The Online Library of Liberty

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• Introduction to the Liberty Fund Edition
• Editor’s Note
• Preface to the First Edition
• Preface to the Second Edition
• Lecture I: The Relation Between Law and Public Opinion
• Lecture II: Characteristics of Law-making Opinion In England
• Lecture III: Democracy and Legislation
• Lecture IV: The Three Main Currents of Public Opinion
• I.: The Period of Old Toryism Or Legislative Quiescence (1800–1830) 1
• II.: The Period of Benthamism Or Individualism (1825–1870) 3
• III.: Period of Collectivism (1865–1900) 5
• Lecture V: The Period of Old Toryism Or Legislative Quiescence (1800–1830)
• (a): State of Opinion (1760–1830)
• (b): Absence of Changes In the Law
• (c): Why Considerable Changes Took Place During the Period of Quiescence
• (d): Close of the Period of Quiescence
• Lecture VI: The Period of Benthamism Or Individualism 1
• (a): Benthamite Ideas As to the Reform of the Law
• (b): the Acceptance of Benthamism
• (c): the Trend and Tendency of Benthamite Legislation
• Lecture VII: The Growth of Collectivism
• Tory Philanthropy and the Factory Movement
• Changed Attitude of the Working Classes
• Modification In Economic and Social Beliefs
• Characteristics of Modern Commerce
• Introduction of Household Suffrage, 1868–1884
• Lecture VIII: The Period of Collectivism
• (a): Principles of Collectivism
• (b): Trend of Collectivist Legislation
• Lecture IX: The Debt of Collectivism to Benthamism
• Lecture X: Counter-currents and Cross-currents of Legislative Opinion
• A.: the Course of Legislative Opinion
• B.: the Actual Course of Ecclesiastical Legislation
• Lecture XI: Judicial Legislation
• I.: The Special Characteristics of Judicial Legislation In Relation to Public Opinion
• II.: The Effect of Judge-made Law On Parliamentary Legislation
• Lecture XII: Relation Between Legislative Opinion and General Public Opinion
• I.: As to Analogous Changes of Opinion In Different Spheres and Also In the Lives of Individuals.
• II.: As to the Dependence of Legislative Opinion On the General Tendencies of English Thought.
• Appendix
• Note I.: The Right of Association
• Note II.: The Ecclesiastical Commission
• Note III.: University Tests
• Note IV.: Judge-made Law
• Note V.: Proposed Collectivist Legislation of 1905 *
• Introduction to the Second Edition

Characteristics of Modern Commerce

The extension of trade and commerce is bound up with faith in unlimited competition, but it has, nevertheless, since the middle of the nineteenth century, shaken that confidence in the omnipotence of individual effort and self-help which was the very essence of the liberalism that ruled England during the existence of the middle class Parliament created by the first Reform Act. For combination has gradually become the soul of modern commercial systems. One trade after another has passed from the management of private persons into the hands of corporate bodies created by the State. This revolution may be traced in every volume of the statute-book which has appeared during the last seventy years or more, and especially in the long line of Railway Companies Acts passed since 1823,40 and in the Joint Stock Companies Acts passed from 1856 to 1862. This legislation was favoured and promoted by Liberals,41 but the revolution of which it is the sign has nevertheless tended to diminish, in appearance at least, the importance of individual action, and has given room, and supplied arguments for State intervention in matters of business with which in England the State used to have little or no concern. What, too, is of primary importance, this revolution has accustomed the public to constant interference, for the real or supposed benefit of the country, with the property rights of private persons. The truth of these statements may be shown by a comparison between the position of a coach-owner in 1830 as a carrier of passengers and goods, with the position in 1905 of our great modern carrier, a railway company. The coach-owner set up his business at his own will and carried it on, broadly speaking,42 on his own terms; he possessed no legal monopoly, he asked for no legal privileges; he needed no Act of Parliament which should authorise him to take the property of others on terms of compulsory purchase, or generally to interfere with the property rights of his neighbours. If his concern prospered his success was attributable to his own resources and sagacity, and enforced the homely lesson that wealth is the reward of a man’s own talent and energy. There was nothing in the business of a coach-owner which even suggested the expediency of the Government undertaking the duties of carriers. A railway company, on the other hand, is the creature of the State. It owes its existence to an Act of Parliament. It carries on business on terms more or less prescribed by Parliament. It could not in practice lay down a mile of its railway, unless it were empowered to interfere with the property right of others, and above all, to take from landowners, under a system of compulsory purchase, land which the owners may deem worth much more than the price which they are compelled to take, or which they may be unwilling to sell at any price whatever. The success of a railway company is the triumph, not of individual, but of corporate energy, and directs popular attention to the advantages of collective rather than of individual action. The fact, moreover, that a business such as that of a railway company, the due transaction whereof is of the highest importance to the nation, must under the conditions of modern life be managed by a large corporation, affords an argument43 —as to the force whereof there may be a wide difference of opinion—in favour of the control or even the management of railways by the State.

But the line of reasoning which may be urged in favour of the State management of railways applies to many other concerns,44 for a railway company is after all only one among many corporations which carry on business, and business in which the nation has a vital interest, in virtue of powers and privileges conferred upon them by Act of Parliament.

The modern development then of corporate trade has in more ways than one fostered the growth of collectivist ideas. It has lessened the importance of the individual trader. It has transformed the abstract principle that all property, and especially property in land, belongs in a sense to the nation, into a practical maxim on which Parliament acts every year with the approval of the country. It constantly suggests the conclusion that every large business may become a monopoly, and that trades which are monopolies may wisely be brought under the management of the State. The characteristics of modern commerce, looked at from this point of view, make for socialism.

[40. ]The year in which was passed the Act under which was constructed the Stockton and Darlington Railway. See Annual Register, 1823, p. 241.

[41. ]Here, as in other cases, a law favouring the power of combination has of necessity a twofold, and in a certain sense a contradictory effect. The Companies Acts, introducing the principle of partnerships with limited liability, create an extension of individual freedom. But the same Acts, in so far as they transfer the management of business from the hands of private persons into the hands of corporate bodies, substitute combined for individual action.

[42. ]See for a carrier’s common law liability, Leake, Contracts, 4th ed. p. 132, and for its modification by statute, the Carriers Act, 1830, 11 Geo. IV. & 1 Will. IV. c. 68.

[43. ]“Whatever,” writes Mill, “if left to spontaneous agency, can only be done by joint-stock associations, will often be as well, and sometimes better done, as far as the actual work is concerned, by the State. Government management is, indeed, proverbially jobbing, careless, and ineffective, but so likewise has generally been joint-stock management. . . . The defects . . . of government management do not seem to be necessarily much greater, if greater at all, than those of management by joint stock.”—Mill, Political Economy, ch. xi. s. xi. p. 580.

[44. ]See Leonard Darwin, Municipal Trade, for a careful examination of the cases in which a trade may or may not be carried on with advantage by the State, and remember that the State takes a part in trade as much when it acts through local bodies as when it acts through the central government.