A Critical Examination of Socialism
by William Hurrell Mallock
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London John Murray, Albemarle Street, W. 1908 Printed by Hazell, Watson and Viney, Ld., London and Aylesbury.


The Civic Federation of New York, an influential body which aims, in various ways, at harmonising apparently divergent industrial interests in America, having decided on supplementing its other activities by a campaign of political and economic education, invited me, at the beginning of the year 1907, to initiate a scientific discussion of socialism in a series of lectures or speeches, to be delivered under the auspices of certain of the great Universities in the United States. This invitation I accepted, but, the project being a new one, some difficulty arose as to the manner in which it might best be carried out—whether the speeches or lectures should in each case be new, dealing with some fresh aspect of the subject, or whether they should be arranged in a single series to be repeated without substantial alteration in each of the cities visited by me. The latter plan was ultimately adopted, as tending to render the discussion of the subject more generally comprehensible to each local audience. A series of five lectures, substantially the same, was accordingly delivered by me in New York, Cambridge, Chicago, Philadelphia, and Baltimore. But whilst this plan secured continuity of treatment, it secured it at the expense of comprehensiveness. Certain important points had to be passed over. In the present volume the substance of the original lectures has been entirely rearranged and rewritten, and more than half the matter is new. Even in the present volume, however, it has been impossible to treat the subject otherwise than in a general way. At almost every point a really complete discussion would necessitate a much fuller analysis of facts than it has been practicable to give here. Arguments here necessarily confined to a few pages or to a chapter, would each, for their complete elucidation, require a separate monograph. Most readers, however, will be able to supply much of what is missing, by the light of their own common sense; and general arguments, in which, as in block plans of buildings, many details are suppressed, have for practical purposes the great advantage of being generally and easily intelligible, whereas, if stated in fuller and more complex form, they might confuse rather than enlighten a large number of readers.

The fact that the fundamental arguments of this volume were disseminated throughout the United States, not only at the meetings addressed, but also in all the leading newspapers, has had the valuable result, by means of the mass of criticisms which they elicited, of illustrating the manner in which socialists attempt to meet them; and has enabled me to revise, with a view to farther clearness, certain passages which were intentionally or unintentionally misunderstood, and also to emphasise the curious confusions of thought into which various critics have been driven in their efforts to controvert or get round them. I may specially mention a small volume by Mr. G. Wilshire of New York—a leading publisher and disseminator of socialistic literature—which was devoted to examining my own arguments seriatim. To the principal criticisms of this writer allusions will be found in the following pages. Most of my socialistic opponents (though to this rule there were amusing exceptions) wrote, according to their varying degrees of intelligence and education, with remarkable candour, and also with great courtesy. Mr. Wilshire, in particular, whilst seeking to refute my arguments as a whole, admitted the force of many of them; and did his best, in his elaborate resume of them, to state them all fairly.

The contentions, and even the phraseology of socialists are in all countries (with the possible exception of Russia) identical. All are vitiated by the same distinctive errors, and it is indifferent whether, for purposes of detail criticism, we go to speakers and writers in this country or America. Except for the correction of a few verbal errors which have escaped my notice in the American edition, and which obscure the meaning of perhaps four or five sentences, for the introduction of a few additional notes, and for the translation of dollars and cents into pounds and shillings, the English and the American editions are the same.

W. H. M.

January, 1908.




Socialism an unrealised theory. In order to discuss it, it must be defined.

Being of no general interest except as a nucleus of some general movement, we must identify it as a theory which has united large numbers of men in a common demand for change.

As the definite theoretical nucleus of a party or movement, socialism dates from the middle of the nineteenth century, when it was erected into a formal system by Karl Marx.

We must begin our examination of it by taking it in this, its earliest, systematic form.



The doctrine of Marx that all wealth is produced by labour.

His recognition that the possibilities of distribution rest on the facts of production.

His theory of labour as the sole producer of wealth avowedly derived from Ricardo's theory of value.

His theory of capital as consisting of implements of production, which are embodiments of past labour, and his theory of modern capitalism as representing nothing but a gradual abstraction by a wholly unproductive class, of these implements from the men who made them, and who alone contribute anything to their present productive use.

His theory that wages could never rise, but must, under capitalism, sink all over the world to the amount which would just keep the labourers from starvation, when, driven by necessity, they will rebel, and, repossessing themselves of their own implements, will be rich forever afterwards by using them for their own benefit.



The theory of Marx analysed. It is true as applied to primitive communities, where the amount of wealth produced is very small, but it utterly fails to account for the increased wealth of the modern world.

Labour, as Marx conceived of it, can indeed increase in productivity in two ways, but to a small degree only, neither of which explains the vast increase of wealth during the past hundred and fifty years.

The cause of this is the development of a class which, not labouring itself, concentrates exceptional knowledge and energy on the task of directing the labour of others, as an author does when, by means of his manuscript, he directs the labour of compositors.

Formal definition of the parts played respectively by the faculties of the labouring and those of the directing classes.



Two kinds of human effort being thus involved in modern production, it is necessary for all purposes of intelligible discussion to distinguish them by different names.

The word "labour" being appropriated by common custom to the manual task-work of the majority, some other technical word must be found to designate the directive faculties as applied to productive industry. The word here chosen, in default of a better, is "ability."

Ability, then, being the faculty which directs labour, by what means does it give effect to its directions?

It gives effect to its directions by means of its control of capital, in the form of wage-capital.

Ability, using wage-capital as its implement of direction, gives rise to fixed capital, in the form of the elaborate implements of modern production, which are the material embodiments of the knowledge, ingenuity, and energy of the highest minds.



The more educated socialists of to-day, when the matter is put plainly before them, admit that the argument of the preceding chapters is correct, and repudiate the doctrine of Marx that "labour" is the sole producer.

Examples of this admission on the part of American socialists.

The socialism of Marx, however, still remains the socialism of the more ignorant classes, and also of the popular agitator.

It is, moreover, still used as an instrument of agitation by many who personally repudiate it. The case of Mr. Hillquit.

The doctrine of Marx, therefore, still requires exposure.

Further, it is necessary to understand this earlier form of socialistic theory in order to understand the later.



The more educated socialists of to-day, besides virtually accepting the argument of the preceding chapters with regard to labour, virtually accept the argument set forth in them with regard to capital.

Mr. Sidney Webb, for example, recognises it as an implement of direction, the only alternative to which is a system of legal coercion.

Other socialists advocate the continued use of wage-capital as the implement of direction, but they imagine that the situation would be radically changed by making the "state" the sole capitalist.

But the "state," as some of them are beginning to realise, would be merely the private men of ability—the existing employers—turned into state officials, and deprived of most of their present inducements to exert themselves.

A socialistic state theoretically could always command labour, for labour can be exacted by force; but the exercise of ability must be voluntary, and can only be secured by a system of adequate rewards and inducements.

Two problems with which modern socialism is confronted: How would it test its able men so as to select the best of them for places of power? What rewards could it offer them which would induce them systematically to develop, and be willing to exercise, their exceptional faculties?



How are the men fittest for posts of industrial power to be selected from the less fit?

This problem solved automatically by the existing system of private and separate capitals.

The fusion of all private capitals into a single state capital would make this solution impossible, and would provide no other. The only machinery by which the more efficient directors of labour could be discriminated from the less efficient would be broken. Case of the London County Council's steamboats.

Two forms which the industrial state under socialism might conceivably take: The official directors of industry might be either an autocratic bureaucracy, or they might else be subject to elected politicians representing the knowledge and opinions prevalent among the majority.

Estimate of the results which would arise in the former case. Illustrations from actual bureaucratic enterprise.

Estimate of the results which would arise in the latter case. The state, as representing the average opinion of the masses, brought to bear on scientific industrial enterprise. Illustrations.

The state as sole printer and publisher. State capitalism would destroy the machinery of industrial progress just as it would destroy the machinery by which thought and knowledge develop.

But behind the question of whether socialism could provide ability with the conditions or the machinery requisite for its exercise is the question of whether it could provide it with any adequate stimulus.



Mr. Sidney Webb, and most modern socialists of the higher kind, recognise that this problem of motive underlies all others.

They approach it indirectly by sociological arguments borrowed from other philosophers, and directly by a psychology peculiar to themselves.

The sociological arguments by which socialists seek to minimise the claims of the able man.

These founded on a specific confusion of thought, which vitiated the evolutionary sociology of that second half of the nineteenth century. Illustrations from Herbert Spencer, Macaulay, Mr. Kidd, and recent socialists.

The confusion in question a confusion between speculative truth and practical.

The individual importance of the able man, untouched by the speculative conclusions of the sociological evolutionists, as may be seen by the examples adduced in a contrary sense by Herbert Spencer. This is partially perceived by Spencer himself. Illustrations from his works.

Ludicrous attempts, on the part of socialistic writers, to apply the speculative generalisations of sociology to the practical position of individual men.

The climax of absurdity reached by Mr. Sidney Webb.



The individual motives of the able man as dealt with directly by modern socialists.

They abandon their sociological ineptitudes altogether, and betake themselves to a psychology which they declare to be scientific, but which is based on no analysis of facts, and consists really of loose assumptions and false analogies.

Their treatment of the motives of the artist, the thinker, the religious enthusiast, and the soldier.

Their unscientific treatment of the soldier's motive, and their fantastic proposal based on it to transfer this motive from the domain of war to that of industry.

The socialists as their own critics when they denounce the actual motives of the able man as he is and as they say he always has been. They attack the typically able man of all periods as a monster of congenital selfishness, and it is men of this special type whom they propose to transform suddenly into monsters of self-abnegation.

Their want of faith in the efficacy of their own moral suasion and their proposal to supplement this by the ballot.



Exaggerated powers ascribed to democracy by inaccurate thinkers.

An example from an essay by a recent philosophic thinker, with special reference to the rewards of exceptional ability.

This writer maintains that the money rewards of ability can be determined by the opinion of the majority expressing itself through votes and statutes.

The writer's typical error. A governing body might enact any laws, but they would not be obeyed unless consonant with human nature.

Laws are obliged to conform to the propensities of human nature which it is their office to regulate.

Elaborate but unconscious admission of this fact by the writer here quoted himself.

The power of democracy in the economic sphere, its magnitude and its limits. The demands of the minority a counterpart of those of the majority.

The demand of the great wealth-producer mainly a demand for power.

Testimony of a well-known socialist to the impossibility of altering the character of individual demand by outside influence.



The meaning of Christian socialism, as restated to-day by a typical writer.

His just criticism of the fallacy underlying modern ideas of democracy. The impossibility of equalising unequal men by political means.

Christian socialism teaches, he says, that the abler men should make themselves equal to ordinary men by surrendering to them the products of their own ability, or else by abstaining from its exercise.

The author's ignorance of the nature of the modern industrial process. His idea of steel.

He confuses the production of wealth on a great scale with the acquisition of wealth when produced.

The only really productive ability which he distinctly recognises is that of the speculative inventor.

He declares that inventors never wish to profit personally by their inventions. Let the great capitalists, he says, who merely monopolise inventions, imitate the self-abnegation of the inventors, and Christian socialism will become a fact.

The confusion which reigns in the minds of sentimentalists like the author here quoted. Their inability to see complex facts and principles, in their connected integrity, as they are. Such persons herein similar to devisers of perpetual motions and systems for defeating the laws of chance at a roulette-table.

All logical socialistic conclusions drawn from premises in which some vital truth or principle is omitted. Omission in the premises of the earlier socialists. Corresponding omission in the premises of the socialists of to-day.

Origin of the confusion of thought characteristic of Christian as of all other socialists. Temperamental inability to understand the complexities of economic life. This inability further evidenced by the fact that, with few exceptions, socialists themselves are absolutely incompetent as producers. Certain popular contentions with regard to modern economic life, urged by socialists, but not peculiar to socialism, still remain to be considered in the following chapters.



Modern socialists admit that of the wealth produced to-day labour does not produce the whole, but that some part is produced by directive ability. But they contend that labour produces more than it gets. We can only ascertain if such an assertion is correct by discovering how to estimate with some precision the amount produced by labour and ability respectively.

But since for the production of the total product labour and ability are both alike necessary, how can we say that any special proportion of it is produced by one or the other?

J.S. Mill's answer to this question.

The profound error of Mill's argument.

Practically so much of any effect is due to any one of its causes as would be absent from this effect were the cause in question taken away. Illustrations.

Labour itself produces as much as it would produce were there no ability to direct it.

The argument which might be drawn from the case of a community in which there was no labour.

Such an argument illusory; for a community in which there was no labour would be impossible; but the paralysis of ability, or its practical non-existence possible.

Practical reasoning of all kinds always confines itself to the contemplation of possibilities. Illustrations.

Restatement of proposition as to the amount of the product of labour.

The product of ability only partially described by assimilating it to rent.

Ability produces everything which would not be produced if its operation were hampered or suspended.

Increased reward of labour in Great Britain since the year 1800. The reward now received by labour far in excess of what labour itself produces.

In capitalistic countries generally labour gets, not less, but far more than its due, if its due is to be measured by its own products.

It is necessary to remember this; but its due is not to be measured exclusively by its own products.

As will be seen in the concluding chapter.



The proposal to confiscate interest for the public benefit, on the ground that it is income unconnected with any corresponding effort.

Is the proposal practicable? Is it defensible on grounds of abstract justice?

The abstract moral argument plays a large part in the discussion.

It assumes that a man has a moral right to what he produces, interest being here contrasted with this, as a something which he does not produce.

Defects of this argument. It ignores the element of time. Some forms of effort are productive long after the effort itself has ceased.

For examples, royalties on an acted play. Such royalties herein typical of interest generally.

Industrial interest as a product of the forces of organic nature. Henry George's defence of interest as having this origin.

His argument true, but imperfect. His superficial criticism of Bastiat.

Nature works through machine-capital just as truly as it does in agriculture.

Machines are natural forces captured by men of genius, and set to work for the benefit of human beings.

Interest on machine-capital is part of an extra product which nature is made to yield by those men who are exceptionally capable of controlling her.

By capturing natural forces, one man of genius may add more to the wealth of the world in a year than an ordinary man could add to it in a hundred lifetimes.

The claim of any such man on the products of his genius is limited by a variety of circumstances; but, as a mere matter of abstract justice, the whole of it belongs to him.

Abstract justice, however, in a case like this, gives us no practical guidance, until we interpret it in connection with concrete facts, and translate the just into terms of the practicable.



The practical outcome of the moral attack on interest is logically an attack on bequest.

Modern socialism would logically allow a man to inherit accumulations, and to spend the principal, but not to receive interest on his money as an investment.

What would be the result if all who inherited capital spent it as income, instead of living on the interest of it?

Two typical illustrations of these ways of treating capital.

The ultimate difference between the two results.

What the treatment of capital as income would mean, if the practice were made universal. It would mean the gradual loss of all the added productive forces with which individual genius has enriched the world.

Practical condemnation of proposed attack on interest.

Another aspect of the matter.

Those who attack interest, as distinct from other kinds of money-reward, admit that the possession of wealth is necessary as a stimulus to production.

But the possession of wealth is desired mainly for its social results far more than for its purely individual results.

Interest as connected with the sustentation of a certain mode of social life.

Further consideration of the manner in which those who attack interest ignore the element of time, and contemplate the present moment only.

The economic functions of a class which is not, at a given moment, economically productive.

Systematic failure of those who attack interest to consider society as a whole, continually emerging from the past, and dependent for its various energies on the prospects of the future.

Consequent futility of the general attack on interest, though interest in certain cases may be justly subjected to special but not exaggerated burdens.



Equality of opportunity, as an abstract demand, is in an abstract sense just; but it changes its character when applied to a world of unequal individuals.

Equality of opportunity in the human race-course. To multiply competitors is to multiply failures.

Educational opportunity. Unequal students soon make opportunities unequal.

Opportunity in industrial life. Socialistic promises of equal industrial opportunities for all. Each "to paddle his own canoe."

These absurd promises inconsistent with the arguments of socialists themselves.

A socialist's attempt to defend these promises by reference to employes of the state post-office.

Equality of industrial opportunity for those who believe themselves possessed of exceptional talent and aspire "to rise."

Opportunities for such men involve costly experiment, and are necessarily limited.

Claimants who would waste them indefinitely more numerous than those who could use them profitably.

Such opportunities mean the granting to one man the control of other men by means of wage-capital.

Disastrous effects of granting such opportunities to all or even most of those who would believe themselves entitled to them.

True remedy for the difficulties besetting the problem of opportunity.

Ruskin on human demands. Needs and "romantic wishes." The former not largely alterable. The latter depend mainly on education.

The problem practically soluble by a wise moral education only, which will correlate demand and expectation with the personal capacities of the individual.

Relative equality of opportunity, not absolute equality, the true formula.

Equality of opportunity, though much talked about by socialists, is essentially a formula of competition, and opposed to the principles of socialism.




This book, though consisting of negative criticism and analysis of facts, and not trenching on the domain of practical policy and constructive suggestion, aims at facilitating a rational social policy by placing in their true perspective the main statical facts and dynamic forces of the modern economic world, which socialism merely confuses.

In pointing out the limitations of labour as a productive agency, and the dependence of the labourers on a class other than their own, it does not seek to represent the aspirations of the former to participate in the benefits of progress as illusory, but rather to place such aspirations on a scientific basis, and so to remove what is at present the principal obstacle that stands in the way of a rational and scientific social policy.




Socialism, whatever may be its more exact definition, stands for an organisation of society, and more especially for an economic organisation, radically opposed to, and differing from, the organisation which prevails to-day. So much we may take for granted; but here, before going further, it is necessary to free ourselves from a very common confusion. When socialism, as thus defined, is spoken of as a thing that exists—as a thing that has risen and is spreading—two ideas are apt to suggest themselves to the minds of all parties equally, of which one coincides with facts, while the other does not, having, indeed, thus far at all events, no appreciable connection with them; and it is necessary to get rid of the false idea, and concern ourselves only with the true.

The best way in which I can make my meaning clear will be by referring to a point with regard to which the earlier socialistic thinkers may be fairly regarded as accurate and original critics. The so-called orthodox economists of the school of Mill and Ricardo accepted the capitalistic system as part of the order of nature, and their object was mainly to analyse the peculiar operations incident to it. The abler among the socialists were foremost in pointing out, on the contrary, a fact which now would not be denied by anybody: that capitalism in its present form is a comparatively modern phenomenon, owing its origin historically to the dissolution of the feudal system, and not having entered on its adolescence, or even on its independent childhood, till a time which may be roughly indicated as the middle of the eighteenth century. The immediate causes of its then accelerated development were, as the socialists insist, the rapid invention of new kinds of machinery, and more especially that of steam as a motor power, which together inaugurated a revolution in the methods of production generally. Production on a small scale gave way to production on a large. The independent weavers, for example, each with his own loom, were wholly unable to compete with the mechanisms of the new factory; their looms, by being superseded, were virtually taken away from them; and these men, formerly their own masters, working with their own implements, and living by the sale of their own individual products, were compelled to pass under the sway of a novel class, the capitalists; to work with implements owned by the capitalists, not themselves; and to live by the wages of their labour, not by their sale of the products of it.

Such, as the socialists insist, was the rise of the capitalistic system; and when once it had been adequately organised, as it first was, in England, it proceeded, they go on to observe, to spread itself with astonishing rapidity, all other methods disappearing before it, through their own comparative inefficiency. But when socialists or their opponents turn from capitalism to socialism, and speak of how socialism has risen and spread likewise, their language, as thus applied, has no meaning whatever unless it is interpreted in a totally new sense. For in the sense in which socialists speak of the rise and spread of capitalism, socialism has, up to the present time, if we except a number of small and unsuccessful experiments, never risen or spread or had any existence at all. Capitalism rose and spread as an actual working system, which multiplied and improved the material appliances of life in a manner beyond the reach of the older system displaced by it. It realised results of which previously mankind had hardly dreamed. Socialism, on the other hand, has risen and spread thus far, not as a system which is threatening to supersede capitalism by its actual success as an alternative system of production, but merely as a theory or belief that such an alternative is possible. Let us take any country or any city we please—for example, let us say Chicago, in which socialism is said to be achieving its most hopeful or most formidable triumphs—and we shall look in vain for a sign that the general productive process has been modified by socialistic principles in any particular whatsoever. Socialism has produced resolutions at endless public meetings; it has produced discontent and strikes; it has hampered production constantly. But socialism has never inaugurated an improved chemical process; it has never bridged an estuary or built an ocean liner; it has never produced or cheapened so much as a lamp or a frying-pan. It is a theory that such things could be accomplished by the practical application of its principles; but, except for the abortive experiments to which I have referred already, it is thus far a theory only, and it is as a theory only that we can examine it.

What, then, as a theory, are the distinctive features of socialism? Here is a question which, if we address it indiscriminately to all the types of people who now call themselves socialists, seems daily more impossible to answer; for every day the number of those is increasing who claim for their own opinions the title of socialistic, but whose quarrel with the existing system is very far from apparent, while less apparent still is the manner in which they propose to alter it. The persons to whom I refer consist mainly of academic students, professors, clergymen, and also of emotional ladies, who enjoy the attention of footmen in faultless liveries, and say their prayers out of prayer-books with jewelled clasps. All these persons unite in the general assertion that, whatever may be amiss with the world, the capitalistic system is responsible for it, and that somehow or other this system ought to be altered. But when we ask them to specify the details as to which alteration is necessary—what precisely are the parts of it which they wish to abolish and what, if these were abolished, they would introduce as a substitute—one of them says one thing, another of them says another, and nobody says anything on which three of them could act in concert.

Now, if socialism were confined to such persons as these, who are in America spoken of as the "parlour socialists," it would not only be impossible to tell what socialism actually was, but what it was or was not would be immaterial to any practical man. As a matter of fact, however, between socialism of this negligible kind—this sheet-lightning of sentiment reflected from a storm elsewhere—and the socialism which is really a factor to be reckoned with in the life of nations, we can start with drawing a line which, when once drawn, is unmistakable. Socialism being avowedly a theory which, in the first instance at all events, addresses itself to the many as distinct from and opposed to the few, it is only or mainly the fact of its adoption by the many which threatens to render it a practical force in politics. Its practical importance accordingly depends upon two things—firstly, on its possessing a form sufficiently definite to unite what would otherwise be a mass of heterogeneous units, by developing in all of them a common temper and purpose; and, secondly, on the number of those who can be taught to adopt and welcome it. The theory of socialism is, therefore, as a practical force, primarily that form of it which is operative among the mass of socialists; and when once we realise this, we shall have no further difficulty in discovering what the doctrines are with which, at all events, we must begin our examination. We are guided to our starting-point by the broad facts of history.

The rights of the many as opposed to the actual position of the few—a society in which all should be equal, not only in political status, but also in social circumstances; ideas such as these are as old as the days of Plato, and they have, from time to time in the ancient and the modern world, resulted in isolated and abortive attempts to realise them. In Europe such ideas were rife during the sixty or seventy years which followed the great political revolution in France. Schemes of society were formulated which were to carry this revolution further, and concentrate effort on industrial rather than political change. Pictures were presented to the imagination, and the world was invited to realise them, of societies in which all were workers on equal terms, and groups of fraternal citizens, separated no longer by the egoisms of the private home, dwelt together in palaces called "phalansteries," which appear to have been imaginary anticipations of the Waldorf-Astoria Hotel. Here lapped in luxury, they were to feast at common tables; and between meals the men were to work in the fields singing, while a lady accompanied their voices on a grand piano under a hedge. These pictures, however, agreeable as they were to the fancy, failed to produce any great effect on the multitudes; for the multitudes felt instinctively that they were too good to be true. That such was the case is admitted by socialistic historians themselves. Socialism during this period was, they say, in its "Utopian stage." It was not even sufficiently coherent to have acquired a distinctive name till the word "socialism" was coined in connection with the views of Owen, which suffered discredit from the failure of his attempts to put them into practice. Socialism in those days was a dream, but it was not science; and in a world which was rapidly coming to look upon science as supreme, nothing could convince men generally—not even the most ignorant—which had not, or was not supposed to have, the authority of science at the back of it.

Such being the situation, as the socialists accurately describe it, an eminent thinker arose who at last supplied what was wanting. He provided the unorganised aspirations, which by this time were known as socialism, with a formula which was at once definite, intelligible, and comprehensive, and had all the air of being rigidly scientific also. By this means thoughts and feelings, previously vague and fluid, like salts held in solution, were crystallised into a clear-cut theory which was absolutely the same for all; which all who accepted it could accept with the same intellectual confidence; and which thus became a moral and mental nucleus around which the efforts and hopes of a coherent party could group themselves.

Such was the feat accomplished by Karl Marx, through his celebrated treatise on Capital, which was published between fifty and sixty years ago, and which has, since then, throughout all Europe and America, been acclaimed as the Magna Charta, or the Bible, of "scientific socialism."

Whatever may be the change which, as a theory, socialism has subsequently undergone—and changes there have been which will presently occupy our attention—it is with the theory of Marx, and the temper of mind resulting from it, that socialism, regarded as a practical force, begins; and among the majority of socialists this theory is predominant still. In view, therefore, of the requirements of logic, of history, and of contemporary facts, our own examination must begin with the theory of Marx likewise.



All radical revolutions which are advocated in the interests of the people are commended to the people, and the people are invited to accomplish them, on the ground that majorities are, if they would only realise it, capable of moulding society in any manner they please. As applied to matters of legislation and government, this theory is sufficiently familiar to everybody. It has been elaborated in endless detail, and has expressed itself in the constitutions of all modern democracies. What Karl Marx did, and did for the first time, was to invest this theory of the all-efficiency of the majority with a definiteness, in respect of distribution of wealth, similar to that with which it had been invested already in respect of the making of laws and the dictation of national policies.

The practical outcome of the scientific reasoning of Marx is summed up in the formula which has figured as the premise and conclusion of every congress of his followers, of every book or manifesto published by them, and of every propagandist oration uttered by them at street-corners, namely, "All wealth is produced by labour, therefore to the labourers all wealth is due"—a doctrine in itself not novel if taken as a pious generality, but presented by Marx as the outcome of an elaborate system of economics.

The efficiency of this doctrine as an instrument of agitation is obvious. It appeals at once to two universal instincts: the instinct of cupidity and the instinct of universal justice. It stimulates the labourers to demand more than they receive already, and it stimulates to demand the more on the ground that they themselves have produced it. It teaches them that the wealth of every man who is not a manual labourer is something stolen from themselves which ought to be and which can be restored to them.

Now, whatever may be the value of such teaching as a contribution to economic science, it illustrates by its success one cardinal truth, and by implication it bears witness to another. The first truth is that, no matter how desirable any object may be which is obtruded on the imagination of anybody, nobody will bestir himself in a practical way to demand it until he can be persuaded to believe that its attainment is practically possible. The other is this: that the possibilities of redistributing wealth depend on the causes by which wealth is produced. All wealth, says Marx, can practically be appropriated by the labourers. But why? Because the labourers themselves comprise in their own labour all the forces that produce it. If its production necessitated the activity of any persons other than themselves, these other persons would inevitably have some control over its distribution; since if it were distributed in a manner of which these other persons disapproved, it would be open to them to refuse to take part in its production any longer; and there would, in consequence, be no wealth, or less wealth, to distribute.

Let us, then, examine the precise sense and manner in which this theory of labour as the sole producer of wealth is elaborated and defended by Marx in his Bible of Scientific Socialism. His argument, though the expression of it is very often pedantic and encumbered with superfluous mathematical formulae, is ingenious and interesting, and is associated with historical criticism which, in spite of its defects, is valuable. Marx was, indeed, foremost among those thinkers already referred to who first insisted on the fact that the economic conditions of to-day are mainly a novel development of others which went before them, and that, having their roots in history, they must be studied by the historical method. He recognised, however, that for practical purposes each age must concern itself with its own environment; and his logical starting-point is an analysis of wealth-production as it exists to-day. He begins by insisting on the fact that labour in the modern world is divided with such a general and such an increasing minuteness that each labour produces one kind of product only, of which he himself can consume but a small fraction, and often consumes nothing. His own product, therefore, has for him the character of wealth only because he is able to exchange it for commodities of other kinds; and the amount of wealth represented by it depends upon what the quantity of other assorted commodities, which he can get in exchange for it, is. What, then, is the common measure, in accordance with which, as a fact, one kind of commodity will exchange for any other, or any others? For his answer to this question Marx goes to the orthodox economists of his time—the recognised exponents of the system against which his own arguments were directed—and notably, among these, to Ricardo; and, adopting Ricardo's conclusions, as though they were axiomatic, he asserts that the measure of exchange between one class of commodities and another—such, for example, as cigars, printed books, and chronometers—is the amount of manual labour, estimated in terms of time, which is on an average necessary to the production of each of them. His meaning in this respect is illustrated with pictorial vividness by his teaching with regard to the form in which the measure of exchange should embody itself. This, he said, ought not to be gold or silver, but "labour-certificates," which would indicate that whoever possessed them had laboured for so many hours in producing no matter what, and which would purchase anything else, or any quantity of anything else, representing an equal expenditure of labour of any other kind.

Having thus settled, as it seemed to him beyond dispute, that manual labour, estimated in terms of time, is the sole source and measure of economic values or of wealth, Marx goes on to point out that, by the improvement of industrial methods, labour in the modern world has been growing more and more productive, so that each labour-hour results in an increased yield of commodities. Thus a man who a couple of centuries ago could have only just kept himself alive by the products of his entire labour-day, can now keep himself alive by the products of half or a quarter of it. The products of the remainder of his labour-day are what Marx called a "surplus value," meaning by this phrase all that output of wealth which is beyond what is practically necessary to keep the labourer alive. But what, he asks, becomes of this surplus? Does it go to the labourers who have produced it? No, he replies. On the contrary, as fast as it is produced, it is abstracted from the labourer in a manner, which he goes on to analyse, by the capitalist.

Marx here advances to the second stage of his argument. Capital, as he conceives of it, is the tools or instruments of production; and modern capital for him means those vast aggregates of machinery by the use of which in most industries the earlier implements have been displaced. Now, here, says Marx, the capitalist is sure to interpose with the objection that the increased output of wealth is due, not to labour, but to the machinery, and that the labourer, as such, has consequently no claim on it. But to this objection Marx is ready with the following answer—that the machinery itself is nothing but past labour in disguise. It is past labour crystallised, or embodied in an external form, and used by present labour to assist itself in its own operations. Every wheel, crank, and connecting-rod, every rivet in every boiler, owes its shape and its place to labour, and labour only. Labour, therefore—the labour of the average multitude—remains the sole agent in the production of wealth, after all.

Capital, however, as thus understood, has, he says, this peculiarity—that, being labour in an externalised and also in a permanent form, it is capable of being detached from the labourers and appropriated by other people; and the essence of modern capitalism is neither more nor less than this—the appropriation of the instruments of production by a minority who are not producers. So long as the implements of production were small and simple, and such that each could be used by one man or family, the divorce between the labourer and his implements was not easy to accomplish; but in proportion as these simple implements were developed into the aggregated mechanisms of the factory, each of which aggregates was used in common by hundreds and even by thousands of labourers, the link between the implement and the user was broken by an automatic process; for a single organised mechanism used by a thousand men could not, in the nature of things, be owned by each one of the thousand individually, and collective ownership by all of them was an idea as yet unborn. Under these circumstances, with the growth of modern machinery, the ownership of the implements of production passed, by what Marx looked upon as a kind of historical fatality, into the hands of a class whose activities were purely acquisitive, and had no true connection with the process of production at all; and this class, he said, constitutes the capitalists of the modern world.

The results of this process have, according to him, been as follows: Society has become divided into two contrasted groups—an enormous group, and a small one. The enormous group—the great body of every nation—the people—the labouring mass—the one true producing power—has been left without any implements by means of which its labour can exert itself, and these implements have been monopolised by the small group alone. The people at large, in fact, have become like the employes of a single mill-owner, who have no choice but to work within the walls of that mill or starve; and the possessing class at large has become like the owner of such a single mill, who, holding the keys of life and death in his hands, is able to impose on the mill-workers almost any terms he pleases as the price of admission to his premises and to the privilege of using his machinery; and the price which such an owner, so situated, will exact (such was the contention of Marx) inevitably must come, and historically has come, to this—namely, the entire amount of goods which the labouring class produces, except such a minimum as will just enable its members to keep themselves in working order, and to reproduce their kind. Thus all capital, as at present owned, all profits, and all interest on capital, are neither more nor less than thefts from the labouring class of commodities which are produced by the labouring class alone.

The argument of Marx is not, however, finished yet. There remains a third part of it which we still have to consider. Writing as he did, almost half a century ago, he said that the process of capitalistic appropriation had not—yet completed itself. A remnant of producers on a restricted scale survived, still forming a middle class, which was neither rich nor poor. But, he continued, in all capitalistic countries, a new movement, inevitable from the first, had set in, and its pace was daily accelerating. Just as the earlier capitalists swallowed up most of the small producers, so were the great capitalists swallowing up the smaller, and the middle class which survived was disappearing day by day. Wages, meanwhile, were regulated by an iron law. Under the system of capitalism it was an absolute impossibility that they could rise. As he put it, in language which has since become proverbial, "The rich are getting richer, the poor poorer, the middle class is being crushed out," and the time, he continued, was in sight already—it would arrive, according to him, before the end of the nineteenth century—when nothing would be left but a handful of idle and preposterous millionaires on the one hand, and a mass of miserable ragamuffins who provided all the millions on the other, having for themselves only enough food and clothing to enable them to move their muscles and protect their nakedness from the frost. Then, said Marx, when this contrast has completed itself, the situation will be no longer tolerable. "Then the knell of the capitalistic system will have sounded." The producers will assert themselves under the pressure of an irresistible impulse; they will repossess themselves of the implements of production of which they have been so long deprived. "The expropriators will in their turn be expropriated," and the labourers thenceforth owning the implements of production collectively, all the wealth of the world will forever afterwards be theirs.

This concluding portion of the gospel of Marx—its prophecies—has been in many of its details so completely falsified by events that even his most ardent disciples no longer insist on it. I have only mentioned it here because of the further light which it throws on what alone, in this discussion, concerns us—namely, the Marxian theory of labour as the sole producer of wealth, and the absolute nullity, so far as production goes, of every form of activity associated with the possession of capital, or with any class but the labouring.

This theory of production, then, which has been the foundation of socialism as a party—or, as Gronluend, a disciple of Marx, calls it, "its idee mere"—and which is still its foundation for the great majority of socialists, we will now examine in detail, and, considering how complex are the processes of production in the modern world, ask how far it gives us, or fails to give us, even an approximately complete account of them.

We shall find that, in spite of the plausibility with which the talent of Marx invested it, this basic doctrine of so-called scientific socialism is the greatest intellectual mare's-nest of the century which has just ended; and when once we have realised with precision on what, in the modern world, the actual efficiency of the productive process depends, we shall see that the analysis of Marx bears about the same relation to the economic facts of to-day that the child's analysis of matter into the four traditional elements, or the doctrine of Thales that everything is made of water, bears to the facts of chemistry as modern science has revealed them to us.



In approaching the opinions of another, from whom we are about to differ, we gain much in clearness if at starting we can find some point of agreement with him. In the case of Marx we can find this without difficulty, for the first observation which our subject will naturally suggest to us is an admission that, within limits, his theory of production is true. Whatever may be the agencies which are required to produce wealth, human effort is one of them; and into whatever kinds this necessary agency may divide itself, one kind must always be labour, in the sense in which Marx understood it—in other words, that use of the hands and muscles by which the majority of mankind have always gained their livelihood.

It is, moreover, easy to point out actual cases in which all the wealth that is produced is produced by labour only. The simplest of such cases are supplied us by the lowest savages, who manage, by their utmost exertions, to provide themselves with the barest necessaries. Such cases show that labour, wherever it exists, produces at least a minimum of what men require; for if it were not so there would be no men to labour. Such cases show also another thing. The most primitive races possess rude implements of some kind, which any pair of hands can fashion, just as any pair of hands can use them. These rude implements are capital in its embryonic form; and so far as they go, they verify the Marxian theory that capital is nothing but past labour crystallised.

But we need not, in order to see labour, past and present, operating and producing in a practically unalloyed condition, go to savage or even semi-civilised countries. The same thing may be seen among groups of peasant proprietors, which still survive here and there in the remoter parts of Europe. These men and their families, by their own unaided labour, produce nearly everything which they eat and wear and use. Mill, in his treatise on Political Economy, gives us an account of this condition of things, as prevailing among the peasants in certain districts of Germany. "They labour early and late," he says, quoting from a German eulogist. "They plod on from day to day and from year to year, the most untirable of human animals." The German writer admires them as men who are their own masters. Mill holds them up as a shining and instructive example of the magic effect of ownership in intensifying human labour. In any case such men are examples of two things—of labour operating as the sole productive agency, and also of such labour self-intensified to its utmost pitch. And what does the labour of these men produce? According to the authority from which Mill quotes, it produces just enough to keep them above the level of actual want. Here, then, we have an unexceptionable example of the wealth-producing power of labour pure and simple; and if we imagine an entire nation of men who, as their own masters, worked under liked conditions, we should have an example of the same thing on a larger and more instructive scale. We should have a whole nation which produced only just enough to keep it above the level of actual bodily want.

And now let us turn from production in an imaginary nation such as this, and compare it with production at large among the civilised nations of to-day. Nobody could insist on the contrast between the efficiency of the two processes more strongly than do the socialists themselves. The aggregate wealth of the civilised nations to-day is, they say, so enormous—it consists of such a multitude of daily renewed goods and services—that luxuries undreamed of by the labourer of earlier times might easily be made as abundant for every household as water. In other words, if we take a million men, admittedly consisting of labourers pure and simple in the first place, and the same number of men exerting themselves under modern conditions in the second place, the industrial efforts of the second million are, hour for hour, infinitely more productive than the industrial efforts of the first. If, for example, we take the case of England, and compare the product produced per head of the industrial population towards the close of the seventeenth century, with the product produced less than two centuries afterwards, at the time when Marx was writing his work on Capital, the later product will, according to the estimate of statisticians, stand to the earlier in the proportion of thirty-three to seven.

Now, if we adopt the scientific theory of Marx that labour pure and simple is the sole producer of wealth, and that labour is productive in proportion to the hours devoted to it, how has it happened—this is our crucial question—that the amount of labour which produced seven at one period should produce thirty-three at another? How are we to explain the presence of the additional twenty-six?

The answer of Marx, and of those who reason like him, is that, owing to the development of knowledge, mechanical and chemical especially, and the consequent development of industrial methods and machinery, labour as a whole has itself become more productive. But to say this is merely begging the question. To what is this development of knowledge, of methods, and of machinery due? Is it due to such labour as that of the "untirable human animals," to which Mill refers as an example of labour in its intensest form? In a word, does ordinary labour, or the industrial effort of the majority, contain in itself any principle of advance at all?

We must, in order to do justice to any theory, consider not only the points on which its exponents lay the greatest stress, but also those which they recognise as implied in it, or which we may see to be implied in it ourselves. And if we consider the theory of Marx in this way, we shall see that labour, in the sense in which he understands the word, does contain principles of advance which are of two distinguishable kinds.

One of these is recognised by Marx himself. Just as, when he says that labour is the sole productive agency, he assumes the gifts of nature, which provide it with something to work upon, so, when he conceives of labour as the effort of hand and muscle, he assumes a human mind behind these by which hand and muscle are directed. Such being the case, he expressly admits also that mind is in some cases a more efficient director than in others, and is able to train the hands and muscles of the labourer, so that these acquire the quality which is commonly called skill. Ruskin, who asserted, like Marx, that labour is the sole producer, used in this respect a precisely similar argument. He defined skill as faculty which exceptional powers of mind impart to the hands of those by whom such powers are possessed, from the bricklayer who, in virtue of mere alertness and patience, can lay in an hour more bricks than his fellows, up to a Raphael, whose hands can paint a Madonna, while another man's could hardly be trusted to distemper a wall evenly.

Now, in skill, as thus defined, we have doubtless a correct explanation of how mere labour—the manual effort of the individual—may produce, in the case of some men, goods whose value is great, and goods, in the case of other men, whose value is comparatively small; and since some epochs are more fertile in developed skill than others, an equal amount of labour on the part of the same community may produce, in one century, goods of greater aggregate value than it was able to produce in the century that went before it. But these goods, whose superior value is due to exceptional skill—or, as would commonly be said, to qualities of superior craftsmanship—though they form some of the most coveted articles of the wealth of the modern world, are not typical of it; and from the point of view of the majority, they are the part of it which is least important. The goods whose value is due to exceptional craftsmanship—such as an illuminated manuscript, for example, or a vase by Benvenuto Cellini—are always few in number, and can be possessed by the few only. The distinctive feature of wealth-production in the modern world, on the contrary, is the multiplication of goods relatively to the number of the producers of them, and the consequent cheapening of each article individually. The skill of the craftsman gives an exceptional value to the particular articles on which his own hands are engaged. It does not communicate itself to the labour of the ordinary men around him. The agency which causes the increasing and sustains the increased output of necessaries, comforts, and conveniences in the progressive nations of to-day must necessarily be an agency of some kind or other which raises the productivity of industrial exertion as a whole. Those, therefore, who, in spite of the fact that the productivity of modern communities has, relatively to their numbers, undergone an increase which is general, still maintain that the sole productive agency is labour, must seek for an explanation of this increase in some other fact than skill.

And without transgressing the limits which the theory of Marx imposes on us, such a further fact is very easy to find. Adam Smith opens his Wealth of Nations with a discussion of it. The chief cause, he says, which in all progressive countries increases the productive power of the individual labourer, is not the development among a few of potentialities which are above the average, but a more effective development of potentialities common to all, in consequence of labour being divided, so that each man devotes his life to the doing of some one thing. Thus if ten ordinary men were to engage in the business of pin-making, each making every part of every pin for himself, each man would probably complete but one pin in a day. But if each man makes one part, and nothing else but that, thus repeating incessantly a single series of motions, each will acquire the knack of working with such rapidity that the ten together will make daily, not ten pins, but some thousands. Here we have labour divided by its different applications, but not requiring different degrees of capacity. We have the average labour of the average man still. And here we have a fact which, unlike the fact of skill—a thing in its nature confined to the few only—affords a real explanation, up to a certain point, of how ordinary labour as a whole, without ceasing to be ordinary labour, may rise from a lower to a higher grade of efficiency.

But such simple divisions of labour as those which are here in question fail, for a reason which will be specified in another moment, to carry us far in the history of industrial progress. They do but bring us to the starting-point of production as it exists to-day. The efficiency of productive effort has made all its most astounding advances since the precise time at which the Wealth of Nations was written; and these advances we shall find that it is quite impossible to explain merely by a further division of average and equal labour. Such a further division has no doubt been an element of the process; but it is an explanation which itself requires explaining. Even in Adam Smith's time two other factors were at work, which have ever since been growing in magnitude and importance; and the secret of modern production lies, we shall find, in these. I call them two, but fundamentally there is only one, for that which is most obvious, and of which I shall speak first, is explainable only as the direct result of the second. This, the most obvious factor, is the modern development of machinery. The other is the growing application of exceptional mental powers, not to the manual labour of the men by whom these powers are possessed, but to the process of directing and co-ordinating the divided labours of others.

Now, as to machinery, Marx and his followers, as we have seen, maintain that it represents nothing but the average labour of the past; and so long as it exists only in its smaller and simpler forms, the devising and constructing of which are not referable to any faculties which we are able to distinguish from those of the average labourer, we have further seen that the theory of Marx holds good. Labour produces alike both the finished goods and its implements. But in proportion as machines or other contrivances, such as vessels, grow in size or complexity, and embody, as they do in their more modern developments, ingenuity of the highest and knowledge of the most abstruse kinds, the situation changes; and we are able to identify certain faculties as essential to the ultimate result, which affect the work of the labourers, but which do not emanate from themselves. Any three men of average strength and intelligence might make a potter's wheel together, or build a small boat together, as they frequently do now, their several tasks being interchangeable, or assigned to each of them by easy mutual agreement. The business of directing labour has not separated itself from the actual business of labouring. Each man knows the object of what he does, and can co-ordinate that object with the object of what is done by his fellows. But when the ultimate result is something so vast and complicated that a thousand men instead of three have to co-operate in the production of it, when a million pieces of metal, some large and some minute, have to be cast, filed, turned, rolled, or bent, so that finally they may all coalesce into a single mechanical organism, no one labourer sees further than the task which he performs himself. He cannot adjust his work to that of another man, who is probably working a quarter of a mile away from him, and he has in most cases no idea whatever of how the two pieces of work are related to each other. Each labourer has simply to perform his work in accordance with directions which emanate from some mind other than his own, and the whole practical value of what the labourers do depends on the quality of the directions which are thus given to each.

In other words, in proportion as the industrial process is enhanced in productivity by the concentration on it of the higher faculties of mankind, there is an increasing fission of this process as a whole into two kinds of activity represented by two different groups. We have no longer merely—although we have this still—an increasing division of labour; but we have the labourers of all kinds and grades separating themselves into one group on the one hand, and the men who direct their labour, as a separate group, on the other hand.

The function of the directive faculties, as applied thus to the operations of modern labour, can perhaps be most easily illustrated by the case of a printed book. Let us take two editions of ten thousand copies each, similarly printed, and priced at six shillings a copy; the one being an edition of a book so dull that but twenty copies can be sold of it, the other of a book so interesting that the public buys the whole ten thousand. Now, apart from its negligible value as so many tons of waste paper, each pile of books represents economic wealth only in proportion to the quantity of it for which the vendors can find purchasers. Hence we have in the present case two piles of printed paper which, regarded as paper patterned with printer's ink, are similar, but one of which is wealth to the extent of three thousand pounds, while the other is wealth to the extent of no more than six pounds. And to what is the difference between these two values due? It obviously cannot be due to the manual labour of the compositors, for this, both in kind and quantity, is in each case the same. It is due to the special directions under which the labour of the compositors is performed. But these directions do not emanate from the men by whose hands the types are arranged in a given order.

They come from the author, who conveys them to the compositors through his manuscript; which manuscript, considered under its economic aspect, is neither more nor less than a series of minute orders, which modify from second to second every movement of the compositors' hands, and determine the subsequent results of every impress of the type on paper; one mind thus, by directing the labour of others, imparting the quality of much wealth or of little or of none, to every one of the ten thousand copies of which the edition is composed.

Similarly when a man invents, and brings into practical use, some new and successful apparatus such, let us say, as the telephone, the same situation repeats itself. The new apparatus is an addition to the world's wealth, not because so many scraps of wood, brass, nickel, vulcanite, and such and such lengths of wire are shaped, stretched, and connected with sufficient manual dexterity—for the highest dexterity is very often employed in the making of contrivances which turn out to be futile—but because each of its parts is fashioned in obedience to certain designs with which this dexterity, as such, has nothing at all to do. The apparatus is successful, and an addition to the world's wealth, because the designs of the inventor, just like the author's manuscript, constitute a multitude of injunctions proceeding from a master-mind, which is not the mind of those by whose hands they are carried into execution.

And with the direction of labour generally, whether in the production of machinery or the use of the machinery in the production of goods for the public, the case is again the same. We have manual labour of a given kind and quality, which assists in producing what is wanted or not wanted—what is so much wealth or simply so much refuse, in accordance with the manner in which all this labour is directed by faculties specifically different from those exercised by the manual labourers themselves.

And now we are in a position to sum up in a brief and decisive formula what the difference between the sets of faculties thus contrasted is. It is not essentially a difference between lower and higher, for some forms of labour, such as that of the great painter, may be morally higher than some forms of direction. The difference is one not of degree, but of kind, and includes two different psycho-physical processes. Labour, from the most ordinary up to the rarest kind, is the mind or the brain of one man affecting that man's own hands, and the single task on which his hands happen to be engaged. The directive faculties are the mind or the brain of one man simultaneously affecting the hands of any number of other men, and through their hands the simultaneous tasks of all of them, no matter how various these tasks may be.



The human activities and faculties, then, which are involved in the production of modern wealth, are not, as Marx says—and as the orthodox economists said, whom he rightly calls his masters, and as their followers still say—of one kind—namely, those embodied in the individual task-work of the individual, to which Marx, Ricardo, and Mill alike give the name of "labour"; they are of two kinds. And this, indeed, the earlier economists recognised, as we may see by Mill's casual admission that the progress of industrial effort depends before all things on thought and the advance of knowledge. But they recognised the fact in a general way only. How thought and knowledge affected the industrial process they made no attempt to explain, otherwise than by comprehending them on occasion under the common name of labour, which they assigned throughout most of their arguments to manual task-work only.

Now, it is doubtless true that, as a mere matter of verbal propriety, this general sense may be given to the word "labour," if we please; but if in discussing the efforts which produce wealth we admit that these efforts are not of one kind but two, and if the word "labour" is, in nine cases out of ten, employed with the definite intention of designating only one of them, it is impossible to reason about the industrial process intelligibly, so long as we apply also the same name to the other. We might as well use the word "man"—as with reference to some problems we are perfectly right in doing—to designate both men and women, and then attempt to discuss the relations between the two sexes.

For the directive faculties, so essentially distinct from those to which universal custom has allocated the name of labour, it is difficult to find a name equally convenient and satisfying. In default of a better, I have, on former occasions, applied to it the name of Ability; and this will serve our purpose here—especially as it is a name which has been, of recent years, applied by many of the more thoughtful socialists themselves to certain activities of a mental and moral kind, which their conception of labour cannot be made to include, but which they are beginning to recognise as playing some part in production. We must remember, however, that we are using it in a strictly technical sense, which will in some respects be narrower than the ordinary, and in some more comprehensive. It will exclude all kinds of cleverness unapplied to economic production; and will include many powers, in so far as such production is affected by them, to the expression of whose scope and character it may sometimes appear inadequate.[1]

And now when we have come thus far, a quite new question arises. We have seen how ability is, by its direction of labour, the chief agency in that process which produces wealth to-day, and how it makes the amount produced, relatively to the number of the producers, so incomparably greater than it ever was under any previous system. We have now to consider the means by which this faculty of direction is exercised.

In order to understand this, we must turn our attention again to capital, as something distinct and detached from the human efforts that have produced it; and we shall find that the conception of it which dominated the thought of Marx, and that which dominates the thought of the orthodox school of economists, either excludes altogether, or fails to reveal the nature of, that particular force and function of it which, in the modern world, are fundamental.

Capital is divided traditionally into two kinds, technically called "fixed" and "circulating." By fixed capital, which is what Marx had mainly in view, is meant machinery, and the works and structures connected with it; and it is called "fixed" on account of its comparative permanence. By circulating capital is meant, as Adam Smith puts it, any stock of those consumable commodities which, produced by the aid of machinery, the merchant or the store-keeper buys in order to sell them at a profit; and it is called "circulating" because the commodities which are sold to-day are replaced by new ones of an equivalent kind to-morrow.

Now, as to fixed capital, or the endlessly elaborated machinery of the modern world, we have seen already that this is, in its distinctive features, not, as Marx declared it to be, a crystallisation of labour, but a crystallisation of the ability by which labour has been directed; but this revised explanation tells us nothing of the means by which the direction is accomplished. Still less is any light thrown on the question by the nature of circulating capital, as Adam Smith understands it.

The kind of capital which alone concerns us here is a kind which resembles circulating capital in respect of its material form, and is often indeed in this respect identical with it; but it differs from circulating capital in respect of the use made of it. Such capital we may call wage-capital. Wage-capital, although in practice it disguises itself under the form of money, is essentially a stock of goods which are the daily necessaries of life, but which, instead of being sold to the public, like the goods of the store-keeper, at a profit, are distributed by their possessor among a special group of labourers on conditions. The first of these is naturally that the labourers do work of some sort. The second condition, and the one that concerns us here, is that, besides doing work of some sort, each labourer shall do the work which the distributer of the goods prescribes to him.

Here we have before us the means by which, in the modern world, the ability of the few directs the labour of the many; and, in proportion to the quality and intensity of the directive powers that are exercised, adds to the value of the results which this labour would have produced otherwise. Thus in wage-capital we have the capital of the modern world in what dynamically is its primary and parent form—a kind of capital which improved machinery is always tending to augment, but of whose use the machinery itself, its renewal, and its continued improvement, are the consequences.

That such is the case might be illustrated by any number of familiar examples. A man invents a new machine having some useful purpose—let us say the production of some new kind of manure, which will double the fertility of every field in the country. In order to put this machine on the market, and make it a fact instead of a mere conception, the first thing necessary is, as every human being knows, that the inventor shall possess, or acquire, the control of capital. And what is the next step? When the capital is provided, how will it first be used? It will be used in the form of wages, or articles of daily consumption, which will be distributed among a certain number of mechanics and other labourers, on condition that they set about fashioning, in certain prescribed groups, so much metal into so many prescribed shapes—some of them shaping it into wheels, some into knives and rollers, some into sieves, rods, cranks, cams, and eccentrics, in accordance with patterns which have never been followed previously; and of all these individual operations the new machine, as a practical implement, is the result. The machine is new, and it is an addition to the wealth-producing powers of the world, not because it embodies so much labour, but because it embodies so much labour directed in a new way; and it is only by means of the conditions which the possession of wage-capital enables the inventor or his partners to impose upon every one of the labourers that the machine, as a practical implement, comes into existence at all.

Hence we see that Marx was at once right and wrong when he said that modern capitalism is, in its essence, monopoly. It is monopoly; but it is not primarily, as Marx thought, a passive monopoly of improved instruments of production. It is primarily a monopoly of products which are essential to the life of the labourer; and it is a monopoly of these, not in the invidious sense that the monopolists retain them for their own personal consumption, as they do in the case of rare wines and fabrics, which can, from the nature of the case, be enjoyed by a few only. It is a monopoly of them in the sense that the monopolists have such a control over their distribution as enables them to control the purely technical actions of those persons who ultimately own and consume the whole of them.[2]

Modern capital, then, I repeat, is primarily wage-capital, such capital as modern machinery being the direct result of its application; and wage-capital is productive, not in virtue of any quality inherent in itself, but merely because as a fact, under the modern system, it constitutes the reins by which the exceptional ability of a few guides the labour, skilled or unskilled, of the many. It is the means by which the commonest labourer, who hardly knows the rule of three, is made to work as though he were master of the abstruest branches of mathematics; by which the artisan who only has a smattering—if he has as much as that—of mechanics, metallurgy, chemistry, is made to work as though all the sciences had been assimilated by his single brain.

Let any one consider, for example, one of the great steel bridges which now throw their single spans over waters such as the Firth of Forth. These structures are crystallised labour, doubtless, but they are, in their distinctive features, not crystallised labour as such. They are crystallised mechanics, crystallised chemistry, crystallised mathematics—in short, crystallised intellect, knowledge, imagination, and executive capacity, of kinds which hardly exist in a dozen minds out of a million; and labour conduces to the production of such astonishing structures only because it submits itself to the guidance of these intellectual leaders. And the same is the case with modern production generally. Though labour is essential to the production of wealth even in the smallest quantities, the distinguishing productivity of industry in the modern world depends not on the labour, but on the ability with which the labour is directed; and in the modern world the primary function of capital is that of providing ability with its necessary instrument of direction.

No unprejudiced person, who is capable of coherent thought, can, when the matter is thus plainly stated, possibly deny this. That it cannot be denied will be shown in the two following chapters by recent admissions on the part of socialists themselves, the more thoughtful of whom have now virtually abandoned the earlier theoretical framework of socialism altogether, and are trying to substitute a new one, with which we will deal later, and which will indeed prove the main subject of our inquiry.


[1] When I insisted on this distinction between "labour" and "ability" in America, innumerable critics met me with two objections. One of these, as stated by a writer who confessed himself otherwise in entire agreement with me, was this: "It is impossible, as Mr. Mallock attempts to do, to draw a hard-and-fast line between mental effort and muscular." No such attempt is made. As I pointed out in one of my speeches, many kinds of "labour" (e.g. that of the great painter) exhibit higher mentality than do many kinds of ability. Further, I pointed out that, in a technical sense, the same effort may be either an effort of labour or ability, according to its application. Thus, if a singer sings to an audience, his effort is technically "labour," because it ends with the single task; but if he sings so as to produce a gramophone record, his effort is an act of "ability," for he influences the products of other men, by whom the records are multiplied. The second objection was expressed by one of my critics thus: "I say that all productive effort is labour.... I dare you to tell any one of these genii that they are not labourers." Another critic said: "Just as 'land' in economics means all the forces of nature, so does 'labour' mean all the forces of man. Why, then, speak of ability?" These criticisms are purely verbal. If we like to take "labour" as a collective name for all forms of human effort, we can of course do so; but in that case we must find other differential names for the different forces of effort individually. To give them all the same name is not to explain them. It is to tie them all up in a parcel.

[2] If this fact requires any further exemplification, we can find one on a large scale in the pages of Marx himself. According to him the first appreciable capitalistic movement—the first leaping of the modern system in the womb—took place in the English cloth trade about four hundred years ago. Now, if capitalism were merely, as according to Marx it is, a passive monopoly by some men of implements which have been produced by others, the pioneers of capitalism in the reign of Henry VIII. would have got into their possession all the hand-looms then in use; they would have taken their toll in kind from all whom they allowed to use them; and there the matter would have ended. The looms of to-day would be the looms of four hundred years ago. The passive ownership of machines does nothing to improve their construction. If a gang of ignorant thieves could steal all the watches in America, and then let them out to the public at so much a month or year, this would not convert the three-dollar watches into chronometers. And how little mere labour, or the experience gained by labour, tends to improve the implements which the labourer uses is shown by the fact that the looms which wove Anne Boleyn's petticoats were practically the same as the looms which wove those of Semiramis.



In saying that, up to the point which our argument has thus far reached, the more thoughtful among the socialists to-day concede and even assert its truth, I have evidence in view of a very opposite kind. When I delivered, as I did recently, a series of addresses on socialism to various meetings in America, I approached the subject in the manner in which I have approached it here. I began with the process of production pure and simple, and I showed how crude and childish, as applied to production in modern times, was the analysis of Marx and all the earlier socialists. I showed, as I have shown here, that, the amount of labour being given, the quantity and quality of wealth that will result from its exercise depend on the ability with which by means of wage-capital this labour is directed.

The two addresses in which these points were elaborated had no sooner been delivered than, from all parts of the country, through newspapers and private letters, and sometimes by word of mouth, socialists of various types addressed themselves to the business of replying to me. These replies, whatever may have been their differences otherwise, all took the form of a declaration that I was only wasting my time in exposing the doctrine that labour is the sole producer of wealth, and in laying such stress on the part played by directive ability; for no serious socialist of the present day any longer believed the one, or failed to recognise the other. Thus one of my critics told me that what I ought to do was "to discuss the principles of socialism as understood and accepted by the intelligent disciples, and not the worn-out and discredited theories of Marx." Another was good enough to tell me that I had "cleverly accomplished the task of exposing the errors of Marx, both of premise and of logic"; but the leaders of socialistic thought "in its later developments" had, he proceeded to say, long ago outgrown these. A third wrote me a letter bristling with all kinds of challenges, and asked me if I thought, for example, that socialists were such fools as not to recognise that the talents of an inventor like Mr. Edison increased the productivity of labour by the new direction which they gave to it. I might multiply similar quotations, but one more will be enough here. It is taken from a long article directed against myself by Mr. Hillquit—a writer to whom my special attention was called as by far the most accomplished exponent, among the militant socialists of America, of socialism in its most logical and most highly developed form. "It requires," said Mr. Hillquit, "no special genius to demonstrate that all labour is not alike, nor equally productive. It is still more obvious that common manual labour is impotent to produce the wealth of modern nations—that organisation, direction, and control are essential to productive work in the field of modern production, and are just as much a factor in it as mere physical effort."[3]

But we need not confine ourselves to my own late critics in America. The general history of socialism as a reasoned theory is practically the same in one country as in another. The intellectual socialists in England, among whom Mr. Bernard Shaw and Mr. Sidney Webb are prominent, express themselves in even plainer terms with regard to the part which directive ability, as opposed to labour, plays in the modern world. "Ability," says Mr. Shaw, employing the very word, is often the factor which determines whether a given industry shall make a loss of five per cent. or else a profit of twenty; and Mr. Webb, as we shall have occasion to see presently, carries the argument further, and states it in greater detail.

Why, then, it may be asked, should a critic of contemporary socialism think it worth while to expose with so much minuteness a fallacy which intellectual socialists now all agree in repudiating, and to insist with such emphasis on facts which they profess to recognise as self-evident? To this question there are two answers.

One of these I indicated at the close of our opening chapter; and this at the cost of what in logic is a mere digression, it will be desirable, for practical purposes, to state it with greater fulness.

Admissions and assertions, such as those which I have just now quoted, do, no doubt, represent a definite intellectual advance which has taken place in the theory of socialism, among those who are its most thoughtful exponents, and in a certain sense its leaders. They represent what these leaders think and say among themselves, and what they put forward when disputing with opponents who are competent to criticise them. But what they do not represent is socialism as still preached to the populace, or the doctrine which is still vital for socialists as a popular party. This is still, just as it was originally, the socialism of Marx in an absolutely unamended form. It is the doctrine that the manual efforts of the vast multitude of labourers, directed only by the minds of the individual labourers themselves, produce all the wealth of the world; that the holding of any of this wealth by any other class whatever stands for nothing but a system of legalised plunder; and that the labourers need only inaugurate a legislation of a new kind in order to secure and enjoy what always was by rights their own. Let me illustrate this assertion by two examples, one supplied to us by England, the other by America.

In England the body which calls itself the Social Democratic Federation, and represents at this moment socialism of the more popular kind, began its campaign with a manifesto which was headed with the familiar words, "All wealth is due to labour; therefore to the labourer all wealth is due." This text or motto was followed by certain figures, with regard to the total income of Great Britain, and the manner in which it is at present distributed. Labour was represented as getting less than one-fourth of the whole, and the labourers were informed that if they would but "educate themselves, agitate, and organise," the remaining three-fourths would automatically pass into their possession. This document, it is true, was issued some twenty years ago;[4] but that the form which socialism takes, when addressed to the masses of the population, has not appreciably altered from that day to this, will be made sufficiently clear by the following pertinent fact. Shortly after my arrival in America, in the winter of 1907, the most active disseminator of socialistic literature in New York sent me, by way of a challenge, a new and very spruce volume, which contained the most important of his previous leaflets and articles, collected and republished, and claiming renewed attention. The first of these—and it was signalised by an accompanying advertisement as fundamental—bore the impressive title of, "Why the Working Man should be a Socialist," and the answer to this question is given in the writer's opening words. "You know," he says, addressing any labourer and the street-worker, "or you ought to know, that you alone produce all the good things of life; and you know, or you ought to know, that by so simple a process as that of casting your ballot intelligently you will be able"—to do what? The writer explains himself in language which, except for a difference in his statistics, is almost a verbal repetition of that of his English predecessors. He specifies two sums, one representing the income which each working-man in America would receive were the entire wealth of the country divided equally among the manual labourers; the other representing the income which, on an average, he actually receives as wages; and the writer tells every working man that, by "merely casting his ballot intelligently," he can secure for himself the whole difference between the larger sum and the less.[5]

But the fact that the Marxian doctrine of the all-productivity of labour, and the consequent economic nullity of all other forms of effort, still supplies the main ideas by which popular socialism is vitalised, is shown perhaps even more distinctly by the popular hopes and demands which result from this doctrine indirectly than it is by the direct reassertion of the formal doctrine itself. One of the members of the Parliamentary Labour party in England celebrated his success at the polls by a letter to the Times, proclaiming that socialism was a moral quite as much as an economic movement, and that an object which to socialists was dearer even than the seizure of the riches of the rich, was the achievement of "economic freedom," or, in other words, the "emancipation of labour," or, in other words again, the abolition of the system which he described as "wagedom." I merely mention the particular letter in question in order to remind the reader of these familiar phrases, which are current in every country where the theory of socialism has spread itself.

Now, what does all this talk about the emancipation of labour mean? It can only mean one or other of two things: either that the economic prosperity of every nation in the future will depend on the emancipation of every average mind from the guidance of any minds that are in any way superior to itself, or are able to enhance the productivity of an average pair of hands—a proposition so ludicrous that nobody would consciously assent to it; or else it means a continued assent to the theory which fails to correlate labour with directive ability at all, and so never raises the question of whether the latter is necessary or no.

What, then, becomes of that chorus of vehement protestations, with which my critics in America were all so eager to overwhelm me, to the effect that socialists to-day recognise as clearly as I do that "common manual labour," as Mr. Hillquit puts it, "is impotent to produce the wealth of modern nations," apart from the "organisation and control" of the minds most competent to direct it? That the more intellectual socialists of to-day do recognise this fact—some with greater and some with less distinctness—is the very point on which I am anxious to insist. We shall have abundant opportunities for considering it later on. For the moment, however, I pause to ask them the following question. Recognising, as they do, and eagerly proclaiming as they do, whenever they address themselves to those who are capable of serious dispute with them, that the original theory of socialism, which was the creed of such bodies as the International, is absolutely false in itself, and in many of the expectations which it stimulates, why do not they set themselves, whenever they address the multitude, to expose and repudiate a fallacy in which they no longer believe? Do they do this? Do they make an attempt to do this? On the contrary, as a rule, though there are doubtless many honourable exceptions, they endeavour to hide from the multitude their intellectual change of front altogether; and, instead of insisting that the undirected labour of the many is, in the modern world, impotent to produce anything, they continue to speak of it as though it produced everything, and as though no class other than the labouring fulfilled any economic function or had any right to exist.[6]

Let me give the reader an example, which is curiously apt here. It is taken from Mr. Hillquit's own attack on myself, which filled the front sheet of a newspaper, and was distributed to the public at the door of one of the buildings in which I spoke. Of the short passages, amounting to some twenty lines out of six hundred, in which alone he condescended to detailed argument, the first is that in which, as we have already seen, he declares that all socialists know, without any instruction on my part, that common manual labour, unless it is directed by ability, is "impotent to produce the wealth of modern nations." But having made this admission with much blowing of trumpets, he immediately drops it, and instead of developing its consequences, he diverts the attention of his readers from it by a long series of irrelevancies; nor does he return to the question of directive ability at all till he is nearing the end of his discourse, when he suddenly takes it up again, declaring that he will meet and refute me on ground which I myself have chosen, and show that wealth—at all events in the commercial sense—is still produced by manual labour alone. He refers to my selection of the case of a printed book, as illustrating, in the manner explained in an earlier chapter, the part which directive ability plays in modern production. The economic value of an edition of a printed book, I said, as the reader will remember, depends in the most obvious way, not on the labour of compositors, but on the quality of the directions which the author imposes on this labour through his manuscript—the author's mind being typical of directive ability generally. And what has Mr. Hillquit—the intellectual Ajax of the socialists—got to say about this? "Whether a book," he says, "is a work of genius or mere rubbish will largely affect its literary or artistic value; but it will have very little bearing on its economic or commercial value." This, he goes on to argue, will, despite all my objections, be found to depend on ordinary manual labour, of which the labour of the hands of the compositors is that which concerns us most. Nothing, according to him, can be more evident than this. "For the market price," he says, "of a wretched detective story, of the same length as Hamlet, and printed in the same way, will be exactly the same as that of a copy of Hamlet itself."

Now, if we consider Mr. Hillquit as a purely literary critic, we can but admire his subtlety in discovering that the literary value of a book is largely affected by the fact of the book's not being rubbish; but when he descends from pure criticism to economics, it is difficult, unless we suppose him to have taken leave of his senses, to imagine that he can himself believe in the medley of nonsense propounded by him. For what he is here doing—or more probably pretending to do—is to confuse the cost of producing an edition of a book with the commercial value of that edition when produced. The labour in question no doubt determines the price at which the printed paper can be sold at a profit, or without loss; but the number of copies which the public will be willing to buy, or, in other words, the value of the edition commercially, depends on qualities resident in the mind of the author, which render the book attractive to but few readers, or to many. Whether these qualities amount to genius in the higher sense of the word, or to nothing more than a knack of titillating the curiosity of the vulgar, does not affect the question. In either case—and this is the sole important fact—they are qualities of the author's mind, and of the author's mind alone; and the labour of the compositors conduces to the production of a pile of volumes which is of large, of little, or of no value commercially, not according to the dexterity with which this labour is performed, but according to the manner in which the author's mind directs it.

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