THE LAWS OF NATURE
"If," wrote Condorcet, "there is a science which forecasts, guides, and promotes the advance of the human race, it must be based on the records of past progress." But we must go back still further. We must return to the first causes of that progress which the human race has realised since its appearance upon earth, and of the progress that it is still destined to realise. We must have an understanding of man, the laws which determine and govern his activities, the nature and circumstances of the environment in which he has been placed for the fulfilment of a purpose still hidden from his eyes.
I. The Motive of Human Activity.
Man is an organism composed of vital, physical, intellectual, and moral forces. This matter and these forces, which form the individual and the species, can only be preserved and developed by the assimilation, or, to use the economic term, the consumption of materials and forces of like nature. Failing this consumption, their vitality wastes and is finally extinguished. But waste and extinction of vitality cause pain and suffering, and it is the stimulus of pain and suffering which impels man to acquire the materials necessary for the development and preservation of his life. All these materials are present in his environment, air, &c.; and nature gives him a small number free of cost. But with the exception of this minority they must be discovered, acquired, and adapted to the purposes of consumption. Man must be a producer.
Man is also subject to a further necessity, one which is again inherent in his environment. He must defend both life and the means of its support from the attacks of numerous spoilers and agents of destruction. The risks to which he is exposed under this head entail more pain and more endurance.
It is to meet this twofold need—sustenance and self-defence—that man labours, labours to produce the necessaries of consumption and to destroy the agents or elements that menace his security. Labour therefore implies waste of vital force, and this more endurance and more pain. Humanity is, however, compensated by the pleasure and enjoyment which it derives from consuming the materials that support life, and from providing the services that safeguard it. But always, whether there be question of nourishment or self-defence, the pleasure of these actions is bought with a pain. It is an exchange, and, like every other exchange, it may result in a profit or loss. It is profitable when the sum of vitality, acquired or preserved, exceeds the amount of vital force expended in the task. The product may be concrete or one of service, but it is always subject to the costs of production which are inseparable from every expenditure of force.
Excess of expenditure over receipts means, on the other hand, loss, so that man is only stimulated to work when he expects that his receipts will exceed his expenses, that the pleasure will outweigh the pain. The degree of the stimulus naturally varies with the sums involved and the rate of expected profit; the prime motive of human activity, no less than that of all other creatures, is, therefore, the hope of profit. This motive, or motor-power, has been called interest.
II. The Natural Law of the Economy Of Power, or the Law of Least Expenditure.
From the motive of which we have spoken, the roots of which lie deep in human nature and the conditions of human existence, we derive a first natural law, the Law of Economy in Production, or the Law of Least Expenditure. Under the spur of interest, man first satisfies his most pressing needs, those that appeal with the greatest urgency, or penalise deficient supply with the greatest amount of suffering. It is only after this that he endeavours to decrease expenditure by selecting the more remunerative spheres of activity, and by setting himself to perfect processes, or invent tools, which enable him to enhance the profits of production. By increasing the margin of gain, enlarging the excess Of material acquired or saved over the outlay of vital force, he also insures the preponderance of compensatory pleasure over the discomfort, which is inseparable from effort.
The individual whose income exceeds expenditure, who possesses a profit, may sink it in the purchase of immediate enjoyment, or collect it as capital to be employed in a further increase of his productive capacity. He may, also, simply hoard it against future need. It, then, serves the purpose of a twofold reserve, drafts upon which may obviate privations, or furnish the means of repelling such chances as may, hereafter, menace vitality. When individuals of the same, or of alien races, join issue as to who shall obtain the materials of subsistence, the victor is he who has devoted most profits to remunerative ends, to measures best fitted to conserve, or augment, his vital force.
III. The Natural Law of Competition For a Subsistence.
1. Animal Competition.—A struggle to acquire the means of living has been called competition for a subsistence. It invariably appears so soon as the natural supply of material ceases to suffice for the demands of every member of the community, the weak and strong alike. Early man, as yet uninstructed in artificial production, depended solely upon the provision of nature, and the consequences of a deficit were soon felt in a society living on the products of hunting and the natural fruits of the earth. The more effective members, the fleet hunter and skilled forager, excelled and lived; the feeble and less fitted for these tasks languished and passed away. Hence the original struggle, first manifestation of a principle which rules all created things, and which we have named Animal Competition.
2. Destructive Competition, or the State of War.—A progressive restriction in the natural sources of supply soon compelled even the most effective individual to pay a higher price for his accustomed share, and increased cost entailed increased suffering. With the amount of labour and effort, required for the purchase of a livelihood, increasing in inverse ratio to the shrinkage of supply, palliative measures became inevitable. Two alternatives presented themselves—to restrict competition, or to multiply the sources of subsistence.
Now the sum of knowledge required for artificial production of the material necessaries of life is such that the highest intelligence fails unless accompanied by long experience. This is so true that, to this present day, it is beyond the capabilities of many backward tribes. Very simple, on the contrary, is the alternative as viewed by a strong man. Strength knows its own value as against a weak competitor. When, more, we see how incapable is the rest of brute creation to grasp this elementary calculation, we may find the first glimmering of man's superiority in his early appreciation of its truth.
The enterprise did, without doubt, involve a certain amount of labour and a certain risk. But victory in the struggles of unequals—and nowhere is there greater inequality than between members of the human race—does not always entail profound exertion, or the taking of dangerous risks. In any case, the strong soon learned that it was more profitable to prey upon the weak than to continue the previous system of sharing an inadequate food supply. Where it was customary to devour the actual body of the defeated, the new system was by so much the more productive. In other words, the effort or suffering involved in destroying an inferior was held preferable to the alternative of dwelling in amity but eating insufficiently. The invariable choice of this alternative measures the expectation of profit which it offered. Where cannibalism intervened as an accident, the person of every victim was at once a meal gained and a meal—very many meals—saved.
This second form of destructive competition is the pure State of War. First originating in man's struggle for mastery over the beasts, the issue became one as between man and man. A State of War was, thenceforward, inseparable from human existence. As the prime motive of the construction of a vast armoury of destructive agencies, it directly assured the triumph of humanity over the beasts, though nature had often endowed them far more efficiently. Indirectly, it determined those industrial discoveries which have enabled man to multiply and artificially supplement nature's provision of the material bases of existence, instead of bowing his head with the beasts when spontaneous production lags in the race with his demands. Thus it came to pass that the strong no longer found it profitable to massacre, despoil, or yet devour his victims. Instead, obligations are imposed, and the victim survives as a serf or slave. Political States are formed and competition in the form of war is waged between communities, possessing territory and subject peoples, against the hordes, still in a state of savagery and dependent upon the chase or pillage. The communities afterwards compete among themselves, seeking in territorial expansion either an extended area of supply or an increased holding in slaves, serfs, or subjects. Self-aggrandizement and self-protection are practically the sole ends of modern warfare.
Progress, under the direct or indirect impulse of this second form of competition has engendered a third form—Productive or Industrial competition. A brief survey of its history shows us that a continual menace of destruction, or at least of dispossession, compelled the communities which founded, and owned, political States, to apply themselves to the improvement of their instruments, and the consolidation of the material bases of their power. These instruments, and this fabric, may be divided into two categories. Their first constituent is a destructive apparatus, an army; their second is a productive apparatus, capable of assuring subsistence to the proprietary community within the State, and also to its dependents. It must, in addition, furnish those advances which are necessary, first for the erection, and subsequently for the maintenance in working order, of the destructive apparatus. Under pressure of the State of War—and the more so as that pressure grew and increased—State-owning communities were impelled not merely to improve the art and engines of warfare, but also to promote the productive capacities of industries whose function was not merely to provide sustenance, but, through the support of the defensive establishment, to become the final foundation of their powers of political aggrandizement. Now expansion in the productive capacity of any industry depends upon two conditions—Security, and Liberty.
Without some assured title to the fruits of his progress, a producer has no motive for undertaking such costly labours as the discovery of new processes, or the invention of tools and machines, which will increase his output. It is further essential that a manufacturer should be true to devote himself to that particular industry to which his abilities are best fitted, and to offer his wares in those markets which yield the highest returns. The highest place in the hierarchy of the nations has gone to that State which secured the fullest liberty, and the greatest security, to its industrial population. The dominion of such a State increases with its strength, and the security and liberty which it guarantees initiated and developed the third form of competition—Productive or Industrial competition. This form displaces the State of War as naturally as that replaced its predecessor in the series.
3. Productive or Industrial Competition.—Competition in the field of production, as in all others, benefits the species by affirming that: "The race is to the fleet, the battle to the strong." But if the rivalries of war and of peace lead to one goal, it is by very different roads.
The means by which competition of the destructive, or warlike, kind proceeds, are direct. Two starveling tribes come to blows over a patch of vegetation or a tract of hunting ground, and the stronger—driving off, if it does not actually destroy, the weaker—seizes the means of subsistence which were the cause of their struggle. At the later stage, when mankind has learned artificial production of the material needs of life, the communities of strong men, which founded the commercial enterprises called States, fight for the possession of a territory and the subjection of its inhabitants. They, like their predecessors, seek the means of subsistence, and they hope to obtain them by appropriating the entire nett profit earned by the labour of their slaves, their serfs, or their subjects. They may annex this in the guise of forced labour, or under the name of taxes, and they may style their conduct political competition, but it differs in no single particular from the actions of a hunting or of a marauding tribe. Both move along the straight road of direct competitive destruction, and both actions are of the class of destructive or warlike competition.
Very different are the processes of industrial competition, although they too issue in the survival of the strongest, of the fittest. The most powerful rival still takes the first place, but it no longer rests with the victor to proclaim, or to assess, his own victory. This function has passed to a third party—to those who consume the products or services which the competitors offer. The consumer always buys in the cheapest market. When he has once ascertained the precise nature of the wares competing for his custom, his own merchandise—and this may be actual produce, service, or the monetary equivalent of either—invariably selects that market in which it can command the highest return. When two markets are equal in this respect, the balance of trade inclines to that in which the purchaser's needs, or demands, are supplied with goods of the better quality.
The cheapest seller—all else being equal—commands the market, and the cheapest seller is the most powerful or effective producer. Productive or industrial competition, therefore, acts upon the producer by stimulating his powers and capacities of production. The less effective producer—whether of merchandise or services—is penalised by failing to sell; he cannot, that is, obtain those other services and goods which he himself needs, and upon which his very existence depends. To increase their powers or capacities of production, producers apply the principle known as the Division of Labour. They also seek to invent, and make practical use of, processes, tools, and machines, by the use of which an identical expenditure of labour and suffering are enabled to return products, or services, in a constantly increasing ratio.
Productive competition is supported by the Law of the Economy of Power, and these two co-operate in furthering the advance of productive capacity. But while acting as a propeller, this same rivalry fulfils a second, and no less useful, function. As the pivot of a balance, it supports the scales that maintain equilibrium between supply and demand, between outlay and return, at the level of the price required to induce the creation of products or services. The motor-force, of our first view, now appears as a "governor," and its supporter in this regard is a new law—the Law of Value.
IV. The Natural Law of Value.
Value is a power whose source resides in man himself. Its seat is the sum of those forces, vital, physical, and moral, with which man is endowed, and which he applies to the purposes of production or destruction. Applied to destruction, it constitutes military or war value, and while war was the sole sanction of security in the world this (aspect of) value was of most use to the species, and thus the most esteemed. It does not, however, appear in the guise of an agency which regulates competition, until viewed from the standpoint of production.
Production acts through labour, and labour is an outlay of vital force, consequently of suffering. Also, the motive of this outlay is the expectation of profit. Profit is thus seen as a product of labour, which enables a man to purchase enjoyment, or to obviate a sum of suffering which is greater than the similar factor in his original outlay. Vital power expended in this manner is not lost, but re-embodied. It reappears, plus profit earned, in the product, and it constitutes the value of that product.
An isolated man consumes this value so soon as he has produced it. But to-day is the day of division of labour and of exchange—systems under which the producer offers commodities, in which value has been invested, for other commodities which he does not possess, or for that which will enable him to obtain those commodities—for money.
The ultimate motive of all exchange is identical, being the hope of obtaining a greater amount of vital power than was expended in producing the commodity offered by the seller. In economical language, it is the hope of recovering the costs of production plus a profit. The product offered by the seller must also furnish the consumer, the purchaser, with sufficient vital power—certainly with a sufficient restorative of his vitality, to induce him to purchase it with an equivalent sufficient to replace the vital power expended in production plus a profit. The degree of this profit varies with the relative value of the products in question. The producer seeks to raise it to the highest possible point, and the purchaser struggles to limit it to a minimum. The rate of profit is, however, determined by the point at which the comparative intensity of the needs, or desires, of the two parties to a bargain meet—the intensity of the seller's desire to sell and the intensity of the purchaser's desire to buy. These measures of desire translate themselves into terms of exchange as the quantity of his product which either party offers—the amount of wares offered by the seller, and the amount of money offered by the purchaser. At this point we may conceive several variations in the position of seller and buyer. One producer may meet one consumer.
One consumer may be met by several producers, or the position may be exactly reversed.
There may be sufficient consumers and sufficient producers to erect real competition on either side.
In every one of these hypothetical markets, prices, or the rate of exchange, will be determined by the comparative urgency of opposing desires. We shall, at the present moment, confine our attention to the third alternative. Then, if there are several sellers, and each carries a more or less full stock, the fear of being undersold by a rival will compel the merchants to successively increase the amounts which they offer at a given price. But the purchasers, having no fear of a failure in supply, will continually reduce the price which they are willing to pay. Prices will fall since there is no approximation of demand to supply. In a seller's market, where the sum of the desire to purchase outruns that of the desire to sell—of supply, a buyer's refusal to increase his bids may result in his failure to complete a purchase, and the tendency of price is upwards.
It is most essential to note that market prices do not solely follow the quantities offered, but develop according to a geometrical progression. A short supply not only reduces market offers, but it also increases the effectiveness of demand; a glut in supply produces the opposite result, since the urgency of the seller increases while demand slackens. In one case the value of the product offered rises to a point which yields more than the required profit, over and above the actual costs of production; in the other, prices fall until profits may vanish and an actual loss set in. It is now easy to understand the regulative action of competition. It is continually tending to "fix" exchange-value—in other words, to maintain prices at a point which is equal to the cost of production plus the amount of profit necessary to induce the producer to create the product, or service, which he seeks to sell. Adam Smith characteristically termed this the natural price. Over-supply and over-production cause a fall in the price-current, and as this fall results from an impulse which develops according to a geometrical progression, it very soon drops below the natural price. As soon as this point is reached production naturally tends to diminish, and the consequent gradual rise in the price-current frequently repasses the natural price and erects a surplus profit. But the movements of capital and labour invariably follow profits. As soon as a particular industry promises to return more than the normal rate of profit, capital and labour flow in; production is forced up by leaps and bounds, and the markets are once more filled to repletion. The socialistic cry for regulation, whether by the State or any other artificial authority, is therefore entirely absurd. Regulation is essential, but the two natural laws of Production and Value have long since joined to secure it. We need only refrain from throwing obstacles in the way of their regulative operation; or, if an artificial obstruction opposes that action, to guarantee their freedom in removing the obstruction, according to their own methods. Their action must be secured, but it is to be secured only by refraining from all interference.
Such is the motive, and such the laws, which govern human activity. The motive is Interest, and the laws are those of Least Expenditure, or Economy of Power, of Competition in its several forms, and of Value. Under the spur of this motive, and guided by these laws, man has achieved that progress which has raised him from the level of the brutes to civilisation, and has advanced through the State of War to the State of Peace.
As long as the State of War was an integral condition of existence, and of progress, this motive, and these laws, worked for the adaptation of political and social economies to that state. When civilisation became the guarantee of security, and the State of War yielded to the State of Peace, the motive and the laws remained, but they worked to another end. And from the point at which to-day stands on the long high-road of evolution, we may already look forward and prophecy concerning the political and economical organisation of the Society of To-morrow. Earlier volumes from my pen have foreshadowed that future. The arbitrary conceptions of the Socialist will have no part in it, for it will not be founded on laws which issue from the brain of man, but upon laws which are of one origin with those that govern the physical world. Of them Quesnay, one of the fathers of Political Economy, has said, "These Laws of the Physical World were ordained for good alone, and these must be no attribution to them of ills which are the just and inevitable penalty for their violation."