Econlib

The Library

Other Sites

 Front Page arrow Titles (by Subject) arrow Book IV: INFLUENCE OF THE PROGRESS OF SOCIETY ON PRODUCTION AND DISTRIBUTION - Principles of Political Economy with some of their Applications to Social Philosophy (Ashley ed.)

Return to Title Page for Principles of Political Economy with some of their Applications to Social Philosophy (Ashley ed.)

Search this Title:

Also in the Library:

Subject Area: Economics
Topic: General Treatises on Economics
Collection: Banned Books

Book IV: INFLUENCE OF THE PROGRESS OF SOCIETY ON PRODUCTION AND DISTRIBUTION - John Stuart Mill, Principles of Political Economy with some of their Applications to Social Philosophy (Ashley ed.) [1848]

Edition used:

Principles of Political Economy with some of their Applications to Social Philosophy, ed. William James Ashley (London: Longmans, Green and Co., 1909, 7th ed.).

About Liberty Fund:

Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.


Book IV

INFLUENCE OF THE PROGRESS OF SOCIETY ON PRODUCTION AND DISTRIBUTION

CHAPTER I

general characteristics of a progressive state of wealth

§1. The three preceding Parts include as detailed a view as our limits permit, of what, by a happy generalization of a mathematical phrase, has been called the Statics of the subject. We have surveyed the field of economical facts, and have examined how they stand related to one another as causes and effects; what circumstances determine the amount of production, of employment for labour, of capital and population; what laws regulate rent, profits, and wages; under what conditions and in what proportions commodities are interchanged between individuals and between countries. We have thus obtained a collective view of the economical phenomena of society, considered as existing simultaneously. We have ascertained, to a certain extent, the principles of their interdependence; and when the state of some of the elements is known, we should now be able to infer, in a general way, the contemporaneous state of most of the others. All this, however, has only put us in possession of the economical laws of a stationary and unchanging society. We have still to consider the economical condition of mankind as liable to change, and indeed (in the more advanced portions of the race, and in all regions to which their influence reaches) as at all times undergoing progressive changes. We have to consider what these changes are, what are their laws, and what their ultimate tendencies; thereby adding a theory of motion to our theory of equilibrium—the Dynamics of political economy to the Statics.

In this inquiry, it is natural to commence by tracing the operation of known and acknowledged agencies. Whatever may be the other changes which the economy of society is destined to undergo, there is one actually in progress, concerning which there can be no dispute. In the leading countries of the world, and in all others as they come within the influence of those leading countries, there is at least one progressive movement which continues with little interruption from year to year and from generation to generation; a progress in wealth; an advancement of what is called material prosperity. All the nations which we are accustomed to call civilized, increase gradually in production and in population: and there is no reason to doubt, that not only these nations will for some time continue so to increase, but that most of the other nations of the world, including some not yet founded, will successively enter upon the same career. It will, therefore, be our first object to examine the nature and consequences of this progressive change; the elements which constitute it, and the effects it produces on the various economical facts of which we have been tracing the laws, and especially on wages, profits, rents, values, and prices.

§2. Of the features which characterize this progressive economical movement of civilized nations, that which first excites attention, through its intimate connexion with the phenomena of Production, is the perpetual, and so far as human foresight can extend, the unlimited, growth of man's power over nature. Our knowledge of the properties and laws of physical objects shows no sign of approaching its ultimate boundaries: it is advancing more rapidly, and in a greater number of directions at once, than in any previous age or generation, and affording such frequent glimpses of unexplored fields beyond, as to justify the belief that our acquaintance with nature is still almost in its infancy. This increasing physical knowledge is now, too, more rapidly than at any former period, converted, by practical ingenuity, into physical power. The most marvellous of modern inventions, one which realizes the imaginary feats of the magician, not metaphorically but literally—the electro-magnetic telegraph—sprang into existence but a few years after the establishment of the scientific theory which it realizes and exemplifies. Lastly, the manual part of these great scientific operations is now never wanting to the intellectual: there is no difficulty in finding or forming, in a sufficient number of the working hands of the community, the skill requisite for executing the most delicate processes of the application of science to practical uses. From this union of conditions, it is impossible not to look forward to a vast multiplication and long succession of contrivances for economizing labour and increasing its produce; and to an ever wider diffusion of the use and benefit of those contrivances.

Another change, which has always hitherto characterized, and will assuredly continue to characterize, the progress of civilized society, is a continual increase of the security of person and property. The people of every country in Europe, the most backward as well as the most advanced, are, in each generation, better protected against the violence and rapacity of one another, both by a more efficient judicature and police for the suppression of private crime, and by the decay and destruction of those mischievous privileges which enabled certain classes of the community to prey with impunity upon the rest. They are also, in every generation, better protected, either by institutions or by manners and opinion, against arbitrary exercise of the power of government. Even in semi-barbarous Russia, acts of spoliation directed against individuals, who have not made themselves politically obnoxious, are not supposed to be now so frequent as much to affect any person's feelings of security. Taxation, in all European countries, grows less arbitrary and oppressive, both in itself and in the manner of levying it. Wars, and the destruction they cause, are now usually1 confined, in almost every country, to those distant and outlying possessions at which it comes into contact with savages. Even the vicissitudes of fortune which arise from inevitable natural calamities, are more and more softened to those on whom they fall, by the continual extension of the salutary practice of insurance.

Of this increased security, one of the most unfailing effects is a great increase both of production and of accumulation. Industry and frugality cannot exist where there is not a preponderant probability that those who labour and spare will be permitted to enjoy. And the nearer this probability approaches to certainty, the more do industry and frugality become pervading qualities in a people. Experience has shown that a large proportion of the results of labour and abstinence may be taken away by fixed taxation, without impairing, and sometimes even with the effect of stimulating, the qualities from which a great production and an abundant capital take their rise. But those qualities are not proof against a high degree of uncertainty. The Government may carry off a part; but there must be assurance that it will not interfere, nor suffer any one to interfere, with the remainder.

One of the changes which most infallibly attend the progress of modern society, is an improvement in the business capacities of the general mass of mankind. I do not mean that the practical sagacity of an individual human being is greater than formerly. I am inclined to believe that economical progress has hitherto had even a contrary effect. A person of good natural endowments, in a rude state of society, can do a great number of things tolerably well, has a greater power of adapting means to ends, is more capable of extricating himself and others from an unforeseen embarrassment, than ninety-nine in a hundred of those who have known only what is called the civilized form of life. How far these points of inferiority of faculties are compensated, and by what means they might be compensated still more completely, to the civilized man as an individual being, is a question belonging to a different inquiry from the present. But to civilized human beings collectively considered, the compensation is ample. What is lost in the separate efficiency of each, is far more than made up by the greater capacity of united action. In proportion as they put off the qualities of the savage, they become amenable to discipline; capable of adhering to plans concerted beforehand, and about which they may not have been consulted; of subordinating their individual caprice to a preconceived determination, and performing severally the parts allotted to them in a combined undertaking. Works of all sorts, impracticable to the savage or the half-civilized, are daily accomplished by civilized nations, not by any greatness of faculties in the actual agents, but through the fact that each is able to rely with certainty on the others for the portion of the work which they respectively undertake. The peculiar characteristic, in short, of civilized beings, is the capacity of co-operation; and this, like other faculties, tends to improve by practice, and becomes capable of assuming a constantly wider sphere of action.

Accordingly there is no more certain incident of the progressive change taking place in society, than the continual growth of the principle and practice of co-operation. Associations of individuals voluntarily combining their small contributions now perform works, both of an industrial and of many other characters, which no one person or small number of persons are rich enough to accomplish, or for the performance of which the few persons capable of accomplishing them were formerly enabled to exact the most inordinate remuneration. As wealth increases and business capacity improves, we may look forward to a great extension of establishments, both for industrial and other purposes, formed by the collective contributions of large numbers; establishments like those called by the technical name of joint-stock companies, or the associations less formally constituted, which are so numerous in England, to raise funds for public or philanthropic objects, 1 or, lastly, those associations of workpeople either for production, or to buy goods for their common consumption, which are now specially known by the name of co-operative societies.

The progress which is to be expected in the physical sciences and arts, combined with the greater security of property, and greater freedom in disposing of it, which are obvious features in the civilization of modern nations, and with the more extensive and more skilful employment of the joint-stock principle, afford space and scope for an indefinite increase of capital and production, and for the increase of population which is its ordinary accompaniment. That the growth of population will overpass the increase of production, there is not much reason to apprehend; and that it should even keep pace with it, is inconsistent with the supposition of any real improvement in the poorest classes of the people. It is, however, quite possible that there might be a great progress in industrial improvement, and in the signs of what is commonly called national prosperity; a great increase of aggregate wealth, and even, in some respects, a better distribution of it; that not only the rich might grow richer, but many of the poor might grow rich, that the intermediate classes might become more numerous and powerful, and the means of enjoyable existence be more and more largely diffused, while yet the great class at the base of the whole might increase in numbers only, and not in comfort nor in cultivation. We must, therefore, in considering the effects of the progress of industry, admit as a supposition, however greatly we deprecate as a fact, an increase of population as long-continued, as indefinite, and possibly even as rapid, as the increase of production and accumulation.

With these preliminary observations on the causes of change at work in a society which is in a state of economical progress, I proceed to a more detailed examination of the changes themselves.

CHAPTER II

influence of the progress of industry and population on values and prices

§ 1. The changes which the progress of industry causes or presupposes in the circumstances of production, are necessarily attended with changes in the values of commodities.

The permanent values of all things which are neither under a natural nor under an artificial monopoly, depend, as we have seen, on their cost of production. But the increasing power which mankind are constantly acquiring over nature, increases more and more the efficiency of human exertion, or, in other words, diminishes cost of production. All inventions by which a greater quantity of any commodity can be produced with the same labour, or the same quantity with less labour, or which abridge the process, so that the capital employed needs not be advanced for so long a time, lessen the cost of production of the commodity. As, however, value is relative; if inventions and improvements in production were made in all commodities, and all in the same degree, there would be no alteration in values. Things would continue to exchange for each other at the same rates as before; and mankind would obtain a greater quantity of all things in return for their labour and abstinence, without having that greater abundance measured and declared (as it is when it affects only one thing) by the diminished exchange value of the commodity.

As for prices, in these circumstances they would be affected or not, according as the improvements in production did or did not extend to the precious metals. If the materials of money were an exception to the general diminution of cost of production, the values of all other things would fall in relation to money, that is, there would be a fall of general prices throughout the world. But if money, like other things, and in the same degree as other things, were obtained in greater abundance and cheapness, prices would be no more affected than values would: and there would be no visible sign in the state of the markets, of any of the changes which had taken place; except that there would be (if people continued to labour as much as before) a greater quantity of all sorts of commodities, circulated at the same prices by a greater quantity of money.

Improvements in production are not the only circumstance accompanying the progress of industry which tends to diminish the cost of producing, or at least of obtaining, commodities. Another circumstance is the increase of intercourse between different parts of the world. As commerce extends, and the ignorant attempts to restrain it by tariffs become obsolete, commodities tend more and more to be produced in the places in which their production can be carried on at the least expense of labour and capital to mankind. As civilization spreads, and security of person and property becomes established, in parts of the world which have not hitherto had that advantage, the productive capabilities of those places are called into fuller activity, for the benefit both of their own inhabitants and of foreigners. The ignorance and misgovernment in which many of the regions most favoured by nature are still grovelling, afford work, probably, for many generations before those countries will be raised even to the present level of the most civilized parts of Europe. Much will also depend on the increasing migration of labour and capital to unoccupied parts of the earth, of which the soil, climate, and situation are found, by the ample means of exploration now possessed, to promise not only a large return to industry, but great facilities of producing commodities suited to the markets of old countries. Much as the collective industry of the earth is likely to be increased in efficiency by the extension of science and of the industrial arts, a still more active source of increased cheapness of production will be found, probably, for some time to come, in the gradually unfolding consequences of Free Trade, and in the increasing scale on which Emigration and Colonization will be carried on.

From the causes now enumerated, unless counteracted by others, the progress of things enables a country to obtain at less and less of real cost, not only its own productions but those of foreign countries. Indeed, whatever diminishes the cost of its own productions, when of an exportable character, enables it, as we have already seen, to obtain its imports at less real cost.

§ 2. But is it the fact, that these tendencies are not counteracted? Has the progress of wealth and industry no effect in regard to cost of production, but to diminish it? Are no causes of an opposite character brought into operation by the same progress, sufficient in some cases not only to neutralize, but to overcome the former, and convert the descending movement of cost of production into an ascending movement? We are already aware that there are such causes, and that, in the case of the most important classes of commodities, food and materials, there is a tendency diametrically opposite to that of which we have been speaking. The cost of production of these commodities tends to increase.

This is not a property inherent in the commodities themselves. If population were stationary, and the produce of the earth never needed to be augmented in quantity, there would be no cause for greater cost of production. Mankind would, on the contrary, have the full benefit of all improvements in agriculture, or in the arts subsidiary to it, and there would be no difference, in this respect, between the products of agriculture and those of manufactures.1 The only products of industry which, if population did not increase, would be liable to a real increase of cost of production, are those which, depending on a material which is not renewed, are either wholly or partially exhaustible; such as coal, and most if not all metals; for even iron, the most abundant as well as most useful of metallic products, which forms an ingredient of most minerals and of almost all rocks, is susceptible of exhaustion so far as regards its richest and most tractable ores.

When, however, population increases, as it has never yet failed to do when the increase of industry and of the means of subsistence made room for it, the demand for most of the productions of the earth, and particularly for food, increases in a corresponding proportion. And then comes into effect that fundamental law of production from the soil, on which we have so frequently had occasion to expatiate; the law, that increased labour, in any given state of agricultural skill, is attended with a less than proportional increase of produce. The cost of production of the fruits of the earth increases, caeteris paribus, with every increase of the demand.

No tendency of a like kind exists with respect to manufactured articles. The tendency is in the contrary direction. The larger the scale on which manufacturing operations are carried on, the more cheaply they can in general be performed. Mr. Senior has gone the length of enunciating as an inherent law of manufacturing industry, that in it increased production takes place at a smaller cost, while in agricultural industry increased production takes place at a greater cost. I cannot think, however, that even in manufactures, increased cheapness follows increased production by anything amounting to a law. It is a probable and usual, but not a necessary, consequence.

As manufactures, however, depend for their materials either upon agriculture, or mining, or the spontaneous produce of the earth, manufacturing industry is subject, in respect of one of its essentials, to the same law as agriculture. But the crude material generally forms so small a portion of the total cost, that any tendency which may exist to a progressive increase in that single item, is much over-balanced by the diminution continually taking place in all the other elements; to which diminution it is impossible at present to assign any limit.

The tendency, then, being to a perpetual increase of the productive power of labour in manufactures, while in agriculture and mining there is a conflict between two tendencies, the one towards an increase of productive power, the other towards a diminution of it, the cost of production being lessened by every improvement in the processes, and augmented by every addition to population; it follows that the exchange values of manufactured articles, compared with the products of agriculture and of mines, have, as population and industry advance, a certain and decided tendency to fall. Money being a product of mines, it may also be laid down as a rule, that manufactured articles tend, as society advances, to fall in money price. The industrial history of modern nations, especially during the last hundred years, fully bears out this assertion.

§ 3. Whether agricultural produce increases in absolute as well as comparative cost of production, depends on the conflict of the two antagonist agencies, increase of population, and improvement in agricultural skill. In some, perhaps in most, states of society, (looking at the whole surface of the earth,) both agricultural skill and population are either stationary, or increase very slowly, and the cost of production of food, therefore, is nearly stationary. In a society which is advancing in wealth, population generally increases faster than agricultural skill, and food consequently tends to become more costly; but there are times when a strong impulse sets in towards agricultural improvement. Such an impulse has shown itself in Great Britain during the last twenty or thirty1 years. In England and Scotland agricultural skill has of late increased considerably faster than population, insomuch that food and other agricultural produce, notwithstanding the increase of people, can be grown at less cost than they were thirty years ago:2 and the abolition of the Corn Laws has given an additional stimulus to the spirit of improvement. In some other countries, and particularly in France, the improvement of agriculture gains ground still more decidedly upon population, because though agriculture, except in a few provinces, advances slowly, population advances still more slowly, and even with increasing slowness; its growth being kept down, not by poverty, which is diminishing, but by prudence.

Which of the two conflicting agencies is gaining upon the other at any particular time, might be conjectured with tolerable accuracy from the money price of agricultural produce (supposing bullion not to vary materially in value), provided a sufficient number of years could be taken, to form an average independent of the fluctuations of seasons. This, however, is hardly practicable, since Mr. Tooke has shown that even so long a period as half a century may include a much greater proportion of abundant and a smaller of deficient seasons than is properly due to it. A mere average, therefore, might lead to conclusions only the more misleading, for their deceptive semblance of accuracy. There would be less danger of error in taking the average of only a small number of years, and correcting it by a conjectural allowance for the character of the seasons, than in trusting to a longer average without any such correction. It is hardly necessary to add, that in founding conclusions on quoted prices, allowance must also be made as far as possible for any changes in the general exchange value of the precious metals.∗3

§ 4. Thus far, of the effect of the progress of society on the permanent or average values and prices of commodities. It remains to be considered in what manner the same progress affects their fluctuations. Concerning the answer to this question there can be no doubt. It tends in a very high degree to diminish them.

In poor and backward societies, as in the East, and in Europe during the Middle Ages, extraordinary differences in the price of the same commodity might exist in places not very distant from each other, because the want of roads and canals, the imperfection of marine navigation, and the insecurity of communications generally, prevented things from being transported from the places where they were cheap to those where they were dear. The things most liable to fluctuations in value, those directly influenced by the seasons, and especially food, were seldom carried to any great distances. Each locality depended, as a general rule, on its own produce and that of its immediate neighbourhood. In most years, accordingly, there was, in some part or other of any large country, a real dearth. Almost every season must be unpropitious to some among the many soils and climates to be found in an extensive tract of country; but as the same season is also in general more than ordinarily favourable to others, it is only occasionally that the aggregate produce of the whole country is deficient, and even then in a less degree than that of many separate portions; while a deficiency at all considerable, extending to the whole world, is a thing almost unknown. In modern times, therefore, there is only dearth, where there formerly would have been famine, and sufficiency everywhere when anciently there would have been scarcity in some places and superfluity in others.

The same change has taken place with respect to all other articles of commerce. The safety and cheapness of communications, which enable a deficiency in one place to be supplied from the surplus of another, at a moderate or even a small advance on the ordinary price, render the fluctuations of prices much less extreme than formerly. This effect is much promoted by the existence of large capitals, belonging to what are called speculative merchants, whose business it is to buy goods in order to resell them at a profit.

These dealers naturally buying things when they are cheapest, and storing them up to be brought again into the market when the price has become unusually high; the tendency of their operations is to equalize price, or at least to moderate its inequalities. The prices of things are neither so much depressed at one time, nor so much raised at another, as they would be if speculative dealers did not exist.

Speculators, therefore, have a highly useful office in the economy of society; and (contrary to common opinion) the most useful portion of the class are those who speculate in commodities affected by the vicissitudes of seasons. If there were no corn-dealers, not only would the price of corn be liable to variations much more extreme than at present, but in a deficient season the necessary supplies might not be forthcoming at all. Unless there were speculators in corn, or unless, in default of dealers, the farmers became speculators, the price in a season of abundance would fall without any limit or check, except the wasteful consumption that would invariably follow. That any part of the surplus of one year remains to supply the deficiency of another, is owing either to farmers who withhold corn from the market, or to dealers who buy it when at the cheapest and lay it up in store.

§ 5. Among persons who have not much considered the subject, there is a notion that the gains of speculators are often made by causing an artificial scarcity; that they create a high price by their own purchases, and then profit by it. This may easily be shown to be fallacious. If a corn-dealer makes purchases on speculation, and produces a rise, when there is neither at the time nor afterwards any cause for a rise of price except his own proceedings; he no doubt appears to grow richer as long as his purchases continue, because he is a holder of an article which is quoted at a higher and higher price: but this apparent gain only seems within his reach so long as he does not attempt to realize it. If he has bought, for instance, a million of quarters, and by withholding them from the market, has raised the price ten shillings a quarter; just so much as the price has been raised by withdrawing a million quarters, will it be lowered by bringing them back, and the best that he can hope is that he will lose nothing except interest and his expenses. If by a gradual and cautious sale he is able to realize, on some portion of his stores, a part of the increased price, so also he will undoubtedly have had to pay a part of that price on some portion of his purchases. He runs considerable risk of incurring a still greater loss; for the temporary high price is very likely to have tempted others, who had no share in causing it, and who might otherwise not have found their way to his market at all, to bring their corn there, and intercept a part of the advantage. So that instead of profiting by a scarcity caused by himself, he is by no means unlikely, after buying in an average market, to be forced to sell in a superabundant one.

As an individual speculator cannot gain by a rise of price solely of his own creating, so neither can a number of speculators gain collectively by a rise which their operations have artificially produced. Some among a number of speculators may gain, by superior judgment or good fortune1 in selecting the time for realizing, but they make this gain at the expense, not of the consumer, but of the other speculators who are less judicious. They, in fact, convert to their own benefit the high price produced by the speculations of the others, leaving to these the loss resulting from the recoil. It is not to be denied, therefore, that speculators may enrich themselves by other people's loss. But it is by the losses of other speculators. As much must have been lost by one set of dealers as is gained by another set.

When a speculation in a commodity proves profitable to the speculators as a body, it is because, in the interval between their buying and reselling, the price rises from some cause independent of them, their only connexion with it consisting in having foreseen it. In this case, their purchases make the price begin to rise sooner than it otherwise would do, thus spreading the privation of the consumers over a longer period, but mitigating it at the time of its greatest height: evidently to the general advantage. In this, however, it is assumed that they have not overrated the rise which they looked forward to. For it often happens that speculative purchases are made in the expectation of some increase of demand, or deficiency of supply, which after all does not occur, or not to the extent which the speculator expected. In that case the speculation, instead of moderating fluctuation, has caused a fluctuation of price which otherwise would not have happened, or aggravated one which would. But in that case, the speculation is a losing one, to the speculators collectively, however much some individuals may gain by it. All that part of the rise of price by which it exceeds what there are independent grounds for, cannot give to the speculators as a body any benefit, since the price is as much depressed by their sales as it was raised by their purchases; and while they gain nothing by it, they lose, not only their trouble and expenses, but almost always much more, through the effects incident to the artificial rise of price, in checking consumption, and bringing forward supplies from unforeseen quarters. The operations, therefore, of speculative dealers, are useful to the public whenever profitable to themselves; and though they are sometimes injurious to the public, by heightening the fluctuations which their more usual office is to alleviate, yet whenever this happens the speculators are the greatest losers. The interest, in short, of the speculators as a body, coincides with the interest of the public; and as they can only fail to serve the public interest in proportion as they miss their own, the best way to promote the one is to leave them to pursue the other in perfect freedom.

I do not deny that speculators may aggravate a local scarcity. In collecting corn from the villages to supply the towns, they make the dearth penetrate into nooks and corners which might otherwise have escaped from bearing their share of it. To buy and resell in the same place, tends to alleviate scarcity; to buy in one place and resell in another, may increase it in the former of the two places, but relieves it in the latter, where the price is higher, and which, therefore, by the very supposition, is likely to be suffering more. And these sufferings always fall hardest on the poorest consumers, since the rich, by outbidding, can obtain their accustomed supply undiminished if they choose. To no persons, therefore, are the operations of corn-dealers on the whole so beneficial as to the poor. Accidentally and exceptionally, the poor may suffer from them: it might sometimes be more advantageous to the rural poor to have corn cheap in winter, when they are entirely dependent on it, even if the consequence were a dearth in spring, when they can perhaps obtain partial substitutes. But there are no substitutes, procurable at that season, which serve in any great degree to replace bread-corn as the chief article of food: if there were, its price would fall in the spring, instead of continuing, as it always does, to rise till the approach of harvest.

There is an opposition of immediate interest, at the moment of sale, between the dealer in corn and the consumer, as there always is between the seller and the buyer: and a time of dearth being that in which the speculator makes his largest profits, he is an object of dislike and jealousy at that time, to those who are suffering while he is gaining. It is an error, however, to suppose that the corn-dealer's business affords him any extraordinary profit: he makes his gains not constantly, but at particular times, and they must therefore occasionally be great, but the chances of profit in a business in which there is so much competition, cannot on the whole be greater than in other employments. A year of scarcity, in which great gains are made by corn-dealers, rarely comes to an end without a recoil which places many of them in the list of bankrupts. There have been few more promising seasons for corn-dealers than the year 1847, and seldom was there a greater break-up among the speculators than in the autumn of that year. The chances of failure, in this most precarious trade, are a set-off against great occasional profits. If the corn-dealer were to sell his stores, during a dearth, at a lower price than that which the competition of the consumers assigns to him, he would make a sacrifice, to charity or philanthropy, of the fair profits of his employment, which may be quite as reasonably required from any other person of equal means. His business being a useful one, it is the interest of the public that the ordinary motives should exist for carrying it on, and that neither law nor opinion should prevent an operation beneficial to the public from being attended with as much private advantage as is compatible with full and free competition.

It appears, then, that the fluctuations of values and prices arising from variations of supply, or from alterations in real (as distinguished from speculative) demand, may be expected to become more moderate as society advances. With regard to those which arise from miscalculation, and especially from the alterations of undue expansion and excessive contraction of credit, which occupy so conspicuous a place among commercial phenomena, the same thing cannot be affirmed with equal confidence. Such vicissitudes, beginning with irrational speculation and ending with a commercial crisis, have not hitherto become either less frequent or less violent with the growth of capital and extension of industry. Rather they may be said to have become more so: in consequence, as is often said, of increased competition; but, as I prefer to say, of a low rate of profits and interest, which makes capitalists dissatisfied with the ordinary course of safe mercantile gains.1 The connexion of this low rate of profit with the advance of population and accumulation, is one of the points to be illustrated in the ensuing chapters.

CHAPTER III

influence of the progress of industry and population, on rents, profits, and wages

§ 1. Continuing the inquiry into the nature of the economical changes taking place in a society which is in a state of industrial progress we shall next consider what is the effect of that progress on the distribution of the produce among the various classes who share in it. We may confine our attention to the system of distribution which is the most complex, and which virtually includes all others—that in which the produce of manufactures is shared between two classes, labourers and capitalists, and the produce of agriculture among three, labourers, capitalists, and landlords.

The characteristic features of what is commonly meant by industrial progress, resolve themselves mainly into three, increase of capital, increase of population, and improvements in production; understanding the last expression in its widest sense, to include the process of procuring commodities from a distance, as well as that of producing them. The other changes which take place are chiefly consequences of these; as, for example, the tendency to a progressive increase of the cost of production of food; arising from an increased demand, which may be occasioned either by increased population, or by an increase of capital and wages, enabling the poorer classes to increase their consumption. It will be convenient to set out by considering each of the three causes, as operating separately; after which we can suppose them combined in any manner we think fit.

Let us first suppose that population increases, capital and the arts of production remaining stationary. One of the effects of this change of circumstances is sufficiently obvious: wages will fall; the labouring class will be reduced to an inferior condition. The state of the capitalist, on the contrary, will be improved. With the same capital, he can purchase more labour, and obtain more produce. His rate of profit is increased. The dependence of the rate of profits on the cost of labour is here verified; for the labourer obtaining a diminished quantity of commodities, and no alteration being supposed in the circumstances of their production, the diminished quantity represents a diminished cost. The labourer obtains not only a smaller real reward, but the product of a smaller quantity of labour. The first circumstance is the important one to himself, the last to his employer.

Nothing has occurred, thus far, to affect in any way the value of any commodity; and no reason, therefore, has yet shown itself, why rent should be either raised or lowered. But if we look forward another stage in the series of effects, we may see our way to such a consequence. The labourers have increased in numbers: their condition is reduced in the same proportion; the increased numbers divide among them only the produce of the same amount of labour as before. But they may economize in their other comforts, and not in their food: each may consume as much food, and of as costly a quality as previously; or they may submit to a reduction, but not in proportion to the increase of numbers. On this supposition, notwithstanding the diminution of real wages, the increased population will require an increased quantity of food. But since industrial skill and knowledge are supposed to be stationary, more food can only be obtained by resorting to worse land, or to methods of cultivation which are less productive in proportion to the outlay. Capital for this extension of agriculture will not be wanting; for though, by hypothesis, no addition takes place to the capital in existence, a sufficient amount can be spared from the industry which previously supplied the other and less pressing wants which the labourers have been obliged to curtail. The additional supply of food, therefore, will be produced, but produced at a greater cost; and the exchange value of agricultural produce must rise. It may be objected, that profits having risen, the extra cost of producing food can be defrayed from profits, without any increase of price. It could, undoubtedly, but it will not; because, if it did, the agriculturist would be placed in an inferior position to other capitalists. The increase of profits, being the effect of diminished wages, is common to all employers of labour. The increased expenses arising from the necessity of a more costly cultivation, affect the agriculturist alone. For this peculiar burthen he must be peculiarly compensated, whether the general rate of profit be high or low. He will not submit indefinitely to a deduction from his profits to which other capitalists are not subject. He will not extend his cultivation by laying out fresh capital, unless for a return sufficient to yield him as high a profit as could be obtained by the same capital in other investments. The value, therefore, of his commodity will rise, and rise in proportion to the increased cost. The farmer will thus be indemnified for the burthen which is peculiar to himself, and will also enjoy the augmented rate of profit which is common to all capitalists.

It follows, from principles with which we are already familiar, that in these circumstances rent will rise. Any land can afford to pay, and under free competition will pay, a rent equal to the excess of its produce above the return to an equal capital on the worst land, or under the least favourable conditions. Whenever, therefore, agriculture is driven to descend to worse land, or more onerous processes, rent rises. Its rise will be twofold, for, in the first place, rent in kind, or corn rent, will rise; and in the second, since the value of agricultural produce has also risen, rent, estimated in manufactured or foreign commodities (which is represented, caeteris paribus, by money rent) will rise still more.

The steps of the process (if, after what has been formerly said, it is necessary to retrace them) are as follows. Corn rises in price, to repay with the ordinary profit the capital required for producing additional corn on worse land or by more costly processes. So far as regards this additional corn, the increased price is but an equivalent for the additional expense; but the rise, extending to all corn, affords on all, except the last produced, an extra profit. If the farmer was accustomed to produce 100 quarters of wheat at 40s., and 120 quarters are now required, of which the last twenty cannot be produced under 45s., he obtains the extra five shillings on the entire 120 quarters, and not on the last twenty alone. He has thus an extra 25l. beyond the ordinary profits, and this, in a state of free competition, he will not be able to retain. He cannot however be compelled to give it up to the consumer, since a less price than 45s. would be inconsistent with the production of the last twenty quarters. The price, then, will remain at 45s., and the 25l. will be transferred by competition not to the consumer but to the landlord. A rise of rents is therefore inevitably consequent on an increased demand for agricultural produce, when unaccompanied by increased facilities for its production. A truth which, after this final illustration, we may henceforth take for granted.

The new element now introduced—an increased demand for food—besides occasioning an increase of rent, still further disturbs the distribution of the produce between capitalists and labourers. The increase of population will have diminished the reward of labour: and if its cost is diminished as greatly as its real remuneration, profits will be increased by the full amount. If, however, the increase of population leads to an increased production of food, which cannot be supplied but at an enhanced cost of production, the cost of labour will not be so much diminished as the real reward of it, and profits, therefore, will not be so much raised. It is even possible that they might not be raised at all. The labourers may previously have been so well provided for, that the whole of what they now lose may be struck off from their other indulgences, and they may not, either by necessity or choice, undergo any reduction in the quantity or quality of their food. To produce the food for the increased number may be attended with such an increase of expense, that wages, though reduced in quantity, may represent as great a cost, may be the product of as much labour, as before, and the capitalist may not be at all benefited. On this supposition the loss to the labourer is partly absorbed in the additional labour required for producing the last instalment of agricultural produce; and the remainder is gained by the landlord, the only sharer who always benefits by an increase of population.

§ 2. Let us now reverse our hypothesis, and instead of supposing capital stationary and population advancing, let us suppose capital advancing and population stationary; the facilities of production, both natural and acquired, being, as before, unaltered. The real wages of labour, instead of falling, will now rise; and since the cost of production of the things consumed by the labourer is not diminished, this rise of wages implies an equivalent increase of the cost of labour, and diminution of profits. To state the same deduction in other terms; the labourers not being more numerous, and the productive power of their labour being only the same as before, there is no increase of the produce; the increase of wages, therefore, must be at the charge of the capitalist. It is not impossible that the cost of labour might be increased in even a greater ratio than its real remuneration. The improved condition of the labourers may increase the demand for food. The labourers may have been so ill off before, as not to have food enough; and may now consume more: or they may choose to expend their increased means partly or wholly in a more costly quality of food, requiring more labour and more land; wheat, for example, instead of oats, or potatoes. This extension of agriculture implies, as usual, a greater cost of production and a higher price, so that besides the increase of the cost of labour arising from the increase of its reward, there will be a further increase (and an additional fall of profits) from the increased costliness of the commodities of which that reward consists. The same causes will produce a rise of rent. What the capitalists lose, above what the labourers gain, is partly transferred to the landlord, and partly swallowed up in the cost of growing food on worse land or by a less productive process.

§ 3. Having disposed of the two simple cases, an increasing population and stationary capital, and an increasing capital and stationary population, we are prepared to take into consideration the mixed case, in which the two elements of expansion are combined, both population and capital increasing. If either element increases faster than the other, the case is so far assimilated with one or other of the two preceding: we shall suppose them, therefore, to increase with equal rapidity; the test of equality being, that each labourer obtains the same commodities as before, and the same quantity of those commodities. Let us examine what will be the effect, on rent and profits, of this double progress.

Population having increased, without any falling off in the labourer's condition, there is of course a demand for more food. The arts of production being supposed stationary, this food must be produced at an increased cost. To compensate for this greater cost of the additional food, the price of agricultural produce must rise. The rise extending over the whole amount of food produced, though the increased expenses only apply to a part, there is a greatly increased extra profit, which, by competition, is transferred to the landlord. Rent will rise, both in quantity of produce and in cost; while wages, being supposed to be the same in quantity, will be greater in cost. The labourer obtaining the same amount of necessaries, money wages have risen; and as the rise is common to all branches of production, the capitalist cannot indemnify himself by changing his employment, and the loss must be borne by profits.

It appears, then, that the tendency of an increase of capital and population is to add to rent at the expense of profits: though rent does not gain all that profits lose, a part being absorbed in increased expenses of production, that is, in hiring or feeding a greater number of labourers to obtain a given amount of agricultural produce. By profits, must of course be understood the rate of profit; for a lower rate of profit on a larger capital may yield a larger gross profit, considered absolutely, though a smaller in proportion to the entire produce.

This tendency of profits to fall, is from time to time counteracted by improvements in production: whether arising from increase of knowledge, or from an increased use of the knowledge already possessed. This is the third of the three elements, the effects of which on the distribution of the produce we undertook to investigate; and the investigation will be facilitated by supposing, as in the case of the other two elements, that it operates, in the first instance, alone.

§ 4. Let us then suppose capital and population stationary, and a sudden improvement made in the arts of production; by the invention of more efficient machines, or less costly processes, or by obtaining access to cheaper commodities through foreign trade.

The improvement may either be in some of the necessaries or indulgences which enter into the habitual consumption of the labouring class; or it may be applicable only to luxuries consumed exclusively by richer people. Very few, however, of the great industrial improvements are altogether of this last description. Agricultural improvements, except such as specially relate to some of the rarer and more peculiar products, act directly upon the principal objects of the labourer's expenditure. The steam-engine, and every other invention which affords a manageable power, are applicable to all things, and of course to those consumed by the labourer. Even the power-loom and the spinning-jenny, though applied to the most delicate fabrics, are available no less for the coarse cottons and woollens worn by the labouring class. All improvements in locomotion cheapen the transport of necessaries as well as of luxuries. Seldom is a new branch of trade opened, without, either directly or in some indirect way, causing some of the articles which the mass of the people consume to be either produced or imported at smaller cost. It may safely be affirmed, therefore, that improvements in production generally tend to cheapen the commodities on which the wages of the labouring class are expended.

In so far as the commodities affected by an improvement are those which the labourers generally do not consume, the improvement has no effect in altering the distribution of the produce. Those particular commodities, indeed, are cheapened; being produced at less cost, they fall in value and in price, and all who consume them, whether landlords, capitalists, or skilled and privileged labourers, obtain increased means of enjoyment. The rate of profits, however, is not raised. There is a larger gross profit, reckoned in quantity of commodities. But the capital also, if estimated in those commodities, has risen in value. The profit is the same percentage on the capital that it was before. The capitalists are not benefited as capitalists, but as consumers. The landlords and the privileged classes of labourers, if they are consumers of the same commodities, share the same benefit.

The case is different with improvements which diminish the cost of production of the necessaries of life, or of commodities which enter habitually into the consumption of the great mass of labourers. The play of the different forces being here rather complex, it is necessary to analyse it with some minuteness.

As formerly observed,∗ there are two kinds of agricultural improvements. Some consist in a mere saving of labour, and enable a given quantity of food to be produced at less cost, but not on a smaller surface of land than before. Others enable a given extent of land to yield not only the same produce with less labour, but a greater produce; so that, if no greater produce is required, a part of the land already under culture may be dispensed with. As the part rejected will be the least productive portion, the market will thenceforth be regulated by a better description of land than what was previously the worst under cultivation.

To place the effect of the improvement in a clear light, we must suppose it to take place suddenly, so as to leave no time, during its introduction, for any increase of capital or of population. Its first effect will be a fall of the value and price of agricultural produce. This is a necessary consequence of either kind of improvement, but especially of the last.

An improvement of the first kind, not increasing the produce, does not dispense with any portion of the land; the margin of cultivation (as Dr. Chalmers terms it) remains where it was; agriculture does not recede, either in extent of cultivated land, or in elaborateness of method: and the price continues to be regulated by the same land, and by the same capital, as before. But since that land or capital, and all other land or capital which produces food, now yields its produce at smaller cost, the price of food will fall proportionally. If one-tenth of the expense of production has been saved, the price of produce will fall one-tenth.

But suppose the improvement to be of the second kind; enabling the land to produce, not only the same corn with one-tenth less labour, but a tenth more corn with the same labour. Here the effect is still more decided. Cultivation can now be contracted, and the market supplied from a smaller quantity of land. Even if this smaller surface of land were of the same average quality as the larger surface, the price would fall one-tenth, because the same produce would be obtained with a tenth less labour. But since the portion of land abandoned will be the least fertile portion, the price of produce will thenceforth be regulated by a better quality of land than before. In addition, therefore, to the original diminution of one-tenth in the cost of production, there will be a further diminution, corresponding with the recession of the “margin” of agriculture to land of greater fertility. There will thus be a twofold fall of price.

Let us now examine the effect of the improvements, thus suddenly made, on the division of the produce; and in the first place, on rent. By the former of the two kinds of improvement, rent would be diminished. By the second, it would be diminished still more.

Suppose that the demand for food requires the cultivation of three qualities of land, yielding, on an equal surface, and at an equal expense, 100, 80, and 60 bushels of wheat. The price of wheat will, on the average, be just sufficient to enable the third quality to be cultivated with the ordinary profit. The first quality therefore will yield forty and the second twenty bushels of extra profit, constituting the rent of the landlord. And first, let an improvement be made, which, without enabling more corn to be grown, enables the same corn to be grown with one-fourth less labour. The price of wheat will fall one-fourth, and 80 bushels will be sold for the price for which 60 were sold before. But the produce of the land which produces 60 bushels is still required, and the expenses being as much reduced as the price, that land can still be cultivated with the ordinary profit. The first and second qualities will therefore continue to yield a surplus of 40 and 20 bushels, and corn rent will remain the same as before. But corn having fallen in price one-fourth, the same corn rent is equivalent to a fourth less of money and of all other commodities. So far, therefore, as the landlord expends his income in manufactured or foreign products, he is one-fourth worse off than before. His income as landlord is reduced to three-quarters of its amount: it is only as a consumer of corn that he is as well off.

If the improvement is of the other kind, rent will fall in a still greater ratio. Suppose that the amount of produce which the market requires, can be grown not only with a fourth less labour, but on a fourth less land. If all the land already in cultivation continued to be cultivated, it would yield a produce much larger than necessary. Land, equivalent to a fourth of the produce, must now be abandoned; and as the third quality yielded exactly one-fourth, (being 60 out of 240,) that quality will go out of cultivation. The 240 bushels can now be grown on land of the first and second qualities only; being, on the first, 100 bushels plus one-third, or 133 1/3 bushels; on the second, 80 bushels plus one-third, or 106 2/3 bushels; together 240. The second quality of land, instead of the third, is now the lowest, and regulates the price. Instead of 60, it is sufficient if 106 2/3 bushels repay the capital with the ordinary profit. The price of wheat will consequently fall, not in the ratio of 60 to 80, as in the other case, but in the ratio of 60 to 106 2/3. Even this gives an insufficient idea of the degree in which rent will be affected. The whole produce of the second quality of land will now be required to repay the expenses of production. That land, being the worst in cultivation, will pay no rent. And the first quality will only yield the difference between 133 1/3 bushels and 106 2/3, being 26 2/3 bushels instead of 40. The landlords collectively will have lost 33 1/3 out of 60 bushels in corn rent alone, while the value and price of what is left will have been diminished in the ratio of 60 to 106 2/3.

It thus appears, that the interest of the landlord is decidedly hostile to the sudden and general introduction of agricultural improvements. This assertion has been called a paradox, and made a ground for accusing its first promulgator, Ricardo, of great intellectual perverseness, to say nothing worse. I cannot discern in what the paradox consists; and the obliquity of vision seems to me to be on the side of his assailants. The opinion is only made to appear absurd by stating it unfairly. If the assertion were that a landlord is injured by the improvement of his estate, it would certainly be indefensible; but what is asserted is, that he is injured by the improvement of the estates of other people, although his own is included. Nobody doubts that he would gain greatly by the improvement if he could keep it to himself, and unite the two benefits, an increased produce from his land, and a price as high as before. But if the increase of produce took place simultaneously on all lands, the price would not be as high as before; and there is nothing unreasonable in supposing that the landlords would be, not benefited, but injured. It is admitted that whatever permanently reduces the price of produce diminishes rent: and it is quite in accordance with common notions to suppose that if, by the increased productiveness of land, less land were required for cultivation, its value, like that of other articles for which the demand had diminished, would fall.

I am quite willing to admit that rents have not really been lowered by the progress of agricultural improvement; but why? Because improvement has never in reality been sudden, but always slow; at no time much outstripping, and often falling far short of, the growth of capital and population, which tends as much to raise rent, as the other to lower it, and which is enabled, as we shall presently see, to raise it much higher, by means of the additional margin afforded by improvements in agriculture. First, however, we must examine in what manner the sudden cheapening of agricultural produce would affect profits and wages.

In the beginning, money wages would probably remain the same as before, and the labourers would have the full benefit of the cheapness. They would be enabled to increase their consumption either of food or of other articles, and would receive the same cost, and a greater quantity. So far, profits would be unaffected. But the permanent remuneration of the labourers essentially depends on what we have called their habitual standard; the extent of the requirements which, as a class, they insist on satisfying before they choose to have children. If their tastes and requirements receive a durable impress from the sudden improvement in their condition, the benefit to the class will be permanent. But the same cause which enables them to purchase greater comforts and indulgences with the same wages, would enable them to purchase the same amount of comforts and indulgences with lower wages; and a greater population may now exist, without reducing the labourers below the condition to which they are accustomed. Hitherto this and no other has been the use which the labourers have commonly made of any increase of their means of living; they have treated it simply as convertible into food for a greater number of children. It is probable, therefore, that population would be stimulated, and that after the lapse of a generation the real wages of labour would be no higher than before the improvement: the reduction being partly brought about by a fall of money wages, and partly through the price of food, the cost of which, from the demand occasioned by the increase of population, would be increased. To the extent to which money wages fell, profits would rise; the capitalist obtaining a greater quantity of equally efficient labour by the same outlay of capital. We thus see that a diminution of the cost of living, whether arising from agricultural improvements or from the importation of foreign produce, if the habits and requirements of the labourers are not raised, usually lowers money wages and rent, and raises the general rate of profit.

What is true of improvements which cheapen the production of food, is true also of the substitution of a cheaper for a more costly variety of it. The same land yields to the same labour a much greater quantity of human nutriment in the form of maize or potatoes, than in the form of wheat. If the labourers were to give up bread, and feed only on those cheaper products, taking as their compensation, not a greater quantity of other consumable commodities, but earlier marriages and larger families, the cost of labour would be much diminished, and if labour continued equally efficient, profits would rise; while rent would be much lowered, since food for the whole population could be raised on half or a third part of the land now sown with corn. At the same time, it being evident that land too barren to be cultivated for wheat might be made in case of necessity to yield potatoes sufficient to support the little labour necessary for producing them, cultivation might ultimately descend lower, and rent eventually rise higher, on a potato or maize system, than on a corn system; because the land would be capable of feeding a much larger population before reaching the limit of its powers.

If the improvement, which we suppose to take place, is not in the production of food, but of some manufactured article consumed by the labouring class, the effect on wages and profits will at first be the same; but the effect on rent very different. It will not be lowered; it will even, if the ultimate effect of the improvement is an increase of population, be raised: in which last case profits will be lowered. The reasons are too evident to require statement.

§ 5. We have considered, on the one hand, the manner in which the distribution of the produce into rent, profits, and wages, is affected by the ordinary increase of population and capital, and on the other, how it is affected by improvements in production, and more especially in agriculture. We have found that the former cause lowers profits; and raises rent and the cost of labour: while the tendency of agricultural improvements is to diminish rent; and all improvements which cheapen any article of the labourer's consumption, tend to diminish the cost of labour and to raise profits. The tendency of each cause in its separate state being thus ascertained, it is easy to determine the tendency of the actual course of things, in which the two movements are going on simultaneously, capital and population increasing with tolerable steadiness, while improvements in agriculture are made from time to time, and the knowledge and practice of improved methods become diffused gradually through the community.

The habits and requirements of the labouring classes being given (which determine their real wages), rents, profits, and money wages at any given time, are the result of the composition of these rival forces. If during any period agricultural improvement advances faster than population, rent and money wages during that period will tend downward, and profits upward. If population advances more rapidly than agricultural improvement, either the labourers will submit to a reduction in the quantity or quality of their food, or if not, rent and money wages will progressively rise, and profits will fall.

Agricultural skill and knowledge are of slow growth, and still slower diffusion. Inventions and discoveries, too, occur only occasionally, while the increase of population and capital are continuous agencies. It therefore seldom happens that improvement, even during a short time, has so much the start of population and capital as actually to lower rent, or raise the rate of profits. There are many countries in which the growth of population and capital is not rapid, but in these agricultural improvement is less active still. Population almost everywhere treads close on the heels of agricultural improvement, and effaces its effects as fast as they are produced.

The reason why agricultural improvement seldom lowers rent, is that it seldom cheapens food, but only prevents it from growing dearer; and seldom, if ever, throws land out of cultivation, but only enables worse and worse land to be taken in for the supply of an increasing demand. What is sometimes called the natural state of a country which is but half cultivated, namely, that the land is highly productive, and food obtained in great abundance by little labour, is only true of unoccupied countries colonized by a civilized people. In the United States the worst land in cultivation is of a high quality (except sometimes in the immediate vicinity of markets or means of conveyance, where a bad quality is compensated by a good situation);1 and even if no further improvements were made in agriculture or locomotion, cultivation would have many steps yet to descend, before the increase of population and capital would be brought to a stand; but in Europe five hundred years ago, though so thinly peopled in comparison to the present population, it is probable that the worst land under the plough was, from the rude state of agriculture, quite as unproductive as the worst land now cultivated; and that cultivation had approached as near to the ultimate limit of profitable tillage, in those times as in the present. What the agricultural improvements since made have really done is, by increasing the capacity of production of land in general, to enable tillage to extend downwards to a much worse natural quality of land than the worst which at that time would have admitted of cultivation by a capitalist for profit; thus rendering a much greater increase of capital and population possible, and removing always a little and a little further off the barrier which restrains them; population meanwhile always pressing so hard against the barrier, that there is never any visible margin left for it to seize, every inch of ground made vacant for it by improvement being at once filled up by its advancing columns. Agricultural improvement may thus be considered to be not so much a counterforce conflicting with increase of population, as a partial relaxation of the bonds which confine that increase.

The effects produced on the division of the produce by an increase of production, under the joint influence of increase of population and capital and improvements of agriculture, are very different from those deduced from the hypothetical cases previously discussed. In particular, the effect on rent is most materially different. We remarked that—while a great agricultural improvement made suddenly and universally would in the first instance inevitably lower rent—such improvements enable rent, in the progress of society, to rise gradually to a much higher limit than it could otherwise attain, since they enable a much lower quality of land to be ultimately cultivated. But in the case we are now supposing, which nearly corresponds to the usual course of things, this ultimate effect becomes the immediate effect. Suppose cultivation to have reached, or almost reached, the utmost limit permitted by the state of the industrial arts, and rent, therefore, to have attained nearly the highest point to which it can be carried by the progress of population and capital, with the existing amount of skill and knowledge. If a great agricultural improvement were suddenly introduced, it might throw back rent for a considerable space, leaving it to regain its lost ground by the progress of population and capital, and afterwards to go on further. But, taking place, as such improvement always does, very gradually, it causes no retrograde movement of either rent or cultivation; it merely enables the one to go on rising, and the other extending, long after they must otherwise have stopped. It would do this even without the necessity of resorting to a worse quality of land; simply by enabling the lands already in cultivation to yield a greater produce, with no increase of the proportional cost. If, by improvements of agriculture, all the lands in cultivation could be made, even with double labour and capital, to yield a double produce, (supposing that in the meantime population increased so as to require this double quantity) all rents would be doubled.

To illustrate the point, let us revert to the numerical example in a former page. Three qualities of land yield respectively 100, 80, and 60 bushels to the same outlay on the same extent of surface. If No. 1 could be made to yield 200, No. 2, 160, and No. 3, 120 bushels, at only double the expense, and therefore without any increase of the cost of production, and if the population, having doubled, required all this increased quantity, the rent of No. 1 would be 80 bushels instead of 40, and of No. 2, 40 instead of 20, while the price and value per bushel would be the same as before: so that corn rent and money rent would both be doubled. I need not point out the difference between this result, and what we have shown would take place if there were an improvement in production without the accompaniment of an increased demand for food.

Agricultural improvement, then, is always ultimately, and in the manner in which it generally takes place also immediately, beneficial to the landlord. We may add, that when it takes place in that manner, it is beneficial to no one else. When the demand for produce fully keeps pace with the increased capacity of production, food is not cheapened; the labourers are not, even temporarily, benefited; the cost of labour is not diminished, nor profits raised. There is a greater aggregate production, a greater produce divided among the labourers, and a larger gross profit; but the wages being shared among a larger population, and the profits spread over a larger capital, no labourer is better off, nor does any capitalist derive from the same amount of capital a larger income.

The result of this long investigation may be summed up as follows. The economical progress of a society constituted of landlords, capitalists, and labourers, tends to the progressive enrichment of the landlord class;1 while the cost of the labourer's subsistence tends on the whole to increase,2 and profits to fall. Agricultural improvements are a counteracting force to the two last effects; but the first, though a case is conceivable in which it would be temporarily checked, is ultimately in a high degree promoted by those improvements; and the increase of population tends to transfer all the benefits derived from agricultural improvement to the landlords alone. What other consequences, in addition to these, or in modification of them, arise from the industrial progress of a society thus constituted, I shall endeavour to show in the succeeding chapter.

CHAPTER IV

of the tendency of profits to a minimum

§ 1. The tendency of profits to fall as society advances, which has been brought to notice in the preceding chapter, was early recognized by writers on industry and commerce; but the laws which govern profits not being then understood, the phenomenon was ascribed to a wrong cause. Adam Smith considered profits to be determined by what he called the competition of capital; and concluded that when capital increased, this competition must likewise increase, and profits must fall. It is not quite certain what sort of competition Adam Smith had here in view. His words in the chapter on Profits of Stock∗ are, “When the stocks of many rich merchants are turned into the same trade, their mutual competition naturally tends to lower its profits; and when there is a like increase of stock in all the different trades carried on in the same society, the same competition must produce the same effect in them all.” This passage would lead us to infer that, in Adam Smith's opinion, the manner in which the competition of capital lowers profits is by lowering prices; that being usually the mode in which an increased investment of capital in any particular trade, lowers the profits of that trade. But if this was his meaning, he overlooked the circumstance, that the fall of price, which if confined to one commodity really does lower the profits of the producer, ceases to have that effect as soon as it extends to all commodities; because, when all things have fallen, nothing has really fallen, except nominally; and even computed in money, the expenses of every producer have diminished as much as his returns. Unless indeed labour be the one commodity which has not fallen in money price, when all other things have: if so, what has really taken place is a rise of wages; and it is that, and not the fall of prices, which has lowered the profits of capital. There is another thing which escaped the notice of Adam Smith; that the supposed universal fall of prices, through increased competition of capitals, is a thing which cannot take place. Prices are not determined by the competition of the sellers only, but also by that of the buyers; by demand as well as supply. The demand which affects money prices consists of all the money in the hands of the community, destined to be laid out in commodities; and as long as the proportion of this to the commodities is not diminished, there is no fall of general prices. Now, howsoever capital may increase, and give rise to an increased production of commodities, a full share of the capital will be drawn to the business of producing or importing money, and the quantity of money will be augmented in an equal ratio with the quantity of commodities. For if this were not the case, and if money, therefore, were, as the theory supposes, perpetually acquiring increased purchasing power, those who produced or imported it would obtain constantly increasing profits; and this could not happen without attracting labour and capital to that occupation from other employments. If a general fall of prices, and increased value of money, were really to occur, it could only be as a consequence of increased cost of production, from the gradual exhaustion of the mines.

It is not tenable, therefore, in theory, that the increase of capital produces, or tends to produce, a general decline of money prices. Neither is it true, that any general decline of prices, as capital increased, has manifested itself in fact. The only things observed to fall in price with the progress of society, are those in which there have been improvements in production, greater than have taken place in the production of the precious metals; as for example, all spun and woven fabrics. Other things, again, instead of falling, have risen in price, because their cost of production, compared with that of gold and silver, has increased. Among these are all kinds of food, comparison being made with a much earlier period of history. The doctrine, therefore, that competition of capital lowers profits by lowering prices, is incorrect in fact, as well as unsound in principle.

But it is not certain that Adam Smith really held that doctrine; for his language on the subject is wavering and unsteady, denoting the absence of a definite and well-digested opinion. Occasionally he seems to think that the mode in which the competition of capital lowers profits, is by raising wages. And when speaking of the rate of profit in new colonies, he seems on the very verge of grasping the complete theory of the subject. “As the colony increases, the profits of stock gradually diminish. When the most fertile and best situated lands have been all occupied, less profit can be made by the cultivators of what is inferior both in soil and situation.” Had Adam Smith meditated longer on the subject, and systematized his view of it by harmonizing with each other the various glimpses which he caught of it from different points, he would have perceived that this last is the true cause of the fall of profits usually consequent upon increase of capital.

∗2. Mr. Wakefield, in his Commentary on Adam Smith, and his important writings on Colonization, takes a much clearer view of the subject, and arrives, through a substantially correct series of deductions, at practical conclusions which appear to me just and important; but he is not equally happy in incorporating his valuable speculations with the results of previous thought, and reconciling them with other truths. Some of the theories of Dr. Chalmers, in his chapter “On the Increase and Limits of Capital,” and the two chapters which follow it, coincide in their tendency and spirit with those of Mr. Wakefield; but Dr. Chalmers' ideas, though delivered, as is his custom, with a most attractive semblance of clearness, are really on this subject much more confused than even those of Adam Smith, and more decidedly infected with the often refuted notion that the competition of capital lowers general prices; the subject of Money apparently not having been included among the parts of political economy which this acute and vigorous writer had carefully studied.

Mr. Wakefield's explanation of the fall of profits is briefly this. Production is limited not solely by the quantity of capital and of labour, but also by the extent of the “field of employment.” The field of employment for capital is twofold; the land of the country, and the capacity of foreign markets to take its manufactured commodities. On a limited extent of land, only a limited quantity of capital can find employment at a profit. As the quantity of capital approaches this limit, profit falls; when the limit is attained, profit is annihilated; and can only be restored through an extension of the field of employment, either by the acquisition of fertile land, or by opening new markets in foreign countries, from which food and materials can be purchased with the products of domestic capital. These propositions are, in my opinion, substantially true; and, even to the phraseology in which they are expressed, considered as adapted to popular and practical rather than scientific uses, I have nothing to object. The error which seems to me imputable to Mr. Wakefield is that of supposing his doctrines to be in contradiction to the principles of the best school of preceding political economists, instead of being, as they really are, corollaries from those principles; though corollaries which, perhaps, would not always have been admitted by those political economists themselves.

The most scientific treatment of the subject which I have met with is in an essay on the effects of Machinery, published in the Westminster Review for January 1826, by Mr. William Ellis:∗ which was doubtless unknown to Mr. Wakefield, but which had preceded him, though by a different path, in several of his leading conclusions. This essay excited little notice, partly from being published anonymously in a periodical, and partly because it was much in advance of the state of political economy at the time. In Mr. Ellis's view of the subject, the questions and difficulties raised by Mr. Wakefield's speculations and by those of Dr. Chalmers, find a solution consistent with the principles of political economy laid down in the present treatise.

§ 3. There is at every time and place some particular rate of profit, which is the lowest that will induce the people of that country and time to accumulate savings, and to employ those savings productively. This minimum rate of profit varies according to circumstances. It depends on two elements. One is, the strength of the effective desire of accumulation; the comparative estimate, made by the people of that place and era, of future interests when weighed against present. This element chiefly affects the inclination to save. The other element, which affects not so much the willingness to save as the disposition to employ savings productively, is the degree of security of capital engaged in industrial operations. A state of general insecurity no doubt affects also the disposition to save. A hoard may be a source of additional danger to its reputed possessor. But as it may also be a powerful means of averting dangers, the effects in this respect may perhaps be looked upon as balanced. But in employing any funds which a person may possess as capital on his own account, or in lending it to others to be so employed, there is always some additional risk, over and above that incurred by keeping it idle in his own custody. This extra risk is great in proportion as the general state of society is insecure: it may be equivalent to twenty, thirty, or fifty per cent, or to no more than one or two; something, however, it must always be: and for this, the expectation of profit must be sufficient to compensate.

There would be adequate motives for a certain amount of saving, even if capital yielded no profit. There would be an inducement to lay by in good times a provision for bad; to reserve something for sickness and infirmity, or as a means of leisure and independence in the latter part of life, or a help to children in the outset of it. Savings, however, which have only these ends in view, have not much tendency to increase the amount of capital permanently in existence. These motives only prompt persons to save at one period of life what they purpose to consume at another, or what will be consumed by their children before they can completely provide for themselves. The savings by which an addition is made to the national capital usually emanate from the desire of persons to improve what is termed their condition in life, or to make a provision for children or others, independent of their exertions. Now, to the strength of these inclinations it makes a very material difference how much of the desired object can be effected by a given amount and duration of self-denial; which again depends on the rate of profit. And there is in every country some rate of profit, below which persons in general will not find sufficient motive to save for the mere purpose of growing richer, or of leaving others better off than themselves. Any accumulation, therefore, by which the general capital is increased, requires as its necessary condition a certain rate of profit; a rate which an average person will deem to be an equivalent for abstinence, with the addition of a sufficient insurance against risk. There are always some persons in whom the effective desire of accumulation is above the average, and to whom less than this rate of profit is a sufficient inducement to save; but these merely step into the place of others whose taste for expense and indulgence is beyond the average, and who, instead of saving, perhaps even dissipate what they have received.

I have already observed that this minimum rate of profit, less than which is not consistent with the further increase of capital, is lower in some states of society than in others; and I may add, that the kind of social progress characteristic of our present civilization tends to diminish it. In the first place, one of the acknowledged effects of that progress is an increase of general security. Destruction by wars, and spoliation by private or public violence, are less and less to be apprehended; and the improvements which may be looked for in education and in the administration of justice, or, in their default, increased regard for opinion, afford a growing protection against fraud and reckless mismanagement. The risks attending the investment of savings in productive employment require, therefore, a smaller rate of profit to compensate for them than was required a century ago, and will hereafter require less than at present. In the second place, it is also one of the consequences of civilization that mankind become less the slaves of the moment, and more habituated to carry their desires and purposes forward into a distant future. This increase of providence is a natural result of the increased assurance with which futurity can be looked forward to; and is, besides, favoured by most of the influences which an industrial life exercises over the passions and inclinations of human nature. In proportion as life has fewer vicissitudes, as habits become more fixed, and great prizes are less and less to be hoped for by any other means than long perseverance, mankind become more willing to sacrifice present indulgence for future objects. This increased capacity of forethought and self-control may assuredly find other things to exercise itself upon than increase of riches, and some considerations connected with this topic will shortly be touched upon. The present kind of social progress, however, decidedly tends, though not perhaps to increase the desire of accumulation, yet to weaken the obstacles to it, and to diminish the amount of profit which people absolutely require as an inducement to save and accumulate. For these two reasons, diminution of risk and increase of providence, a profit or interest of three or four per cent is as sufficient a motive to the increase of capital in England at the present day, as thirty or forty per cent in the Burmese Empire, or in England at the time of King John. In Holland during the last century a return of two per cent on government security, was consistent with an undiminished, if not with an increasing, capital. But though the minimum rate of profit is thus liable to vary, and though to specify exactly what it is would at any given time be impossible, such a minimum always exists; and whether it be high or low, when once it is reached, no further increase of capital can for the present take place. The country has then attained what is known to political economists under the name of the stationary state.

§ 4. We now arrive at the fundamental proposition which this chapter is intended to inculcate. When a country has long possessed a large production, and a large net income to make savings from, and when, therefore, the means have long existed of making a great annual addition to capital; (the country not having, like America [1848], a large reserve of fertile land still unused;) it is one of the characteristics of such a country, that the rate of profit is habitually within, as it were, a hand's breadth of the minimum, and the country therefore on the very verge of the stationary state. By this I do not mean that this state is likely, in any of the great countries of Europe, to be soon actually reached, or that capital does not still yield a profit considerably greater than what is barely sufficient to induce the people of those countries to save and accumulate. My meaning is, that it would require but a short time to reduce profits to the minimum, if capital continued to increase at its present rate, and no circumstances having a tendency to raise the rate of profit occurred in the meantime. The expansion of capital would soon reach its ultimate boundary, if the boundary itself did not continually open and leave more space.

In England, the ordinary rate of interest on government securities, in which the risk is next to nothing, may be estimated [1848] at a little more than three per cent: in all other investments, therefore, the interest or profit calculated upon (exclusively of what is properly a remuneration for talent or exertion) must be as much more than this amount, as is equivalent to the degree of risk to which the capital is thought to be exposed. Let us suppose that in England even so small a net profit as one per cent, exclusive of insurance against risk, would constitute a sufficient inducement to save, but that less than this would not be a sufficient inducement. I now say, that the mere continuance of the present annual increase of capital, if no circumstance occurred to counteract its effect, would suffice in a small number of years to reduce the rate of net profit to one per cent.

To fulfil the conditions of the hypothesis, we must suppose an entire cessation of the exportation of capital for foreign investment. No more capital sent abroad for railways or loans; no more emigrants taking capital with them, to the colonies, or to other countries; no fresh advances made, or credits given, by bankers or merchants to their foreign correspondents. We must also assume that there are no fresh loans for unproductive expenditure, by the government, or on mortgage, or otherwise; and none of the waste of capital which now takes place by the failure of undertakings which people are tempted to engage in by the hope of a better income than can be obtained in safe paths at the present habitually low rate of profit. We must suppose the entire savings of the community to be annually invested in really productive employment within the country itself; and no new channels opened by industrial inventions, or by a more extensive substitution of the best known processes for inferior ones.

Few persons would hesitate to say, that there would be great difficulty in finding remunerative employment every year for so much new capital and most would conclude that there would be what used to be termed a general glut; that commodities would be produced, and remain unsold, or be sold only at a loss. But the full examination which we have already given to this question,∗ has shown that this is not the mode in which the inconvenience would be experienced. The difficulty would not consist in any want of a market. If the new capital were duly shared among many varieties of employment, it would raise up a demand for its own produce, and there would be no cause why any part of that produce should remain longer on hand than formerly. What would really be, not merely difficult, but impossible, would be to employ this capital without submitting to a rapid reduction of the rate of profit.

As capital increased, population either would also increase, or it would not. If it did not, wages would rise, and a greater capital would be distributed in wages among the same number of labourers. There being no more labour than before, and no improvements to render the labour more efficient, there would not be any increase of the produce; and as the capital, however largely increased, would only obtain the same gross return, the whole savings of each year would be exactly so much subtracted from the profits of the next and of every following year. It is hardly necessary to say that in such circumstances profits would very soon fall to the point at which further increase of capital would cease. An augmentation of capital, much more rapid than that of population, must soon reach its extreme limit, unless accompanied by increased efficiency of labour (through inventions and discoveries, or improved mental and physical education), or unless some of the idle people, or of the unproductive labourers, became productive.

If population did increase with the increase of capital, and in proportion to it, the fall of profits would still be inevitable. Increased population implies increased demand for agricultural produce. In the absence of industrial improvements, this demand can only be supplied at an increased cost of production, either by cultivating worse land, or by a more elaborate and costly cultivation of the land already under tillage. The cost of the labourer's subsistence is therefore increased; and unless the labourer submits to a deterioration of his condition, profits must fall. In an old country like England, if, in addition to supposing all improvement in domestic agriculture suspended, we suppose that there is no increased production in foreign countries for the English market, the fall of profits would be very rapid. If both these avenues to an increased supply of food were closed, and population continued to increase, as it is said to do, at the rate of a thousand a day, all waste land which admits of cultivation in the existing state of knowledge would soon be cultivated, and the cost of production and price of food would be so increased, that, if the labourers received the increased money wages necessary to compensate for their increased expenses, profits would very soon reach the minimum. The fall of profits would be retarded if money wages did not rise, or rose in a less degree; but the margin which can be gained by a deterioration of the labourers' condition is a very narrow one: in general they cannot bear much reduction; when they can, they have also a higher standard of necessary requirements, and will not. On the whole, therefore, we may assume that in such a country as England, if the present annual amount of savings were to continue, without any of the counteracting circumstances which now keep in check the natural influence of those savings in reducing profit, the rate of profit would speedily attain the minimum, and all further accumulation of capital would for the present cease.

§ 5. What, then, are these counteracting circumstances, which, in the existing state of things, maintain a tolerably equal struggle against the downward tendency of profits, and prevent the great annual savings which take place in this country from depressing the rate of profit much nearer to that lowest point to which it is always tending, and which, left to itself, it would so promptly attain? The resisting agencies are of several kinds.

First among them, we may notice one which is so simple and so conspicuous, that some political economists, especially M. de Sismondi and Dr. Chalmers, have attended to it almost to the exclusion of all others. This is, the waste of capital in periods of over-trading and rash speculation, and in the commercial revulsions by which such times are always followed. It is true that a great part of what is lost at such periods is not destroyed, but merely transferred, like a gambler's losses, to more successful speculators. But even of these mere transfers, a large portion is always to foreigners, by the hasty purchase of unusual quantities of foreign goods at advanced prices. And much also is absolutely wasted. Mines are opened, railways or bridges made, and many other works of uncertain profit commenced, and in these enterprises much capital is sunk which yields either no return, or none adequate to the outlay. Factories are built and machinery erected beyond what the market requires, or can keep in employment. Even if they are kept in employment, the capital is no less sunk; it has been converted from circulating into fixed capital, and has ceased to have any influence on wages or profits. Besides this, there is a great unproductive consumption of capital, during the stagnation which follows a period of general over-trading. Establishments are shut up, or kept working without any profit, hands are discharged, and numbers of persons in all ranks, being deprived of their income, and thrown for support on their savings, find themselves, after the crisis has passed away, in a condition of more or less impoverishment. Such are the effects of a commercial revulsion: and that such revulsions are almost periodical, is a consequence of the very tendency of profits which we are considering. By the time a few years have passed over without a crisis, so much additional capital has been accumulated, that it is no longer possible to invest it at the accustomed profit: all public securities rise to a high price, the rate of interest on the best mercantile security falls very low, and the complaint is general among persons in business that no money is to be made. Does not this demonstrate how speedily profit would be at the minimum, and the stationary condition of capital would be attained, if these accumulations went on without any counteracting principle? But the diminished scale of all safe gains inclines persons to give a ready ear to any projects which hold out, though at the risk of loss, the hope of a higher rate of profit; and speculations ensue, which, with the subsequent revulsions, destroy, or transfer to foreigners, a considerable amount of capital, produce a temporary rise of interest and profit, make room for fresh accumulations, and the same round is recommenced.

This, doubtless, is one considerable cause which arrests profits in their descent to the minimum, by sweeping away from time to time a part of the accumulated mass by which they are forced down. But this is not, as might be inferred from the language of some writers, the principal cause. If it were, the capital of the country would not increase; but in England it does increase greatly and rapidly. This is shown by the increasing productiveness of almost all taxes, by the continual growth of all the signs of national wealth, and by the rapid increase of population, while the condition of the labourers is certainly not declining, but on the whole improving.1 These things prove that each commercial revulsion, however disastrous, is very far from destroying all the capital which has been added to the accumulations of the country since the last revulsion preceding it, and that, invariably, room is either found or made for the profitable employment of a perpetually increasing capital, consistently with not forcing down profits to a lower rate.

§ 6. This brings us to the second of the counter-agencies, namely, improvements in production. These evidently have the effect of extending what Mr. Wakefield terms the field of employment, that is, they enable a greater amount of capital to be accumulated and employed without depressing the rate of profit: provided always that they do not raise, to a proportional extent, the habits and requirements of the labourer. If the labouring class gain the full advantage of the increased cheapness, in other words, if money wages do not fall, profits are not raised, nor their fall retarded. But if the labourers people up to the improvement in their condition, and so relapse to their previous state, profits will rise. All inventions which cheapen any of the things consumed by the labourers, unless their requirements are raised in an equivalent degree, in time lower money wages: and by doing so, enable a greater capital to be accumulated and employed, before profits fall back to what they were previously.

Improvements which only affect things consumed exclusively by the richer classes, do not operate precisely in the same manner. The cheapening of lace or velvet has no effect in diminishing the cost of labour; and no mode can be pointed out in which it can raise the rate of profit, so as to make room for a larger capital before the minimum is attained. It, however, produces an effect which is virtually equivalent; it lowers, or tends to lower, the minimum itself. In the first place, increased cheapness of articles of consumption promotes the inclination to save, by affording to all consumers a surplus which they may lay by, consistently with their accustomed manner of living; and unless they were previously suffering actual hardships, it will require little self-denial to save some part at least of this surplus. In the next place, whatever enables people to live equally well on a smaller income, inclines them to lay by capital for a lower rate of profit. If people can live on an independence of 500l. a year in the same manner as they formerly could on one of 1000l., some persons will be induced to save in hopes of the one, who would have been deterred by the more remote prospect of the other. All improvements, therefore, in the production of almost any commodity, tend in some degree to widen the interval which has to be passed before arriving at the stationary state: but this effect belongs in a much greater degree to the improvements which affect the articles consumed by the labourer, since these conduce to it in two ways; they induce people to accumulate for a lower profit, and they also raise the rate of profit itself.

§ 7. Equivalent in effect to improvements in production, is the acquisition of any new power of obtaining cheap commodities from foreign countries. If necessaries are cheapened, whether they are so by improvements at home or importation from abroad, is exactly the same thing to wages and profits. Unless the labourer obtains, and by an improvement of his habitual standard, keeps, the whole benefit, the cost of labour is lowered, and the rate of profit raised. As long as food can continue to be imported for an increasing population without any diminution of cheapness, so long the declension of profits through the increase of population and capital is arrested, and accumulation may go on without making the rate of profit draw nearer to the minimum. And on this ground it is believed by some, that the repeal of the corn laws has opened to this country a long era of rapid increase of capital with an undiminished rate of profit.

Before inquiring whether this expectation is reasonable, one remark must be made, which is much at variance with commonly received notions. Foreign trade does not necessarily increase the field of employment for capital. It is not the mere opening of a market for a country's productions, that tends to raise the rate of profits. If nothing were obtained in exchange for those productions but the luxuries of the rich, the expenses of no capitalist would be diminished; profits would not be at all raised, nor room made for the accumulation of more capital without submitting to a reduction of profits: and if the attainment of the stationary state were at all retarded, it would only be because the diminished cost at which a certain degree of luxury could be enjoyed, might induce people, in that prospect, to make fresh savings for a lower profit than they formerly were willing to do. When foreign trade makes room for more capital at the same profit, it is by enabling the necessaries of life, or the habitual articles of the labourer's consumption, to be obtained at smaller cost. It may do this in two ways; by the importation either of those commodities themselves, or of the means and appliances for producing them. Cheap iron has, in a certain measure, the same effect on profits and the cost of labour as cheap corn, because cheap iron makes cheap tools for agriculture and cheap machinery for clothing. But a foreign trade which neither directly, nor by any indirect consequence, increases the cheapness of anything consumed by the labourers, does not, any more than an invention or discovery in the like case, tend to raise profits or retard their fall; it merely substitutes the production of goods for foreign markets in the room of the home production of luxuries, leaving the employment for capital neither greater nor less than before. It is true, that there is scarcely any export trade which, in a country that already imports necessaries or materials, comes within these conditions: for every increase of exports enables the country to obtain all its imports on cheaper terms than before.

A country which, as is now the case with England,1 admits food of all kinds, and all necessaries and the materials of necessaries, to be freely imported from all parts of the world, no longer depends on the fertility of her own soil to keep up her rate of profits, but on the soil of the whole world. It remains to consider how far this resource can be counted upon, for making head during a very long period against the tendency of profits to decline as capital increases.

It must, of course, be supposed that with the increase of capital, population also increases; for if it did not, the consequent rise of wages would bring down profits, in spite of any cheapness of food. Suppose then that the population of Great Britain goes on increasing at its present rate, and demands every year a supply of imported food considerably beyond that of the year preceding. This annual increase in the food demanded from the exporting countries can only be obtained either by great improvements in their agriculture, or by the application of a great additional capital to the growth of food. The former is likely to be a very slow process, from the rudeness and ignorance of the agricultural classes in the food-exporting countries of Europe, while the British colonies and the United States are already in possession of most of the improvements yet made, so far as suitable to their circumstances. There remains as a resource, the extension of cultivation. And on this it is to be remarked, that the capital by which any such extension can take place, is mostly still to be created. In Poland, Russia, Hungary, Spain, the increase of capital is extremely slow. In America it is rapid, but not more rapid than the population. The principal fund at present available for supplying this country with a yearly increasing importation of food, is that portion of the annual savings of America which has heretofore been applied to increasing the manufacturing establishments of the United States, and which free trade in corn may possibly divert from that purpose to growing food for our market. This limited source of supply, unless great improvements take place in agriculture, cannot be expected to keep pace with the growing demand of so rapidly increasing a population as that of Great Britain; and if our population and capital continue to increase with their present rapidity, the only mode in which food can continue to be supplied cheaply to the one, is by sending the other abroad to produce it.1

§ 8. This brings us to the last of the counter-forces which check the downward tendency of profits, in a country whose capital increases faster than that of its neighbours, and whose profits are therefore nearer to the minimum. This is, the perpetual overflow of capital into colonies or foreign countries, to seek higher profits than can be obtained at home. I believe this to have been for many years one of the principal causes by which the decline of profits in England has been arrested. It has a twofold operation. In the first place, it does what a fire, or an inundation, or a commercial crisis would have done: it carries off a part of the increase of capital from which the reduction of profits proceeds. Secondly, the capital so carried off is not lost, but is chiefly employed either in founding colonies, which become large exporters of cheap agricultural produce, or in extending and perhaps improving the agriculture of older communities. It is to the emigration of English capital, that we have chiefly to look for keeping up a supply of cheap food and cheap materials of clothing, proportional to the increase of our population; thus enabling an increasing capital to find employment in the country, without reduction of profit, in producing manufactured articles with which to pay for this supply of raw produce. Thus, the exportation of capital is an agent of great efficacy in extending the field of employment for that which remains: and it may be said truly that, up to a certain point, the more capital we send away, the more we shall possess and be able to retain at home.

In countries which are further advanced in industry and population, and have therefore a lower rate of profit, than others, there is always, long before the actual minimum is reached, a practical minimum, viz., when profits have fallen so much below what they are elsewhere, that, were they to fall lower, all further accumulations would go abroad. In the present state of the industry of the world, when there is occasion, in any rich and improving country, to take the minimum of profits at all into consideration for practical purposes, it is only this practical minimum that needs be considered. As long as there are old countries where capital increases very rapidly, and new countries where profit is still high, profits in the old countries will not sink to the rate which would put a stop to accumulation; the fall is stopped at the point which sends capital abroad. It is only, however, by improvements in production, and even in the production of things consumed by labourers, that the capital of a country like England is prevented from speedily reaching that degree of lowness of profit, which would cause all further savings to be sent to find employment in the colonies, or in foreign countries.1

CHAPTER V

consequences of the tendency of profits to a minimum

§ 1. The theory of the effect of accumulation on profits, laid down in the preceding chapter, materially alters many of the practical conclusions which might otherwise be supposed to follow from the general principles of Political Economy, and which were, indeed, long admitted as true by the highest authorities on the subject.

It must greatly abate, or rather, altogether destroy, in countries where profits are low, the immense importance which used to be attached by political economists to the effects which an event or a measure of government might have in adding to or subtracting from the capital of the country. We have now seen that the lowness of profits is a proof that the spirit of accumulation is so active, and that the increase of capital has proceeded at so rapid a rate, as to outstrip the two counter-agencies, improvements in production, and increased supply of cheap necessaries from abroad: and that unless a considerable portion of the annual increase of capital were either periodically destroyed, or exported for foreign investment, the country would speedily attain the point at which further accumulation would cease, or at least spontaneously slacken, so as no longer to overpass the march of invention in the arts which produce the necessaries of life. In such a state of things as this, a sudden addition to the capital of the country, unaccompanied by any increase of productive power, would be but of transitory duration; since, by depressing profits and interest, it would either diminish by a corresponding amount the savings which would be made from income in the year or two following, or it would cause an equivalent amount to be sent abroad, or to be wasted in rash speculations. Neither, on the other hand, would a sudden abstraction of capital, unless of inordinate amount, have any real effect in impoverishing the country. After a few months or years, there would exist in the country just as much capital as if none had been taken away. The abstraction, by raising profits and interest, would give a fresh stimulus to the accumulative principle, which would speedily fill up the vacuum. Probably, indeed, the only effect that would ensue, would be that for some time afterwards less capital would be exported, and less thrown away in hazardous speculation.

In the first place, then, this view of things greatly weakens, in a wealthy and industrious country, the force of the economical argument against the expenditure of public money for really valuable, even though industriously unproductive, purposes. If for any great object of justice or philanthropic policy, such as the industrial regeneration of Ireland, or a comprehensive measure of colonization or of public education, it were proposed to raise a large sum by way of loan, politicians need not demur to the abstraction of so much capital, as tending to dry up the permanent sources of the country's wealth, and diminish the fund which supplies the subsistence of the labouring population. The utmost expense which could be requisite for any of these purposes, would not in all probability deprive one labourer of employment, or diminish the next year's production by one ell of cloth or one bushel of grain. In poor countries, the capital of the country requires the legislator's sedulous care; he is bound to be most cautious of encroaching upon it, and should favour to the utmost its accumulation at home, and its introduction from abroad. But in rich, populous, and highly cultivated countries, it is not capital which is the deficient element, but fertile land; and what the legislator should desire and promote, is not a greater aggregate saving, but a greater return to savings, either by improved cultivation, or by access to the produce of more fertile lands in other parts of the globe. In such countries, the government may take any moderate portion of the capital of the country and expend it as revenue, without affecting the national wealth: the whole being either drawn from that portion of the annual savings which would otherwise be sent abroad, or being subtracted from the unproductive expenditure of individuals for the next year or two, since every million spent makes room for another million to be saved before reaching the overflowing point. When the object in view is worth the sacrifice of such an amount of the expenditure that furnishes the daily enjoyments of the people, the only well-grounded economical objection against taking the necessary funds directly from capital, consists of the inconveniences attending the process of raising a revenue by taxation, to pay the interest of a debt.

The same considerations enable us to throw aside as unworthy of regard, one of the common arguments against emigration as a means of relief for the labouring class. Emigration, it is said, can do no good to the labourers, if, in order to defray the cost, as much must be taken away from the capital of the country as from its population. That anything like this proportion could require to be abstracted from capital for the purpose even of the most extensive colonization, few, I should think, would now assert: but even on that untenable supposition, it is an error to suppose that no benefit would be conferred on the labouring class. If one-tenth of the labouring people of England were transferred to the colonies, and along with them one-tenth of the circulating capital of the country, either wages, or profits, or both, would be greatly benefited by the diminished pressure of capital and population upon the fertility of the land. There would be a reduced demand for food: the inferior arable lands would be thrown out of cultivation, and would become pasture; the superior would be cultivated less highly, but with a greater proportional return; food would be lowered in price, and though money wages would not rise, every labourer would be considerably improved in circumstances, an improvement which, if no increased stimulus to population and fall of wages ensued, would be permanent; while if there did, profits would rise, and accumulation start forward so as to repair the loss of capital. The landlords alone would sustain some loss of income; and even they, only if colonization went to the length of actually diminishing capital and population, but not if it merely carried off the annual increase.

§ 2. From the same principles we are now able to arrive at a final conclusion respecting the effects which machinery, and generally the sinking of capital for a productive purpose, produce upon the immediate and ultimate interests of the labouring class. The characteristic property of this class of industrial improvements is the conversion of circulating capital into fixed: and it was shown in the first Book,∗ that in a country where capital accumulates slowly, the introduction of machinery, permanent improvements of land, and the like, might be, for the time, extremely injurious; since the capital so employed might be directly taken from the wages fund, the subsistence of the people and the employment for labour curtailed, and the gross annual produce of the country actually diminished. But in a country of great annual savings and low profits, no such effects need be apprehended. Since even the emigration of capital, or its unproductive expenditure, or its absolute waste, do not in such a country, if confined within any moderate bounds, at all diminish the aggregate amount of the wages fund—still less can the mere conversion of a like sum into fixed capital, which continues to be productive, have that effect. It merely draws off at one orifice what was already flowing out at another; or if not, the greater vacant space left in the reservoir does but cause a greater quantity to flow in. Accordingly, in spite of the mischievous derangements of the money-market which were at one time occasioned by the sinking of great sums in railways, I was never able to agree with those who apprehended mischief, from this source, to the productive resources of the country.1 Not on the absurd ground (which to any one acquainted with the elements of the subject needs no confutation) that railway expenditure is a mere transfer of capital from hand to hand, by which nothing is lost or destroyed. This is true of what is spent in the purchase of the land; a portion too of what is paid to parliamentary agents, counsel, engineers, and surveyors is saved by those who receive it, and becomes capital again: but what is laid out in the bonâ fide construction of the railway itself is lost and gone; when once expended, it is incapable of ever being paid in wages or applied to the maintenance of labourers again; as a matter of account, the result is that so much food and clothing and tools have been consumed, and the country has got a railway instead. But what I would urge is, that sums so applied are mostly a mere appropriation of the annual overflowing which would otherwise have gone abroad, or been thrown away unprofitably, leaving neither a railway nor any other tangible result. The railway gambling of 1844 and 1845 probably saved the country from a depression of profits and interest, and a rise of all public and private securities, which would have engendered still wilder speculations, and when the effects came afterwards to be complicated by the scarcity of food, would have ended in a still more formidable crisis than was experienced in the years immediately following. In the poorer countries of Europe, the rage for railway construction might have had worse consequences than in England, were it not that in those countries such enterprises are in a great measure carried on by foreign capital. The railway operations of the various nations of the world may be looked upon as a sort of competition for the overflowing capital of the countries where profit is low and capital abundant, as England and Holland. The English railway speculations are a struggle to keep our annual increase of capital at home; those of foreign countries are an effort to obtain it.∗

It already appears from these considerations, that the conversion of circulating capital into fixed, whether by railways, or manufactories, or ships, or machinery, or canals, or mines, or works of drainage and irrigation, is not likely, in any rich country, to diminish the gross produce or the amount of employment for labour. How much then is the case strengthened, when we consider that these transformations of capital are of the nature of improvements in production, which, instead of ultimately diminishing circulating capital are the necessary conditions of its increase, since they alone enable a country to possess a constantly augmenting capital without reducing profits to the rate which would cause accumulation to stop. There is hardly any increase of fixed capital which does not enable the country to contain eventually a larger circulating capital, than it otherwise could possess and employ within its own limits; for there is hardly any creation of fixed capital which, when it proves successful, does not cheapen the articles on which wages are habitually expended. All capital sunk in the permanent improvement of land lessens the cost of food and materials; almost all improvements in machinery cheapen the labourer's clothing or lodging, or the tools with which these are made; improvements in locomotion, such as railways, cheapen to the consumer all things which are brought from a distance. All these improvements make the labourers better off with the same money wages, better off if they do not increase their rate of multiplication. But if they do, and wages consequently fall, at least profits rise, and, while accumulation receives an immediate stimulus, room is made for a greater amount of capital before a sufficient motive arises for sending it abroad. Even the improvements which do not cheapen the things consumed by the labourer, and which, therefore, do not raise profits nor retain capital in the country, nevertheless, as we have seen, by lowering the minimum of profit for which people will ultimately consent to save, leave an ampler margin than previously for eventual accumulation, before arriving at the stationary state.

We may conclude, then, that improvements in production, and emigration of capital to the more fertile soils and unworked mines of the uninhabited or thinly peopled parts of the globe, do not, as appears to a superficial view, diminish the gross produce and the demand for labour at home; but, on the contrary, are what we have chiefly to depend on for increasing both, and are even the necessary conditions of any great or prolonged augmentation of either. Nor is it any exaggeration to say, that within certain, and not very narrow, limits, the more capital a country like England expends in these two ways, the more she will have left.

CHAPTER VI

of the stationary state

§ 1. The preceding chapters comprise the general theory of the economical progress of society, in the sense in which those terms are commonly understood; the progress of capital, of population, and of the productive arts. But in contemplating any progressive movement, not in its nature unlimited, the mind is not satisfied with merely tracing the laws of the movement; it cannot but ask the further question, to what goal? Towards what ultimate point is society tending by its industrial progress? When the progress ceases, in what condition are we to expect that it will leave mankind?

It must always have been seen, more or less distinctly, by political economists, that the increase of wealth is not boundless: that at the end of what they term the progressive state lies the stationary state, that all progress in wealth is but a postponement of this, and that each step in advance is an approach to it. We have now been led to recognize that this ultimate goal is at all times near enough to be fully in view; that we are always on the verge of it, and that if we have not reached it long ago, it is because the goal itself flies before us. The richest and most prosperous countries would very soon attain the stationary state, if no further improvements were made in the productive arts, and if there were a suspension of the overflow of capital from those countries into the uncultivated or ill-cultivated regions of the earth.

This impossibility of ultimately avoiding the stationary state—this irresistible necessity that the stream of human industry should finally spread itself out into an apparently stagnant sea—must have been, to the political economists of the last two generations, an unpleasing and discouraging prospect; for the tone and tendency of their speculations goes completely to identify all that is economically desirable with the progressive state, and with that alone. With Mr. M'Culloch, for example, prosperity does not mean a large production and a good distribution of wealth, but a rapid increase of it; his test of prosperity is high profits; and as the tendency of that very increase of wealth, which he calls prosperity, is towards low profits, economical progress, according to him, must tend to the extinction of prosperity. Adam Smith always assumes that the condition of the mass of the people, though it may not be positively distressed, must be pinched and stinted in a stationary condition of wealth, and can only be satisfactory in a progressive state. The doctrine that, to however distant a time incessant struggling may put off our doom, the progress of society must “end in shallows and in miseries,” far from being, as many people still believe, a wicked invention of Mr. Malthus, was either expressly or tacitly affirmed by his most distinguished predecessors, and can only be successfully combated on his principles. Before attention had been directed to the principle of population as the active force in determining the remuneration of labour, the increase of mankind was virtually treated as a constant quantity; it was, at all events, assumed that in the natural and normal state of human affairs population must constantly increase, from which it followed that a constant increase of the means of support was essential to the physical comfort of the mass of mankind. The publication of Mr. Malthus' Essay is the era from which better views of this subject must be dated; and notwithstanding the acknowledged errors of his first edition, few writers have done more than himself, in the subsequent editions, to promote these juster and more hopeful anticipations.

Even in a progressive state of capital, in old countries, a conscientious or prudential restraint on population is indispensable, to prevent the increase of numbers from outstripping the increase of capital, and the condition of the classes who are at the bottom of society from being deteriorated. Where there is not, in the people, or in some very large proportion of them, a resolute resistance to this deterioration—a determination to preserve an established standard of comfort—the condition of the poorest class sinks, even in a progressive state, to the lowest point which they will consent to endure. The same determination would be equally effectual to keep up their condition in the stationary state, and would be quite as likely to exist. Indeed, even now, the countries in which the greatest prudence is manifested in the regulating of population are often those in which capital increases least rapidly. Where there is an indefinite prospect of employment for increased numbers, there is apt to appear less necessity for prudential restraint. If it were evident that a new hand could not obtain employment but by displacing, or succeeding to, one already employed, the combined influences of prudence and public opinion might in some measure be relied on for restricting the coming generation within the numbers necessary for replacing the present.

§ 2. I cannot, therefore, regard the stationary state of capital and wealth with the unaffected aversion so generally manifested towards it by political economists of the old school. I am inclined to believe that it would be, on the whole, a very considerable improvement on our present condition. I confess I am not charmed with the ideal of life held out by those who think that the normal state of human beings is that of struggling to get on; that the trampling, crushing, elbowing, and treading on each other's heels, which form the existing type of social life, are the most desirable lot of human kind, or anything but the disagreeable symptoms of one of the phases of industrial progress. It may be a necessary stage in the progress of civilization, and those European nations which have hitherto been so fortunate as to be preserved from it, may have it yet to undergo. It is an incident of growth, not a mark of decline, for it is not necessarily destructive of the higher aspirations and the heroic virtues; as America, in her great civil war, has proved to the world, both by her conduct as a people and by numerous splendid individual examples, and as England, it is to be hoped, would also prove, on an equally trying and exciting occasion.1 But it is not a kind of social perfection which philanthropists to come will feel any very eager desire to assist in realizing. Most fitting, indeed, is it, that while riches are power, and to grow as rich as possible the universal object of ambition, the path to its attainment should be open to all, without favour or partiality. But the best state for human nature is that in which, while no one is poor, no one desires to be richer, nor has any reason to fear being thrust back by the efforts of others to push themselves forward.

That the energies of mankind should be kept in employment by the struggle for riches, as they were formerly by the struggle of war, until the better minds succeed in educating the others into better things, is undoubtedly more desirable than that they should rust and stagnate. While minds are coarse they require coarse stimuli, and let them have them. In the meantime, those who do not accept the present very early stage of human improvement as its ultimate type, may be excused for being comparatively indifferent to the kind of economical progress which excites the congratulations of ordinary politicians; the mere increase of production and accumulation. For the safety of national independence it is essential that a country should not fall much behind its neighbours in these things. But in themselves they are of little importance, so long as either the increase of population or anything else prevents the mass of the people from reaping any part of the benefit of them. I know not why it should be matter of congratulation that persons who are already richer than any one needs to be, should have doubled their means of consuming things which give little or no pleasure except as representative of wealth; or that numbers of individuals should pass over, every year, from the middle classes into a richer class, or from the class of the occupied rich to that of the unoccupied. It is only in the backward countries of the world that increased production is still an important object: in those most advanced, what is economically needed is a better distribution, of which one indispensable means is a stricter restraint on population. Levelling institutions, either of a just or of an unjust kind, cannot alone accomplish it; they may lower the heights of society, but they cannot, of themselves, permanently1 raise the depths.

On the other hand, we may suppose this better distribution of property attained, by the joint effect of the prudence and frugality of individuals, and of a system of legislation favouring equality of fortunes, so far as is consistent with the just claim of the individual to the fruits, whether great or small, of his or her own industry. We may suppose, for instance (according to the suggestion thrown out in a former chapter∗ ), a limitation of the sum which any one person may acquire by gift or inheritance to the amount sufficient to constitute a moderate independence. Under this twofold influence society would exhibit these leading features: a well-paid and affluent body of labourers; no enormous fortunes, except what were earned and accumulated during a single lifetime; but a much larger body of persons than at present, not only exempt from the coarser toils, but with sufficient leisure, both physical and mental, from mechanical details, to cultivate freely the graces of life, and afford examples of them to the classes less favourably circumstanced for their growth. This condition of society, so greatly preferable to the present, is not only perfectly compatible with the stationary state, but, it would seem, more naturally allied with that state than with any other.

There is room in the world, no doubt, and even in old countries, for a great increase of population, supposing the arts of life to go on improving, and capital to increase. But even if innocuous, I confess I see very little reason for desiring it. The density of population necessary to enable mankind to obtain, in the greatest degree, all the advantages both of co-operation and of social intercourse, has, in all the most populous countries, been attained. A population may be too crowded, though all be amply supplied with food and raiment. It is not good for man to be kept perforce at all times in the presence of his species. A world from which solitude is extirpated is a very poor ideal. Solitude, in the sense of being often alone, is essential to any depth of meditation or of character; and solitude in the presence of natural beauty and grandeur, is the cradle of thoughts and aspirations which are not only good for the individual, but which society could ill do without. Nor is there much satisfaction in contemplating the world with nothing left to the spontaneous activity of nature; with every rood of land brought into cultivation, which is capable of growing food for human beings; every flowery waste or natural pasture ploughed up, all quadrupeds or birds which are not domesticated for man's use exterminated as his rivals for food, every hedgerow or superfluous tree rooted out, and scarcely a place left where a wild shrub or flower could grow without being eradicated as a weed in the name of improved agriculture. If the earth must lose that great portion of its pleasantness which it owes to things that the unlimited increase of wealth and population would extirpate from it, for the mere purpose of enabling it to support a larger, but not a better or a happier population, I sincerely hope, for the sake of posterity, that they will be content to be stationary, long before necessity compels them to it.

It is scarcely necessary to remark that a stationary condition of capital and population implies no stationary state of human improvement. There would be as much scope as ever for all kinds of mental culture, and moral and social progress; as much room for improving the Art of Living, and much more likelihood of its being improved, when minds ceased to be engrossed by the art of getting on. Even the industrial arts might be as earnestly and as successfully cultivated, with this sole difference, that instead of serving no purpose but the increase of wealth, industrial improvements would produce their legitimate effect, that of abridging labour. Hitherto [1848] it is questionable if all the mechanical inventions yet made have lightened the day's toil of any human being. They have enabled a greater population to live the same life of drudgery and imprisonment, and an increased number of manufacturers and others to make fortunes. They have increased the comforts of the middle classes. But they have not yet begun to effect those great changes in human destiny, which it is in their nature and in their futurity to accomplish. Only when, in addition to just institutions, the increase of mankind shall be under the deliberate guidance of judicious foresight, can the conquests made from the powers of nature by the intellect and energy of scientific discoverers become the common property of the species, and the means of improving and elevating the universal lot.

CHAPTER VII

on the probable futurity of the labouring classes

§ 1. The observations in the preceding chapter had for their principal object to deprecate a false ideal of human society. Their applicability to the practical purposes of present times consists in moderating the inordinate importance attached to the mere increase of production, and fixing attention upon improved distribution, and a large remuneration of labour, as the two desiderata. Whether the aggregate produce increases absolutely or not, is a thing in which, after a certain amount has been obtained, neither the legislator nor the philanthropist need feel any strong interest: but, that it should increase relatively to the number of those who share in it, is of the utmost possible importance; and this, (whether the wealth of mankind be stationary, or increasing at the most rapid rate ever known in an old country,) must depend on the opinions and habits of the most numerous class, the class of manual labourers.

1 When I speak, either in this place or elsewhere, of “the labouring classes,” or of labourers as a “class,” I use those phrases in compliance with custom, and as descriptive of an existing, but by no means a necessary or permanent, state of social relations. I do not recognize as either just or salutary, a state of society in which there is any “class” which is not labouring; any human beings, exempt from bearing their share of the necessary labours of human life, except those unable to labour, or who have fairly earned rest by previous toil. So long, however, as the great social evil exists of a non-labouring class, labourers also constitute a class, and may be spoken of, though only provisionally, in that character.

Considered in its moral and social aspect, the state of the labouring people has latterly been a subject of much more speculation and discussion than formerly; and the opinion that it is not now what it ought to be, has become very general. The suggestions which have been promulgated, and the controversies which have been excited, on detached points rather than on the foundations of the subject, have put in evidence the existence of two conflicting theories, respecting the social position desirable for manual labourers. The one may be called the theory of dependence and protection, the other that of self-dependence.

According to the former theory, the lot of the poor, in all things which affect them collectively, should be regulated for them, not by them. They should not be required or encouraged to think for themselves, or give to their own reflection or forecast an influential voice in the determination of their destiny. It is supposed to be the duty of the higher classes to think for them, and to take the responsibility of their lot, as the commander and officers of an army take that of the soldiers composing it. This function, it is contended, the higher classes should prepare themselves to perform conscientiously, and their whole demeanour should impress the poor with a reliance on it, in order that, while yielding passive and active obedience to the rules prescribed for them, they may resign themselves in all other respects to a trustful insouciance, and repose under the shadow of their protectors. The relation between rich and poor, according to this theory (a theory also applied to the relation between men and women)1 should be only partly authoritative; it should be amiable, moral, and sentimental: affectionate tutelage on the one side, respectful and grateful deference on the other. The rich should be in loco parentis to the poor, guiding and restraining them like children. Of spontaneous action on their part there should be no need. They should be called on for nothing but to do their day's work, and to be moral and religious. Their morality and religion should be provided for them by their superiors, who should see them properly taught it, and should do all that is necessary to ensure their being, in return for labour and attachment, properly fed, clothed, housed, spiritually edified, and innocently amused.

This is the ideal of the future, in the minds of those whose dissatisfaction with the Present assumes the form of affection and regret towards the Past.1 Like other ideals, it exercises an unconscious influence on the opinions and sentiments of numbers who never consciously guide themselves by any ideal. It has also this in common with other ideals, that it has never been historically realised. It makes its appeal to our imaginative sympathies in the character of a restoration of the good times of our forefathers. But no times can be pointed out in which the higher classes of this or any other country performed a part even distantly resembling the one assigned to them in this theory. It is an idealization, grounded on the conduct and character of here and there an individual. All privileged and powerful classes, as such, have used their power in the interest of their own selfishness, and have indulged their self-importance in despising, and not in lovingly caring for, those who were, in their estimation, degraded, by being under the necessity of working for their benefit. I do not affirm that what has always been must always be, or that human improvement has no tendency to correct the intensely selfish fillings engendered by power; but though the evil may be lessened, it cannot be eradicated, until the power itself is withdrawn. This, at least, seems to me undeniable, that long before the superior classes could be sufficiently improved to govern in the tutelary manner supposed, the inferior classes would be too much improved to be so governed.

I am quite sensible of all that is seductive in the picture of society which this theory presents. Though the facts of it have no prototype in the past, the feelings have. In them lies all that there is of reality in the conception. As the idea is essentially repulsive of a society only held together by the relations and feelings arising out of pecuniary interests, so there is something naturally attractive in a form of society abounding in strong personal attachments and disinterested self-devotion. Of such feelings it must be admitted that the relation of protector and protected has hitherto been the richest source. The strongest attachments of human beings in general, are towards the things or the persons that stand between them and some dreaded evil. Hence, in an age of lawless violence and insecurity, and general hardness and roughness of manners, in which life is beset with dangers and sufferings at every step, to those who have neither a commanding position of their own, nor a claim on the protection of some one who has—a generous giving of protection, and a grateful receiving of it, are the strongest ties which connect human beings; the feelings arising from that relation are their warmest feelings; all the enthusiasm and tenderness of the most sensitive natures gather round it; loyalty on the one part and chivalry on the other are principles exalted into passions. I do not desire to depreciate these qualities.1 The error lies in not perceiving, that these virtues and sentiments, like the clanship and the hospitality of the wandering Arab, belong emphatically to a rude and imperfect state of the social union; and that the feelings between protector and protected, whether between kings and subjects, rich and poor, or men and women,2 can no longer have this beautiful and endearing character where there are no longer any serious dangers from which to protect. What is there in the present state of society to make it natural that human beings, of ordinary strength and courage, should glow with the warmest gratitude and devotion in return for protection? The laws protect them, wherever the laws do not criminally fail in their duty.3 To be under the power of some one, instead of being as formerly the sole condition of safety, is now, speaking generally, the only situation which exposes to grievous wrong. The so-called protectors are now the only persons against whom, in any ordinary circumstances, protection is needed. The brutality and tyranny with which every police report is filled, are those of husbands to wives, of parents to children. That the law does not prevent these atrocities, that it is only now making a first timid attempt to repress and punish them, is no matter of necessity, but the deep disgrace of those by whom the laws are made and administered. No man or woman who either possesses or is able to earn an independent livelihood, requires any other protection than that which the law could and ought to give. This being the case, it argues great ignorance of human nature to continue taking for granted that relations founded on protection must always subsist, and not to see that the assumption of the part of protector, and of the power which belongs to it, without any of the necessities which justify it, must engender feelings opposite to loyalty.

Of the working men, at least in the more advanced countries of Europe, it may be pronounced certain, that the patriarchal or paternal system of government is one to which they will not again be subject. That question was decided, when they were taught to read, and allowed access to newspapers and political tracts; when dissenting preachers were suffered to go among them, and appeal to their faculties and feelings in opposition to the creeds professed and countenanced by their superiors; when they were brought together in numbers, to work socially under the same roof; when railways enabled them to shift from place to place, and change their patrons and employers as easily as their coats; when they were encouraged to seek a share in the government, by means of the electoral franchise.1 The working classes have taken their interests into their own hands, and are perpetually showing that they think the interests of their employers not identical with their own, but opposite to them. Some among the higher classes flatter themselves that these tendencies may be counteracted by moral and religious education: but they have let the time go by for giving an education which can serve their purpose. The principles of the Reformation have reached as low down in society as reading and writing, and the poor will not much longer accept morals and religion of other people's prescribing. I speak more particularly of this country, especially the town population, and the districts of the most scientific agriculture or the highest wages, Scotland and the north of England. Among the more inert and less modernized agricultural population of the southern counties, it might be possible for the gentry to retain, for some time longer, something of the ancient deference and submission of the poor, by bribing them with high wages and constant employment; by insuring them support, and never requiring them to do anything which they do not like. But these are two conditions which never have been combined, and never can be, for long together. A guarantee of subsistence can only be practically kept up, when work is enforced and superfluous multiplication restrained by at least a moral compulsion. It is then, that the would-be revivers of old times which they do not understand, would feel practically in how hopeless a task they were engaged. The whole fabric of patriarchal or seignorial influence, attempted to be raised on the foundation of caressing the poor, would be shattered against the necessity of enforcing a stringent Poor-law.

§ 2. It is on a far other basis that the well-being and well-doing of the labouring people must henceforth rest. The poor have come out of leading-strings, and cannot any longer be governed or treated like children. To their own qualities must now be commended the care of their destiny. Modern nations will have to learn the lesson, that the well-being of a people must exist by means of the justice and self-government, the δικαιοσ[w1]νη and σωχροσ[w1]νη of the individual citizens. The theory of dependence attempts to dispense with the necessity of these qualities in the dependent classes. But now, when even in position they are becoming less and less dependent, and their minds less and less acquiescent in the degree of dependence which remains, the virtues of independence are those which they stand in need of. Whatever advice, exhortation or guidance is held out to the labouring classes, must henceforth be tendered to them as equals, and accepted by them with their eyes open. The prospect of the future depends on the degree in which they can be made rational beings.

There is no reason to believe that prospect other than hopeful. The progress indeed has hitherto been, and still is, slow. But there is a spontaneous education going on in the minds of the multitude, which may be greatly accelerated and improved by artificial aids. The instruction obtained from newspapers and political tracts may not be the most solid kind of instruction, but it is an immense improvement upon none at all. 1 What it does for a people has been admirably exemplified during the cotton crisis, in the case of the Lancashire spinners and weavers, who have acted with the consistent good sense and forbearance so justly applauded, simply because, being readers of newspapers, they understood the causes of the calamity which had befallen them, and knew that it was in no way imputable either to their employers or to the Government. It is not certain that their conduct would have been as rational and exemplary, if the distress had preceded the salutary measure of fiscal emancipation which gave existence to the penny press. The institutions for lectures and discussion, the collective deliberations on questions of common interest, the trade unions, the political agitation, all serve to awaken public spirit, to diffuse variety of ideas among the mass, and to excite thought and reflection in the more intelligent. Although the too early attainment of political franchises by the least educated class might retard, instead of promoting, their improvement, there can be little doubt that it has been greatly stipulated by the attempt to acquire them.1 In the meantime, the working classes are now part of the public; in all discussions on matters of general interest they, or a portion of them, are now partakers; all who use the press as an instrument may, if it so happens, have them for an audience; the avenues of instruction through which the middle classes acquire such ideas as they have, are accessible to, at least, the operatives in the towns. With these resources, it cannot be doubted that they will increase in intelligence, even by their own unaided efforts; while there is reason to hope that great improvements both in the quality and quantity of school education will be effected by the exertions either of government or of individuals, and that the progress of the mass of the people in mental cultivation, and in the virtues which are dependent on it, will take place more rapidly, and with fewer intermittences and aberrations, than if left to itself.

From this increase of intelligence, several effects may be confidently anticipated. First: that they will become even less willing than at present to be led and governed, and directed into the way they should go, by the mere authority and prestige of superiors. If they have not now, still less will they have hereafter, any deferential awe, or religious principle of obedience, holding them in mental subjection to a class above them. The theory of dependence and protection will be more and more intolerable to them, and they will require that their conduct and condition shall be essentially self-governed. It is, at the same time, quite possible that they may demand, in many cases, the intervention of the legislature in their affairs, and the regulation by law of various things which concern them, often under very mistaken ideas of their interest. Still, it is their own will, their own ideas and suggestions, to which they will demand that effect should be given, and not rules laid down for them by other people. It is quite consistent with this, that they should feel respect for superiority of intellect and knowledge, and defer much to the opinions, on any subject, of those whom they think well acquainted with it. Such deference is deeply grounded in human nature; but they will judge for themselves of the persons who are and are not entitled to it.

§ 3. It appears to me impossible but that the increase of intelligence, of education, and of the love of independence among the working classes, must be attended with a corresponding growth of the good sense which manifests itself in provident habits of conduct, and that population, therefore, will bear a gradually diminishing ratio to capital and employment. This most desirable result would be much accelerated by another change, which lies in the direct line of the best tendencies of the time; the opening of industrial occupations freely to both sexes. The same reasons which make it no longer necessary that the poor should depend on the rich, make it equally unnecessary that women should depend on men; and the least which justice requires is that law and custom should not enforce dependence (when the correlative protection has become superfluous) by ordaining that a woman, who does not happen to have a provision by inheritance, shall have scarcely any means open to her of gaining a livelihood, except as a wife and mother. Let women who prefer that occupation, adopt it; but that there should be no option, no other carrière possible for the great majority of women, except in the humbler departments of life, is a flagrant social injustice.1 The ideas and institutions by which the accident of sex is made the groundwork of an inequality of legal rights, and a forced dissimilarity of social functions, must ere long be recognised as the greatest hindrance to moral, social, and even intellectual improvement. On the present occasion I shall only indicate, among the probable consequences of the industrial and social independence of women, a great diminution of the evil of over-population. It is by devoting one-half of the human species to that exclusive function, by making it fill the entire life of one sex, and interweave itself with almost all the objects of the other, that the animal instinct in question is nursed into the disproportionate preponderance which it has hitherto exercised in human life.

§ 4. The political consequences of the increasing power and importance of the operative classes, and of the growing ascendancy of numbers, which, even in England and under the present institutions, is rapidly giving to the will of the majority at least a negative voice in the acts of government, are too wide a subject to be discussed in this place. But, confining ourselves to economical considerations, and notwithstanding the effect which improved intelligence in the working classes, together with just laws, may have in altering the distribution of the produce to their advantage, I cannot think that they will be permanently contented with the condition of labouring for wages as their ultimate state.1 They may be willing to pass through the class of servants in their way to that of employers; but not to remain in it all their lives. To begin as hired labourers, then after a few years to work on their own account, and finally employ others, is the normal condition of labourers in a new country, rapidly increasing in wealth and population, like America or Australia. 1 But in an old and fully peopled country, those who begin life as labourers for hire, as a general rule, continue such to the end, unless they sink into the still lower grade of recipients of public charity. In the present stage of human progress, when ideas of equality are daily spreading more widely among the poorer classes, and can no longer be checked by anything short of the entire suppression of printed discussion and even of freedom of speech, it is not to be expected that the division of the human race into two hereditary classes, employers and employed, can be permanently maintained. The relation is nearly as unsatisfactory to the payer of wages as to the receiver. If the rich regard the poor as, by a kind of natural law, their servants and dependents, the rich in their turn are regarded as a mere prey and pasture for the poor; the subject of demands and expectations wholly indefinite, increasing in extent with every concession made to them. 2 The total absence of regard for justice or fairness in the relations between the two, is as marked on the side of the employed as on that of the employers. We look in vain among the working classes in general for the just pride which will choose to give good work for good wages; for the most part, their sole endeavour is to receive as much, and return as little in the shape of service, as possible. It will sooner or later become insupportable to the employing classes, to live in close and hourly contact with persons whose interests and feelings are in hostility to them. Capitalists are almost as much interested as labourers in placing the operations of industry on such a footing, that those who labour for them may feel the same interest in the work, which is felt by those who labour on their own account.

The opinion expressed in a former part of this treatise respect. ing small landed properties and peasant proprietors, may have made the reader anticipate that a wide diffusion of property in land is the resource on which I rely for exempting at least the agricultural labourers from exclusive dependence on labour for hire. Such, however, is not my opinion. I indeed deem that form of agricultural economy to be most groundlessly cried down, and to be greatly preferable, in its aggregate effects on human happiness, to hired labour in any form in which it exists at present; because the prudential check to population acts more directly, and is shown by experience to be more efficacious; and because, in point of security, of independence, of exercise of any other than the animal faculties, the state of a peasant proprietor is far superior to that of an agricultural labourer in this or any other old country. Where the former system already exists, and works on the whole satisfactorily, I should regret, in the present state of human intelligence, to see it abolished in order to make way for the other, under a pedantic notion of agricultural improvement as a thing necessarily the same in every diversity of circumstances. In a backward state of industrial improvement, as in Ireland, I should urge its introduction, in preference to an exclusive system of hired labour; as a more powerful instrument for raising a population from semi-savage listlessness and recklessness, to persevering industry and prudent calculation.

But a people who have once adopted the large system of production, either in manufactures or in agriculture, are not likely to recede from it; and when population is kept in due proportion to the means of support, it is not desirable that they should. Labour is unquestionably more productive on the system of large industrial enterprises; the produce, if not greater absolutely, is greater in proportion to the labour employed: the same number of persons can be supported equally well with less toil and greater leisure; which will be wholly an advantage, as soon as civilization and improvement have so far advanced, that what is a benefit to the whole shall be a benefit to each individual composing it.1 And in the moral aspect of the question, which is still more important than the economical, something better should be aimed at as the goal of industrial improvement, than to disperse mankind over the earth in single families, each ruled internally, as families now are, by a patriarchal despot, and having scarcely any community of interest, or necessary mental communion, with other human beings. The domination of the head of the family over the other members, in this state of things, is absolute; while the effect on his own mind tends towards concentration of all interests in the family, considered as an expansion of self, and absorption of all passions in that of exclusive possession, of all cares in those of preservation and acquisition. As a step out of the merely animal state into the human, out of reckless abandonment to brute instincts into prudential foresight and self-government, this moral condition may be seen without displeasure. But if public spirit, generous sentiments, or true justice and equality are desired, association, not isolation, of interests, is the school in which these excellences are nurtured. The aim of improvement should be not solely to place human beings in a condition in which they will be able to do without one another, but to enable them to work with or for one another in relations not involving dependence. Hitherto there has been no alternative for those who lived by their labour, but that of labouring either each for himself alone, or for a master. But the civilizing and improving influences of association, and the efficiency and economy of production on a large scale, may be obtained without dividing the producers into two parties with hostile interests and feelings, the many who do the work being mere servants under the command of the one who supplies the funds, and having no interest of their own in the enterprise except to earn their wages with as little labour as possible. The speculations and discussions of the last fifty years, and the events of the last thirty,1 are abundantly conclusive on this point. If the improvement which even triumphant military despotism has only retarded, not stopped, shall continue its course,2 there can be little doubt that the status of hired labourers will gradually tend to confine itself to the description of workpeople whose low moral qualities render them unfit for anything more independent: and that the relation of masters and work-people will be gradually superseded by partnership, in one of two forms: in some cases, association of the labourers with the capitalist; in others, and perhaps finally in all,1 association of labourers among themselves.

2 § 5. The first of these forms of association has long been practised, not indeed as a rule, but as an exception. In several departments of industry there are already cases in which every one who contributes to the work, either by labour or by pecuniary resources, has a partner's interest in it, proportional to the value of his contribution. It is already a common practice to remunerate those in whom peculiar trust is reposed, by means of a percentage on the profits: and cases exist in which the principle is, with excellent success, carried down to the class of mere manual labourers.

In the American ships trading to China, it has long been the custom for every sailor to have an interest in the profits of the voyage; and to this has been ascribed the general good conduct of those seamen, and the extreme rarity of any collision between them and the government or people of the country. An instance in England, not so well known as it deserves to be, is that of the Cornish miners. “In Cornwall the mines are worked strictly on the system of joint adventure; gangs of miners contracting with the agent, who represents the owner of the mine, to execute a certain portion of a vein and fit the ore for market, at the price of so much in the pound of the sum for which the ore is sold. These contracts are put up at certain regular periods, generally every two months, and taken by a voluntary partnership of men accustomed to the mine. This system has its disadvantages, in consequence of the uncertainty and irregularity of the earnings, and consequent necessity of living for long periods on credit; but it has advantages which more than counterbalance these drawbacks. It produces a degree of intelligence, independence, and moral elevation, which raise the condition and character of the Cornish miner far above that of the generality of the labouring class. We are told by Dr. Barham, that ‘they are not only, as a class, intelligent for labourers, but men of considerable knowledge.’ Also, that ‘they have a character of independence, something American, the system by which the contracts are let giving the takers entire freedom to make arrangements among themselves; so that each man feels, as a partner in his little firm, that he meets his employers on nearly equal terms.’... With this basis of intelligence and independence in their character, we are not surprised when we hear that ‘a very great number of miners are now located on possessions of their own, leased for three lives or ninety-nine years, on which they have built houses;’ or that “281, 541l. are deposited in saving banks in Cornwall, of which two-thirds are estimated to belong to miners.'”∗

Mr. Babbage, who also gives an account of this system, observes that the payment to the crews of whaling ships is governed by a similar principle; and that “the profits arising from fishing with nets on the south coast of England are thus divided: one-half the produce belongs to the owner of the boat and net; the other half is divided in equal portions between the persons using it, who are also bound to assist in repairing the net when required.” Mr. Babbage has the great merit of having pointed out the practicability, and the advantage, of extending the principle to manufacturing industry generally.∗1

1 Some attention has been excited by an experiment of this nature, commenced above thirty years ago by a Paris tradesman, a house-painter, M. Leclaire,∗ and described by him in a pamphlet published in the year 1842. M. Leclaire, according to his statement, employs on an average two hundred workmen, whom he pays in the usual manner, by fixed wages or salaries. He assigns to himself, besides interest for his capital, a fixed allowance for his labour and responsibility as manager. At the end of the year, the surplus profits are divided among the body, himself included, in the proportion of their salaries.† The reasons by which M. Leclaire was led to adopt this system are highly instructive. Finding the conduct of his workmen unsatisfactory, he first tried the effect of giving higher wages, and by this he managed to obtain a body of excellent workmen, who would not quit his service for any other. “Having thus succeeded” (I quote from an abstract of the pamphlet in Chambers' Journal,‡ ) “in producing some sort of stability in the arrangement of his establishment, M. Leclaire expected, he says, to enjoy greater peace of mind. In this, however, he was disappointed. So long as he was able to superintend everything himself, from the general concerns of his business down to its minutest details, he did enjoy a certain satisfaction; but from the moment that, owing to the increase of his business, he found that he could be nothing more than the centre from which orders were issued, and to which reports were brought in, his former anxiety and discomfort returned upon him.” He speaks lightly of the other sources of anxiety to which a tradesman is subject, but describes as an incessant cause of vexation the losses arising from the misconduct of workmen. An employer “will find workmen whose indifference to his interests is such that they do not perform two-thirds of the amount of work which they are capable of; hence the continual fretting of masters, who, seeing their interests neglected, believe themselves entitled to suppose that workmen are constantly conspiring to ruin those from whom they derive their livelihood. If the journeyman were sure of constant employment, his position would in some respects be more enviable than that of the master, because he is assured of a certain amount of day's wages, which he will get whether he works much or little. He runs no risk, and has no other motive to stimulate him to do his best than his own sense of duty. The master, on the other hand, depends greatly on chance for his returns: his position is one of continual irritation and anxiety. This would no longer be the case to the same extent, if the interests of the master and those of the workmen were bound up with each other, connected by some bond of mutual security, such as that which would be obtained by the plan of a yearly division of profits.”

Even in the first year during which M. Leclaire's experiment was in complete operation, the success was remarkable. Not one of his journeymen who worked as many as three hundred days, earned in that year less than 1500 francs, and some considerably more. His highest rate of daily wages being four francs, or 1200 francs for 300 days, the remaining 300 francs, or 12l., must have been the smallest amount which any journeyman, who worked that number of days, obtained as his proportion of the surplus profit. M. Leclaire describes in strong terms the improvement which was already manifest in the habits and demeanour of his workmen, not merely when at work, and in their relations with their employer, but at other times and in other relations, showing increased respect both for others and for themselves. 1 M. Chevalier, in a work published in 1848,∗ stated on M. Leclaire's authority, that the increased zeal of the workpeople continued to be a full compensation to him, even in a pecuniary sense, for the share of profit which he renounced in their favour. 2 And M. Villiaumé, in 1857,† observes:—“Though he has always kept himself free from the frauds which are but too frequent in his profession, he has always been able to hold his ground against competition, and has acquired a handsome competency in spite of the relinquishment of so great a portion of his profits. Assuredly he has been only thus successful because the unusual activity of his workpeople, and the watch which they kept over one another, have compensated him for the sacrifice made in contenting himself with only a share of the gain.ℍ∗

The beneficent example set by M. Leclaire has been followed, with brilliant success, by other employers of labour on a large scale at Paris; and I annex, from the work last referred to (one of the ablest of the many able treatises on political economy produced by the present generation of the political economists of France), some signal examples of the economical and moral benefit arising from this admirable arrangement.†

1 Until the passing of the Limited Liability Act, it was held that an arrangement similar to M. Leclaire's would have been impossible in England, as the workmen could not, in the previous state of the law, have been associated in the profits, without being liable for losses. One of the many benefits of that great legislative improvement has been to render partnerships of this description possible, and we may now expect to see them carried into practice. Messrs Briggs, of the Whitwood and Methley collieries, near Normanton in Yorkshire, have taken the first step. They now work these mines by a company, two-thirds of the capital of which they themselves continue to hold, but undertake, in the allotment of the remaining third, to give the preference to the “officials and operatives employed in the concern;” and, what is of still greater importance, whenever the annual profit exceeds 10 per cent, one-half the excess is divided among the work-people and employés, whether shareholders or not, in proportion to their earnings during the year. It is highly honourable to these important employers of labour to have initiated a system so full of benefit both to the operatives employed and to the general interest of social improvement: and they express no more than a just confidence in the principle when they say, that “the adoption of the mode of appropriation thus recommended would, it is believed, add so great an element of success to the undertaking as to increase rather than diminish the dividend to the shareholders.”1

2 § 6. The form of association, however, which if mankind continue to improve, must be expected in the end to predominate, is not that which can exist between a capitalist as chief, and work-people without a voice in the management, but the association of the labourers themselves on terms of equality, collectively owning the capital with which they carry on their operations, and working under managers elected and removable by themselves. So long as this idea remained in a state of theory, in the writings of Owen or of Louis Blanc, it may have appeared, to the common modes of judgment, incapable of being realised, and not likely to be tried unless by seizing on the existing capital, and confiscating it for the benefit of the labourers; which is even now imagined by many persons, and pretended by more, both in England and on the Continent, to be the meaning and purpose of Socialism. But there is a capacity of exertion and self-denial in the masses of mankind, which is never known but on the rare occasions on which it is appealed to in the name of some great idea or elevated sentiment. Such an appeal was made by the French Revolution of 1848. For the first time it then seemed to the intelligent and generous of the working classes of a great nation, that they had obtained a government who sincerely desired the freedom and dignity of the many, and who did not look upon it as their natural and legitimate state to be instruments of production, worked for the benefit of the possessors of capital. Under this encouragement, the ideas sown by Socialist writers, of an emancipation of labour to be effected by means of association, throve and fructified; and many working people came to the resolution, not only that they would work for one another, instead of working for a master tradesman or manufacturer, but that they would also free themselves, at whatever cost of labour or privation, from the necessity of paying, out of the produce of their industry, a heavy tribute for the use of capital; that they would extinguish this tax, not by robbing the capitalists of what they or their predecessors had acquired by labour and preserved by economy, but by honestly acquiring capital for themselves. If only a few operatives had attempted this arduous task, or if, while many attempted it, a few only had succeeded, their success might have been deemed to furnish no argument for their system as a permanent mode of industrial organization. But, excluding all the instances of failure, there exist, or existed a short time ago,1 upwards of a hundred successful, and many eminently prosperous, associations of operatives in Paris alone, besides a considerable number in the departments. An instructive sketch of their history and principles has been published, under the title of L'Association Ouvrière Industrielle et Agricole, by H. Feugueray: and as it is frequently affirmed in English newspapers that the associations at Paris have failed, by writers who appear to mistake the predictions of their enemies at their first formation for the testimonies of subsequent experience, I think it important to show by quotations from M. Feugueray's volume, strengthened by still later testimonies,2 that these representations are not only wide of the truth, but the extreme contrary of it.

The capital of most of the associations was originally confined to the few tools belonging to the founders, and the small sums which could be collected from their savings, or which were lent to them by other workpeople as poor as themselves. In some cases, however, loans of capital were made to them by the republican government: but the associations which obtained these advances, or at least which obtained them before they had already achieved success, are, it appears, in general by no means the most prosperous. The most striking instances of prosperity are in the case of those who have had nothing to rely on but their own slender means and the small loans of fellow-workmen, and who lived on bread and water while they devoted the whole surplus of their gains to the formation of a capital.

“Often,” says M. Feugueray,∗ “there was no money at all in hand, and no wages could be paid. The goods did not go off, the payments did not come in, bills could not get discounted, the warehouse of materials was empty; they had to submit to privation, to reduce all expenses to the minimum, to live sometimes on bread and water.... It is at the price of these hardships and anxieties that men who began with hardly any resource but their good will and their hands, succeeded in creating customers, in acquiring credit, forming at last a joint capital, and thus founding associations whose futurity now seems to be assured.”

I will quote at length the remarkable history of one of these associations.∗

“The necessity of a large capital for the establishment of a pianoforte manufactory was so fully recognised in the trade, that in 1848 the delegates of several hundred workmen who had combined to form a great association, solicited from the government a subvention of 300,000 francs [12,000l.], being a tenth part of the whole sum voted by the National Assembly. I remember that, as one of the Commission charged with the distribution of the fund, I tried in vain for two hours to convince the two delegates with whom the Commission conferred, that their request was exorbitant. They answered imperturbably, that their trade was a peculiar one; that the association could only have a chance of success on a very large scale and with a considerable capital; that 300,000 francs were the smallest sum which could sufffice them, and that they could not reduce the demand by a single sou. The Commission refused.

“Now, after this refusal, the project of a great association being abandoned, what happened was this. Fourteen workmen, and it is singular that among them was one of the two delegates, resolved to set up by themselves a pianoforte-making association. The project was hazardous on the part of men who had neither money nor credit: but faith does not reason—it acts.

“Our fourteen men therefore went to work, and I borrow from an excellent article by M. Cochut in the National, the accuracy of which I can attest, the following account of their first proceedings.

“Some of them, who had worked on their own account, brought with them in tools and materials the value of about 2000 francs [80l.]. There was needed besides a circulating capital. Each member, not without difficulty, managed to subscribe 10 francs [8s.]. A certain number of workmen not interested in the society gave their adhesion by bringing small contributions. On March 10, 1849, a sum of 229½ francs [9l. 3s. 7½d.] having been realized, the association was declared constituted.

“This sum was not even sufficient for setting up, and for the small expenses required from day to day for the service of a workshop. There being nothing left for wages, nearly two months elapsed without their touching a farthing. How did they subsist during this interval? As workmen live when out of employment, by sharing the portion of a comrade who is in work; by selling or pawning bit by bit the few articles they possess.

“They had executed some orders. They received the payment on the 4th of May. That day was for them like a victory at the opening of a campaign, and they determined to celebrate it. After paying all debts that had fallen due, the dividend of each member amounted to 6 francs 61 centimes. They agreed to allow to each 5 francs [4s.] on account of his wages, and to devote the surplus to a fraternal repast. The fourteen shareholders, most of whom had not tasted wine for a year past, met, along with their wives and children. They expended 32 sous [1s. 4d.] per family. This day is still spoken of in their workshops with an emotion which it is difficult not to share.

“For a month longer it was necessary to content themselves with the receipt of five franca per week. In the course of June a baker, either from love of music or on speculation, offered to buy a piano, paying for it in bread. The bargain was made at the price of 480 francs. It was a piece of good luck to the association. They had now at least what was indispensable. They determined not to reckon the bread in the account of wages. Each ate according to his appetite, or rather to that of his family; for the married shareholders were allowed to take away bread freely for their wives and children.

“Meanwhile the association, being composed of excellent workmen, gradually surmounted the obstacles and privations which had embarrassed its starting. Its account-books offer the best proof of the progress which its pianos had made in the estimation of buyers. From August 1849 the weekly contingent rises to 10, 15, and 20 francs per week; and this last sum does not represent all their profits, each partner having left in the common stock much more than he received from it. Indeed it is not by the sum which the member receives weekly that his situation can be judged, but by the share acquired in the ownership of a property already considerable. The following was the position of the association when it took stock on the 30th December 1850.

“At this period the number of shareholders was thirty-two. Large workshops and warehouses, rented for 2000 francs, were no longer sufficient for the business.

Frs.Cents.
∗ “The last two items consisted of safe securities, nearly all of which have since been realized.”
† “These adherents are workmen of the trade, who subscribed small sums to the association at its commencement: a portion of them were reimbursed in the beginning of 1851. The sum due to creditors has also been much reduced: on the 23rd of April it only amounted to 113 francs 59 centimes.”
Independent of tools, valued at . . . . .5,92260
They possessed in goods and especially in
materials, the value of . . . . . . .		22,97228
They had in cash . . . . . . . . .1,02110
” in bills . . . . . . . . .3,540
There was due to them∗ . . . . . . .5,86190
——————
They had thus to their credit . . . . . .39,31788
Against this are only to be debited 4737 francs
86 centimes due to creditors, and 1650 francs
to eighty adherents;† in all . . . . .		6,38786
——————
Remaining . . . . . . . . .32,93002
[£13194s.]

which formed their indivisible capital and the reserve of the individual members. At this period the association had 76 pianos under construction, and received more orders than they could execute.”

From a later report we learn that this society subsequently divided itself into two separate associations, one of which, in 1854, already possessed a circulating capital of 56,000 francs‡ [2240l.]. In 1863 its total capital was 6520l.

The same admirable qualities by which the associations were carried through their early struggles, maintained them in their increasing prosperity. Their rules of discipline, instead of being more lax, are stricter than those of ordinary workshops; but being rules self-imposed, for the manifest good of the community, and not for the convenience of an employer regarded as having an opposite interest, they are far more scrupulously obeyed, and the voluntary obedience carries with it a sense of personal worth and dignity. With wonderful rapidity the associated workpeople have learnt to correct those of the ideas they set out with which are in opposition to the teaching of reason and experience. Almost all the associations, at first, excluded piece-work, and gave equal wages whether the work done was more or less. Almost all have abandoned this system, and after allowing to every one a fixed minimum, sufficient for subsistence, they apportion all further remuneration according to the work done: most of them even dividing the profits at the end of the year, in the same proportion as the earnings.∗

It is the declared principle of most of these associations that they do not exist for the mere private benefit of the individual members, but for the promotion of the co-operative cause. With every extension, therefore, of their business, they take in additional members, not (when they remain faithful to their original plan) to receive wages from them as hired labourers, but to enter at once into the full benefits of the association, without being required to bring anything in, except their labour: the only condition imposed is that of receiving during a few years a smaller share in the annual division of profits, as some equivalent for the sacrifices of the founders. When members quit the association, which they are always at liberty to do, they carry none of the capital with them: it remains an indivisible property, of which the members for the time being have the use, but not the arbitrary disposal: by the stipulations of most of the contracts, even if the association breaks up, the capital cannot be divided, but must be devoted entire to some work of beneficence or of public utility. A fixed, and generally a considerable, proportion of the annual profits, is not shared among the members, but added to the capital of the association, or devoted to the repayment of advances previously made to it: another portion is set aside to provide for the sick and disabled, and another to form a fund for extending the practice of association, or aiding other associations in their need. The managers are paid, like other members, for the time which is occupied in management, usually at the rate of the highest paid labour: but the rule is adhered to, that the exercise of power shall never be an occasion of profit.

Of the ability of the associations to compete successfully with individual capitalists, even at an early period of their existence, M. Feugueray said, “The associations which have been founded in the last two years” (M. Feugueray wrote in 1851) “had many obstacles to overcome; the majority of them were almost entirely without capital: all were treading in a path previously unexplored; they ran the risks which always threaten innovators and beginners. Nevertheless, in many of the trades in which they have been established, they are already formidable competitors of the old houses, and are even complained of on that account by a part of the bourgeoisie. This is not only true of the cooks, the lemonade sellers, and hair-dressers, trades the nature of which enables the associations to rely on democratic custom, but also in other trades where they have not the same advantages. One has only to consult the makers of chairs, of arm-chairs, of files, and one will learn from them if the most important establishments in their respective trades are not those of the associated workmen.”

1 The vitality of these associations must indeed be great, to have enabled about twenty of them to survive not only the anti-socialist reaction, which for the time discredited all attempts to enable workpeople to be their own employers—not only the tracasseries of the police, and the hostile policy of the government since the usurpation—but in addition to these obstacles, all the difficulties arising from the trying condition of financial and commercial affairs from 1854 to 1858. Of the prosperity attained by some of them even while passing through this difficult period, I have given examples which must be conclusive to all minds as to the brilliant future reserved for the principle of co-operation.∗

1 It is not in France alone that these associations have commenced a career of prosperity. To say nothing at present of Germany, Piedmont, and Switzerland (where the Konsum-Verein of Zürich is one of the most prosperous co-operative associations in Europe), England can produce cases of success rivalling even those which I have cited from France. Under the impulse commenced by Mr. Owen, and more recently propagated by the writings and personal efforts of a band of friends, chiefly clergymen and barristers, to whose noble exertions too much praise can scarcely be given, the good seed was widely sown; the necessary alterations in the English law of partnership were obtained from Parliament, on the benevolent and public-spirited initiative of Mr. Slaney; many industrial associations, and a still greater number of co-operative stores for retail purchases, were founded. Among these are already many instances of remarkable prosperity, the most signal of which are the Leeds Flour Mill, and the Rochdale Society of Equitable Pioneers. Of this last association, the most successful of all, the history has been written in a very interesting manner by Mr. Holyoake;∗ and the notoriety which by this and other means has been given to facts so encouraging, is causing a rapid extension of associations with similar objects in Lancashire, Yorkshire, London, and elsewhere.

The original capital of the Rochdale Society consisted of 28l.; brought together by the unassisted economy of about forty labourers, through the slow process of a subscription of twopence (afterwards raised to threepence) per week. With this sum they established in 1844 a small shop, or store, for the supply of a few common articles for the consumption of their own families. As their carefulness and honesty brought them an increase of customers and of subscribers, they extended their operations to a greater number of articles of consumption, and in a few years were able to make a large investment in shares of a Co-operative Corn Mill. Mr. Holyoake thus relates the stages of their progress up to 1857:—

“The Equitable Pioneers' Society is divided into seven departments : Grocery, Drapery, Butchering, Shoemaking, Clogging, Tailoring, Wholesale.

“A separate account is kept of each business, and a general account is given each quarter, showing the position of the whole.

“The grocery business was commenced, as we have related, in December 1844, with only four articles to sell. It now includes whatever a grocer's shop should include.

“The drapery business was started in 1847, with an humble array of attractions. In 1854 it was erected into a separate department.

“A year earlier, 1846, the Store began to sell butcher's meat, buying eighty or one hundred pounds of a tradesman in the town. After a while the sales were discontinued until 1850, when the Society had a warehouse of its own. Mr. John Moorhouse, who has now two assistants, buys and kills for the Society three oxen, eight sheep, sundry porkers and calves, which are on the average converted into 130l. of cash per week.

“Shoemaking commenced in 1852. Three men and an apprentice make, and a stock is kept on sale.

“Clogging and tailoring commenced also in this year.

“The wholesale department commenced in 1852, and marls an important development of the Pioneers' proceedings. This department has been created for supplying any members requiring large quantities, and with a view to supply the co-operative stores of Lancashire and Yorkshire, whose small capitals do not enable them to buy in the best markets, nor command the services of what is otherwise indispensable to every store—a good buyer, who knows the markets and his business, who knows what, how, and where to buy. The wholesale department guarantees purity, quality, fair prices, standard weight and measure, but all on the never-failing principle, cash payment.”

In consequence of the number of members who now reside at a distance, and the difficulty of serving the great increase of customers, “Branch Stores have been opened. In 1856 the first Branch was opened in the Oldham Road; about a mile from the centre of Rochdale. In 1857 the Castleton Branch, and another in the Whitworth Road, were established, and a fourth Branch in Pinfold.”

The warehouse, of which their original Store was a single apartment, was taken on lease by the Society, very much out of repair, in 1849. “Every part has undergone neat refitting and modest decoration, and now wears the air of a thoroughly respectable place of business. One room is now handsomely fitted up as a news room. Another is neatly fitted up as a library.... Their news room is as well supplied as that of a London club.” It is now “free to members, and supported from the Education Fund,” a fund consisting of 2½ per cent of all the profits divided, which is set apart for educational purposes. “The Library contains 2200 volumes of the best, and among them, many of the most expensive books published. The Library is free. From 1850 to 1855, a school for young persons was conducted at a charge of twopence per month. Since 1855, a room has been granted by the Board for the use of from twenty to thirty persons, from the ages of fourteen to forty, for mutual instruction on Sundays and Tuesdays....

“The corn-mill was of course rented, and stood at Small Bridge, some distance from the town—one mile and a half. The Society have since built in the town an entirely new mill for themselves. The engine and the machinery are of the moat substantial and improved kind. The capital invested in the corn-mill is 8450l., of which 3731l. 15s. 2d. is subscribed by the Equitable Pioneers' Society. The corn-mill employs eleven men.”

At a later period they extended their operations to the staple manufacture itself. From the success of the Pioneers' Society grew not only the co-operative corn-mill, but a co-operative association for cotton and woollen manufacturing. “The capital in this department is 4000l., of which sum 2042l. has been subscribed by the Equitable Pioneers' Society. This Manufacturing Society has ninety-six power-looms at work, and employs twenty-six men, seven women, four boys, and five girls—in all forty-two persons....”

“In 1853 the Store purchased for 745l.; a warehouse (freehold) on the opposite side of the street, where they keep and retail their stores of flour, butcher's meat, potatoes, and kindred articles. Their committee-rooms and offices are fitted up in the same building. They rent other houses adjoining for calico and hosiery and shoe stores. In their wilderness of rooms, the visitor stumbles upon shoemakers and tailors at work under healthy conditions, and in perfect peace of mind as to the result on Saturday night. Their warehouses are everywhere as bountifully stocked as Noah's Ark, and cheerful customers literally crowd Toad Lane at night, swarming like bees to every counter. The industrial districts of England have not such another sight as the Rochdale Co-operative Store on Saturday night.”∗ Since the disgraceful failure of the Rochdale Savings Bank in 1849, the Society's Store has become the virtual Savings Bank of the place.

The following Table, completed to 11360 from the Almanack published by the Society, shows the pecuniary result of its operations from the commencement.

Year.No. of
members.		Amount of Capital.Amount of cash sales
in store (annual).		Amount of profit
(annual).
∗ [1865] The latest report to which I have access is that for the quarter ending September 20, 1864, of which I take the following abstract from the November number of that valuable periodical the Co-operator, conducted by Mr. Henry Pitman, one of the most active and judicious apostles of the Co-operative cause:—“The number of members is 4580, being an increase of 132 for the three months. The capital or assets of the society is 59,536l. 10s. 1d., or more than last quarter by 3687l. 13s. 7d. The cash received for sale of goods is 45,806l. 0s. 10½d., being an increase of 2283l. 12s. 5½d. as compared with the previous three months. The profit realized is 5713l. 2s. 7½d., which, after depreciating fixed stock account 182l. 2s. 4½d., paying interest on share capital 598l. 17s. 6d., applying 2½ per cent to an educational fund, viz. 122l. 17s. 9d., leaves a dividend to members on their purchases of 2s. 4d. in the pound. Non-members have received 261l. 18s. 4d., at 1s. 8d. in the pound on their purchases, leaving 8d. in the pound profit to the society, which increases the reserve fund 104l. 15s. 4d. This fund now stands at 1352l. 7s. 11½d., the accumulation of profits from the trade of the public with the store since September 1862, over and above the 1s. 8d. in the pound allowed to such purchasers.”
£s.d.£s.d.£s.d.
1844282800——————
1845741811257106532176
18468625271½1,14617780163½
184711028653½1,924131072210
1848140397002,27665½1171610½
18493901,1931916,61118056139
18506002,29910513,179170889125
18516302,78501½17,63840990198½
18526803,4710616,352501,206152½
18537205,84831122,760001,6741811½
18549007,17215733,364001,763112½
1855140011,0321210½44,9021203,10684½
1856160012,920131½63,1971003,921131½
1857185015,1421279,788005,47068½
1858195018,1605471,689006,284174½
1859270327,060142104,0120010,739186½
1860∗345037,71090152,0630015,906911

I need not enter into similar particulars respecting the Corn-Mill Society, and will merely state that in 1860 its capital is set down,on the same authority, at 26,618l. 14s. 6d., and the profit for that single year at 10,164l. 12s. 5d. For the manufacturing establishment I have no certified information later than that of Mr. Holyoake, who states the capital of the concern, in 1857, to be 5500l. But a letter in the Rochdale Observer of May 26, 1860, editorially announced as by a person of good information, says that the capital had at that time reached 50,000l.: and the same letter gives highly satisfactory statements respecting other similar associations; the Rosendale Industrial Company, capital 40,000l.; the Walsden Co-operative Company, capital 8000l.; the Bacup and Wardle Commercial Company, with a capital of 40,000l.; “of which more than one-third is borrowed at 5 per cent, and this circumstance, be reduced to during the last two years of unexampled commercial prosperity, has caused the rate of dividend to shareholders to rise to an almost fabulous height.”

1 It is not necessary to enter into any details respecting the subsequent history of English Co-operation; the less so, as it is now one of the recognised elements in the progressive movement of the age, and, as such, has latterly been the subject of elaborate articles in most of our leading periodicals, one of the most recent and best of which was in the Edinburgh Review for October 1864: and the progress of Co-operation from month to month is regularly chronicled in the Co-operator. I must not, however, omit to mention the last great step in advance in reference to the Co-operative Stores, the formation in the North of England (and another is in course of formation in London) of a Wholesale Society, to dispense with the services of the wholesale merchant as well as of the retail dealer, and extend to the Societies the advantage which each society gives to its own members, by an agency for co-operative purchases, of foreign as well as domestic commodities, direct from the producers.

2 It is hardly possible to take any but a hopeful view of the prospects of mankind, when, in two leading countries of the world, the obscure depths of society contain simple working men whose integrity, good sense, self-command, and honourable confidence in one another, have enabled them to carry these noble experiments to the triumphant issue which the facts recorded in the preceding pages attest.

From the progressive advance of the co-operative movement, a great increase may be looked for even in the aggregate productiveness of industry. The sources of the increase are twofold. In the first place, the class of mere distributors, who are not producers but auxiliaries of production, and whose inordinate numbers, far more than the gains of capitalists, are the cause why so great a portion of the wealth produced does not reach the producers—will be reduced to more modest dimensions. Distributors differ from producers in this, that when producers increase, even though in any given department of industry they may be too numerous, they actually produce more: but the multiplication of distributors does not make more distribution to be done, more wealth to be distributed; it does but divide the same work among a greater number of persons, seldom even cheapening the process. By limiting the distributors to the number really required for making the commodities accessible to the consumers-which is the direct effect of the co-operative system—a vast number of hands will be set free for production, and the capital which feeds and the gains which remunerate them will be applied to feed and remunerate producers. This great economy of the world's resources would be realized even if co-operation stopped at associations for purchase and consumption, without extending to production.

The other mode in which co-operation tends, still more efficaciously, to increase the productiveness of labour, consists in the vast stimulus given to productive energies, by placing the labourers, as a mass, in a relation to their work which would make it their principle and their interest—at present it is neither—to do the utmost, instead of the least possible, in exchange for their remuneration. 1 It is scarcely possible to rate too highly this material benefit, which yet is as nothing compared with the moral revolution in society that would accompany it: the healing of the standing feud between capital and labour; the transformation of human life, from a conflict of classes struggling for opposite interests, to a friendly rivalry in the pursuit of a good common to all; the elevation of the dignity of labour; a new sense of security and independence in the labouring class; and the conversion of each human being's daily occupation into a school of the social sympathies and the practical intelligence.

Such is the noble idea which the promoters of Co-operation should have before them. But to attain, in any degree, these objects, it is indispensable that all, and not some only, of those who do the work should be identified in interest with the prosperity of the undertaking. Associations which, when they have been successful, renounce the essential principle of the system, and become joint-stock companies of a limited number of shareholders, who differ from those of other companies only in being working men; associations which employ hired labourers without any interest in the profits (and I grieve to say that the Manufacturing Society even of Rochdale has thus degenerated) are, no doubt, exercising a lawful right in honestly employing the existing system of society to improve their position as individuals, but it is not from them that anything need be expected towards replacing that system by a better. Neither will such societies, in the long run, succeed in keeping their ground against individual competition. Individual management, by the one person principally interested, has great advantages over every description of collective management. Co-operation has but one thing to oppose to those advantages—the common interest of all the workers in the work. When individual capitalists, as they will certainly do, add this to their other points of advantage; when, even if only to increase their gains, they take up the practice which these co-operative societies have dropped, and connect the pecuniary interest of every person in their employment with the most efficient and most economical management of the concern; they are likely to gain an easy victory over societies which retain the defects, while they cannot possess the full advantages, of the old system.

Under the most favourable supposition, it will be desirable, and perhaps for a considerable length of time, that individual capitalists, associating their work-people in the profits, should coexist with even those co-operative societies which are faithful to the co-operative principle. Unity of authority makes many things possible, which could not or would not be undertaken subject to the chance of divided councils or changes in the management. A private capitalist, exempt from the control of a body, if he is a person of capacity, is considerably more likely than almost any association to run judicious risks, and originate costly improvements. Co-operative societies may be depended on for adopting improvements after they have been tested by success, but individuals are more likely to commence things previously untried. Even in ordinary business, the competition of capable persons who in the event of failure are to have all the loss, and in the case of success the greater part of the gain, will be very useful in keeping the managers of co-operative societies up to the due pitch of activity and vigilance.

When, however, co-operative societies shall have sufficiently multiplied, it is not probable that any but the least valuable work-people will any longer consent to work all their lives for wages merely; both private capitalists and associations will gradually find it necessary to make the entire body of labourers participants in profits. Eventually, and in perhaps a less remote future than may be supposed, we may, through the co-operative principle, see our way to 1 a change in society, which would combine the freedom and independence of the individual, with the moral, intellectual, and economical advantages of aggregate production; and which, without violence or spoliation, or even any sudden disturbance of existing habits and expectations, would realize, at least in the industrial department, the best aspirations of the democratic spirit, by putting an end to the division of society into the industrious and the idle, and effacing all social distinctions but those fairly earned by personal services and exertions. Associations like those which we have described, by the very process of their success, are a course of education in those moral and active qualities by which alone success can be either deserved or attained. As associations multiplied, they would tend more and more to absorb all work-people, except those who have too little understanding, or too little virtue, to be capable of learning to act on any other system than that of narrow selfishness. As this change proceeded, owners of capital would gradually find it to their advantage, instead of maintaining the struggle of the old system with work-people of only the worst description, to lend their capital to the associations; to do this at a diminishing rate of interest, and at last, perhaps, even to exchange their capital for terminable annuities. In this or some such mode, the existing accumulations of capital might honestly, and by a kind of spontaneous process, become in the end the joint property of all who participate in their productive employment: a transformation which, thus effected, (and assuming of course that both sexes participate equally in the rights and in the government of the association)∗ would be the nearest approach to social justice, and the most beneficial ordering of industrial affairs for the universal good, which it is possible at present to foresee.

1 § 7. I agree, then with the Socialist writers in their conception of the form which industrial operations tend to assume in the advance of improvement; and I entirely share their opinion that the time is ripe for commencing this transformation, and that it should by all just and effectual means be aided and encouraged. But while I agree and sympathize with Socialists in this practical portion of their aims, I utterly dissent from the most conspicuous and vehement part of their teaching, their declamations against competition. With moral conceptions in many respects far ahead of the existing arrangements of society, they have in general very confused and erroneous notions of its actual working; and one of their greatest errors, as I conceive, is to charge upon competition all the economical evils which at present exist. They forget that wherever competition is not, monopoly is; and that monopoly, in all its forms, is the taxation of the industrious for the support of indolence, if not of plunder. They forget, too, that with the exception of competition among labourers, all other competition is for the benefit of the labourers, by cheapening the articles they consume; that competition even in the labour market is a source not of low but of high wages, wherever the competition for labour exceeds the competition of labour, as in America, in the colonies, and in the skilled trades; and never could be a cause of low wages, save by the overstocking of the labour market through the too great numbers of the labourers' families; while, if the supply of labourers is excessive, not even Socialism can prevent their remuneration from being low. Besides, if association were universal, there would be no competition between labourer and labourer; and that between association and association would be for the benefit of the consumers, that is, of the associations; of the industrious classes generally.

I do not pretend that there are no inconveniences in competition, or that the moral objections urged against it by Socialist writers, as a source of jealousy and hostility among those engaged in the same occupation, are altogether groundless. But if competition has its evils, it prevents greater evils. As M. Feugueray well says,∗ “The deepest root of the evils and iniquities which fill the industrial world, is not competition, but the subjection of labour to capital, and the enormous share which the possessors of the instruments of industry are able to take from the produce.... If competition has great power for evil, it is no less fertile of good, especially in what regards the development of the individual faculties, and the success of innovations.” It is the common error of Socialists to overlook the natural indolence of mankind; their tendency to be passive, to be the slaves of habit, to persist indefinitely in a course once chosen. Let them once attain any state of existence which they consider tolerable, and the danger to be apprehended is that they will thenceforth stagnate; will not exert themselves to improve, and by letting their faculties rust, will lose even the energy required to preserve them from deterioration. Competition may not be the best conceivable stimulus, but it is at present a necessary one, and no one can foresee the time when it will not be indispensable to progress. Even confining ourselves to the industrial department, in which, more than in any other, the majority may be supposed to be competent judges of improvements; it would be difficult to induce the general assembly of an association to submit to the trouble and inconvenience of altering their habits by adopting some new and promising invention, unless their knowledge of the existence of rival associations made them apprehend that what they would not consent to do, others would, and that they would be left behind in the race.

Instead of looking upon competition as the baneful and anti-social principle which it is held to be by the generality of Socialists, I conceive that, even in the present state of society and industry, every restriction of it is an evil, and every extension of it, even if for the time injuriously affecting some class of labourers, is always an ultimate good. To be protected against competition is to be protected in idleness, in mental dulness; to be saved the necessity of being as active and as intelligent as other people; and if it is also to be protected against being underbid for employment by a less highly paid class of labourers, this is only where old custom, or local and partial monopoly, has placed some particular class of artisans in a privileged position as compared with the rest; and the time has come when the interest of universal improvement is no longer promoted by prolonging the privileges of a few. If the slop-sellers and others 1 of their class have lowered the wages of tailors, and some other artisans, by making them an affair of competition instead of custom, so much the better in the end. What is now required is not to bolster up old customs, whereby limited classes of labouring people obtain partial gains which interest them in keeping up the present organization of society, but to introduce new general practices beneficial to all; and there is reason to rejoice at whatever makes the privileged classes of skilled artisans feel that they have the same interests, and depend for their remuneration on the same general causes, and must resort for the improvement of their condition to the same remedies, as the less fortunately circumstanced and comparatively helpless multitude.1

[1][“Usually” inserted in 4th ed. (1857)]

[1][The remaining words of the sentence were added in the 6th ed. (1865).]

[1][The following passage of the original (1848) text was omitted in the 5th ed. (1862): “The former, indeed, so far as present foresight can extend, does not seem to be susceptible to improved processes to so great a degree as some branches of manufacture; but inventions may be in reserve for the future which may invert this relation.”]

[1][The “fifteen or twenty” of the 1st ed. (1848) was replaced in the 6th ed. (1865) by “twenty or twenty-five,” and in the 7th (1871) by “twenty or thirty.”]

[2][Written in 1848.]

[∗][1852] A still better criterion, perhaps, than that suggested in the text, would be the increase or diminution of the amount of the labourer's wages estimated in agricultural produce.

[3][See Appendix X. Prices in the 19th Century.]

[1][“Or good fortune” added in 3rd ed. (1852).]

[1][See Appendix Y. Commercial Cycles.]

[∗]Supra, pp. 183–4.

[1][Parenthesis added in 2nd ed. (1849).]

[1][See Appendix Z. Rents in the 19th Century.]

[2][See Appendix AA. Wages in the 19th Century.]

[∗]Wealth of Nations, book i. ch. 9.

[∗][1862] Now so much better known through his apostolic exertions, by pen, purse, and person, for the improvement of popular education, and especially for the introduction into it of the elements of practical political economy.

[∗]Book iii. ch. 14.

[1][So since the 6th ed. (1865). The original (1848) ran: “the condition of the labourers certainly is not on the whole declining.”]

[1][So from the 5th ed. (1862). In the 1st ed. (1848) the parenthesis had been: “(which is now very nearly, and will soon be entirely, our own case).”]

[1][See Appendix BB. The Importation of Food.]

[1][See Appendix CC. The Tendency of Profits to a Minimum.]

[∗]Supra, p. 94.

[1][The present form of this sentence dates from the 6th ed. (1865). The original [1848] text ran: “the great sums in process of being sunk,” and “I cannot agree.”]

[∗][1852] It is hardly needful to point out how fully the remarks in the text have been verified by subsequent facts. The capital of the country, far from having been in any degree impaired by the large amount sunk in railway construction, was soon again overflowing.

[1][This and the preceding sentence replaced in the 6th ed. (1865) the following passage of the original [1848] text: “The northern and middle states of America are a specimen of this stage of civilization in very favourable circumstances; having, apparently, got rid of all social injustices and inequalities that affect persons of Caucasian race and of the male sex, while the proportion of population to capital and land is such as to ensure abundance to every able-bodied member of the community who does not forfeit it by misconduct. They have the six points of Chartism, and they have no poverty: and all that these advantages seem to have done for them is that the life of the whole of one sex is devoted to dollar-hunting, and of the other to breeding dollar-hunters.” Into this, however, had been inserted since the 2nd ed. (1849), after “done for them,” the parenthesis “(notwithstanding some incipient signs of a better tendency).”]

[1][“Permanently” inserted in 2nd ed. (1849); “of themselves” in 3rd (1852).]

[∗]Supra, pp. 227–9.

[1][This paragraph replaced in the 3rd ed. (1852) the following paragraph of the original (1848) text:

“The economic condition of that class, and along with it of all society, depends therefore essentially on its moral and intellectual, and that again on its social, condition. In the details of political economy, general views of society and politics are out of place; but in the more comprehensive inquiries it is impossible to exclude them; since the various leading departments of human life do not develop themselves separately, but each depends on all, or is profoundly modified by them. To obtain any light on the great economic question of the future, which gives the chief interest to the phenomena of the present—the physical condition of the labouring classes—we must consider it, not separately, but in conjunction with all other points of their condition.”]

[1][Parenthesis inserted in 3rd ed. (1852).]

[1][Carlyle's Past and Present appeared in 1843.]

[1][In the 3rd ed. (1852) “qualities” replaced “virtues,” and the next sentence was omitted: “That the most beautiful developments of feeling and character often grow out of the most painful, and in many respects the most hardening and corrupting, circumstances of our condition, is now, and probably will long be, one of the chief stumbling-blocks both in the theory and in the practice of morals and education.”]

[2][“Whether... women” inserted in 3rd ed.]

[3][So since the 3rd ed. The original text ran: “The laws protect them: where laws do not reach, manners and opinion shield them.” The reference to police reports and atrocities later in the paragraph was introduced in the 3rd ed., and “the protection of the law” was expanded into the protection which the law “ought to give.”]

[1][The last clause inserted in 3rd ed. (1852).]

[1][This and the following sentence were inserted in the 6th ed. (1865).]

[1][Here was omitted from the 2nd ed. (1849) the following passage of the 1st (1848): “It is of little importance that some of them may, at a certain stage of their progress, adopt mistaken opinions. Communists are already numerous, and are likely to increase in number; but nothing tends more to the mental development of the working classes than that all the questions which Communism raises should be largely and freely discussed by them; nothing could be more instructive than that some should actually form communities, and try practically what it is to live without the institution of property.”]

[1][The original (1848) text ran: “that there should be no other carrière possible... is one of those social injustices which call loudest for remedy. Among the salutary consequences of correcting it, one of the most probable would be a great diminution,” &c.

In the 2nd ed. (1849) the following sentence was inserted after “remedy”: “The ramifications of this subject are far too numerous and intricate to be pursued here. The social and political equality of the sexes is not a question of economical detail, but one of principle, so intimately connected with all the more vital points of human improvement, that none of them can be thoroughly discussed independently of it. But for this very reason it cannot be disposed of by way of parenthesis, in a treatise devoted to other subjects. It is sufficient for the immediate purpose, to point out, among the probable consequences of the industrial and social independence of women, a great diminution,” &c.

This was replaced in the 3rd ed. (1852) by the present text, and a note attached: “It is truly disgraceful that in a woman's reign not one step has been made by law towards removing even the smallest portion of the existing injustice to women. The brutal part of the populace can still maltreat, not to say kill, their wives, with the next thing to impunity; and as to civil and social status, in framing a new reform bill for the extension of the elective franchise, the opportunity was not taken for so small a recognition of something like equality of rights, as would have been made by admitting to the suffrage women of the same class and the same householding and tax-paying qualifications as the men who already possess it.”

Further comments were added to the note in the 4th ed. (1857): “Mr. Fitzroy's Act for the Better Protection of Women and Children against Assaults, is a well-meant though inadequate attempt to wipe off the former reproach. The second is more flagrant than ever, another Reform Bill having been since presented, largely extending the franchise among many classes of men, but leaving all women in their existing state of political as well as social servitude.”

The whole note disappeared in the 5th ed. (1862).]

[1][At this point was omitted from the 3rd ed. (1852) the following passage of the original (1848) text: “To work at the bidding and for the profit of another, without any interest in the work—the price of their labour being adjusted by hostile competition, one side demanding as much and the other paying as little as possible—is not, even when wages are high, a satisfactory state to human beings of educated intelligence, who have ceased to think themselves naturally inferior to those whom they serve.”]

[1][The rest of the paragraph, with the exception of the two sentences indicated in the next note, replaced in the 3rd ed. (1852) the following single sentence of the original text: “But something else is required when wealth increases slowly, or has reached the stationary state, when positions, instead of being more mobile, would tend to be much more permanent than at present, and the condition of any portion of mankind could only be desirable, if made desirable from the first.”]

[2][This and the following sentence are an expansion in the 4th ed. (1857) of the clause in the 3rd: “while the return given in the shape of service is sought to be reduced to the lowest minimum.”]

[1][The remainder of this paragraph (subjected subsequently to verbal alterations) replaced in the 3rd ed. (1852) the following original (1848) text: “The problem is, to obtain the efficiency and economy of production on a large scale, without dividing the producers into two parties with hostile interests, employers and employed, the many who do the work being mere servants under the command of the one who supplies the funds, and having no interest of their own in the enterprise, except to fulfil their contract and earn their wages.”]

[1][3rd ed. (1852), “five”; 4th (1857), “ten”; 6th (1865), “twenty”; 7th (1871), “thirty.”]

[2][So since 5th ed. (1862). In the 3rd and 4th, “Unless the military despotism now triumphant on the Continent should succeed in its nefarious attempts to throw back the human mind.”]

[1][In 3rd ed.: “temporarily and in some cases..., in other cases and finally in all.” In 5th ed. (1862): “perhaps finally in all.” In 6th ed. (1865), “temporarily” omitted.]

[2][The following passage, inserted at this point in the 2nd ed. (1849) disappeared from the 3rd (1852).

“§ 5. It is this feeling, of the nature of the problem” (see supra, p. 761, n. 1), “almost as much as despair of the improvement of the condition of the labouring masses by other means, which has caused so great a multiplication of projects for the ‘organization of industry’ by the extension and development of the co-operative or joint stock principle: some of the more conspicuous of which have been described and characterized in an early chapter of this work. It is most desirable that all these schemes should have opportunity and encouragement to test their capabilities by actual experiment. There are, in almost all of them, many features, in themselves well worth submitting to that test; while, on the other hand, the exaggerated expectations entertained by large and growing multitudes in all the principal nations of the world, concerning what it is possible, in the present state of human improvement, to effect by such means, have no chance of being corrected except by a fair trial in practice. The French Revolution of February 1848, at first seemed to have opened a fair field for the trial of such experiments, on a perfectly safe scale, and with every advantage that could be derived from the countenance of a government which sincerely desired their success. It is much to be regretted that these prospects have been frustrated, and that the reaction of the middle class against anti-property doctrines has engendered for the present an unreasoning and undiscriminating antipathy to all ideas, however harmless or however just, which have the smallest savour of Socialism. This is a disposition of mind, of which the influential classes, both in France and elsewhere, will find it necessary to divest themselves. Socialism has now become irrevocably one of the leading elements in European politics. The questions raised by it will not be set at rest by merely refusing to listen to it; but only by a more and more complete realization of the ends which Socialism aims at, not neglecting its means so far as they can be employed with advantage.”]

[∗]This passage is from the Prize Essay on the Causes and Remedies of National Distress, by Mr. Samuel Laing. The extracts which it includes are from the Appendix to the Report of the Children's Employment Commission.

[∗]Economy of Machinery and Manufactures, 3rd edition, ch. 26.

[1][The long quotation from Babbage, which appeared in the 1st and 2nd eds. (1848, 1849), disappeared from the 3rd (1852): “I venture to quote the principal part of his observations on the subject.

‘The general principles on which the proposed system is founded, are—1st. That a considerable part of the wages received by each person employed, should depend on the profits made by the establishment; and 2nd. That every person connected with it should derive more advantage from applying any improvement he might discover, to the factory in which he is employed, than he could by any other course.

‘It would be difficult to prevail on the large capitalist to enter upon any system, which would change the division of the profits arising from the employment of his capital in setting skill and labour in action; any alteration, therefore, must be expected rather from the small capitalist, or from the higher class of workmen, who combine the two characters; and to these latter classes, whose welfare will be first affected, the change is most important. I shall therefore first point out the course to be pursued in making the experiment; and then, taking a particular branch of trade as an illustration, I shall examine the merits and defects of the proposed system as applied to it.

‘Let us suppose, in some large manufacturing town, ten or twelve of the most intelligent and skilful workmen to unite, whose characters for sobriety and steadiness are good, and are well known among their class. Such persons will each possess some small portion of capital; and let them join with one or two others who have raised themselves into the class of small master-manufacturers, and therefore possess rather a larger portion of capital. Let these persons, after well considering the subject, agree to establish a manufactory of fire-irons and fenders; and let us suppose that each of the ten workmen can command forty pounds, and each of the small capitalists possesses two hundred pounds: thus they have a capital of 800l. with which to commence business, and for the sake of simplifying, let us further suppose the labour of each of these twelve persons to be worth two pounds a week. One portion of their capital will be expended in procuring the tools necessary for their trade, which we shall take at 400l., and this must be considered as their fixed capital. The remaining 400l. must be employed as circulating capital, in purchasing the iron with which their articles are made, in paying the rent of their workshops, and in supporting themselves and their families until some portion of it is replaced by the sale of the goods produced.

‘Now the first question to be settled is, what proportion of the profit should be allowed for the use of capital, and what for skill and labour? It does not seem possible to decide this question by any abstract reasoning: if the capital supplied by each partner is equal, all difficulty will be removed; if otherwise, the proportion must be left to find its level, and will be discovered by experience; and it is probable that it will not fluctuate much. Suppose it to be agreed that the capital of 800l. shall receive the wages of one workman. At the end of each week, every workman is to receive one pound as wages, and one pound is to be divided amongst the owners of the capital. After a few weeks the returns will begin to come in; and they will soon become nearly uniform. Accurate accounts should be kept of every expense and of all the sales; and at the end of each week the profit should be divided. A certain portion should be laid aside as a reserved fund, another portion for repair of the tools, and the remainder being divided into thirteen parts, one of these parts would be divided amongst the capitalists and one belong to each workman. Thus each man would, in ordinary circumstances, make up his usual wages of two pounds weekly. If the factory went on prosperously, the wages of the men would increase; if the sales fell off, they would be diminished. It is important that every person employed in the establishment, whatever might be the amount paid for his services, whether he act as labourer or porter, or as the clerk who keeps the accounts, or as book-keeper employed for a few hours once a week to superintend them, should receive one-half of what his service is worth in fixed salary, the other part varying with the success of the undertaking.

‘The result of such arrangements in a factory would be,

  • ‘1. That every person engaged in it would have a direct interest in its prosperity; since the effect of any success, or falling off, would almost immediately produce a corresponding change in his own weekly receipts.
  • ‘2. Every person concerned in the factory would have an immediate interest in preventing any waste or mismanagement in all the departments.
  • ‘3. The talents of all connected with it would be strongly directed to improvement in every department.
  • ‘4. None but workmen of high character and qualifications could obtain admission into such establishments, because when any additional hands were required, it would be the common interest of all to admit only the most respectable and skilful, and it would be far less easy to impose upon a dozen workmen than upon the single proprietor of a factory.
  • ‘5. When any circumstance produced a glut in the market, more skill would be directed to diminishing the cost of production; and a portion of the time of the men might then be occupied in repairing and improving their tools, for which a reserved fund would pay, thus checking present, and at the same time facilitating future, production.
  • ‘6. Another advantage, of no small importance, would be the total removal of all real or imaginary causes for combinations. The workmen and the capitalist would so shade into each other—would so evidently have a common interest, and their difficulties and distresses would be mutually so well understood, that instead of combining to oppress one another, the only combination which could exist would be a most powerful union between both parties to overcome their common difficulties.

‘One of the difficulties attending such a system is, that capitalists would at first fear to embark in it, imagining that the workmen would receive too large a share of the profits: and it is quite true that the workmen would have a larger share than at present: but at the same time, it is presumed the effect of the whole system would be, that the total profits of the establishment being much increased, the smaller proportion allowed to capital under this system would yet be greater in actual amount, than that which results to it from the larger share in the system now existing.

‘A difficulty would occur also in discharging workmen who behaved ill, or who were not competent to their work; this would arise from their having a certain interest in the reserved fund, and perhaps from their possessing a certain portion of the capital employed; but without entering into detail, it may be observed, that such cases might be determined on by meetings of the whole establishment; and that if the policy of the laws favoured such establishments, it would scarcely be more difficult to enforce just regulations than it now is to enforce some which are unjust, by means of combinations either amongst the masters or the men.’”]

[1][In the original ed. (1849) this paragraph began thus: “In this imaginary case” described by Babbage, see supra, p. 766, n. 1, “it is supposed that each labourer brings some small portion of capital into the concern: but the principle is equally applicable to the ordinary case in which the whole capital belongs to an individual capitalist. An application of it to such a case is actually in progress by a Paris tradesman,” &c. The present text, but with “about ten years ago,” dates from the 3rd ed. (1852). The 4th, 5th, and 6th eds. (1857, 1862, 1865) have “about sixteen years ago”; the 7th (1871) “above thirty.”]

[∗]His establishment is 11, Rue Saint Georges.

[†][1849] It appears, however, that the workmen whom M. Leclaire had admitted to this participation of profits, were only a portion (rather less than half) of the whole number whom he employed. This is explained by another part of his system. M. Leclaire pays the full market rate of wages to all his workmen. The share of profit assigned to them is, therefore, a clear addition to the ordinary gains of their class, which he very laudably uses as an instrument of improvement, by making it the reward of desert, or the recompense for peculiar trust.

[‡]For September 27, 1845.

[1][Added in 2nd ed. (1849).]

[∗]Lettres sur l'Organisation du Travail, by Michel Chevalier, lettre xiv.

[2][The concluding sentence of this paragraph, together with the next paragraph and the examples quoted in the note, were added in the 5th ed. (1862).]

[†]Nouveau Traité d'Economie Politique.

[∗][1865] At the present time M. Leclaire's establishment is conducted on a somewhat altered system, though the principle of dividing the profits is maintained. There are now three partners in the concern: M. Leclaire himself, one other person (M. Defournaux), and a Provident Society (Société de Secours Mutuels), of which all persons in his employment are the members. (This Society owns an excellent library, and has scientific, technical, and other lectures regularly delivered to it.) Each of the three partners has 100,000 francs invested in the concern; M. Leclaire having advanced to the Provident Society as much as was necessary to supply the original insufficiency of their own funds. The partnership, on the part of the Society, is limited; on that of M. Leclaire and M. Defournaux, unlimited. These two receive 6000 francs (240l.) per annum each as wages of superintendence. Of the annual profits they receive half, though owning two-thirds of the capital. The remaining half belongs to the employés and workpeople; two-fifths of it being paid to the Provident Society, and the other three-fifths divided among the body. M. Leclaire, however, now reserves to himself the right of deciding who shall share in the distribution, and to what amount; only binding himself never to retain any part, but to bestow whatever has not been awarded to individuals, on the Provident Society. It is further provided that in case of the retirement of both the private partners, the goodwill and plant shall become, without payment, the property of the Society.

[†]“In March 1847, M. Paul Dupont, the head of a Paris printing-office, had the idea of taking his workmen into partnership by assigning to them a tenth of the profits. He habitually employs three hundred; two hundred of them on piece work, and a hundred by the day. He also employs a hundred extra hands, who are not included in the association. The portion of profit which falls to the workmen does not bring them in, on the average, more than the amount of a fortnight's wages; but they receive their ordinary pay according to the rates established in all the great Paris printing offices; and have, besides, the advantage of medical attendance in illness at the expense of the association, and a franc and a half per day while incapacitated for work. The workmen cannot draw out their share of profit except on quitting the association. It is left at interest (sometimes invested in the public funds), and forms an accumulating reserve of savings for its owners.

“M. Dupont and his partners find this association a source of great additional profit to them: the workmen, on their side, congratulate themselves daily on the happy idea of their employer. Several of them have by their exertions caused the establishment to gain a gold medal in 1849, and an honorary medal at the Universal Exhibition of 1855: some even have personally received the recompense of their inventions and of their labours. Under an ordinary employer, these excellent people would not have had leisure to prosecute their inventions, unless by leaving the whole honour to one who was not the author of them: but, associated as they were, if the employer had been unjust, two hundred men would have obliged him to repair the wrong.

“I have visited this establishment, and have been able to see for myself the improvement which the partnership produces in the habits of the workpeople.

“M. Gisquet, formerly Prefect of Police, has long been the proprietor of an oil manufactory at St. Denis, the most important one in France next to that of M. Darblay, of Corbeil. When in 1848 he took the personal management of it, he found workmen who got drunk several days in the week, and during their work sung, smoked, and sometimes quarrelled with one another. Many unsuccessful attempts had been made to alter this state of things: he accomplished it by forbidding his workmen to get drunk on working days, on pain of dismissal, and at the same time promising to share with them, by way of annual gratuity, five per cent of his net profits, in shares proportioned to wages, which are fixed at the current rates. From that time the reformation has been complete, and he is surrounded by a hundred workmen full of zeal and devotion. Their comforts have been increased by what they have ceased to spend in drink, and what they gain by their punctuality at work. The annual gratuity has amounted, on the average, to the equivalent of six weeks' wages.

“M. Beslay, a member of the Chamber of Deputies from 1830 to 1839, and afterwards of the Constituent Assembly, has founded an important manufactory of steam engines at Paris, in the Faubourg of the Temple. He has taken his workpeople into partnership ever since the beginning of 1847, and the contract of association is one of the most complete which have been made between employers and workpeople.”

The practical sagacity of Chinese emigrants long ago suggested to them, according to the report of a recent visitor to Manilla, a similar constitution of the relation between an employer and labourers. “In these Chinese shops” (at Manilla) “the owner usually engages all the activity of his countrymen employed by him in them, by giving each of them a share in the profits of the concern, or in fact by making them all small partners in the business, of which he of course takes care to retain the lion's share, so that while doing good for him by managing it well, they are also benefiting themselves. To such an extent is this principle carried that it is usual to give even their coolies a share in the profits of the business in lieu of fixed wages, and the plan appears to suit their temper well; for although they are in general most complete eye-servants when working for a fixed wage, they are found to be most industrious and useful ones when interested even for the smallest share.”—McMicking's Recollections of Manilla and the Philippines during 1848, 1849, and 1850, p. 24.

[1][This paragraph was added in the 6th ed. (1865); and it was said that Messrs. Briggs “have issued a proposal to work”; changed to “They now work” &c., in the 7th ed. (1871).]

[1][For the abandonment of the Briggs experiment in 1875 see Schloss, Methods of Industrial Remuneration (2nd ed.), p. 282.]

[2][The opening paragraphs of this section and the account of French cooperative societies which follows were added in the 3rd ed. (1852). At the same time the following paragraph and section of the original (1848) text were removed:

“Under this system,” of M. Leclaire, “as well as under that recommended by Mr. Babbage, the labourers are, in reality, taken into partnership with their employer. Bringing nothing into the common concern but their labour, while he brings not only his labour of direction and superintendence but his capital also, they have justly a smaller share of the profits; this, however, is a matter of private arrangement in all partnerships; one partner has a large, another a small share, according to their agreement, grounded on the equivalent which is given by each. The essence, however, of a partnership is obtained, since each benefits by all things that are beneficial to the concern, and loses by all which are injurious. It is, in the fullest sense, the common concern of all.

“§ 6. To this principle, in whatever form embodied, it seems to me that futurity has to look for obtaining the benefits of co-operation, without constituting the numerical majority of the co-operators an inferior caste. The objections that apply to a ‘co-operative society,’ in the Communist or Owenite sense, in which, by force of giving to every member of the body a share in the common interest, no one has a greater share in it than another, are not applicable to what is now suggested. It is expedient that those, whose performance of the part assigned to them is the most essential to the common end, should have a greater amount of personal interest in the issue of the enterprise. If those who supply the funds, and incur the whole risk of the undertaking, obtained no greater reward or more influential voice than the rest, few would practise the abstinence through which those funds are acquired and kept in existence. Up to a certain point, however, the principle of giving to every person concerned an interest in the profits is an actual benefit to the capitalist, not only (as M. Leclaire has testified) in point of ease and comfort, but even in pecuniary advantage. And after the point of greatest benefit to the employers has been attained, the participation of the labourers may be carried somewhat further without any material abatement from that maximum of benefit. At what point, in each employment of capital, this ultimatum is to be found, will one day be known and understood from experience; and up to that point it is not unreasonable to expect that the partnership principle will be, at no very distant time, extended.

“The value of this ‘organization of industry,’ for healing the widening and embittering feud between the class of labourers and the class of capitalists, must, I think, impress itself by degrees on all who habitually reflect on the condition and tendencies of modern society. I cannot conceive how any such person can persuade himself that the majority of the community will for ever, or even for much longer, consent to hew wood and draw water all their lives in the service and for the benefit of others; or can doubt, that they will be less and less willing to co-operate as subordinate agents in any work, when they have no interest in the result, and that it will be more and more difficult to obtain the best work-people, or the best services of any work-people, except on conditions similar in principle to those of M. Leclaire. Although, therefore, arrangements of this sort are now in their infancy, their multiplication and growth, when once they enter into the general domain of popular discussion, are among the things which may most confidently be expected.”]

[1][So since 4th ed. (1857). Originally, in 3rd ed. (1852), “a few months ago.”]

[2][“Strengthened” &c., added in 5th ed. (1862).]

[∗]P. 112.

[∗]Pp. 113–6.

[‡]Article by M. Cherbuliez on “Operative Associations,” in the Journal des Economistes for November 1860.

I subjoin, from M. Villiaumé and M. Cherbuliez, detailed particulars of other eminently successful experiments by associated workpeople.

“We will first cite,” says M. Cherbuliez, “as having attained its object and arrived at a definitive result, the Association Remquet, of the Rue Garancière, at Paris, whose founder, in 1848, was a foreman in M. Renouard's printing establishment. That firm being under the necessity of winding up, he proposed to his fellow-workmen to join with him in continuing the enterprise on their own account, asking a subvention from the government to cover the purchase-money of the business and the first expenses. Fifteen of them accepted the proposal, and formed an association, whose statutes fixed the wages for every kind of work, and provided for the gradual formation of a working capital by a deduction of 25 per cent from all wages and salaries, on which deduction no dividend or interest was to be allowed during the ten years that the association was intended to last. Remquet asked and obtained for himself the entire direction of the enterprise, at a very moderate fixed salary. At the winding up, the entire profits were to be divided among all the members, proportionally to their share in the capital, that is, to the work they had done. A subvention of 80,000 francs was granted by the State, not without great difficulty, and on very onerous conditions. In spite of these conditions, and of the unfavourable circumstances resulting from the political situation of the country, the association prospered so well, that on the winding up, after repaying the advance made by the State, it was in possession of a clear capital of 155,000 francs [6200l.], the division of which gave on the average between ten and eleven thousand francs to each partner; 7000 being the smallest and 18,000 the largest share.

“The Fraternal Association of Working Tinmen and Lampmakers had been founded in March 1848 by 500 operatives, comprising nearly the whole body of the trade. This first attempt, inspired by unpractical ideas, not having survived the fatal days of June, a new association was formed of more modest proportions. Originally composed of forty members, it commenced business in 1849 with a capital composed of the subscriptions of its members, without asking for a subvention. After various vicissitudes, which reduced the number of partners to three, then brought it back to fourteen, then again sunk it to three, it ended by keeping together forty-six members, who quietly remodelled their statutes in the points which experience had shown to be faulty, and their number having been raised by successive steps to 100, they possessed, in 1858, a joint property of 50,000 francs, and were in a condition to divide annually 20,000 francs.

“The Association of Operative Jewellers, the oldest of all, had been founded in 1831 by eight workmen, with a capital of 200 francs [8l.] derived from their united savings. A subvention of 24,000 francs enabled them in 1849 greatly to extend their operations, which in 1858 had already attained the value of 140,000 francs, and gave to each partner an annual dividend equal to double his wages.”

The following are from M. Villiaumé:—

“After the insurrection of June 1848, work was suspended in the Faubourg St. Antoine, which, as we know, is principally occupied by furniture-makers. Some operative arm-chair makers made an appeal to those who might be willing to combine with them. Out of six or seven hundred composing the trade, four hundred gave in their names. But capital being wanting, nine of the most zealous began the association with all that they possessed; being a value of 369 francs in tools, and 135 francs 20 centimes in money.

“Their good taste, honesty, and punctuality having increased their business, they soon numbered 108 members. They received from the State an advance of 25,000 francs, reimbursable in 14 years by way of annuity, with interest at 3¾ per cent.

“In 1857 the number of partners is 65, the auxiliaries average 100. All the partners vote at the election of a council of eight members, and a manager whose name represents the firm. The distribution and superintendence of all the works is entrusted to foremen chosen by the manager and council. There is a foreman to every 20 or 25 workmen.

“The payment is by the piece, at rates determined in general assembly. The earnings vary from 3 to 7 francs a day, according to zeal and ability. The average is 50 francs [2l.] a fortnight, and no one gains much less than 40 francs per fortnight, while many earn 80. Some of the carvers and moulders make as much as 100 francs, being 200 francs [8l.] a month. Each binds himself to work 120 hours per fortnight, equal to ten per day. By the regulations, every hour short of the number subjects the delinquent to a penalty of 10 centimes [one penny] per hour up to thirty hours, and 15 centimes [1½d.] beyond. The object of this rule was to abolish Saint Monday, and it succeeded in its effort. For the last two years the conduct of the members has been so good, that fines have fallen into disuse.

“Though the partners started with only 359 francs, the value of the plant (Rue de Chavonne, Cour St. Joseph, Faubourg St. Antoine) already in 1851 amounted to 5713 francs, and the assets of the association, debts due to them included, to 24,000 francs. Since then the association has become still more flourishing, having resisted all the attempts made to impede its progress. It does the largest business, and is the most considered, of all the houses in Paris in the trade. Its business amounts to 400,000 francs a year.” Its inventory in December 1855 showed, according to M. Villiaumé, a balance of 100,398 francs 90 centimes in favour of the association, but it possessed, he says, in reality, 123,000 francs.

But the most important association of all is that of the Masons. “The Association of Masons was founded August 10th, 1848. Its address is Rue St. Victor, 155. Its number of members is 85, and its auxiliaries from three to four hundred. There are two managers, one for the building department, the other for the pecuniary administration: these are regarded as the ablest master-masons in Paris, and are content with a moderate salary. This association has lately constructed three or four of the most remarkable mansions in the metropolis. Though it does its work more economically than ordinary contractors, yet as it has to give long credits, it is called upon for considerable advances: it prospers, however, as is proved by the dividend of 56 per cent which has been paid this year on its capital, including in the payment those who have associated themselves in its operations. It consists of workmen who bring only their labour, of others who bring their labour and a capital of some sort, and of a third class who do not work, but contribute capital only.

“The masons, in the evening, carry on mutual instruction. They, as well as the arm-chair makers, give medical attendance at the expense of the association, and an allowance to its sick members. They extend their protection over every member in every action of his life. The arm-chair makers will soon each possess a capital of two or three thousand francs, with which to portion their daughters or commence a reserve for future years. Of the masons, some have already 4000 francs, which are left in the common stock.

“Before they were associated, these workmen were poorly clad in jackets and blouses; because, for want of forethought, and still more from want of work, they had never 60 francs beforehand to buy an overcoat. Most of them are now as well dressed as shopkeepers, and sometimes more tastefully. For the workman, having always a credit with the association, can get whatever he wants by signing an order; and the association reimburses itself by fortnightly stoppages,making him save as it were in spite of himself. Some workmen who are not in debt to the concern, sign orders payable to themselves at five months date, to resist the temptation of needless expense. They are put under stoppages of 10 francs per fortnight, and thus at the end of five months they have saved the amount.”

The following table, taken by M. Cherbuliez from a work (Die gewerblichen und wirthschaftlichen Genossenschaften der arbeitenden Classen in England, Frankreich und Deutschland), published at Tübingen in 1860, by Professor Huber (one of the most ardent and high-principled apostles of this kind of cooperation) shows the rapidly progressive growth in prosperity of the Masons' Association up to 1858:—

YearAmount of
business done.
francs.		Profits
realized.
francs.
1852 . . . . . .45,530 . .1,000
1853 . . . . . .297,208 . .7,000
1854 . . . . . .344,240 . .20,000
1855 . . . . . .614,694 . .46,000
1856 . . . . . .998,240 . .80,000
1857 . . . . . .1,330,000 . .100,000
1858 . . . . . .1,231,461 . .130,000

“Of this last dividend,” says M. Cherbuliez, “30,000 francs were taken for the reserve fund, and the remaining 100,000, divided among the shareholders, gave to each from 500 to 1500 francs, besides their wages or salaries, and their share in the fixed capital of the concern.”

Of the management of the associations generally, M. Villaumé says, “I have been able to satisfy myself personally of the ability of the managers and councils of the operative associations. The managers are far superior in intelligence, in zeal, and even in politeness, to most of the private masters in their respective trades. And among the associated workmen, the fatal habit of intemperance is gradually disappearing, along with the coarseness and rudeness which are the consequence of the too imperfect education of the class.”

[∗]Even the association founded by M. Louis Blane, that of the tailors of Clichy, after eighteen months' trial of this system, adopted piece-work. One of the reasons given by them for abandoning the original system is well worth extracting. “Besides the vices I have mentioned, the tailors complained that it caused incessant disputes and quarrels, through the interest which each had in making his neighbours work. Their mutual watchfulness degenerated into a real slavery; nobody had the free control of his time and his actions. These dissensions have disappeared since piece-work was introduced.”—Feugueray, p. 88. One of the most discreditable indications of a low moral condition given of late by part of the English working classes, is the opposition to piece-work. When the payment per piece is not sufficiently high, that is a just ground of objection. But dislike to piece-work in itself, except under mistaken notions, must be dislike to justice and fairness; a desire to cheat, by not giving work in proportion to pay. Piece-work is the perfection of contract; and contract, in all work, and in the most minute detail—the principle of so much pay for so much service, carried out to the utmost extremity—is the system, of all others, in the present state of society and degree of civilization, most favourable to the worker; though most unfavourable to the non-worker who wishes to be paid for being idle.

[1][This paragraph dates from the 5th ed. (1862), and replaced the following passages of the 3rd (1852): “It is painful to think that these bodies, formed by the heroism and maintained by the public spirit and good sense of the working people of Paris, are in danger of being involved in the same ruin with everything free, popular, or tending to improvement in French institutions. The unprincipled adventurer who has for the present succeeded in reducing France to the political condition of Russia, knows that two or three persons cannot meet together to discuss, though it be only the affairs of a workshop, without danger to his power. He has therefore already suppressed most of the provincial associations, and many of those of Paris, and the remainder, instead of waiting to be dissolved by despotism, are, it is said, preparing to emigrate. Before this calamity overtook France, the associations could be spoken of not with the hope merely, but with positive evidence, of their being able to compete successfully with individual capitalists. ‘The associations,’ says M. Feugueray,” &c., as in the present text, supra, p. 781.

“Though the existing associations may be dissolved, or driven to expatriaté, their experience will not be lost. They have existed long enough to furnish the type of future improvement: they have exemplified the process for bringing about a change in society, which would combine the freedom and independence of the individual,” &c., as in the present text, infra, p. 791.

To the 4th ed. (1857) was added this note: “It appears however from subsequent accounts that in 1854 twenty-five associations still existed in Paris and several in the provinces, and that many of these were in a most flourishing condition. This number is exclusive of Co-operative Stores, which have greatly multiplied, especially in the South of France, and are not understood to be discouraged by the Government.”]

[∗][1865] In the last few years the co-operative movement among the French working classes has taken a fresh start. An interesting account of the Provision Association (Association Alimentaire) of Grenoble has been given in a pamphlet by M. Casimir Périer (Les Sociétés de Co-opération); and in the Times of November 24, 1864, we read the following passage:—“While a certain number of operatives stand out for more wages, or fewer hours of labour, others, who have also seceded, have associated for the purpose of carrying on their respective trades on their own account, and have collected funds for the purchase of instruments of labour. They have founded a society, ‘Société Générale d'Approvisionnement et de Consommation.’ It numbers between 300 and 400 members, who have already opened a ‘co-operative store’ at Passy, which is now within the limits of Paris. They calculate that by May next, fifteen new self-supporting associations of the same kind will be ready to commence operations; so that the number will be for Paris alone from 50 to 60.”

[1][This paragraph and the subsequent account of the Rochdale Pioneers date from the 5th ed. (1862), though the reference to the Zürich society and to Mr. Plummer in the footnote were added in the 6th ed. (1865). From the 4th (1857) disappeared the following footnote:

“Though this beneficent movement has been so seriously checked in the country in which it originated, it is rapidly spreading in those other countries which have acquired, and still retain, any political freedom. It forms already an important feature in the social improvement which is proceeding at a most rapid pace in Piedmont. In England also, under the impulse given by the writings and personal exertions of a band of friends, chiefly clergymen and barristers, the movement has made some progress. On the 15th of February, 1856, there had been registered under the Industrial and Provident Societies' Act, thirty-three associations, seventeen of which were industrial societies, the remainder being associations for co-operative consumption only: without reckoning Scotland, where, also, these associations were rapidly spreading. It is believed that all such societies are now registered under the Limited Liabilities Act. From later information it appears that the productive associations (excluding the flour mills, which partake more of the nature of stores) have fallen off in number since their first start; and their progress, in the present moral condition of the bulk of the population, cannot possibly be rapid. But those which subsist, continue to do as much business as they ever did: and there are in the North of England instances of brilliant and steadily progressive success. Co-operative stores are increasing both in number and prosperity, especially in the North; and they are the best preparation for a wider application of the principle.”]

[∗]Self-help by the People—History of Co-operation in Rochdale. An instructive account of this and other co-operative associations has also been written in the Companion to the Almanack for 1862, by Mr. John Plummer, of Kettering; himself one of the most inspiring examples of mental cultivation and high principle in a self-instructed working man.

[∗]“But it is not,” adds Mr. Holyoake, “the brilliancy of commercial activity in which either writer or reader will take the deepest interest; it is in the new and improved spirit animating this intercourse of trade. Buyer and seller meet as friends; there is no overreaching on one side, and no suspicion on the other.... These crowds of humble working men, who never knew before when they put good food in their mouths, whose every dinner was adulterated, whose shoes let in the water a month too soon, whose waistcoats shone with devil's dust, and whose wives wore calico that would not wash, now buy in the markets like millionaires, and as far as pureness of food goes, live like lords.” Far better, probably, in that particular; for assuredly lords are not the customers least cheated in the present race of dishonest competition. “They are weaving their own stuffs, making their own shoes, sewing their own garments, and grinding their own corn. They buy the purest sugar and the best tea, and grind their own coffee. They slaughter their own cattle, and the finest beasts of the land waddle down the streets of Rochdale for the consumption of flannel weavers and cobblers. (Last year the Society advertised for a Provision Agent to make purchases in Ireland, and to devote his whole time to that duty.) When did competition give poor men these advantages? And will any man say that the moral character of these people is not improved under these influences? The teetotallers of Rochdale acknowledge that the Store has made more sober men since it commenced than all their efforts have been able to make in the same time. Husbands who never knew what it was to be out of debt, and poor wives who during forty years never had sixpence uncondemned in their pockets, now possess little stores of money sufficient to build them cottages, and go every week into their own market with money jingling in their pockets; and in that market there is no distrust and no deception; there is no adulteration, and no second prices. The whole atmosphere is honest. Those who serve neither hurry, finesse, nor flatter. They have no interest in chicanery. They have but one duty to perform—that of giving fair measure, full weight, and a pure article. In other parts of the town, where competition is the principle of trade, all the preaching in Rochdale cannot produce moral effects like these.

“As the Store has made no debts, it has incurred no losses; and during thirteen years' transactions, and receipts amounting to 303,852l., it has had no law-suits. The Arbitrators of the Societies, during all their years of office, have never had a case to decide, and are discontented that nobody quarrels.”

[1][This paragraph added in 6th ed. (1865).]

[2][This paragraph is from the 5th ed. (1862), and so is the explanation, in the next paragraph but one, of the increase in the productiveness of industry. The argument as to the limitation of the number of distributors was inserted in the 6th ed. (1865).]

[1][The present text from this point to the point indicated in the next paragraph but two dates from the 6th ed. (1865).]

[1][The rest of this paragraph dates from the 3rd ed. (1852).]

[∗][1865] In this respect also the Rochdale Society has given an example of reason and justice, worthy of the good sense and good feeling manifested in their general proceedings. “The Rochdale Store,” says Mr. Holyoake, “renders incidental but valuable aid towards realizing the civil independence of women. Women may be members of this Store, and vote in its proceedings. Single and married women join. Many married women become members because their husbands will not take the trouble, and others join it in self-defence to prevent the husband from spending their money in drink. The husband cannot withdraw the savings at the Store standing in the wife's name unless she signs the order.”

[1][This section added in 3rd ed. (1852).]

[∗]P. 90.

[1][“Of their class” was inserted in 4th ed. (1857); and the words of the 3rd ed. (1852), “so unjustly and illiberally railed at—as if they were one iota worse in their motives or practices than other people, in the existing state of society,—” were omitted.]

[1][See Appendix DD. The Subsequent History of Co-operation.]