbers. More than nine-tenths of this sum belongs to the income of the classes that pay income-tax. Of the working-class income, not more than two per cent is counted twice over, according to Professor Leone Levi.

[3]There is a general agreement amongst statisticians with regard to these figures.Cf.Messrs Giffen, Mulhall, and Leone Levipassim.

[4]Out of anythousandinhabitants,two hundred and fifty-eightare under ten years of age; andthree hundred and sixty-sixout of everythousandare under fifteen.

[5]Statistics in support of the above result might be indefinitely multiplied, both from European countries and America. So far as food is concerned, scientific authorities tell us that iftwentyrepresents the amount required by a man, a woman will requirefifteen, and a childeleven; but the total expenditures necessary are somewhat different in proportion.

[6]The total imperial taxation in the United Kingdom is abouttwo pounds eight shillingsper head; and the total local taxation is aboutone pound four shillings. Thus the two together come tothree pounds twelve shillingsper head, which for every family of four and a half persons gives a total ofsixteen pounds four shillings.

[7]The number of females over fifteen years of age is abouttwelve millions. Those who work for wages number less thanfive millions.

[8]Mr. Giffen’s latest estimates show that not more than twenty-three per cent of the wage-earners in this country earn less thantwenty shillingsa week; whilst seventy-seven per cent earn this sum and upwards. Thirty-five per cent earn fromtwenty shillingstotwenty-five shillings; and forty-one per cent earn more thantwenty-five shillings. See evidence given by Mr. Giffen before the Labour Commission, 7th December 1892.

[9]The reader must observe that I speak of therentof the land, not of the land itself, as the subject of the above calculation. I forbear to touch the question of any mere change in the occupancy or administration of the land, or even of any scheme of nationalising the land by purchasing it at its market price from the owners; for by none of these would the present owners be robbed pecuniarily, nor would the nation pecuniarily gain, except in so far as new conditions of tenure made agriculture more productive. All such schemes are subjects of legitimate controversy, or, in other words, are party questions; and I therefore abstain from touching them. I deal in the text with facts about which there can be no controversy.

[10]It is also every year becoming more unimportant, in diametrical contradiction of the theories of Mr. H. George. This was pointed out some twelve years ago by Professor Leone Levi, who showed that whereas in 1814 the incomes of the landlord and farmer were fifty-six per cent of the total assessed to income-tax, in 1851 they were thirty-seven per cent, and in 1880 only twenty-four per cent. They are now only sixteen per cent.

[11]See Local Government Board valuation of 1878.

[12]Recent falls in rent make it impossible to give the figures with actual precision; but the returns in the New Doomsday Book, taken together with subsequent official information, enable us to arrive at the substantial facts of the case. In 1878 the rental of the owners of more thana thousandacres wastwenty-nine million pounds. The rental of the rural owners of smaller estates wasthirty-two million pounds; and the rental of small urban and suburban owners wasthirty-six million pounds. The suburban properties averagedthree and a halfacres, the average rent beingthirteen poundsper acre.

[13]According to the Local Government Report of 1878, the rental of all the properties overfive hundredacres averagedthirty-six shillingsan acre; that of properties betweenfiftyanda hundredacres,forty-eight shillingsan acre; and that of properties betweentenandfiftyacres,a hundred and sixteen shillingsan acre. In Scotland, the rental of properties overfive hundredacres averagednine shillingsan acre: that of properties betweentenandfiftyacres,four hundred and thirteen shillings. With regard to the value of properties undertenacres, the following Scotch statistics are interesting. Four-fifths of the ground rental of Edinburgh is taken by owners of less than one acre, the rental of such owners being on an averageninety-nine pounds. Three-fourths of the ground rental of Glasgow is taken by owners of similar plots of ground; only there the rental of such owners isa hundred and seventy-one pounds. In the municipal borough of Kilmarnock, land owned in plots of less than an acre lets per acre atthirty-two pounds. The land of the few men who own larger plots lets for not more thantwenty pounds. Each one of theeleven thousandmen who own collectively four-fifths of Edinburgh, has in point of money as much stake in the soil as though he were the owner in Sutherland oftwo thousandacres: and each one of theten thousandmen who own collectively three-fourths of Glasgow, has as much stake in the soil as though he were the owner in Sutherland ofthree thousand four hundredacres.

[14]This is Mr. Giffen’s estimate. Mr. Mulhall, who has made independent calculations, does not differ from Mr. Giffen by more than five per cent.

[15]General merchandise is estimated by Mr. Mulhall atthree hundred and forty-three million pounds. For everyhundredinhabitants in the year 1877 there werefivehorses,twenty-eightcows,seventy-sixsheep, andtenpigs. In 1881 there were in Great Britainfive million four hundred and seventy-five thousandhouses. The rent of eighty-seven per cent of these was underthirty poundsa year, and the rental of more than a half averaged onlyten pounds. The total house-rental of Great Britain in that year wasone hundred and fourteen million pounds; and the aggregate total of houses overthirty poundsannual value wassixty million pounds; though in point of number these houses were only thirteen per cent of the whole.

[16]This classification of houses may perhaps be objected to; but from the above point of view it is correct. Houses represent an annual income ofone hundred and thirty-five million pounds. Not more thanthirty-five million poundsare spent annually in building new houses; whilst the whole are counted as representing a newone hundred million poundsevery year. It is plain, therefore, that if we estimate the entire annual value as above, the sum in question stands not for the houses, but for the use of them. Even more clearly does the same reasoning apply to railways and shipping. Whether we send goods by these or are conveyed by them ourselves, all that we get from them is the mere service of transport. On transport and travelling by railway aboutseventy million poundsare spent annually: by ship aboutthirty million pounds; by trams abouttwo million pounds.

[17]The total annual imports are aboutfour hundred and twenty million pounds. The amount retained for home consumption is aboutthree hundred and sixty-five million pounds.

[18]The approximate value of the food consumed annually in the United Kingdom (exclusive of alcoholic drinks) istwo hundred and ninety million pounds. The total value of food imported is overone hundred and fifty million pounds.

[19]The number of persons fed on home-grown meat wastwenty-three millions one hundred thousand. The number fed on imported meat wasfourteen millions seven hundred thousand. In other words, the number of persons who subsist on imported meat now is about equal to the entire population of the United Kingdom in 1801.

[20]From the year 1843 to 1851, the annual income of the nation averagedfive hundred and fifteen million pounds, according to the calculations of Messrs. Leone Levi, Dudley Baxter, Mulhall, and Giffen.

[21]The actual figures are as follows:—In 1887 the estimates of the value of agricultural products per each individual actually engaged in agriculture were: United Kingdom,ninety-eight pounds; France,seventy-one pounds; Belgium,fifty-six pounds; Germany,fifty-two pounds; Austria,thirty-one pounds; Italy,thirty-seven pounds.

[22]It is understating the case to say that the British operative to-day works one hundred and eighty-nine hours less annually than his predecessor of forty or fifty years ago, and one hundred and eighty-nine hours = three weeks of nine hours a day. To this must be added at least a week of additional holidays.

[23]The hours of labour in Switzerland are, on an average, sixty-six a week.

[24]The agricultural population in France is abouteighteen millions; in this country, aboutsix millions. The produce of France is worth aboutfour hundred and fourteen million pounds; of this country,two hundred and twenty-six million pounds.

[25]According to Eden it was aboutseventeen hundred million poundsat the beginning of the present century. Twenty-five years previously it was, according to Young’s estimate,eleven hundred million pounds.

[26]I have not mentioned Profits. They consist, says Mill, of Interest on Capital and Wages of Superintendence; to which he adds compensation for risk—a most important item, but not requiring to be included here.

[27]From 1716 to 1770 the cotton manufactured in this country annually averaged undertwo and a half million poundsweight. From 1771 to 1775 it wasfour million seven hundred thousand pounds. From 1781 to 1785 it waseleven million pounds. From 1791 to 1795 it wastwenty-six million pounds; and from 1795 to 1800 it wasthirty-seven million pounds.

[28]Pitt estimated that the hands employed in spinning increased from forty thousand to eighty thousand between the years 1760 and 1790.

[29]Were any confirmation of this conclusion needed, it is afforded us by the fact that in 1786 a spinner receivedten shillingsa pound for spinning cotton of a certain quality: in 1795 he had received onlyeightpence, or a fifteenth part of ten shillings; and yet in the course of a similar day’s labour, he made more money than he had been able to do under the former scale of payment. The price of spinning No. 100 wasten shillingsper pound in 1786; in 1793,two shillings and sixpence. The subsequent drop toeightpencecoincided with the application of machinery to the working of the mule.

[30]Were this work a treatise on political economy, rather than a work on practical politics, in which only the simplest and most fundamental economic principles are insisted on, I should have here introduced a chapter on the special and peculiar part which fixed capital, other than machinery, plays in agriculture. I have not done so, however, for fear of interrupting the thread of the main argument; but it will be useful to call the reader’s attention to the subject in a note.It was explained in the last chapter that rent (to speak with strict accuracy) is not to be described as the product of superior soils, but rather as the product of the qualities which make such soils superior—qualities which are present in them and which in poorer soils are absent. Now in speaking of rent, we assumed these superior qualities to be natural. As a matter of fact, however, in highly cultivated countries, many of them are artificial. They have been added to the soil by human exertion—for instance by the process of draining; or they have been actually placed in the soil, as by the process of manuring. In this way land and capital merge and melt into one another, and illustrate each other’s functions as productive agents. It is impossible to imagine a more complete and beautiful example of the relation between the two. At this point the rent of Capital and the rent of Land become indistinguishable.

It was explained in the last chapter that rent (to speak with strict accuracy) is not to be described as the product of superior soils, but rather as the product of the qualities which make such soils superior—qualities which are present in them and which in poorer soils are absent. Now in speaking of rent, we assumed these superior qualities to be natural. As a matter of fact, however, in highly cultivated countries, many of them are artificial. They have been added to the soil by human exertion—for instance by the process of draining; or they have been actually placed in the soil, as by the process of manuring. In this way land and capital merge and melt into one another, and illustrate each other’s functions as productive agents. It is impossible to imagine a more complete and beautiful example of the relation between the two. At this point the rent of Capital and the rent of Land become indistinguishable.

[31]In a state where the employing class were physically the masters of the employed, Wage Capital would be unnecessary for the employer. A system of forced labour might take its place.

[32]This was Pitt’s computation.SeeLecky,History of England during the Eighteenth Century, vol. vi. chap. xxiii.

[33]The amount of land, formerly waste, that was added to the cultivable area during the last century, was in England and Wales not more than sixteen per cent of the total.

[34]The rental of Great Britain in 1750 was aboutthirteen million five hundred thousand pounds, and in 1800 abouttwenty-nine million six hundred thousand pounds. According to the estimates of Arthur Young, the farmer’s income somewhat more. The wages of Agricultural Labour had not risen proportionately.

[35]SeeEncyclopædia Britannica, first and earlier editions.

[36]SeeEncyclopædia Britannica, first and earlier editions. The product of each smelting furnace in use in 1780 wastwo hundred and ninety-four tonsannually. In 1788, these same furnaces were producing, by the aid of new inventions,five hundred and ninety-four tons.

[37]According to Arthur Young’s estimates, the earnings of an agricultural family, consisting of seven persons all capable of work, would be aboutfifty-one poundsannually. This gives a little overseven poundsa head; but when the children and others not capable of work are taken into account the average is considerably lower. The wages, however, of the artisan class being higher, the average amount per head taken by the whole working population would be aboutseven pounds.

[38]About £1 12s. per head would have to be set down to land, were the land question being dealt with. But for the purpose of the above discussion, land may be ignored, as it does not affect the problem.

[39]This fact has been commented on with much force by Mr. Gourlay in a paper contributed by him to theNational Review.

[40]The matter may also be put in this way. There areninety-nine labourersengaged on a certain work at which there is room fora hundred. Theninety-nine menproduce every week value to the amount ofninety-nine pounds. There are two candidates for the hundredth place: one a labourer, John; and one, a man of ability, James. If John takes the vacant place, we havea hundred menproducinga hundred pounds. If James takes the vacant place, the productivity of labour by his action is (we will say) doubled, and we havea hundred menproducinga hundred and ninety-eight pounds. No amount of theory based on the fact that James could do nothing without theninety-nine labourerscan obscure or do away with the practical truth and importance of the fact that the exertion of James will produceninety-eight poundsmore than the exertion of John; and any person with whom the decision rested, which of these two men should take the hundredth place, would base their decision on this fact.

[41]I saypracticallyas absurd, meaning absurd and practically meaningless in an economic argument. There are many points of view from which it would be philosophically true.

[42]The examples given above might be multiplied indefinitely. Maudslay was brought up as a “powder-boy” at Woolwich. The inventors of the planing machine, Clements and Fox, were brought up, the one as a slater, the other as a domestic servant. Neilson, the inventor of the hot-blast, was a millwright. Roberts, the inventor of the self-acting mule and the slotting-machine, was a quarryman. The illustrious Bramah began life as a common farm-boy.

[43]By labouring classes is meant all those families having incomes of less than ahundred and fifty poundsa year. The substantial accuracy of this rough classification has already been pointed out. No doubt they include many persons who are not manual labourers; but against this must be set the fact that, according to the latest evidence, there are at least ahundred and eighty thousandskilled manual labourers who earn more than ahundred and fifty pounds. And, at all events, whether the classes in question are manual labourers or not, they are, with very manifest exceptions, wage-earners—that is to say, for whatever money they receive they give work which is estimated at at least the same money value. A schoolmaster, for instance, who receives ahundred and forty poundsa year gives in return teaching which is valued at the same sum. School teaching is wealth just as much as a schoolhouse; it figures in all estimates as part of the national income; and therefore the schoolmaster is a producer just as much as the school builder.

[44]This corresponds with Arthur Young’s estimate of wages for about the same period.

[45]Statisticians estimate that in 1860 the working classes of the United Kingdom received in wagesfour hundred million pounds; the population then being about twice what it was at the close of the last century. In order to arrive at the receipts of British Labour, the receipts of Irish Labour must be deducted from this total. The latter are proportionately much lower than the former, and could not have reached the sum ofeighty million pounds. But assuming them to have reached that, and deductingeighty million poundsfromfour hundred million pounds, there is left for British Labourthree hundred and twenty million pounds, to be divided, roughly speaking, amongsttwenty millionpeople; which for eachten millionsyields ahundred and sixty million pounds.

[46]According to the latest estimates, it exceedsseven hundred million pounds.

[47]The entire population has risen from abouttwenty-seven million five hundred thousandtothirty-eight millions. But a large part of this increase has taken place amongst the classes who pay income-tax, and are expressly excluded from the above calculations. These classes have risen fromone million five hundred thousandtofive millions.

[48]These considerations are so obvious, and have been so constantly dwelt upon by all economic writers, other than avowed Socialists, that it is quite unnecessary here to insist on these further. Even the Socialists themselves have recognised how much force there is in them, and have consequently been at pains to meet them by the following curious doctrine. They maintain that a man who makes or inherits a certain sum has a perfect right to possess it, to hoard it, or squander it on himself; but no right to any payment for the use made of it by others. They argue that if he puts it into a business he is simply having it preserved for him; for the larger part of the Capital at any time existing would dwindle and disappear if it were not renewed by being used. Let him put it into a business, say the Socialists, and draw it out as he wants it. Few things can show more clearly than this suggested arrangement the visionary character of the Socialistic mind; for it needs but little thought to show that such an arrangement would defeat its own objects and be altogether impracticable. The sole ground on which the Socialists recommend it, in preference to the arrangement which prevails at present, is that the interest which the owners of the Capital are forbidden to receive themselves would by some means or other be taken by the State instead and distributed amongst the labourers as an addition to their wages, and would thus be the means of supplying them with extra comforts. Now the interest if so applied would, it is needless to say, be not saved but consumed. But the owners of the Capital, who are thus deprived of their interest, are to have the privilege, according to the arrangement we are considering, of consuming their Capital in lieu of the interest that has been taken from them. Accordingly, whereas the interest is all that is consumed now, under this arrangement the Capital would be consumed as well. The tendency, in fact, of the arrangement would be neither more nor less than this: to increase the consumption of the nation at the expense of its savings, until at last all the savings had disappeared. It would be impracticable also for many other reasons, to discuss which here would simply be waste of time. It is enough to observe that the fact of its having been suggested is only a tribute to the insuperable nature of the difficulty it was designed to meet.

[49]The part played in national progress by the mere business sagacity of investors, amounts practically to a constant criticism of inventions, discoveries, schemes, and enterprises of all kinds, and the selection of those that are valuable from amongst a mass of what is valueless and chimerical.

[50]See Mr. Giffen’s Inaugural Address of the Fiftieth Session of the Statistical Society.

[51]The gross amount assessed to income-tax in 1891 was nearlyseven hundred million pounds; now more thana hundred million poundswas exempt, as belonging to persons with incomes of less thana hundred and fifty poundsa year. Mr. Giffen maintains (see his evidence given before the Royal Commission on Labour, 7th December 1892) that there is an immense middle-class income not included amongst the wages of the labouring class. This, according to the classification adopted above, which divides the population into those with incomes above, and those with incomes belowa hundred and fifty pounds, would raise the collective incomes of the latter to overseven hundred million pounds.

[52]See Mr. Giffen’s Address, as above.

[53]If the number of employers does not increase, it is true that they, unlike the employed, will be richer in proportion to their numbers; but they will be poorer in proportion to the number of men employed by them.

[54]Thus the old theory of the wage-fund, which has so often been attacked of late, has after all this great residuary truth, namely, that the amount of wealth that is spent and taken in wages is limited by the total amount of wealth producedin proportion to the numberof labourers who assist in its production. That theory, however, as commonly understood, is no doubt erroneous, though not for the reasons commonly advanced by its critics. The theory of a wage-fund as commonly understood means this—that if there were eight labourers and a capital offour hundred pounds, which would be spent in wages and replaced within a year, and if this were distributed in equal shares offifty pounds, it would be impossible to increase the share of one labourer without diminishing that of the others; or to employ more labourers without doing the same thing. But the truth is that if means were discovered by which the productivity of any one labourer could be doubled during the first six months, the wholefifty poundsdestined for his whole year’s subsistence might be paid to him during the first six months, and the fund would meanwhile have been created with which to pay him a similar sum for the next six months—the employer gaining in the same proportion as the labourer. So, too, with regard to an additional number of labourers—if ability could employ their labour to sufficient advantage, part of the sum destined to support the original labourer for the second six months of the year might be advanced to them, and before the second six months’ wages became due there might be enough to pay an increased wage to all.

[55]This is true even of productive or distributive industries carried out by the State. The real Socialistic principle of production has never been applied by the State, or by any municipal authority; nor has any practical party so much as suggested that it should be. The manager of a State factory has just the same motive to save that an ordinary employer has: he can invest his money, and get interest on it. A State or a municipal business differs only from a private Capitalist’s business either in making no profits, as is the case in the building of ships of war; or of securing the services of Ability at a somewhat cheaper rate, and, in consequence, generally diminishing its efficacy. Of State business carried on at a profit, the Post Office offers the best example; and it is the example universally fixed on by contemporary English Socialists. It is an example, however, which disproves everything that they think it proves; and shows the necessary limitations of the principle involved, instead of the possibility of its extension. For, in the first place, the object aimed at—i.e.the delivery of letters—is one of exceptional simplicity. In the second place, all practical men agree that, could the postal service be carried out by private and competing firms, it would (at all events in towns) be carried out much better; only the advantages gained in this special and exceptional case from the entire service being under a single management, outweigh the disadvantages. And lastly, the business, as it stands, is a State business in the most superficial sense only. The railways and the steamers that carry the letters are all the creations of private enterprise, in which the principle of competition, and the motive force of the natural rewards of Ability, have had free play. Indeed the Post Office, as we now know it, if we can call it Socialistic at all, represents only a superficial layer of State Socialism resting on individualism, and only made possible by its developments. Real State Socialism would be merely the Capitalistic system minus the rewards of that Ability by which alone Capital is made productive.

[56]Principles of Economics, by Alfred Marshall, book iv. chap. vii.

[57]Though I have aimed at excluding from this volume all controversial matter, I may here hazard the opinion that the Socialistic principle is most properly applied to providing the labourers, not with things that they would buy if they were able to do so, but things that naturally they would not buy. Things procurable by money may be divided into three classes—things that are necessary, things that are superfluous, and things that are beneficial. Clothing is an example of the first class, finery of the second, and education of the third. If a man receives food from the State, otherwise than as a reward for a given amount of labour, his motive to labour will be lessened. If a factory girl, irrespective of her industry, was supplied by the State with fashionable hats and jackets, her motive to labour would be lessened also; for clothing and finery are amongst the special objects to procure which labour is undertaken. But desire to be able to pay for education does not constitute, for most men and women, a strong motive to labour; and therefore education may be supplied by the State, without the efficacy of their labour being interfered with.

[58]In our imaginary community we have at first eight labourers, who producefifty poundsa year a-piece =four hundred pounds. Then we have eight labourers + one able man, who producefour hundred poundsa year for each labourer =three thousand two hundred pounds. Of this the able man takestwo thousand eight hundred pounds. Now, suppose the labourers strike for double wages, and succeed in getting them, their total wages areeight hundred poundsa year instead offour hundred pounds; and the employer’s income istwo thousand four hundred poundsinstead oftwo thousand eight hundred pounds. The labourers gain a hundred per cent; the employer loses little more than fourteen per cent. The labourers therefore have a stronger motive in demanding than the employer has in resisting. But let us suppose that, the total income of the community remaining unchanged, the labourers have succeeded in obtainingone thousand eight hundred pounds, thus leaving the employerone thousand four hundred pounds. The situation will now be changed. The labourers could not possibly now gain an increase of a hundred per cent, for the entire income available would not supply this; but let us suppose they strike for an increase oftwo hundred pounds. If they gained that, their income would betwo thousand pounds, and that of the employerone thousand two hundred pounds; but the former situation would be reversed. The employer now would lose more than the labourer would gain. The labourers would gain, in round numbers, only eleven per cent; and the employer would lose fourteen per cent. Therefore the employer would have a stronger motive in resisting than the labourers in demanding.

[59]The possibility of such a result would depend upon two assumptions, which are not in accordance with reality, and for which allowance must be made. The first is the assumption that the labouring population is stationary; the second is that Ability can increase the productivity of Labour equally in all industries. In reality, however, as was noticed in the last chapter, the number of labourers increases constantly, and the improvements in different industries are very unequal; and, owing to these two causes, it often happens that the total value produced in some industries by Labour and Ability together is not so great as is the share that is taken by Labour in others. Thus the labourers employed in the inferior industries could by no possibility raise their wages to the amount received by the labourers employed in the superior ones. Their effort accordingly would be to obtain employment in the latter, and to do so by accepting wages higher indeed than what they receive at present, but lower than those received by the men whose positions they wish to take. Thus, under such circumstances, a union of industrial interests ceases to be any longer possible. By an irresistible and automatic process, there is produced an antagonism between them; and the labourers who enjoy the higher wages will do what is actually done by our Trade Unions: they will form a separate combination to protect their own interests, not only against the employers, but even more directly against other labourers. At a certain stage of their demands, the labourers may be able to combine more readily and more closely than the employers; but when a certain stage has been passed, the case will be the reverse. The employers will be forced more and more into unanimous action, whilst the labourers, by their diverging interests, are divided into groups whose action is mutually hostile.

[60]The reader must always bear in mind the definition given of Labour, as that kind of industrial exertion which is applied to one task at a time only, and while so applied begins and ends with that task; as distinguished from Ability, which influences simultaneously an indefinite number of tasks.

[61]Mr. Shaw, for instance, is at much pains to point out that Ability is not one definite thing, as the power of jumping is, and makes himself merry by asking if Wellington’s Ability could be compared with Cobden’s, or Napoleon’s with Beethoven’s. This is all beside the mark. I have been careful to define the sense in which I used the word Ability—to define it with the utmost exactness. I have said that I use it as meaning productive Ability—industrial Ability. That is to say, those faculties by which men, not labouring themselves, are capable of directing to the best advantage the labour of others, with a view to the production of economic commodities. In the Middle Ages I said that another kind of Ability was more important—i.e.Military Ability, instead of Economic; and the historical importance of this fact, which Mr. Shaw says I discovered only after I had written my first article on Fabian Economics, I insisted on, at much greater length, years ago, when criticising Karl Marx’s “Theory of Value,” in this [the Fortnightly] Review. Again, let Mr. Shaw turn toLabour and the Popular Welfare, p. 328, and he will find what he says put more clearly by myself than by him.

[62]It is interesting to see the analysis which Mr. Shaw gives of the elements which make up thefive hundred million pounds(see page 482 of his article). It shows a curious want of sense of proportion, and reads much like a statement that a young man’s bankruptcy was due to theone hundred thousand poundshe has spent on the turf, thefifty thousand poundshe had spent on building a house, thefifty poundshe has spent on a fur coat, and the sixpence he gave last Saturday to the porter at Paddington Station. But there is in it a more serious error than this. Mr. Shaw says, and rightly, that a large part of the millions to which he alludes consists of payments to artists and other professional men (e.g.doctors), by very rich commonplace people competing for their services. But he entirely mistakes the meaning of this fact. I have pointed it out carefully inLabour and the Popular Welfare(Book I. chap. iii.) and have illustrated it by one of the exact cases Mr. Shaw has in view, viz. that of a doctor who gets a fee ofone thousand two hundred poundsfrom “a very rich commonplace person.” I pointed out that in the estimates, from which Mr. Shaw gets his figures offive hundred million pounds, all such payments are counted twice over. The “very rich commonplace person” and the doctor both pay income-tax on and are regarded as possessing the sameone thousand two hundred pounds. As matters stand this is right enough, for the patient receives either in good or fancied good an equivalent for his fee in the doctor’s services; but if the sum in question were to be divided up and distributed, there would for distribution be oneone thousand two hundred poundsonly. By reference to calculations of Professor Leone Levi, with whom I corresponded on these matters, I drew the conclusion that the sum thus counted twice over was aboutone hundred million poundsannually ten years ago. This would knock off twenty per cent at once from Mr. Shaw’sfive hundred million pounds; and I may again mention Mr. Giffen’s emphatic warning that, if we are thinking of any general redistribution, anothertwo hundred million poundswould have to be deducted from the sums which persons like Mr. Shaw imagine await their seizure.

[63]The case may also be put in another way. Interest is the product of capitalquâcapital, as opposed to the product of ability as distinct from capital. But the bulk of modern capital is historically the creation of ability, which has miraculously multiplied the few loaves and fishes existing at the close of the last century. Interest may therefore be called the secondary or indirect product of ability, whilst earnings and profits may be called the direct product of ability. Any one who is living on interest at the present moment is almost sure to be living, not on his own ability, but on the products of the ability of some member of his own family who has added to the national wealth within the past two generations. Suppose a man who died in 1830 left a fortune oftwo hundred thousand pounds, which he made, as Salt did, by the invention and production of some new textile fabric; and suppose that this fortune is now in the hands of a foolish and feeble grandson, who enjoyseight thousand poundsa year. This is evidently not the product of the grandson’s ability; but it is the product of the ability of the grandfather. The truth of this may be easily seen by altering the supposition thus—by supposing that the original maker of the fortune, instead of dying in 1830, is alive now, but as imbecile as we supposed his grandson to be. He has, we will say, long retired from business, and lives on the interest of the capital he made when his faculties were in their vigour. Would any one say that he is not living on his own ability? The only difference is—and it is a difference which, from many points of view, is of the greatest importance—that formerly he was living on the direct product of his ability, and he is now living on its indirect product.

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