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and the acquisition of gain but to consumption and the satisfaction of
want.



176 SOCIALISM

that gold and silver pieces in order to be productive
must be exchanged ; and the point of it is that they
are entitled to interest because of what their
borrower gains from their equivalents, the bulls and
cows bought with them.

The Collectivists display no more wisdom in their
views regarding capital than the advocates of the
oldest and crudest schemes of Socialism. They do
not, it is true, maintain that capital is powerless, or
useless, or essentially hurtful. They admit that it
contributes to production, and object only to its
being held by individuals. But the admission that
it is a natural and important factor in production
does not in the least prevent their bringing against
profits, rents, and interest, those accusations of dis-
honesty, injustice, exploitation of labour, &c., which
are not only baseless but ludicrous, when once the
utility or productivity of capital is acknowledged.

Collectivism likewise threatens to prove as hostile
as Communism could be to the maintenance and
increase of capital. It undertakes to organise
society in a way which would rapidly destroy the
capital which exists and prevent the formation of
capital in the future. It professes not to forbid men
to possess wealth, or even enormous wealth, but it is
quite resolved that they shall not use any portion
of their wealth as capital. In order to establish
their system the leading representatives of Collect-
ivism do not suggest the killing or robbing of the
capitalists of a nation, but the buying them out
with annuities, which they will only be allowed
to spend unproductively. In other words, the rich



SOCIALISM AND CAPITAL 177

are to be prevented from employin^i^ their wealth
as capital, but guaranteed the enjoyment of it
through the contributions of the community so
long as it is not applied to aid labour ; and the poor
are to be required to help in paying enormous
annuities to capitalists like the Duke of West-
minster and Baron Rothschild, on condition of their
beinof henceforth mere consumers of wealth. At the
same time all the producers or labourers in a com-
munity are to be prohibited from forming capital of
their own, but to be compelled to contribute to the
maintenance of a collective capital, in which each
individual can have only an infinitesimal interest.
Can a plan more certain to diminish capital and
increase poverty be imagined ?

The foregoing remarks may have been sufficient
to show that the teaching of Socialists as to capital
has not only no claim to be regarded as scientific
truth, but is radically erroneous. Notwithstanding
all that Socialists have urged to the contrary, it
remains clear and certain that capital and labour,
even under the regime of private property and
personal freedom, are indispensable to each other
and essentially beneficial to each other. The im-
mediate interests of capitalists and labourers, as of
all buyers and sellers, are, indeed, in each particular
instance opposed ; but on the whole and in the long
run they will coincide. In spite of a direct personal
contrariety of interests between each seller and
buyer, it is clearly the great general interest of
every seller that there should be plenty of buyers
possessed of plenty to buy with. Were a shop-

M



178 SOCIALISM

keeper to ascribe his failure in business to the
inniiber of his customers and the extent of their
purchases, he would be considered insane. It is
precisely the same absurdity to refer the poverty of
labourers to capital, and to represent capitalists as
their natural enemies.

Does it follow that all the griefs of labour against
capital are without warrant, and that all the angry
feelinofs which labourers have entertained towards
capitalists have had no reasonable foundation ? By
no means. Does it follow that all capital is honestly
gained and honourably used ? By no means. Does
it follow that a great many capitalists do not fail to
treat labour as they ought and to appreciate their
indebtedness to it as they ought ? By no means.
Does it follow that labour is more to blame than
capital for the evils of our industrial and social con-
dition ? By no means.

Political economists have been accused of return-
ing, or at least of suggesting, affirmative answers to
these questions. There is probably little, if any,
truth in the charge. But were it true much of the
distrust and dislike shown by the working classes
towards economists and their science would be ac-
counted for, and justified. Economists have certainly
no warrant in their science, or in facts, to answer
any of these questions affirmatively. It is their
duty to set forth what is true both about labour
and capital ; it is their shame, if they plead as
partisans the cause either of capital or of labour.
They are bound by regard to truth, and in the
interest even of labour, to expose the falsity of such



SOCIALISM AND CAPITAL 179

accusations as Socialists bring against capital itself,
and against capitalists as a class ; but they are
equally bound not to deny or excuse the abuses
of capital or the demerits of capitalists. Some
capitalists are probably as bad as Socialists represent
the class to be ; doubtless few of them are as good
as they ought to be.

The mere capitalist is never a satisfactory human
being, and is often a very despicable one. The
man of wealth who takes no trouble even in the
administration of his capital, who is a simj)le
investor or sleeping partner, and devotes his
abilities and means neither to the public service nor
to the promotion of any important cause, but is
active only in consumption, and self-gratification,
well deserves contempt and condemnation. The
world gets benefit from his capital indeed, but
without exertion or merit of his, and it would get
it not less were he dead. His life is a continuous
violation of duty, since duty demands from every
man labour according to his ability, service accord-
ing to his means. Unfortunately there are not
only many such capitalists, but many such who
consume what they so easily get in waste and vice.
Against them socialistic criticism is far from wholly
inapplicable. Their prevalence goes a considerable
way, perhaps, to explain the success of socialistic
propagandism.

But the waking and active capitalist may be as
objectionable as the sleeping and inactive one. He
is a man whose thousfhts and enero-ies are neces-
sarily concentrated on the pursuit of wealth, and,



I So SOCIALISM

therefore, a man specially apt to become possessed
by the demon of avarice, enslaved by the desire of
gain, hard and selfish, heedless of the claims of
justice and sympathy. It is only too possible that
workmen may have very real and serious grievances
against their capitalist employers. Wherever
labourers have been ignorant, politically feeble and
fettered, divided or isolated — wherever they have
not learned to combine, or been so circumstanced
that they could not combine their forces and give
an effective expression to their wishes — capitalists
have taken full advantage of their inexperience, their
weakness, and their disunion. Nowhere would it be
safe for working men to trust merely to the justice
of capitalists. Everywhere it would be ridiculous
for them to trust to their generosity. For labour
to be on its guard against the selfishness of capital,
for labour to organise itself for self-defence and the
attainment of its due, is only ordinary prudence.

Then, while it is very easy to show against Socialism
the legitimacy of expecting profit from capital, of
claiming a rent for land, or of taking interest for the
loan of money ; it is impossible to defend many of
the practices prevalent in the industrial, commercial,
and financial world. The mendacious puffery of
wares, the dishonest adulteration of goods, the
mean tricks of trade, the commercial devices for
the spoliation of the inexperienced and unwary, so
prevalent among us, are, of course, discreditable
to our present civilisation. We have become so
accustomed to them that we do not feel their
hatefulness as we ought. Socialism is beneficial



SOCIALISM AND CAPITAL i8i

in so far that it incites us to hate them, althouoh
we must find some other remedy for them than
the drastic one which it recommends. The greatest
fortunes of our age have been made not from
agriculture, manufactures, or what is commonly
called trade, but by speculation. This has now
become a most elaborate and powerful art. I do
not say that it is not an art which has a legitimate
and even necessary place in our economical system,
or that fortunes may not be legitimately made by
it. But, without a doubt, it is an art which has
often been most wickedly and cruelly exercised,
and many of the largest fortunes made by it have
been made with very dirty hands. Even in this
age of low interest your skilled speculator can make
an exorbitant percentage on his money by seemingly
taking upon himself great risks which he knows how
to evade by bringing ruin upon hundreds of simpler
and less-informed individuals, or even, perhaps, upon
a whole people struggling to become a nation or
sinking under the pressure of debt and taxation.
There are great money-lords who in our own genera-
tion have been as successful robbers as the most
rapacious and unscrupulous of mediaeval warriors.

Further, men who as capitalists receive only a very
moderate profit on their capital may as employers of
labour render themselves justly objectionable to
their workmen by an overbearing demeanour, by dis-
plays of bad temper, by arbitrary requirements and
unreasonable expectations, by a want of frankness,
courtesy, and friendliness in their behaviour. They
may pay their workmen the wages of their labour,



1 82 SOCIALISM

yet withhold from them the respect due to them
as men who are their own equals as men ; and the
consideration due to them as their partners in a
contract, rendering at least an equivalent for what
they receive and contributing to their prosperity.
They may plainly show that they do not realise
that they are living in a free and democratic age ; and
that they are not the masters of slaves or serfs.
And they may thus, and often really do thus, most
grievously and foolishly strain and embitter the re-
lations between themselves and their workmen.

I would only add that capitalists may be fairly
expected to recognise their special indebtedness to
their operatives by a special interest in their welfare.
A capitalist has become, let us suppose, a man of
great wealth, and he has made his fortune honestly ;
he has paid his workmen their reasonable wages ;
the rate of his own profits has been moderate, or
even small. Still, as all the many men whom he
has employed have contributed each something to
his fortune, he is a man of great wealth. Ought
he not to feel that he owes some gratitude to his
workmen ? Surely he ought. May society not look
to him to take a special interest in the improvement
of the condition of the operative class to whose
labours he has chiefly owed his success ? Surely it
may. And should this man make even most muni
ficent public benefactions of a merely general kind —
should he build town-halls, endow cliurches, and
leave large legacies to missions and charities — yet
overlook the class by the aid of which he has made
his wealth, his charity, it seems to me, can l)y no means



SOCIALISM AND CAPITAL 183

be pronounced without flaw. The capitaHsts of this
country could, I am convinced, if they would only
gird themselves up to the task, do greater things
for our labouring classes than any absolute ruler can
for those of his empire. I know of no problem as to
the requirements of the labouring classes which he
could solve by the methods of despotism which they
might not solve better by the methods of freedom.
No class of men is called to a nobler mission than
the capitalists of Great Britain. It is their interest
as well as their duty to listen to the call.

SUPPLEMENTARY NOTE.

The theory of Marx as to the nature and effects of capitalistic
production rests on his theory as to the cause and measure of
value. And in this respect his system of economics, which is
substantially constituted by these two theories, has the merit of
consistency. If sundry economists who preceded him in taking the
same view of the relation of labour to value gave quite a diflerent
view of the relation of labour to capital, we can only attribute
that to defective logic or imperfect courage. The consequences
which he deduces from his theory of value are really implied in
it. That theory is the foundation-stone of the whole Marxian
structure. It is, however, as we have seen in the previous
<;hapter, one which only requires to be tried and tested to crumble
into dust.

Of late there are symptoms that some of the most cultured
advocates of Social Democracy are becoming ashamed of the
Marxian theory of value. At least I observe that some of our
Fabians are beginning to say that collectivist economics is
independent of any particular theory of value and compatible
with an acceptance of the theoiy of value with which the
names of "VValras and Jevons, Menger and Bcihm-Bawerk, are
familiarly associated. But why have they not also given some
reasons for their opinion ? It seems to me that they must
inevitably perceive it to be an error as soon as they make any



i84 SOCIALISM

serious attempt to deduce the Marxian theory of surplus-value
either without any theory of value, or from any other theory of
value than that on which Marx relied. The system of Marx
cannot be half accepted and half I'ejected ; it must stand or fall
as a whole.

While Marx was no more the first to maintain that the profit
of the capitalist is wholly drawn from unpaid labour than that
labour alone creates value, he was also no less the first to attempt
a complete demonstration of the former than of the latter of
those doctrines. His originality and merit were of the same kind
as regards both. It is only with the former that we have at
present to concern ourselves.

Proudhon began his investigation of the nature of property by
defining property as " theft." Marx starts on his investigation
of the nature of capitalist production with the conception that
capital consists of " the means of exploitation." The coincidence
is remarkable ; but Marx is very often to be found stepping in
the footmarks of the man whom he particvdarly delighted to
depreciate. Ko impartial thinker has approved of, or can ap-
prove of, his definition of capital, If he wished to have a term
for "the means of exploitation," he should have invented one,
and not appropriated a word which has in economic science a
recognised signification quite different from that which he sought
to substitute for it. Capital as generally understood by
economists is wealth which is used not for the direct gratification
of desire but as a means of producing additional wealth. Every
instrument auxiliary to labour and productive of wealth is in this
sense capital. In the Marxian sense no such instrument is
capital unless the possessor of it can, by entrusting or lending it
to another, derive from it a benefit to himself which is robbery
of the other. A strange notion ! Could a manufacturer, by some
gi-and mechanical contrivance, himself work the whole machinery
of his factory, and dispense with labourers altogether, he would
forthwith cease to be a capitalist in the Mai-xian sense. And, on
the other hand, were some ingenious man, by much hard thinking
and through much self-sacrifice, to invent an instrument by
the help of which there could be performed in a single day
as much work as would otherwise require ten days' toil, to charge
for the loan of it a shilling or even a penny more than an equiva-



SOCIALISM AND CAPITAL 185

lent for its deterioration while employed by its borrower, he
would become a capitalist and an exploiter. Such a conception of
capital is its own refutation. It obviously implies the assumption
that capital is essentially sterile, and unentitled to any profit.
This assumption also needs no special refutation. Capital by
itself is indeed unproductive. But so is labour by itself. If
capital can produce nothing without natural agents and labour,
labour can produce nothing without natural agents, and extremely
little without capital.

By representing capital as " an historic category " Marx meant
that it had not existed in all stages of society, and was even a
comparatively late phenomenon in history. But this view was
only a consequence of the conception which he had formed of the
nature of capital, not a result of historic investigation. Capital
must be admitted, indeed, to have had an origin in history, to
have been derived from labour and natural agents, and not to be,
as labour and natural agents are, primordial in production ; it is
only a secondary, not a primary, factor of production. But if it
be conceived of in its proper acceptation as wealth devoted to
production it must have been almost coeval with man. History
does not inform us of any age in which capital thus understood
was non-existent. "Man," it has been said, "is a tool-using
animal." But the simplest tool is an instrument of production
equally with the most complex machine, and as such is equally
capital. Man as a rational being is naturally endowed with the
power of seeing that he can often better attain his ends indirectly
by the use of means with which he can provide himself than by
the immediate and direct action of his own members. This
power, a universal and distinctive characteristic of humanity, is
the root alike of invention and of capital, two of the chief
secondary factors of production. Some outgrowths of it are
to be found among the most uncultured peoples of the earth ;
and the latest, most elaborate, and most subtle of the mechanical,
commercial, and capitalistic contrivances and processes adopted in
the most advanced of modern nations are only its most evolved
results.

That capital, in the Marxian sense, is " an historic category "
may be doubted. No one, it is true, will refuse to admit that
capital may grow, and often has grown, by exploitation, by



iS6 SOCIALISM

appropriation of the wealth created by unpaid labour. But
that is not what Marx had to show in order to confirm and
justify his conception of capital. What he required to prove
was that it necessai'ily and exclusively so grows ; that the
exploitation of labour is its essential function, and the whole
secret and source of its accumulation. That is what he has
not done. Hence capital, as defined by him, is rather a mythic
or metaphysical than an historic category, originating as it does
in the imaginative or dialectic identification of the nature of
capital with its abuse, and in the personification of it as " a
vampire." While admitting that the present era is a capitalist
era, we may reasonably hold that " the capitalist era " of Marx
is, if anywhere, still in the future, awaiting, perhaps, its advent
in Collectivism.

Marx is mistaken when he represents capital as a product of
circulation which makes its first appearance in the form of
money. On the contrary, it is just the commodities which
constitute capital that are cii"culated, and money presupposes
both their existence and their circulation. Neither the means
of production nor of exploitation originated in circulation and
money. " The modern history of capital " may, perhaps, be
dated from the sixteenth century, but it was preceded by a
mediaeval history of capital, and that again by an ancient history
of it. The time of the utmost exploitation of labour by capital
was that of slavery, when the capitalist made of the labourer a
mere instrument of production, a mere portion of his capital.
That money may not be capital Marx himself admits ; but having
made the admission he should have further allowed that money
is not otherwise capital than any commodity may be capital.
W^hen he afiirms that " if we abstract from the material sub-
stance of the circulation of commodities — that is, from the
exchange of the various use-values — and consider only the
economic forms produced by this process of circulation, we find
its final result to be money," he falls again into the same error as
when he maintained that through abstraction of the use-values of
commodities we find them to be mere congelations or crystals of
the social substance, human labour in the abstract. In other
words he again adopts the irrational intellectual procedure which
in the Middle Ages peopled the world of thought with " entities "



SOCIALISM AND CAPITAL 187

and " quiddities." The abstraction which he i-ecommeiids is of
the kind which only generates fictitious notions and fallacious
arguments.

The whole of that portion of his argument which is intended
to prove that profit cannot arise in the process of circulation or
exchange is also dependent on an abstract notion to which nothing
real corresponds. Circulation as he conceives of it ; circulation as
an exchange either of equivalents in which no one gains, or of
non-equivalents in which what one gains another loses ; is not a
normal economic process, or the process treated of in economic
science. In an exchange, as understood in economics, both
parties to it believe it to be for their advantage. In no case
of sale does either the buyer or seller seek either a mere equiva-
lent or a loss. Were the view of Marx correct, there should not
be any profits made in the distributing trades. The ability of
certain manufacturers to buy their raw materials cheaper and to
obtain for their products a wider and better market than their
rivals is a copious source of profit to them. Circulation or
exchange — the actual process, not the fictitious Mai-xian ab-
straction of it — so augments the useful co-operation of the
powers of nature and of man as in countless cases enormously to
aid production and to increase profits. The Marxian " demon-
stration " of the source of surplus-value has, in fact, scarcely even
an appearance of applicability in the sphere of commerce, and is
practically confined by its author to that of industry.

Marx further denies that profit can arise from any portion of
capital except such as is expended on wages, or what he calls
variable capital. He holds that all other capital — what he calls
constant capital — is unproductive of profit. While he admits
that capital incorporated in machinery contributes powerfully to
production, he yet assei-ts that it has no influence whatever on
the production of surplus-value. This monstrous paradox he
obviously required to maintain before he could pretend to make
out that capital grows only by the exploitation of labour. He
had the woful courage to do so ; and his followers have had
the credulity to believe him in defiance alike of reason and of
experience.

Consider what the paradox implies. Take two capitalists, AB
and CD. Suppose AB to have a capital of ;^iooo ; to expend



1 88 SOCIALISM

lialf of it in wages amounting to ^50 a year to each of ten tailors,
and half of it in materials for them to woik on ; and to find him-
self at the close of the year to have made profit to the extent of
^S°°- Suppose CD to have a capital of ^100,000, of which
^99,500 are invested in pearls, while the remaining _;!^ 500 are
expended in wages to ten workmen who string the pearls into
necklaces, &c. What amount of profit should, according to the
doctrine of Marx, fall to CD during the year ? Just the same
as to AB, because, although his total capital is a hundred times
greater, his variable capital is the same. In other words, if Marx
be correct, CD must expect to get 99-^- per cent, less profit on his
capital than AB. Should he get the same rate of profit the
amount of it would be not ^^500 but ;^5ooo. In this latter
case, however, he must, according to the Marxian economics, rob
his workmen to the extent of ;i^5oo each, not like AB only to
the extent of ;^5o each. And to accomplish that — to appropriate
to himself ^^500 out of the annual wages due to a common work-
man—would surely be a feat not less remarkable than to take the
breeches off a kilted Highlander or to extract sunbeams from
cucumbers.*

The view of Marx is undoubtedly erroneous. Profits are
derivable from all the factors of production, and not merely from
labour. Gi'eater disposable wealth or purchasing power, superior
intelligence in buying, selling, and management, the possession of
more powerful or perfect machinery, and other advantages are



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