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their prejudices against it. Of late, however, some
attempts have been made to render plausible the
notion that capital is, if not altogether inefiicient as
a factor in production, at least much less efficient
than is ordinarily supposed. All these attempts
necessarily take the form of arguments designed to
show that the various elements of the cost of
production are paid not out of capital accumulated
by past saving, but out of the produce which
labour itself creates. The conclusion sought to
be proved carries absurdity so plainly on the
face of it that there is no wonder that most of
these attempts dropped almost instantaneously into

The only one, indeed, which has succeeded in
attracting general attention is that of Mr. Henry

* The eminent American economist, Prof Francis A. Walker, contends,
that " although wages are, to a very considerable degree, in all communi-
ties, advanced out of capital, and this from the very necessity of the case,"
jet that they " must in any philosophical view of the subject be regarded as
paid out of the product of current industry." While accepting all the
facts on which this opinion is founded, I think a correct interpretation of
them would show that the "philosophical view" of wages is that which
regards them as "paid" or 'paijable out of capital. Profit on capitalised
labour or interest on credit given by labourers to their employers ought
not, it seems to me, to be regarded as strictly wages. Of course, capital-
ists always expect to be repaid out of the product of labour, and are
always influenced by their expectations as to the amount and value of the
product in determining the rate of wages which they will consent to give.
The view of Walker as to the source of wages is not to be confounded with
that of George, its exaggeration and caricature. The inferences which he
draws from it are in no degree either revolutionary or socialistic. His
treatise on "The Wages Question" (1891) is one of the ablest on the
subject. Ch. viii. is the portion of it specially referred to in this note.



George. He, of course, has too much abihty and
o-ood sense to asfree with those fanatical SociaHsts
who are hostile to capital itself, or who venture to
maintain that it does nothing for labour while
labour does everything for it. For example, he
does not even apply to capital in the form of
machinery, the same reasoning which he does to
capital in the form of wages. He does not maintain
either that machinery is useless in production, or
that the wealth spent in producing it was wealth
which the machinery itself had to generate. But
the wealth spent in wages he tries to prove to have
been produced by the very labour for which it is
paid. Each labourer, he holds, makes the fund
from which his wages are drawn, and makes it not
only without deducting anything from his employer's
capital, but even while increasing it.

Mr. George brings forward, in proof of his
hypothesis, a number of instances, which are inge-
niously and interestingly presented, but which supply
no real evidence. He starts with the assumption of
a naked man thrown on an uninhabited island, and
supporting himself by gathering birds' eggs, or
picking berries. The eggs or berries which this
man obtains are, he says, "his wages," and are not
drawn from capital, for " there is no capital in the
case." But manifestly these eggs or berries are not
wages. There can be no wages where there is only
one man ; where there is no quid jpro quo between
one person and another ; where there is neither
employer nor employed.

Mr. George proceeds to imagine a man hiring


another to gather eggs or berries for liim, the
payment being a portion of the eggs or berries
gathered. In this case, too, he says, there are
wages, and they are drawn from the produce of
labour, not at all from capital. But was there ever
such a case ? Would any sane person who was not
in some way dependent on another take only a
portion of the eggs or berries he collected when he
miofht have, and ouwht to have, the whole ? When
a man who collects eggs or berries engages to take
only a portion of them for his trouble and to give
up the remainder to another man, it must be
because he recognises that that man is entitled to
have a share in the eggs or berries in virtue of some
right of property in them ; or because he has done
him some service which makes him his debtor ; or
has already given him wages in some other form
than eggs or berries, but for which eggs or berries
will be accepted as an equivalent.

Mr. George's hypothesis finds, then, no support
or exemplification even in the simplest and most
primitive applications of labour. It fails far more,
of course, to apply to ordinary agricultural and
manufacturing industry, when labour has to be
expended weeks, months, or even years perhaps, in
advance, requires to be provided not merely with a
basket but with costly instruments and materials,
and is seldom occupied with what can be eaten
almost or altogether raw. The ingenuity which
would persuade us that the wages of the workmen
who built the Pyramids, or tunnelled St. Gothard,
or cut the Suez Canal, or cast the cannons of


Herr Krupp, were paid out of the pyramids, the
tunnel, the canal, and the cannons, must be wasted.

It must be added that if the wa^es of labour
were no deduction from capital, while labour only
generated and increased capital, it becomes most
mysterious that capitalists should ever lose their
capital. Yet it is a fact of daily occurrence. And
if any man inclined to approve of Mr. George's
hypothesis will only attempt to act on it, he will
soon find out to his cost how easily the fact may
occur, and how incorrect the hypothesis is. Whoever
tries to establish and carry on business without
capital for the payment of wages, will speedily
discover that he has made a serious mistake. The
hypothesis that such capital is unnecessary, will not
stand the test of practice.

Capital is charged with a worse fault than in-
dolence. It is denounced as not only a sluggard
but a thief It is said to be born in theft and kept
alive only by incessant theft ; to be all stolen from
labour, and to grow only by constantly stealing
from it. This is the thesis on the proof of which
Karl Marx concentrated his energies in his treatise
on " Capital." By the acceptance of some unguarded
statements of Adam Smith, by misconceptions of
Kicardo's meaning, by sophisms borrowed from the
copious store of Proudhon, by erroneous definitions
of value and price, by excluding utility from or
including it in his estimate of value just as it suited
his purpose, by unwarranted assumptions regarding
the functions of labour, and by numerous verbal
and logical juggleries, he elaborated a pretended


demonstration. To expound it in detail would take
a chapter to itself, and a general refutation of it
Avould require at least another, but to indicate its
essential features and fundamental defects need not
detain us long, and may suffice for our present pur-
pose. So far as I am aware it has imposed upon
few who knew sufficiently the elementary truths of
economic science. The crreater number of those who
have accepted its conclusion have, owing to their
ignorance of economics, necessarily received it merely
or chiefly on authority.

Marx regards capital not as a natural and universal
factor of production, but as a temporary fact, or what
he calls an " historical category," which has had an
historical, and even late origin. That origin was,
according to his view, violence and fraud, or in a
single word, spoliation. The mass of capital at
present in existence he traces back to conquest,
the expropriation of the feudal peasantry from
the soil, the suppression of the monasteries, the
confiscation of Church lands, enclosures, legislation
unfavourable to the working classes, and other like
causes. In this part of Marx's doctrine there is
nothing original or specially important. That wealth
has been obtained by the illegitimate means he
describes is indubitable. That it was created by
them is very doubtful. It must have existed before
it could be stolen ; mere theft is not creative either
of wealth or capital. The great mass of extant
capital has not been inherited from so remote a past
as the close of the feudal system and the Reformation,
but is of very recent origin. The great majority of


contemporary ca})italists are not the descendants
of feudal lords or of the appropriators of the wealth
of the Roman Catholic Church, but are the sons,
grandsons, or great-grandsons of poor men. Probably
a larger proportion of the wealth of Britain than
that of any other country may be traced to the
sources described by Marx, but even it must be
only a small proportion. The bulk of British wealth
has had its source within the capitalist system itself,
and is not directly at least inherited plunder. Still
more, of course, does this hold good of American and
Australian wealth.

But here Marx meets us with the cardinal article
of his economic creed — the continuous capitalistic
appro^^riation of surplus value. The profits of capital
are represented by him as of their very nature
robbery. They are only obtained by the abstraction
of what is due to labour. The capitalist and the
labourer make a l)argain, the latter consenting to
accejjt as wages, instead of the full value of what
he produces, only, perhaps, a half or a third, or a
quarter of it, and in fact, only the equivalent of
what will keep him and his family alive, while the
former pockets the remainder, lives in luxury, and
continuously accumulates capital. " Capital, there-
fore, is not only, as Adam Smith says, the command
over labour. It is essentially the command over un-
paid labour. All surplus- value, whatever particular
form (profit, interest, or rent) it may subsequently
crystallise into, is in substance the materialisation
of unpaid labour. The secret of the self- expansion
of capital resolves itself into having the disposal


of a definite quantity of other ])eople's unpaid

If this doctrine be correct all capitalists are
thieves; and Marx often energetically denounces
them as such. In one of the prefaces to his chief
work, however, he has tempered his reproaches by
the statement that as he considers economic evolution
to be simply " a process of natural history," he does
not hold capitalists to be individually responsible,
but merelv regards them as " the personification of
economic categories, the embodiments of class-
interests and class-relations," This only amounts to
saying that although capitalists do live by theft, we
must in condemning them remember that they are
not moral agents. Schiiffle attempts to im^Drove on
it by arguing that although the capitalist must be
ohjectively a thief, he may be subjectively a most
respectable man ; and that although he lives by
stealing, he is not even to be expected to cease from
stealing to the utmost of his power, because "if he
did not abstract as much as possible from the
earninofs of the workmen, and increase his own
wealth indefinitely, he would fall out of the running."
It is a pity that after so remarkable an application
of the terms " objective " and " subjective," Dr.
Schiiflie should not have succeeded in reaching a
more plausible conclusion than that caj)italists are
to be excused for stealing because they could not
otherwise get the plunder. Might not all the
thieves in prison be declared subjectively honest on
the same ground ? If the doctrine of Marx as to
capital be correct ; if the profit of capital be entirely


the result of the exploitation of labour ; if capitalism
be a system of robbery : there is no need of any
apology for calling- capitalists thieves ; and no
possible justification of any man who knows what
ca})ital is living on its gains. All who live on
profits, rents, or interest, are thieves if Marx's
doctrine be true ; and they are consciously thieves
if they believe it to be true.

It is to be hoped that most of them can plead
that they do not believe it to be true. For this
opinion there are many strong reasons. As I
indicated in the previous chapter the notion that all
value is derived from labour is erroneous. But on
this error Marx's whole hypothesis of surplus-value
and of the iniquity of the accumulation of capital
rests. Another support of his hypothesis is the
notion that the true standard of value is to be
found in normal labour- time. But this is a gross
absurdity, justified by no facts, and defended only
by sophisms. A third conception essential to the
hypothesis is that profit arises only from the part of
capital expended in the payment of wages. It
requires us to believe that it is of no consequence to
the caj)italist what he requires to pay for raw
materials, buildings, and machinery, as he can
neither gain nor lose on these things, but only on
what he s})ends in wages. But surely a man who
believes so extraordinary a dogma must have much
more regard for his own fancies than for the actual
experience of other men.

Again, Marx's doctrine of the production of
relative surplus-value necessarily implies that as


capital grows strong labour grows weak ; that as
the wealth of the capitalist accumulates the poverty
of the labourer increases. Almost all modern Socialists
have come to the same conclusion. Marx believes
himself to have demonstrated it. The direct aim of
his entire criticism of capital, and especially of that
analysis of the formation of surplus- value which is
what is most distinctive and famous in his treatise,
is to establish the result w^iich he himself states in
the following vigorous terms : — " Within the capi-
talist system all methods for raising the social
productiveness of labour are brought about at the
cost of the individual labourer ; all means for the
development of production transform themselves
into means of domination over, and exploitation of,
the producers ; they mutilate the labourer into
fragments of a man, degrade him to the level of an
appendage of a machine, destroy every remnant of
charm in his work, and turn it into a nated toil ;
they estrange from him the intellectual potentialities
of the labour-process in the same proportion as
science is incorporated in it as an independent
power ; they distort the conditions under which he
works, subject him during the labour-process to a
despotism the more hateful for its meanness : they
transform his life-time into working-time, and drag
his wife and child beneath the wheels of the Jugger-
naut of capital The law, finally, that always

equilibrates the relative surplus population, or
industrial reserve army, to the extent and energy of
accumulation ; this law rivets the labourer to
capital more firmly than the wedges of Vulcan did


Prometheus to the rock. It establishes an accumu-
lation of misery corresponding with an accumulation
of capital. Accumulation, wealth, at one pole is,
therefore, at the same time accumulation of misery,
agony of toil, slavery, ignorance, brutality, mental
degradation, at the opposite pole."*

The theory which necessitates such a conclusion
must be false, for the conclusion itself is certainly
false. The evils, indeed, incidental to, and inherent
in, the existing economic condition of society must
be admitted to be numerous and serious. There is
no sufficient warrant for any optimistic view either
of the present or of the future of industry. But
such sheer pessimism as that of Marx is thoroughly
baseless and irrational. It insists that within the
capitalist system, and in the measure that the
wealth of capitalists increase, the labouring classes
must become continually poorer, more dependent,
more ignorant, more degraded in intellect and
character. Yet within this very system, and while
wealth has been accumulating with extraordinary
rapidity, the working classes have obtained the
])()litical right formerly denied to them ; democracy
has proved irresistible ; knowledge and the desire
for knowledge have penetrated to the lowest strata
of society ; crime relatively to population has de-
creased ; wages have remarkably risen ; commodities
have generallv fallen in price ; and material comfort
has become much more common. Statistical investi-
gations leave it, perhaps, undecided whether during

'Capital," pp. 65o-i.


the last half-ceiitury wages have increased relatively
to the gains of capital ; but they make it certain
that they have increased absolutely ; and that the
rise of real wao-es has been even erreater than that
of nominal wages. They show that there has been
a remarkable levelling up of wages ; and even that
the wages of the more poorly paid occupations have
increased proportionally much more than those of
the better paid.* The doctrine of Marx, generally
accepted by Socialists, that the increase of production
and the accumulation of capital necessarily tend to
the disadvantage, slavery, and misery of the operative
classes, is thus clearly inconsistent with history,
and is decisively contradicted by science truly so

The claims of the capitalist to remuneration for
what he contributes to production, can no more
reasonably be contested than those of the labourer
for the recompense of his toil ; yet Socialism insists
on contesting them. Capital is a portion of the
capitalist's wealth, and may be any portion of it ;
hence, if wealth can be honestly possessed at all,
capital also may be honestly possessed. But if the
wealth which a man uses as capital be really his
own we must have very much stronger reasons for
denying him the right to benefit by it than any
which Socialists have yet brought forward.

His capital is such portion of a man's wealth as

* Abundant confirmation of the three immediately preceding sentences
will be found in Giffen's "Progress of the Working Classes " ; Atkinson's
"Distribution of Profits"; and especially in P. Leroy-Beauiieu's great
work, " Essai sur la Kepartition des Richesses. "


lie withholds from consumption and devotes to pro-
duction. It is impossible both " to eat one's cake
and to keep it " ; both to consume wealth in the
present and to retain it as capital with a view to
profit in the future. That abstention from con-
sumption, or as economists call it, abstinence, is a
necessary condition of the formation, or an essential
moment or element in the notion, of capital is
evident ; but hardly more so than that the man who
thus abstains is entitled to the use and benefit of
the wealth thus retained, of the capital thus formed.
The ordinary reader may be inclined to pronounce
this certainly very simple truth a truism or a plati-
tude ; but Socialists, from Lassalle and Marx to the
writers of Fabian Essays, have been able to see in
it a paradox, and have made themselves merry over
the notion of the sacrifices and privations of a
Rothschild or a Vanderbilt as capitalists. What
is alone ludicrous, however, is that professed teachers
and reformers of economic science should show such a
portentous ignorance of the ordinary and proper
signification of so simple and familiar an economic
term. It may be easier for a millionaire to capital-
ise ^100,000 than for a poor man to capitalise
sixpence, but the one can no more than the other
capitalise a farthing of the wealth which he con-
sumes, and the rich man and the poor have clearly
an equal and a perfect right to profit by their
capital, both because what they abstained from
spending unproductively was their own property
and because the abstaining was their own action
Fui'ther, the man who abstains from the con-


sumption of wealth in order to profit by it as
capital, runs the risk of losing it, whether he employ
it himself or lend it to another. In either case it is
absurd to expect him to run the risk without chance
of advantage. In the former he must even add the
labour of administration to the cares of the capitalist,
and such labour is not less entitled to recompense
than that of the operative. In the latter, although
he may so lend that the danger of loss is trifling,
it is never wholly eliminated, and where security
is good the remuneration for mere investment is

Moreover, the return for capital, the share of
produce which its owner obtains for the loan of it,
varies naturally according to conditions of demand
and supply, and very largely owing to the demand
of those who seek the wealth of others for the sake
of the profit which they believe they can derive
from it as capital. But manifestly there is no
injustice in men paying for the use of what is not
their own a share of the profit or produce which the
use of it brings them. On the contrary, it is only
right that they should do so in proportion both to
the amount of the capital and the length of time
during which its use is obtained.

The rightful ownership of the wealth from whicli
capital is formed, the abstinence from consumption
involved in its formation, the risk run in its emj^loy-
ment or investment, and the benefit conferred on
enterprise and labour by the use of it, are the
grounds on which the claim of capital to remunera-
tion rest, and on which it is to be defended. Clearer


and stroiig-er grounds there cannot be. The attempts
to assail and reject them show only intellectual
weakness and wilfulness ; not necessarily incapacity
for a certain kind of popular writing and speaking
on social subjects, but utter incompetency to appre-
hend the rudimentary principles of social science,
and especially of economics. Yet Socialists persist
in such attempts.

They have very generally even sought to resusci-
tate the mediaeval superstition that interest is
inherently unjustifiable. They tell us, as if it were
a new discovery, instead of an antiquated and most
justly discredited dogma, that money is by nature
barren, and can of right yield no interest. They
elaborately argue that if capital were honest it
would be content to take no profit. Credit, they
say, should be gratuitous. They would have us
believe that if a man has a field or a house he
should be satisfied if at the end of the lease the
tenant hands it over to him in the condition in
which he received it, and is unreasonable if he looks
for anything more in the shape of rent. Some of
them even think that the rent of a field should be
what they call " prairie value," a something so
indefinite that perhaps the only thing certain about
it is that it would be in general much less than the
interest of the wealth expended as capital on the
field, or, in Carlylean phrase, " a frightful minus
quantity." There are many socialistic variations of
the same tune. But they are all discordant and
nonsensical. There was some excuse for the eariy
Christian Fathers and mediaeval Churchmen enter-


tainino^ such foolish notions, because they fancied
they found them in the Scriptures, to the whole
teachiuir of which thev deemed themselves bound to
yield implicit obedience,* But Socialists liave in
general no such plea to urge.

Nor have they any new arguments to supply the
place formerly filled by authority. The ancient soph-
ism that money is sterile, and that as the essence of
every equitable loan is precisel}^ to return what was
lent or its equivalent, to exact interest is a sort of
robbery, is still the only thing like an argument
which the most recent Socialists can adduce. As
regards this argument Mr. Lecky hardly speaks too
stronglv when he says, "it is enough to make one
ashamed of one's species to think that Bentham was
the first to bring into notice the simple considera-
tion, that if the borrower employs the borrowed
monev in buying bulls and cows, and if these
produce calves to ten times the value of the interest,
the money borrowed can scarcely be said to be
sterile or the borrower a loser." But what are we
to think of those who are unable to see the force of
such a consideration even when it has been pointed
out to them ? What are we to think of the intelli-
0-ence of those whose only answer to it is, " We are
not reasoning about bulls and cows but about pieces
of gold and silver, which do not beget smaller pieces,
and so multiply ? " The argument plainly implies

* Further, in antiquity and the Middle Ages interest was generally
exorbitant, and loans were generally made with a view not to production

Online LibraryRobert FlintSocialism → online text (page 13 of 38)