Front Page Titles (by Subject) 2: Labour Legislation - Socialism: An Economic and Sociological Analysis
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2: Labour Legislation - Ludwig von Mises, Socialism: An Economic and Sociological Analysis 
Socialism: An Economic and Sociological Analysis, trans. J. Kahane, Foreword by F.A. Hayek (Indianapolis: Liberty Fund, 1981).
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Amongst the means destructionist policy has employed, the legal protection of labour is, in its direct effects, the most harmless. Yet this aspect of social policy is specially important as an outcome of destructionist thought.
The advocates of the protection of labour like to consider the problem as analogous to the situation which led to the measures taken in the eighteenth and the first half of the nineteenth century to protect tied labourers under the manorial system. Just as at that time the peasant’s labour obligations were continually reduced by State intervention in an attempt to free the serf step by step, so labour legislation at the present day is supposed to be no more than the attempt to raise the modern proletarian from wage slavery to an existence worthy of a human being. But this comparison is quite invalid. The restriction of the labour duties of the serf did not diminish, but rather increased the amount of work done in the country. Forced labour, poor in quality and in quantity, was reduced so that the peasant would be free to improve his own bit of land or work for hire. Most of the measures taken in favour of the unfree peasant aimed, on the one hand, at increasing the intensity of agricultural work, and, on the other, at freeing labour power for industrial production. When the peasant-policy finally abolished the forced labour of agricultural workers it did not abolish work but increased its opportunities. The effect is quite different when modern social policy “regulates” working time by restricting the working day to ten, nine, and eight hours a day, or, as in various categories of public officials, to six hours or even less. For this reduces the amount of work done and thus the yield of production.
The effect of such measures for the limitation of labour have been too obvious to be overlooked. This is why all efforts to extend the legal protection of labour in calling for a radical reconstruction of conditions of work have encountered strong resistance. Etatist writers generally talk as though the general shortening of working time, the gradual elimination of women’s and children’s labour, and the limitation of night work were to be ascribed exclusively to legislative intervention and the activity of trade unions.7 This attitude shows that they are still influenced by the views on the character of industrial wage labour held in circles unsympathetic to modern capitalist industry. According to these views factory industry has a peculiar aversion to using fully trained labour. It is supposed to prefer the unskilled labourer, the weak woman, and the frail child to the all-round trained expert. For on the one hand it wishes to produce only inferior mass commodities, in the manufacture of which it has no use for the skilled employee; on the other, the simplicity of the movements involved in mechanical production enables industry to employ the undeveloped and the physically weak. As the factories are supposed to be profitable only if they under-pay the workers, it is natural that they should employ unskilled workers, women, and children and try to extend the working day as much as possible. It is supposed that this view can be substantiated by referring to the evolution of large scale industry. But in its beginnings large scale industry had to be content with such labour because at that time it could only employ labour outside the guild organization of handicrafts. It had to take the untrained women and children because they were the only ones available, and was forced to arrange its processes so as to manage with inferior labour. Wages paid in the factories were lower than the earnings of handicraft workers because the labour yield was lower. For the same reason the working-day was longer than in the handicrafts. Only when in time these conditions changed, could large scale industry change the conditions of its labour. The factory had no other alternative than to employ women and children in the beginning, fully trained workers not being available; but when, by competition, it had vanquished the older labour systems and had attracted to itself all the workers there employed, it altered its processes so that skilled male workers became the main labour factor and women and children were forced more and more out of industry. Wages rose, because the production of the efficient worker was higher than the production of the factory girl or child. The worker’s family found that the wife and children did not need to earn. Working hours lessened because the more intensive labour of the efficient worker made possible a better exploitation of the machinery than could be achived with the sluggish and unskilled work of inferior labour.8
The shorter working day and the limitation of woman and child labour, in so far as these improvements were in operation in Germany about the outbreak of the War, were by no means a victory won by the champions of the legal protection of labour from selfish entrepreneurs. They were the result of an evolution in large scale industry which, being no longer compelled to seek its workers on the fringe of economic life, had to transform its working conditions to suit the better quality of labour. On the whole, legislation has only anticipated changes which were maturing, or simply sanctioned those that had already taken place. Certainly it has always tried to go further than the development of industry allowed, but it has not been able to maintain the struggle. It has been obstructed, not so much by the resistance of entrepreneurs, as by the resistance of the workers themselves, a resistance not the less effective for being unvocal and little advertised. For the workers themselves had to pay for every protective regulation, directly as well as indirectly. A restriction on female and child labour burdened the workers’ budget just as much as a limitation of employment in adult labour. The reduction in the supply of labour achieved by such measures does indeed raise the marginal productivity of labour and thus the wage rate corresponding to one unit of production. Whether this rise is sufficient to compensate the worker for the burden of rising commodity prices is questionable. One would have to examine the data of each individual example before forming any conclusions about this. It is probable that the decline of production cannot bring an absolute rise of real income to the worker. But we need not go into this in detail. For one could only speak of a considerable reduction in the supply of labour, brought about by labour laws, if these laws were valid beyond a single country. As long as this was not so, as long as every state proceeded on its own lines, and those countries, whose recently developed industry took every opportunity to supplant the industry of the older industrial states, were backward in promulgating labour-protection, then the worker’s position in the market could not be improved by labour protection. Efforts to generalize labour protection by international treaties were intended to remedy this. But of international labour protection, even more truly than of the national movement, one may say that the process has not gone beyond the stage which would have been reached in the normal evolution of industry.
This attitude of destructionism emerges more clearly from the theory than from the execution of labour protection, for the danger to industrial development implied in the regulations has to a certain extent limited attempts to carry theory into practice. That the theory of the exploitation of wage earners has spread and been so rapidly accepted is due above all to destructionism, which has not hesitated to use a technique for describing industrial working conditions which can only be called emotional. The popular figures, the hard-hearted entrepreneur and the grasping capitalist on the one side, and the noble poor, the exploited worker on the other side, have, so to speak, been introduced into the presuppositions of the legal system. Legislators have been taught to see in every frustration of the plans of an entrepreneur a victory of public welfare over the selfish interests of parasitic individuals. The worker has been taught to believe that he is toiling thanklessly for the profit of capital, and that it is his duty to his class and to history to perform his work as sluggishly as possible.
The theory of wages assumed by the advocates of legal labour protection has many defects. They treat Senior’s arguments against the legal regulation of working hours with contempt, but they produce nothing relevant in refutation of the conclusions he reaches on the assumption of stationary conditions. The inability of the “Socialists of the Chair” (“Kathedersozialist”) school to understand economic problems is particularly evident in Brentano. The idea that wages correspond to the efficiency of labour is so far beyond his comprehension that he actually formulates a “law” that a high wage increases the product of labour, whilst a low wage reduces it, although nothing could be more clear than the fact that good work is paid for at a higher rate than bad.9 This mistake is again obvious when he goes on to say that the shortening of working hours is a cause and not a result of greater efficiency of labour.
Marx and Engels, the fathers of German Socialism, well understood how fundamentally important to the spread of destructionist ideas was the fight for labour legislation. The “Inaugural Address of the International Association of Workers” says that the English ten-hour day was “not only a great practical success; it was the victory of a principle. For the first time the political economy of the bourgeoisie was openly vanquished by the political economy of the working class.”10 Over twenty years before, Engels had made an even more candid admission of the destructionist nature of the Ten Hour Day Bill. He could not help admitting that the counter-arguments of the entrepreneurs were half true. The Bill would, he thought, depress wages and make English industry unable to compete. But this did not alarm him. “Naturally,” he added, “were the Ten Hour Day Bill a final measure, England would be ruined, but because it necessarily involves the passing of subsequent measures, which must lead England into a path quite different from that she has travelled up till now, it will mean progress.”11 If English industry were to succumb to foreign competition the revolution would be unavoidable.12 In a later essay he said of the Ten Hour Day Bill: “It is no longer an isolated attempt to lame industrial development. It is one link in a long chain of measures which will transform the whole present form of society and gradually destroy the former class conflicts. It is not a reactionary but a revolutionary measure.”13
The fundamental importance of the fight for labour legislation cannot be overestimated. But Marx and Engels and their liberal opponents both over-estimated the immediate destructive effects of the particular measures. Destructionism advanced on other fronts.
[7. ]See the criticism of this legend by Hutt, Economica, Vol. VI, pp. 92 ff.
[8. ]This even Brentano has to admit, who otherwise boundlessly overvalues the effects of labour legislation. “The imperfect machine had replaced the family father with child labour ... the perfected machine makes the father again the nourisher of family and gives the child back to the school ... Grown-up workers are now needed again and only those can be used who, by their higher standard of living, are equal to the heightened claims of the machines.” Brentano, Über das Verkältnis von Arbeitslohn und Arbeitszeit zur Arbeitsleistung, 2nd ed. (Leipzig, 1893), p. 43.
[9. ]Brentano, Über das Verhältnis von Arbeitslohn und Arbeitszeit zur Arbeitsleistung, pp. 11, 23 ff.; Brentano, Arbeitszeit und Arbeitslohn nach dem Kriege (Jena, 1919), p. 10; Stucken, “Theorie der Lohnsteigerung” (Schmollers Jahrbuch, 45th year, pp. 1152 ff.).
[10. ]Die Inauguraladresse der Internationalen Arbeiterassoziation, ed. Kautsky (Stuttgart, 1922), p. 27.
[11. ]Engels, Die Lage der arbeitenden Klasse in England, 2nd ed. (Stuttgart, 1892), p. 178. Publisher’s Note: In English, The Condition of the Working Class in England in 1844, with a Preface written in 1892 (London, George Allen & Unwin, Ltd., 1892), p. 177.
[12. ]Ibid., p. 297. Publisher’s Note: In English edition, p. 295.
[13. ]Engels, “Die englische Zehnstundenbill” in Aus dem literarischen Nachlass von Karl Marx, Friedrich Engels und Ferdinand Lassalle, Vol. III (Stuttgart, 1902), p. 393.