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Author of "Political Ideals," "International Politics" etc


J. '-^ '^ vJ 1 J

First published in ig2i


{All rights reserved)





HIS book is a preliminary survey of a very complex
section of social life : it makes no pretence to
^"^ -■. include all the facts in regard to government or
^ industry, and it implies no claim to finality. It is a study
of actual practice with a view to discovering fundamental
principles, and it is not a statement of an ideal nor propa-
ganda for a poHcy ; but such a survey may be useful
both because the facts referred to affect the solution of
such contemporary problems as the nationaHzation of
i 1 industries and because a new field of investigation has
V been opened up by recent governmental experiments and
the reports of Commissions and Committees.

As for the evidence, the survey, so far as personal
experience goes, is the result of some years of service in
three departments of the Central Government deafing
with industry ; but a fortunate contact in lectures and
classes with adult audiences, representing perhaps the
most conscious and critical elements in the political
community, has provided some evidence outside the depart-
ments as to what the citizen thinks and feels about Govern-
ment and the State. With regard to industry, the survey
is coloured b}^ the experience of visits to the coal " face "
in various Durham mines, to textile mills and to engineering
shops, to company meetings, to the slums of Pittsburg
and to the scenes of economic consumption in Paris,


Rome and New York. This, however, is not imagined
to supply sufficient evidence as to government and industry.
The reference to such experience only indicates the par-
ticular keyhole through which a world of facts has
been seen.

Additional evidence has been drawn largely from official
reports and current commentary in the publications of
employers' associations and trade unions ; but the writings
of economists and political theorists have also been used.
Unfortunately the economists tend to describe a situation
which does not now exist, if it ever existed ; and their
psychological assumptions as to motives and their assumed
political theory are sometimes astonishing. Jevons in
The State in Relation to Labour assumes the correctness
of the nineteenth-century faith in " natural " forces :
Dr. Cunningham in his Politics and Economics hardly
discusses politics. Professor Shield Nicholson in his
Principles, Book V — " The Economic Functions of Govern-
ment " — confines the discussion chiefly to taxation and
assumes a contrast between individual freedom and State
control which implies an uncritical philosophy of politics.
Apart from the economists, perhaps the most important
contribution to the analysis of the relation between
government and industry was made by Professor Dicey
in his Law and Public Opinion ; but he makes economic
assumptions almost as alarming as the political assump-
tion of the economists, for he implies that the existing
economic system is in the nature of things and that
modifications of it by law are based upon benevolence
for sufferers. Again, he seems to overrate the importance
of law as compared with administration and of the State
as compared with non-governmental organization. This


criticism of authorities, however, is no denial of the debt
the author owes to them for the work they have done.

Although the principles considered are general in their
appHcation, they are studied mainly in reference to British
experience, and therefore it should be recognized that
their treatment here is not adequate, for it is an absurd
provincialism to believe that " the State " is, in essence,
the United Kingdom or that government is peculiarly
British. Of course the various systems of government and
the many different organizations of industry in other lands
should be studied in order to establish a valid conception
of the whole subject ; and for this reason alone it should
be clear that the following is only a preliminary study.
The excuse for not deaHng in detail with non-British
government and industry is in part personal ignorance,
in part lack of evidence. Nevertheless, it does appear
to be true that in the United Kingdom a characteristic
and very important political and economic tendency is
being developed more rapidly than elsewhere.

It may seem that Russia and Germany have made
more fundamental advances in connecting the State with
industry, for in both these countries there appears to be
a sort of Economic or Industrial Parhament parallel to
the political. But, first, these are very recent experiments,
and, secondly, the most important fact of British industry
is that it is organized from below upwards, from the rank
and file to the leaders or " captains," whereas both in
Russia and Germany organization seems to have been
largely superimposed upon industrial life. What makes
the British experience specially important is that the
movement between government and industry is mutual ;
for each is approaching the other, almost without losing


its own vitality. For that reason, although the evidence
reviewed here is largely British, it is probable that the
conclusion may be vaHd in regard to additional evidence
from other lands.

So far as the conclusion can be stated shortly, it is that
a new conception of the organized economic community
is becoming operative. This is regarded in what follows
as in the main good, and therefore as a proper basis for
progressive action. The organized economic community,
however, is found to be neither the State alone nor the
non-governmental organization of industry, but a unique
complex of these two. The sharpest contrast may be
drawn between this and the controlling ideas of the
nineteenth century. During that already ancient time
two quasi-psychological ideas dominated economic and
political theory — one that each man did in fact seek
chiefly his own interest and the common good was thereby
attained, and the other that the relation of the State to
industry was that of interference in enterprise : but the
conception of an organized or organizable economic com-
munity, if it is valid, would completely displace that
older system of ideas, for it implies that (i) each man
does not in fact chiefly, still less always, seek his own
interest, that (2) the common good is a different kind of
good from the goods of separate individuals, and that
(3) government assists, promotes and of its nature even
enters into industry, therefore exploding the whole mytho-
logy of "interference." The questions, therefore, whether
or not the State does interfere or should interfere are
quite meaningless.

As for the ideals of the nineteenth centur}^ as contrasted
with the prevalent conceptions of fact, these also will


have to be displaced or corrected. Men at that time were
urged each to pursue his own interest : it was seriously
believed that a society in which each pursued his own
interest would be an ideal society and — still more amusing"
— the ideals of competitive enterprise implied that society
as a whole would be protected from exploitation by
selfishness, because each man pursuing his own interest
would obstruct every other pursuing his. Society, there-
fore, would be protected by competition preventing every
man from attaining that which he was urged to pursue.
These conceptions are contradicted not simply by the
advocacy of other ideals, but by the actual practice in
contemporary life. Social organization is actually based
upon the pursuit of a common good shared by indi-
viduals, and, in the economic sphere, this organization is
co-ordinated by the economic activities of government.

An account of contemporary practice and tendencies,
even if it includes a single comprehensive interpretation,
cannot present a picture of a perfectly coherent and
orderly world : but it has been thought better to include
references to facts which are irreconcilable with the main
thesis rather than to omit everything which does not
square with it. It is easy enough to amputate facts
on the Procrustean bed of a theory ; but it is perhaps
preferable to allow gaunt limbs of bare fact to stick out
from under the bedclothes of a book.

London, August 1920.




Preface 5


The Distinction between Government and Industry . 13

Whitehall and the City. Effect of each on the other.
The confusions of political economy. Current contro-
versies. The field to' be surveyed.


Administration and Industry ..... 38

Central governmental offices. The new Advisory Coun-
cils. The character of administration. Parliament. The
development of a new machinery.

Non-Governmental Organization of Industry . . 64

Classification of occupations. Trade Unionism. Em-
ployers' Associations. Joint Bodies. Use of all these in
governmental administration.

Hours and Conditions of Labour ..... 87

The principles of Factory Acts. The Home Office and
inspection. The new attitude. The positive and direc-
tive functions of government.


The State and the Wages System .... 106

The responsibility for evils in the system. Trade Boards.
Coal-Mines (Minimum Wage) Act. Fair wages. The
modification of the wages system by co-operative action
between government and non-governmental bodies.


Unemployment . . . . . . . .130

The industrial character of unemployment. First efforts
of government. The principles at present operative.
Junction between the State and the trade unions.





Commerce and Finance ....... 152

Taxation. Banking. Commercial Companies. Trusts.
State assistance. The principle implied in governmental
action for regulating commerce and finance.

Communal Enterprise . . . . . . .180

Examples of communal enterprise. Purposes and
methods of communal economic organization. The effect
upon economic and upon political life. The necessary
division of the political authority from the management
of an enterprise.

War Controls and Experiments ..... 207

The utility of war experience. Examples of economic
activities undertaken by government. The new prin-
ciples of organization and of distribution. Decentraliza-
tion of economic administration.


Foreign Trade . 224

The world-market. Government in the Board of Trade
and foreign departments. Information and the pro-
motion of trade. Shipping. Undeveloped countries.
The British Empire and the distinction between trade
and government.

International Trade ....... 258

Agreements and the i^emoval of obstacles. International
organizations affecting trade. Non-go vei'nmental or-
ganization. International economic functions to be


The State and Economic Life ..... 282

A. The Changes in the Machinery of Government.
The established division between political and economic
administration .

B. The Change in the Dominant Social Motive.

The development of political government independently
of the pursuit of wealth. The reorganization of economic
life on a basis of common good as contrasted with con-
tending individual interests.

Index . . . 311

Government and Industry



IT is commonly recognized as important that, although
a man may belong to a religious society or not as
he chooses, every man must belong to some State.
Religion, science, art, and perhaps some other sections of
human activity, if organized at all, are organized by volun-
tary groups and many men belong to none of them ; but
political organization appears to be in a sense inevitable
and inclusive. The implied philosophy need not be
discussed here. It is sufficient for the present purpose
if it be granted that every man is a part in the world-
wide organization which includes States and their govern-
ments, local and central ; and that every man seems to be
compelled in this matter less by some superior authority
than by inevitable circumstances. The State or the
organization of government ought not to be regarded
as compulsory in contrast with what is voluntary, but
as inevitable in contrast with what is avoidable. Thus
government is not compulsory in the sense implying
restrictions on freedom, but inevitable because it is the
condition of freedom ; for as no man is able to live without
some food and, unless he is a Robinson Crusoe, his source
of food involves organization, so no man is able to live
with others without some organization of his relations
with them. Government arises from that need of



organization, which is as inevitable a condition of hfe
as food and clothing.

Among all groups of men there are some who are regarded
as more intimately parts of the State or of government
than their fellows : for, although all men are affected
by political organization, not many are consciously or
continuously political in their interests or their activities.
Therefore the few in every country who consider and
who affect directly law and administration are often
regarded as " the State " by contrast with its subjects.
These few include a still smaller group which is called " the
Government," which has as its agents the civil service :
and when the ordinary man thinks, if he ever thinks,
of government and industry, he has in mind a group of
politicals and civil servants contrasted with a group
of " business " men. Whitehall is contrasted with the
City, Washington with Wall Street, the Quai d'Orsay
with the Bourse. This is to put into personal terms the
general contrast between governmental and economic
activities ; but it will indicate sufficiently for the present
what government is. All that is done in regard to law
and administration is government : and it is done by
definite groups of men, although what is done in many
countries rests more or less insecurely upon the judgment
or the acquiescence of all the members of the whole
organization called the State.

The State is not the whole of organized society. The
word State is generally used to refer to a quite definite
type of organization with a limited purpose ; and if
the word is to be used as it is by certain philosophers,
to indicate the whole of social organization, then a new
word would have to be found for what the ordinary man
means by the State. On the other hand, if the State,
in the ordinary sense of the word, is held to be superior
to or inclusive of all other forms of social organization,
the evidence against this view is to be found in the actual
experience of religious, artistic or industrial bodies :


but it is not of immediate importance here, since it is
sufficient for the present argument if the State be regarded
as one among many forms of social organization. The
chief activity of the State, called government, includes
legislation and administration ; and the functions of
government now in most countries include (i) defence
and the relation to foreign peoples, (2) criminal and civil
law, (3) certain social services such as education, (4) the
supervision or regulation of industry, and (5) the organiza-
tion of the income and expenditure necessary for the
performance of the functions of government.

It may, therefore, be taken as proved that the nature
of government is to be discovered by reference to these
functions ; and from these it appears that government
secures a certain amount of a particular kind of order
and liberty. It is an organization which, whatever its
actual effect, is maintained because it is believed to
keep the relations between men and groups of men settled
and regular and because it is believed to provide a certain
amount of opportunity for the free play of certain activities.
Its sphere of action is, therefore, moral, and it is to be
noted that none of the functions so far mentioned are
" economic " in the sense that they exist primarily for
the production and distribution of goods. Besides
performing other functions, however, government comes
into direct contact with the system for producing and
distributing commodities ; but, although there are
instances of government itself entering the economic
sphere, the more normal experience is that it regulates
or modifies industrial life without providing a substitute
for its common organization.

Industrial organization, on the other hand, is a universal
system with incoherent or even contradictory elements.
Goods are in fact produced and distributed, and the vast
majority of men do secure some bread and some clothes :
but almost none of this supply is due to the activities
of governments. There is, as it were, another world


within which commodities are produced and consumed :
some of this world is organized as capitaHst companies,
trade unions and interrelated private enterprises ; but
some parts of this world — for example, sections of " con-
sumers" — are as Uttle organized as the Marches were
in the Middle Ages. The organization, however, which
already exists is very complex ; the machinery is delicate
and therefore jolts or violences tend to obstruct the
output of goods or their distribution.

This production and distribution of commodities results
in a world-wide organization from which no man is
excluded : for every man is a part of the industrial
organization in so far as he is a producer and a consumer.
Not only the business man but also the bishop and
the artist affect the economic situation by services which
are paid for in aprons or vestments or canvas and hats.
The child consumes even before birth, although he does
not, in an economic sense, produce goods and services : and
the fashionable lady, most similar to a riiollusc, affects
the supply of chocolates, even if she does nothing all
her life but eat and sleep. Thus all men are inevitably
parts of the economic organization of humanity ; and
although we cannot, as in the case of the State system,
say that economic organization is compulsory in the
sense of restricting freedom, it is obviously unavoidable
because it is the necessary condition of enjoying food
and clothing in actual life.

There are, however, some persons who are prominently
and essentially producers or controllers of production,
" working " men and women or " business " men. These
are, as it were, the representatives of the economic world,
the legislature and administration in the supply and
distribution of commodities. They may be regarded
as the servants or as the masters of the pubhc which
consumes. They live by services performed, not in the
religious or artistic or governmental sphere, but in the
supply and distribution of commodities ; and as the


active element in State or governmental organization
is spoken of mythologically as " the Government " or
as " Whitehall," so the active element in the production
and distribution of goods is spoken of mythologically as
Business or Finance or Labour. It is, however, important
to recognize that all men form part of this economic
organization, as all men form part of the State system.
It seems reasonable, therefore, to say that there are
two distinct functions performed by organizations in
a complex modern society : one the provision of order
and liberty or justice, with which is connected police,
armed force and criminal and civil law ; the other the
provision of food and clothing, which is performed in
the main by non-governmental organizations in contact
with certain governmental rules such as Patent Laws, Un-
employment Insurance, etc., and with governmental offices
such as the Board of Trade and the Ministry of Labour.
This distinction of functions is the basis of various social
ideals now current ; and most of these ideals are therefore
based upon a dualism. The subject of this book has
to do only with the two functions so far mentioned ; but
it would be misleading to suppose that these two are
the only distinguishable groups of functions. There
is a third. It is the social function included in everything
from the provision of houses and the planning of towns,
through health measures, to education, art and religion.
This third group of functions will not be dealt with in
what follows here : but it is essential to note that they
are not included in what is called " economic " in this
book, nor does it seem possible to include them with
the provision of bread, boots and transport in a general
" social " function. They include interests and involve
psychological impulses and moral ideals which are not
those of either [a] the police function or (6) the provision
of goods. Obviously they are nearly related to both, for
it is impossible to divide social life into completely
separable compartments : but it should be recognized



that, for a description of contemporary social organization
and social tendencies, three and not two categories or
cadres are necessary. Thus there are three chief sections
of social Hfe, embodied in action and organization of three
chief types. There is " Law and Order," which is usually
conceived to be peculiarly the function of the State.
It is what the French call " I'autorite regalienne " and
the Germans " Verwaltung " ; the Lord Chancellor and
the Home Office in Great Britain chiefly embody it, and
its expression is in the law of contract and tort, the
Criminal Procedure Act, 1865, and the Criminal Evidence
Act, 1898. There is, secondly, industrial service into which
" the State " enters as it were by accident : this the
French call " gestion " and the Germans " Wirtschaft,"
and in the British form of social life it is embodied chiefly
in non-governmental organization but also in the Board
of Trade and the Ministry of Labour and the Acts which
they administer. There is, thirdly, — and this is not com-
monly admitted — culture or the development of body
and mind, which the French include under " prevoyance
sociale " and " beaux arts " and the Germans under
" Kultur." In the British form of organization this
function is embodied in churches, clubs, educational and
artistic or scientific societies and, governmentally, in the
Board of Education and the Ministry of Health. These are
not our subject here : but it is important to recognize
that education is not for the sake of industry ^ and that
town-planning and social amenities are results of the
desire for beauty, not of the desire for food and clothing.
The whole of this third Section is omitted in what follows,
and no consideration is given to the peculiar relation of
government to other organizations within this third
section : * but the omission must not be held to imply

1 Nor is religion, in spite of the discovery of Mr. R. Babson
that Christianity can be made to increase output and reduce labour
disputes. See his Bulletin, passim.

- Cf. Webb, Constitution of the Socialist Commonwealth, where the
division of functions appears to be dual, but where the parallel is


that it is regarded as of subordinate importance, still
less that it is merely a subdivision of the section here
called " economic " or " industrial and commercial." We
may now consider the other two social functions.

The contrast between government and economic
organization is not essentially a contrast between separate
groups of men, but between certain elements which are
to be found in every man. As in the case of the mediaeval
controversy between the State and the Church, the quarrel
between the " authorities " in the two spheres should
not obscure the fact that all men are members of both
organizations. The contrast is not that between the
spiritual and the temporal, for bread is spiritual and justice
temporal, and the mediaeval division was too simple :
but in every man there is a part which lives in the world
of justice and liberty and a part which lives in the world
of bread and clothes.

Because all men are thus involved in both organizations,
if not because of incompetent and confused thinking,
the distinction between the State system and economic
organization has not always been perceived : but obviousl}^

Online LibraryCecil Delisle BurnsGovernment and industry → online text (page 1 of 26)