Front Page Titles (by Subject) 14: Wages - Economic Harmonies (Boyers trans.)
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14: Wages - Frédéric Bastiat, Economic Harmonies (Boyers trans.) 
Economic Harmonies, trans by W. Hayden Boyers, ed. George B. de Huszar, introduction by Dean Russell (Irvington-on-Hudson: Foundation for Economic Education, 1996).
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All men eagerly long for security. We do indeed find a few restless, adventurous individuals in the world for whom the thrill of the unknown is a kind of emotional necessity. Nevertheless, we can affirm that men, taken as a whole, want to be free of fear for their future, to know what to count on, to arrange their lives in advance. To understand what store they set by security, we need only to observe how eagerly they rush into government employment. Let no one say that they do so because of the prestige of public service. There are certainly civil service positions in which the work involved is far from being of a high order. It consists, for example, in spying on one's fellow citizens, prying into their affairs, annoying them. Yet such positions are nonetheless sought after. Why? Because they represent security. Who has not heard a father say of his son: “I'm trying to get him on the list for a temporary appointment in such and such a government bureau. Naturally, it's irritating that they require such a costly education. It's also true that with that kind of education, he might have gone into some more brilliant career. As a government functionary he will never get rich, but he will be sure of his living. He will always have enough to eat. In four or five years he will be getting a salary of eight hundred francs; then he will go up, step by step, to three or four thousand. After thirty years of service, he can retire on his pension. His livelihood is therefore assured. It's up to him to learn to live moderately and humbly, etc.”
Security, then, has an all-powerful appeal.
And yet, when we consider the nature of man and of his labors, security seems incompatible with it.
Anyone looking back in his mind's eye to the hazards faced by human society at its inception will have difficulty in understanding how a great multitude of men can possibly obtain from the social order any fixed, assured, and constant means of existence. That they do so is another of those phenomena that fail to impress us as strikingly as they should for the very reason that our eyes are accustomed to them. Here are functionaries who receive fixed salaries, property owners who know in advance what income they will have, investors who can exactly calculate their returns, workmen who earn the same wages every day. If we exclude money, which is introduced simply to facilitate evaluation and exchange, we shall perceive that what remains stable is the quantity of the means of existence, the value of the satisfactions received by these various categories of workers. Now, I maintain that this stability, which little by little is spreading to all mankind, to all kinds of labor, is a miracle of civilization, a prodigious accomplishment of the social order that is so foolishly denounced in our day.
Let us go back, then, to a primitive social order. Let us imagine that we say to a hunting, fishing, pastoral, warrior, or agricultural people: “As your society progresses, you will be able to tell further and further in advance exactly what will be your total enjoyments for every year.”
These good people would not believe us. They would reply: “That will always depend on something that eludes all calculation—the uncertainty of the seasons, for example, etc.” They would never be able to understand the ingenious efforts by which men have succeeded in establishing a kind of insurance bridging all times and all places.
Now, this mutual insurance against the vicissitudes of the future is entirely dependent on a field of human knowledge that I shall call experimental statistics. And since there is continual progress in this field, based as it is on experience, it follows that security also can be progressively extended. It is favored by two permanent factors: first, men long for security; second, every day they acquire more means of attaining it.
Before I demonstrate how security is established in those human transactions in which at first sight it would not seem to be an important concern, let us see how it is obtained in a transaction in which it is of special concern. The reader will thus understand what I mean by experimental statistics.
Consider a group of men who are all homeowners. One house happens to burn, and its owner is ruined. At once alarm spreads among all the others. Each one says to himself: “The same thing could happen to me.” It is not surprising, therefore, that the owners meet and make provision to share possible loss by forming a mutual fire-insurance association. Their agreement is very simple. It is expressed in these terms: If the house of one of us burns, the rest of us will take up a collection to help him.
By this device each owner can be sure of two things; first, that he will have a small share in all misfortunes of this type; second, that he will never have to bear the full brunt of any one misfortune.
In reality, if we extend the calculation over a great number of years, we see that the homeowner makes, so to speak, an arrangement with himself. He lays up savings with which to pay for the disasters that may strike.
This is association. Indeed, the socialists give the name association exclusively to arrangements of this kind. As soon as speculation is introduced, they say, association disappears. I say that it is improved, as we shall see.
The motive that prompted our homeowners to form an association, to provide for mutual insurance, was a love of stability, of security. They prefer known risks to unknown risks, a great number of possible small losses to one large one.
Nevertheless, their objective has not been completely accomplished, and there is still much uncertainty in their situation. Each one of them may say: “Suppose disasters multiply. Will my assessment not become exorbitant? In any case, I should like to know in advance what it will be, and also to insure my household goods, my merchandise, etc., in the same manner.”
These difficulties appear to be in the nature of things and beyond man's power to avoid. We are always tempted to believe, after every advance, that everything possible has been done. How, indeed, can we eliminate this hazard contingent on misfortunes still in a realm beyond our ken?
But mutual insurance has, through experience, gradually acquired in society an important piece of statistical information, namely, the ratio, in terms of yearly averages, between values destroyed by disasters and values covered by insurance.
Armed with this information, an individual or a company, having made all the necessary calculations, goes to the homeowners and says: “By providing for mutual insurance, you have tried to purchase your peace of mind. The price this precious asset costs you is the indeterminate assessment you set aside annually to cover your losses. But you never know in advance what this price will be; and, on the other hand, your peace of mind is never complete. Well, I am here to propose a different procedure. In consideration of a fixed annual premium that you will pay me, I will assume the risk for all losses. I will insure all of you, and here is the capital to guarantee my promises.”
The homeowners are quick to accept, even though this premium would cost a little more than the average assessment under the mutual insurance agreement; for the most important thing in their eyes is not the saving of a few francs, but the assurance of complete peace of mind.
At this point the socialists contend that the association is destroyed. I maintain that it is improved and on the way to still further improvement.
But, say the socialists, now the insured no longer have any common tie! They no longer see one another; they no longer have to reach a common understanding. Parasitical middlemen have intruded themselves among them, and the fact that the homeowners now pay more than is necessary to cover their losses is proof that the insurers are reaping outrageous profits.
It is easy to answer this criticism.
First of all, the association now exists under another form. The premium contributed by the insured still provides the fund to pay for the losses. The insured have found the means of remaining in the association without the bother of running it. Obviously, this is an advantage to every one of them, inasmuch as the end in view is nonetheless attained; and the opportunity of remaining in the association and still retaining independence of movement and the free use of one's faculties is precisely what characterizes social progress.
As for the middleman's profit, it is explainable and completely justified. The insured remain members of the association for the recovery of their losses. But a company has stepped in that offers them the following advantages: first, it removes the element of risk to which they were still exposed; second, it frees them from all trouble or labor that their losses might entail. These are services. Now, service for service. The fact that the proposal is willingly accepted and paid for is proof that the company is performing a service of definite value. The socialists are merely being ridiculous when they rant against the middleman. Does he impose his services by force? Has he other means at his disposal than to say: “I shall cost you something in the way of pains, but I shall save you more”? How, then, can he be called a parasite, or even a middleman?
Therefore, I declare that the association thus transformed is in a position to improve in every way.
In fact, the companies, in the hope of realizing profits proportional to the extent of their business, try constantly for new accounts. They have agents everywhere, they extend credit, they invent countless new coverages in order to increase the number of policyholders, that is, of associated parties. They insure many, many risks that were not covered by the original mutual association. In short, the association steadily increases so as to include more people and more things. As this expansion continues, it allows the companies to lower their rates; they are, in fact, forced to do so by competition. And here again we encounter the great law: the benefit soon slips through the hands of the producer and ultimately comes to rest with the consumer.
Nor is this all. The companies take out insurance on one another in the form of reinsurance; so that, as far as recovery of losses is concerned, which is the heart of the matter, a thousand different companies, operating in England, France, Germany, and America, form a single great corporation. And what is the result? If a house happens to burn in Bordeaux, Paris, or anywhere else, homeowners from all over the world—Englishmen, Belgians, Germans, Spaniards—have their assessment ready and are prepared to make good the loss.
This is an example of the power, the scope, the perfection, that a free and voluntary association can attain. But in order to do so, it must be free to choose its own methods. Now, what happened when the socialists, those great devotees of association, were in power? They found nothing more urgent to do than to browbeat associations of every description, and insurance associations in particular. And why? For the very reason that in order to operate on a world-wide basis, insurance companies follow the procedure of allowing every one of their members to remain independent. How little these poor socialists understand the social mechanism! They want to take us back to the first uncertain steps taken by society in its infancy, to the primitive and almost savage forms of association. They would suppress all progress on the ground that it has departed from these forms.
We shall see that, because of these same prejudices, this same ignorance, they rail constantly against interest, or else against wages, which are fixed forms, and therefore highly developed, for the payment of what is due capital and labor.
The wage system particularly has been the object of the socialists' attack. They have almost gone so far as to present it as something hardly less cruel than slavery or serfdom. In any case, they have viewed it as an oppressive and one-sided arrangement having only the semblance of liberty, as exploitation of the weak by the strong, as tyranny exercised by capital over labor.
Though everlastingly wrangling with one another over the new institutions they would like to establish, they evince a striking unanimity in their common hatred of existing institutions, and the wage system most of all; for, if they cannot reach agreement on the social order of their choice, we must at least give them their due in that they always see eye to eye in abusing, deploring, slandering, hating, and generating hatred for anything that actually exists. I have stated elsewhere the reasons for this attitude.1
Unfortunately, all this did not remain a purely academic question; for socialist propaganda, aided and abetted by a weak and ignorant press, which, without admitting its socialist sympathies, nevertheless sought to curry popular favor by its sensational tirades, has succeeded in inspiring hatred for the wage system even among the wage earners. The workers have become dissatisfied with this form of remuneration. It appears to them unjust, humiliating, odious. They feel that it brands them with the mark of servitude. They desire to share by other means in the distribution of wealth. From this point to becoming infatuated with the most extravagant utopias is only a step, and this step has been taken. In the February Revolution the great preoccupation of the workers was to get rid of the wage system. For the means of doing so they consulted their gods; but on the occasions when the gods did not remain silent, their oracular utterances were, as is customary, anything but clear, though the great word “association” did predominate, as if association and wages were mutually exclusive. Then the workers proposed to try all the forms of this association that was supposed to bring them liberty, and, to make it the more attractive, they invested it with all the charms of “solidarity” and attributed to it all the merits of “brotherhood.” For the moment, one would have thought that the human heart itself was about to undergo a great transformation and, shaking off the yoke of self-interest, would henceforth be guided by nothing less than the purest forms of self-sacrifice. Strange contradiction! People hoped to receive, by way of association, at once the glory of self-sacrifice and the enjoyment of profits hitherto unknown. While they raced madly after fortune, they demanded that they be awarded, or rather they awarded themselves, the palm of martyrdom. Apparently these misguided workers, on the verge of being swept along on the path of injustice, felt the need of deluding themselves, of glossing over with idealism the lessons in plunder that their apostles had taught them, and of covering them with a veil before offering them up in the sanctuary of a new revelation. Perhaps never before had so many dangerous errors, such gross contradictions, taken such a hold upon the human mind.
Let us see, then, what wages are. Let us look at their origin, their form, and their effects. Let us recognize why they were created; let us determine whether in the development of humanity they represent a step backward or forward. Let us ascertain whether or not they are essentially humiliating, degrading, brutalizing; and whether it is possible to discern their alleged connection with slavery.
Services are exchanged for services. What is offered and accepted in exchange is labor, effort, pains, trouble, natural or acquired skills; what is transmitted are satisfactions; what determines the exchange is mutual advantage; and what measures it is the free evaluation of reciprocal services. The various arrangements to which human transactions have given rise have necessitated a very large economic vocabulary, but the words “profit,” “interest,” “wages,” although they express different shades of meaning, do not change the real nature of things. It is always the do ut des, or rather the facio ut facias∗ which, as far as the science of economics is concerned, forms the basis of all human evolution.
Wage earners are no exception to this law. Consider carefully. Do they perform services? Undoubtedly. Do they receive services? They do indeed. Are these services exchanged freely, voluntarily? Do we perceive fraud or violence in this type of transaction? It is at this point, perhaps, that the complaints of the workers begin. They do not go so far as to contend that they have been deprived of their freedom, but they declare that this freedom is purely nominal and even a mockery, for the person whose decisions are determined by necessity is not free in fact. It remains to be seen whether the lack of freedom thus understood is not the result of the worker's situation rather than of the manner in which he is paid.
When a man contributes the strength and skill of his hands to another's service, his payment may consist of a share in the thing produced or else in a fixed wage. In the one case as in the other, he must bargain over this share—for it may be larger or smaller—or for this wage—for it may be higher or lower. And if the man is in absolute want, if he cannot wait, if he is under the spur of urgent necessity, he will submit to its law; he will not be able to resist the conditions laid down by the man for whom he is to work. But it must be noted that it is not the form of his payment that puts him in this state of dependency. Whether he runs the risk of being paid according to the outcome of the enterprise, or whether he contracts for a fixed wage, it is his precarious situation that has put him at a disadvantage in the bargaining. The innovators who have presented the workers with the idea of association as an infallible cure have therefore deceived them and themselves as well. They can convince themselves of this fact by observing carefully situations in which the impoverished worker receives a share of the produce rather than a wage. Certainly there are no men in France more wretchedly poor than the fishermen and the vineyard workers in my native province of Bearn, although they have the honor of enjoying all the benefits of what the socialists exclusively term association.
But before inquiring into the influences that determine the rate at which wages are set, I must define, or rather describe, the nature of this transaction.
Men have a natural tendency—and consequently one that is beneficial, moral, universal, and indestructible—to desire security in regard to their means of existence, to seek stability, and to avoid risk and uncertainty.
Nevertheless, in the earliest stages of society risk and uncertainty held, so to speak, absolute sway; and I have often been amazed that political economy has failed to point out the great progress that has been achieved in constantly lessening their influence on human affairs.
For example, in a small community of hunters, in a nomadic tribe, or a newly established colony, who can predict with certainty what one's labor will be worth tomorrow? Does there not even seem to be a fundamental conflict between these two ideas, for could there be anything more uncertain than the results of labor devoted to hunting, fishing, and agriculture?
Therefore, it would be difficult to find, in the early period of any society, anything resembling salaries, retainers, stipends, wages, incomes, rents, interest payments, insurance premiums, etc., all of which are things invented to give more stability to the status of the individual, to remove from mankind as much as possible that painful sense of uncertainty and anxiety in regard to the means of existence.
The progress that has been made in this direction is truly remarkable, even though custom has so familiarized us with the fact that we fail to notice it. And yet, since the results obtained by labor, and consequently the consumption of products by mankind, can be so profoundly modified by the course of events, by unexpected circumstances, like Nature's whims, inclement weather, and disasters of all kinds, how does it happen that so many men find that, thanks to fixed wages, rents, salaries, pensions, they are exempt, for a time, and some for life, from that uncertainty which seems to form a part of our very nature?
The cause, the motive power, of this wonderful evolution by mankind is to be found in the tendency of all men to strive toward the attainment of their well-being, to which stability is so essential. The means consists in the substitution of the fixed contractual payment covering calculable risks for the earlier form of association wherein all members are liable for all risks of the enterprise—in other words, the creation of a more efficient association. It is curious, to say the least, that our great modern reformers would have us believe that association is dissolved by the presence of the very element that actually improves it.
For certain men to be willing to bind themselves by contract to assume certain risks that naturally fall on others, some degree of progress must have been made in a special field of knowledge that I have called experimental statistics; for they must be able through experience to appraise, at least approximately, these risks, and consequently the value of the services they render those for whom they take this responsibility. That is why the transactions and associations of primitive and ignorant peoples do not permit of provisions of this nature, and why, therefore, risk and uncertainty, as I have said, hold full sway over them. If a savage who is getting along in years and has a certain supply of game laid up engages a young hunter to help him, he will pay him, not with fixed wages, but with a certain share in the kill. How, in fact, could either of them draw inferences from the known to the unknown? The lessons of the past are not sufficiently available to them to permit them to insure themselves against the future beforehand.
In an age of ignorance and barbarism men undoubtedly associate, enter into associations, since otherwise, as we have shown, they cannot live; but association among them can assume only that primitive, elementary form which the socialists represent as the law and the salvation of the future.
Later on, in the case of two men who have long worked together sharing common risks, there comes a time when it is possible for them to calculate their risks in advance, and one of them may assume all the risks in consideration of a stipulated payment.
This arrangement certainly represents progress. To be assured of this, we need only to know that the arrangement is made freely, by mutual consent, which would not happen unless it were to the advantage of both parties. But it is easy to understand in what respects it is to their advantage. One party, by assuming all the risks of the undertaking, gains the advantage of having it completely under his control; the other gains that stability of position so dear to men's hearts. And society in general cannot fail to gain, because now an enterprise that was once subject to the conflicting pressures of two minds and two wills enjoys a unified policy and direction.
But, because the form of the association has been changed, can we say that it has been dissolved, as long as the two men continue to participate in it and nothing has been altered except the manner of distributing what they produce? Above all, can we say that the association has been vitiated as long as the new policy is freely agreed to and it satisfies all parties?
In order to create new means of satisfaction, it is almost always—I could say, always—necessary to have both current labor and the fruits of previous labor available. At the outset capital and labor, when they join forces in a common project, are each obliged to share its risks. This stage continues until these risks can be calculated experimentally. Then two tendencies, equally natural to the human heart, are to be observed: I mean the tendencies toward unified control and fixed responsibilities. Capital then says to Labor: “Experience teaches us that your eventual profit will amount to an average return of so much. If you are willing, I will guarantee you this amount and will run the enterprise, assuming, for better or for worse, all its risks.”
Labor may perhaps reply: “This proposal suits me. Sometimes in a year I receive only three hundred francs; at other times I receive nine hundred. These fluctuations cause me great inconvenience; they prevent me from regulating my expenses and those of my family in a systematic way. It is an advantage for me to be relieved of this continual uncertainty and to receive a fixed return of six hundred francs.”
When this reply is given, the terms of the contract will be changed. They will indeed continue to unite their efforts, to share the proceeds, and consequently the association will not be dissolved; but its form will be altered in that one of the parties, Capital, will take all the risks and all the extraordinary profits, while the other party, Labor, will enjoy all the advantages of stability. Such is the origin of wages.
Sometimes the procedure of reaching an agreement is reversed. Often it is the entrepreneur who says to the capitalist: “We have worked hitherto on the basis of a common sharing of the risks. Now that we have a better knowledge of our expectations, I propose that we draw up a contract. You have twenty thousand francs invested in the enterprise, for which one year you received five hundred francs, and another year fifteen hundred. If you are willing, I will give you a thousand francs a year, or five per cent, and will free you of all risk, on condition that I direct the enterprise as I wish.”
Probably the capitalist will reply: “Since, with considerable and vexatious ups and downs, I receive on the average no more than a thousand francs per year, I prefer to be assured of this sum regularly. Therefore, I shall continue the association by keeping my capital invested in the business, but without assuming any of the risks. My activity and my intelligence can now be more freely turned in other directions.”
From the point of view of society as well as that of the individual, this represents a gain.
Evidently there is in mankind a longing for stability that is constantly working to restrict and circumscribe the role of chance and uncertainty. When two persons share a risk, they cannot eliminate the risk itself, but there is a tendency for one of the two to assume it on a contractual basis. If capital takes the responsibility, then labor receives a fixed return, which is called wages. If labor chooses to accept the risk, for better or for worse, then the return on capital is set aside and fixed under the name of interest.
And since capital consists exclusively of human services, we may say that capital and labor are two words that express the same fundamental idea; consequently, the same may be said of interest and wages. Hence, at this point, where false economic theory never fails to find a conflict, true economic theory always finds identity.
Thus, in their origin, nature, and form, wages are in no way essentially degrading or humiliating, any more than interest is. Both represent the returns due to current and to previous labor as their respective shares of the results of a common enterprise. But, in the long run, it nearly always happens that the two parties provide for a fixed payment for one of these shares. If it is current labor that wants a uniform return, it gives up its share in further but risky profits for the sake of wages. If it is previous labor that wants a uniform return, it sacrifices its hope of extra but uncertain profits in return for interest.
Personally, I am convinced that this new stipulation, representing a later addition to the original association, far from dissolving it, actually improves it. I have no doubts on this score when I reflect that the new arrangement arises from a keenly felt need, from the natural desire of all men for stability, and that, besides, it satisfies all parties without harming—indeed, on the contrary, by improving—the general welfare.
The modern reformers who, alleging that they invented the principle of association, would like to take us back to the days of its most rudimentary forms, ought surely to tell us in what respect contracts stipulating fixed payments contravene justice or equity, in what ways they retard progress, and by virtue of what principle they propose to ban such arrangements. They should also tell us how, if such stipulations are so barbarous, they reconcile the increasing presence and influence of these contracts in modern society with what the reformers themselves proclaim about the perfectibility of mankind.
For my part, I am convinced that these stipulations are one of the most marvelous signs of progress and one of the most potent factors in the development of society. They are at once the fulfillment and the reward of a past and very ancient civilization and the promsie of endless progress for the future. If society had been content with that primitive form of association which makes all parties subject to the risks of an enterprise, ninety-nine per cent of human transactions could not have been carried on. The man who today has a part in twenty enterprises would have been bound for all time to a single one. All operations would have lacked unity of policy and direction. In a word, man would never have enjoyed stability, that precious asset which may well be the source of genius.
The wage system, then, is derived from a natural and indestructible human tendency. Let us note, however, that this system is but an imperfect answer to men's longings. It makes the workers' pay more uniform and equal, more in line with an average figure; but there is one thing that it cannot do, any more than a pooling of risks could, and that is to guarantee them employment.
And at this point I cannot refrain from commenting on the power of a feeling to which I have referred in the course of this discussion, a feeling that the modern reformers do not appear to be at all aware of: I mean man's aversion to uncertainty. It is precisely this feeling that has so favored the socialist ranters in their efforts to foster a hatred for the wage system in the minds of the workers.
We can think of three stages in the progress of the worker's status: the stage in which risk and uncertainty predominate; the stage in which stability predominates; and an intermediate stage in which risk and uncertainty, though partially eliminated, still militate against complete stability.
What the workers have not understood is that the kind of association preached by the socialists represents the infancy of society, the period of the first faltering steps, of sudden ups and downs, of alternating plenty and want—in a word, the absolute reign of risk and uncertainty. The wage system, on the contrary, represents the intermediate stage that separates risk and uncertainty from stability.
Now, the workers, not yet having attained—far from it—a stable condition, placed their hopes, like all men suffering from economic woes, in some kind of change in their status. That is why the socialists found it very easy to dazzle them with the great word “association.” The workers felt that they were being carried forward, whereas in reality they were being swept backward.
Yes, the unfortunate workers were being swept back toward the first uncertain steps in the evolution of society; for was the kind of association being preached to them anything other than the system in which all members are held liable for all the risks? This arrangement is inevitable in times of complete ignorance, since contracts stipulating fixed payments presuppose at least a rudimentary knowledge of experimental statistics. Is the socialists' proposal anything more or less than a pure and simple return to the reign of risk and uncertainty?
Therefore, the workers, who had been so enthusiastic for association as long as it had remained a mere theory, changed their minds as soon as the February Revolution made it appear a real possibility.
At that time many employers, whether under the spell of the universal enthusiasm for association, or out of fear, offered to replace the payment of wages with a profit-sharing arrangement. But the workers drew back from common sharing of this kind—the sharing of the risks. They understood that in reality what they were being offered, in case the enterprise should fail, was the absence of any kind of payment whatsoever, which for them meant death.
Then we observed a phenomenon that would reflect little honor on our country's working class were it not that the blame should be placed on the so-called reformers, in whom the working class, unfortunately, had placed its trust. The workers clamored for a hybrid association providing for a retention of wages and at the same time for their participation in the profits, without, however, involving them in the risks.
It is very unlikely that the workers would ever on their own have thought of putting forward such demands. There is in human nature a fund of good sense and justice to which obvious unfairness is repugnant. In order to deprave man's heart, it is first necessary to corrupt his mind.
This is what the leaders of the socialist school did not fail to do, and, in this regard, I have often wondered whether their motives were not deliberately perverse. I have always been inclined to respect men's motives as something inviolate, but in this case it is difficult to find them above reproach.
After stirring up the working classes against their employers by the persistent and unfair tirades with which socialist books are filled; after convincing the workers that they were involved in a war, and that in war all is fair against the enemy; the leaders of the socialists then clothed the workers' ultimatum, in order to gain it wider acceptance, in scientific subtleties and went so far as to give it colorings of mysticism. They even personified society as an abstract being owing to every individual a certain minimum, namely, a guarantee of livelihood. “You have the right, then,” they told the workers, “to demand a fixed wage.” Thus, they began by satisfying man's natural inclination for stability. Then, they proclaimed that, apart from wages, the worker was entitled to a share in the profits; and, when asked if he should also have a share in the losses, they replied that, by virtue of government intervention and guarantees from the taxpayer, they had invented a system of universal industry and full employment exempt from any possibility of loss. This was the means of allaying the last remaining scruples of the unfortunate workers, who were therefore, as I have said, quite disposed at the time of the February Revolution to demand the adoption for their benefit of these three provisions:
It will be said, perhaps, that these demands are not as unfair or as impossible as they appear, since they have been introduced and maintained in many newspaper concerns, in the railroads, etc.
I say in reply that there is something very childish about deceiving oneself by giving high-sounding names to very trivial things. If one will only be open-minded about the matter, one will doubtless be convinced that this type of profit-sharing, which a few concerns make available to their wage earners, does not constitute association or deserve to be so called, nor does it represent a great revolution in the relations between two classes of society. It is an ingenious bonus system, a useful incentive for the wage earners, offered in a form that is not exactly new, despite the efforts to present it as an endorsement of socialism. The employers who, in adopting this practice, set aside a tenth or a twentieth or a hundredth part of their profits, when they have any, may make a great show of this act of generosity and proclaim themselves noble regenerators of the social order; but the matter really does not deserve our notice, and so I return to my subject.
The establishment of the wage system, then, marked a forward step for society. Originally, past labor (capital) united with current labor (the workers), in sharing the risk, to undertake joint enterprises that, under such terms, must have had very limited scope. If society had not discovered other systems, no large-scale operation would ever have been carried out in this world. Mankind would still be back in the era of hunting and fishing, and a few primitive attempts at agriculture.
Later, obeying the double impulse that leads us both to seek stability and to desire to be in charge of operations for which we have to bear the risks, the two associates, without in any way dissolving their association, established the system by which it was agreed that one party would pay the other a fixed amount and would himself assume all the risks along with the direction of the enterprise. When this fixed sum goes to previously performed labor, to capital, it is called interest; when it goes to current labor, it is called wages.
But, as I have observed, wages are only partially successful in obtaining, for a certain class of men, a state of stability, or security, as regards their means of livelihood. The wage system represents a step—a very definite step, and one so difficult to make that at first sight one might think it impossible—toward the attainment of this wonderful goal; but it does not represent its complete attainment.
In passing, it is perhaps not idle to state that security resembles all the other great objectives that mankind pursues. They are all constantly approached, but never perfectly attained. For the very reason that security is so great a blessing, we shall always strive to extend its benefits among us; but it is not within our power ever to enjoy it completely. We can even go so far as to say that such a state of things is not desirable, at least for man as he now is. An absolute degree of any good thing whatsoever would mean the extinction of all desire, all effort, all planning, all thought, all foresight, all virtue; perfection excludes perfectibility.
The laboring classes, having risen with the passage of time, and thanks to the progress of civilization, to the level represented by the wage system, have not therefore ended their quest for security.
Of course, wages can be counted upon at the end of a day's work; but when circumstances, a crisis in industry, or simply illness, have forced hands to stop working, wages likewise stop coming in. Should the worker then turn to enforced idleness for his daily bread and that of his family? His only recourse is to save up, during his working days, against the time when he will be old or ill.
But who can reckon in advance, for any individual, the number of days when he can help himself, compared to the days when he will need help?
What is impossible for one person becomes more feasible for many by virtue of the law of large numbers. That is why this assessment, paid in during periods of employment against periods of unemployment, attains its goal much more efficiently, more regularly, more surely, when it is centralized in the association rather than left to the risks incurred by the individual.
Hence the various mutual-aid societies,∗ admirable institutions that came into being within society long before even the name of socialism existed. It would be difficult to say to what impulse the invention of such arrangements should be credited. I believe, in truth, that they sprang from the very fact that the need was there, from man's longing for stability, from that ever restless, ever active instinct that prompts us to bridge the gaps that civilization encounters in its progress toward security for all ranks of society.
In any case, I saw mutual-aid societies spring up spontaneously more than twenty years ago among the destitute day laborers and artisans in the poorest villages in the Department of Landes.
The intention of these societies is obviously to secure a stable level of satisfactions, to distribute over all periods of life the wages earned during periods of employment. In all the localities where the societies exist, they have done a great deal of good. The members of the association feel sustained by a sense of security, one of the most precious and comforting feelings that man can experience in his journey through life. In addition, all members feel their mutual dependence, their contribution to one another's needs; they understand to how great an extent the individual's good or bad fortune becomes the good or bad fortune of all; they meet together to observe a few religious ceremonies that their statutes provide for; in a word, they are called upon to cultivate that alert concern for one another's activities so calculated to inspire both self-respect and an appreciation of the dignity of others, which is the first and most difficult step on the road to any kind of civilization.
The secret of the success of these societies—a success that has indeed come slowly, as does everything that involves the masses—is liberty, and this is readily explicable.
The natural danger that threatens such associations consists in the removal of the sense of responsibility. No individual can ever be relieved of responsibility for his own actions without incurring grave perils and difficulties for the future.2 If the day should ever come when all our citizens say, “We shall assess ourselves in order to aid those who cannot work or cannot find work,” there would be reason to fear that man's natural inclination toward idleness would assert itself, and that in short order the industrious would be made the dupes of the lazy. Mutual aid therefore implies mutual supervision, without which the benefit funds would soon be exhausted. This mutual supervision, which is for the association a guarantee of continued existence, and for each individual an assurance that he will not be victimized, is also the source of the moral influence it, as an institution, exercises. Thanks to it, drunkenness and debauchery are gradually disappearing, for by what right could a man claim help from the common fund when it could be proved that he had brought sickness and unemployment on himself through his own fault, by his own bad habits? This supervision restores the sense of responsibility that association, left to itself, would tend to relax.
Now, in order that such supervision may bear its full fruit, the mutual-aid societies must be free, must have certain well-defined prerogatives and be in complete control of their own funds. They must be allowed sufficient flexibility to adapt their regulations to fit local needs.
Suppose that the government interferes. It is easy to imagine the role it will assign itself. Its first concern will be to take over all funds on the pretext of centralizing them; and, in order to make this measure more palatable, it will promise to increase them out of resources taken from the taxpayer.3 “For,” it will say, “is it not entirely natural and just that the state should contribute to so great, so generous, so philanthropic, so humanitarian a work as this?” The first unjust act will be to force into the society, through taxation, citizens who have no right to share in the benefits. The second unjust act will be to propose, in the name of unity, of solidarity (call it what you will), that all associations be merged into one, subject to uniform regulations.
But, I ask, what will happen to the morality of the institution when its treasury is fed by taxes; when no one, except possibly some bureaucrat, finds it to his interest to defend the common fund; when every member, instead of making it his duty to prevent abuses, delights in encouraging them; when all mutual supervision has stopped, and malingering becomes merely a good trick played on the government? The government, to give it its just due, will be disposed to defend itself; but, no longer being able to count on private action, will have to resort to official action. It will appoint various agents, examiners, controllers, and inspectors. It will set up countless formalities as barriers between the workers' claims and his relief payments. In a word, an admirable institution will, from its very inception, be turned into a branch of the police force.
The state will perceive, first of all, the advantages to be gained from adding to the vast throng of its appointees, from multiplying the number of jobs at its disposal, from extending its patronage and electoral influence. It will not realize that, in arrogating to itself a new function, it has also placed upon itself a new, and, indeed, a frightening responsibility. For what must the immediate consequence be? The workers will no longer look upon their common treasury as property to be administered and maintained by themselves, with their own claims on it limited by the extent of its resources. Little by little they will become accustomed to considering unemployment benefits, not as something provided by the limited funds that they have accumulated by their own foresight, but as a debt that society owes them. They will never admit that society cannot pay and will never be satisfied with the benefits they receive. The state will constantly be obliged to ask for new additions to the budget. At this point, encountering opposition from the treasury officials, it will find itself in inextricable difficulties. Abuses will increase all the time, and the government will shrink, as it always does, from rectifying them until there comes the day of explosion. But when this happens, the government will discover that it has to reckon with a population that has lost the ability to act for itself, that looks to a cabinet minister or an official for everything, even its livelihood, a population whose thinking has become so warped as to have lost any notion of right, property, liberty, or justice.
These were some of the reasons for my alarm, I admit, when I discovered that a commission of the legislative assembly had been instructed to prepare a bill on mutual-aid societies. I felt that the knell of doom had rung for them, and I was the more distressed because I am convinced that a great future is in store for them provided they continue to be allowed to breathe the bracing air of freedom. And, indeed, is it so difficult to permit men to experiment, to feel their way, to choose, to make mistakes, to correct them, to learn, to work together, to manage their own property and their own interests, to act for themselves, at their own risk and peril, on their own responsibility? Do we not see that this is what makes them men? Must we always start with the fatal premise that all those who govern are guardians and all the governed are wards?
I maintain that, left to the care and supervision of those concerned, the mutual-aid societies have a most promising future before them, and I need no further proof of my statement than to cite what is taking place across the Channel.
In England individual initiative has not waited for the government to organize a powerful mutual-assistance association among the working classes. For a long time free and self-administered associations have existed in the principal towns of Great Britain etc.....
The total number of these associations, for the United Kingdom, amounts to 33,223, including no less than three million fifty-two thousand individuals, which is half the adult population of Great Britain.....
This great confederation of the laboring classes, this institution which provides a practical and effective outlet for the impulse of brotherly love, rests on the most solid foundations. The combined revenue is five million pounds sterling, and the accumulated capital amounts to eleven million two hundred thousand pounds.
Needy cases are paid out of this fund when employment declines or stops. We are sometimes amazed at England's ability to withstand the repercussions of the tremendous and far-reaching upheavals that her gigantic industrial machine from time to time, and almost periodically, experiences. This ability is to be explained, in large part, by the fact that we have just mentioned.
Mr. Roebuck4 proposed that, in view of the vastness of the problem, the government, acting paternalistically, and on its own initiative, should take the responsibility for solving it..... The Chancellor of the Exchequer refused.
In cases where private individuals are capable of managing their own affairs, the government, in England, deems it unnecessary to interfere. It watches from above to make sure that there are no irregularities; but it permits every man to receive the reward of his own efforts and to run his own business according to his own lights and his own convenience. Certainly England owes a part of her greatness as a nation to this independence of her citizens.5
The author could have added: It is also to this independence that the citizens owe their experience and their personal worth. It is to this independence that the government owes its relative freedom from responsibility, and consequently its stability.
Among the institutions that can arise from the mutual-aid societies, once they have completed the evolution that they have now barely begun, I give first place, because of its social importance, to old-age pensions for the workers.
There are persons who call such an institution a flight of fancy. These persons, no doubt, profess to know the farthermost limits of security beyond which humanity may not go. I shall ask them these simple questions: If they had never been familiar with any social condition except that of primitive tribes that live by hunting or fishing, would they ever have foreseen, I do not go so far as to say returns on landed property, government securities, or fixed salaries, but even the wage system, that first step toward stability in the condition of the poorest classes? And later, if they had known only of the wage system such as it exists in countries where the spirit of association has not yet appeared, would they have ventured to predict the role that was destined to be played by mutual-aid societies such as we have seen in operation in England? Or do they have some good reason to believe that it was easier for the laboring classes to progress first to a wage system, and then to mutual-aid societies, than it is to go on to establishing old-age pensions? Would this third step be more difficult than the other two?
As for myself, I observe that humanity thirsts for security; I see that, from age to age, it fills in the gaps where its achievements have been incomplete, for the benefit of one class or another, by marvelous methods that appear well beyond the inventive powers of any one individual, and I certainly would not venture to predict at what point it will cease its progress along this road.
What is certain is that old-age pensions are universally, unanimously, eagerly, ardently longed for by all the workers, and quite naturally so.
I have often questioned them, and I have always found that the great torment of their lives is not the burden of their toil or the smallness of their wages or even the resentment that the sight of inequality could understandably kindle within them. No; the cause of their concern, their discouragement, their anxiety, their anguish, is the uncertainty of the future. Whatever profession we may belong to, whether we be civil servants, capitalists, owners of property, businessmen, doctors, lawyers, soldiers, magistrates, we have reaped so many benefits, without realizing it and therefore without any sense of gratitude, from the progress that society has made that we no longer understand this torture of uncertainty. But let us put ourselves in the place of a worker or an artisan who, on awakening every morning, is haunted by this thought: “I am young and strong; I am working, and indeed, it seems to me that I have less leisure and more heavy toil than most of my fellow men. Yet I barely succeed in providing for my own needs and those of my wife and children. But what will become of me, what will become of them, when age or illness have sapped my strength? I must exercise superhuman self-control and prudence if I am to save out of my wages enough to meet these misfortunes. As for illness, to be sure, there is always the chance that I may be lucky, and, besides, there are the mutual-aid societies. But old age is not something to be avoided by good luck; it is sure to come. Every day I can feel it coming nearer; it is bound to catch up with me; and then, after a blameless life of honest toil, what prospects do I face? The poorhouse, the prison, or a hovel for myself; for my wife, beggary; for my daughter, still worse. Oh, why isn't there some social institution that could wrest from me, even by force, during my younger days enough to provide for my old age?”
We must, indeed, bear in mind that this thought, which I have just expressed so inadequately, is tormenting, even at the moment that I am writing these words, and every day and every night, and every hour of the day and night, the terrified imaginations of a vast number of our brethren. And when mankind is faced with a problem in such terms as these, we can rest assured that it is not insoluble.
If, in their efforts to gain greater security for themselves, the workers have spread alarm among the other classes of society, it is because they have turned their efforts in a wrong, unjust, and dangerous direction. Their first thought—as is always the practice in France—was to raid the public treasury, to finance their old-age pensions through taxation, to appeal to the state or the law; that is, to enjoy the profits of plunder without incurring either the dangers or the public disapproval attached to it.
It is not from this quarter of the social horizon that the institution so ardently desired by the workers can come. Old-age pensions, if they are to be useful, sound, praiseworthy, if the means of obtaining them is to be in harmony with the end in view, must be the fruit of the workers' own efforts, energy, wisdom, experience, and foresight. They must be fed by their sacrifices, watered by the sweat of their brows. They have no claims on the government except for freedom of action and the suppression of fraud.
But has the time come when it is possible to set up old-age pensions for the workers? I do not dare affirm it; indeed, I do not believe it is so. In order to establish an institution that may achieve a new degree of security for any class in society, it is necessary that a certain amount of progress, a certain advance in civilization, be achieved in the social milieu in which the institution is to exist. An atmosphere congenial to its survival must be prepared. If I am not mistaken, it must be the responsibility of the mutual-aid societies, with the material resources they have built up, with their spirit of association, experience, foresight, and the sense of self-respect that they can instil in the working classes, to set up the old-age pensions.
For if you will observe what has happened in England, you will be convinced that such things are intricately interrelated, and for progress to be made in one area, progress must first be made in certain others.
In England all adults so desiring have over a period of time joined the mutual-aid societies of their own accord, and this is a most important point to bear in mind when we are dealing with operations that must be carried out on a large scale if they are to have any statistical validity.
These societies have tremendous capital funds and in addition receive considerable annual income.
It can be assumed—otherwise we should have to deny the progress of civilization—that a smaller and smaller percentage of these prodigious funds will be required for sick and unemployment benefits.
Better public health is one of the contributions of civilization. Hygiene and medical science are making progress; machines are taking over the most backbreaking jobs; and longevity is increasing. In all these areas the demands on the mutual-aid associations tend to diminish.
Even more decisive and inevitable is the gradual elimination of great industrial crises in England. They were caused sometimes by those sudden enthusiasms that the English periodically experience for rash enterprises that dissipate vast amounts of capital, and sometimes by the great increase in food costs resulting from protective tariffs; for it is quite clear that when meat and bread are very high, and it takes all the people's resources to procure them, other commodities are not bought, and shut-downs in the factories become inevitable.
Public discussion and the lessons learned in the hard school of experience are eliminating the first of these causes; and we can already predict that this nation, which rushed with such sheeplike credulity into American loans, Mexican mine speculations, and railroad schemes, will be more wary than others of the California gold mirage.
What shall I say of free trade? Its triumph is due to Cobden,∗6 not to Sir Robert Peel;† for the apostle would always have found a statesman, whereas the statesman could never have done without the apostle. Here is a new force in the world and one that will, I trust, deal heavy blows to the monster called unemployment. Restriction of trade has the undeniable tendency and effect of placing some of the country's industries, and consequently a part of its population, in a precarious situation. Just as great waves, which are momentarily held above the level of the surrounding sea by some temporary force, constantly threaten to break loose, so these artificially established industries, hemmed in on all sides by successful competitors, are always on the point of toppling down. What is needed to start their collapse? A mere modification of an article in one of the world's innumerable tariff laws. The change is made, and a panic results. Furthermore, the narrower the circle of competition, the greater the variations in the price of a given commodity. If a department of France, a district, or a town had its own customs regulations, the fluctuations in prices would be considerable. Liberty acts on the same principle as insurance. In different parts of the world and in different years it compensates the bad harvests by the good ones. It keeps prices close to an average figure. It is therefore a leveling and balancing force. It contributes to stability; hence, it combats instability, that great cause of panics and unemployment. It is no exaggeration to say that the first fruit of Cobden's work will be greatly to lessen the dangers that in England led to the formation of the mutual-aid societies.
Cobden has undertaken another task (and it will succeed, for truth well served always triumphs), which will be no less important for the security of the workers. I mean the abolition of war, or rather (what amounts to the same thing), the fostering of the spirit of peace in public opinion, which decides the question of war or peace. War is always the greatest of the upheavals that a people can suffer in its industry, the conduct of its business, the investment of its capital, and even its tastes. Consequently, it is a powerful factor in creating disruption and misery among the classes who have the least control over the course their labor is to take. The more remote the danger from this source, the less burdensome will be the responsibilities of the mutual-aid societies.
And, on the other hand, through the force of progress, with the mere passing of time, their resources will become greater and greater. The day will then come when they can win a new and decisive victory over the insecurity that is inherent in human affairs by expanding their functions and setting up old-age pensions; and this they will undoubtedly do, for such is the ardent and unanimous desire of the workers.
It should be noted that even while material circumstances are paving the way for such action, moral circumstances also are favorable, thanks to the influence exerted by the societies themselves. These societies are developing among the workers habits, qualities, virtues, whose possession and dissemination are a necessary preliminary to old-age pensions. On close examination we realize that this institution presupposes a very advanced type of civilization, of which it is both the effect and the reward. How would it be possible if men were not accustomed to meeting, working together, and managing their common affairs, or, on the contrary, if they were addicted to vices that aged them before their time, or if they had come to think that anything is permissible against the public, and that the common interest is fair game for any kind of fraud?
If the establishment of old-age pension funds is not to be a source of disturbance and discord, the workers must understand that they are to depend on no one but themselves, that the common fund must be voluntarily created by those who expect to share in it, that it is wholly unfair and antisocial to make the classes that will not share in the disbursements contribute to the fund by way of taxes, that is, by force. Now, we are far from having reached that point, and the frequent appeals to the state show only too clearly what the workers' hopes and demands are. They feel that their retirement fund must be fed by state appropriations like those for government functionaries. Thus, one abuse always gives rise to another.
But if we agree that old-age pension funds are to be maintained exclusively by those who have a personal stake in them, can we not say that the system already exists, since life insurance companies offer policies that permit every worker to make provision for the future through some sacrifice of the present?
I have written at considerable length about mutual-aid societies and old-age pensions, although these institutions are only indirectly connected with the subject of this chapter. I have yielded to my desire to show mankind gradually proceeding toward the attainment of security, or rather (since security implies something static), emerging victorious in its battle against risk and uncertainty, that ever present threat to all the enjoyments of life, that sword of Damocles that appears to hang unavoidably over human destiny. The gradual elimination of this threat by its reduction to the average level of the risks that all men at all times and in all places must run is certainly one of the most admirable social harmonies that the political economist can contemplate.
And we must not think that ultimate victory over risk and uncertainty will depend upon the fate of these two institutions of more or less accidental origin. On the contrary: even if experience should prove them unfeasible, mankind would still make its way toward stability. The very fact that uncertainty is considered an evil is sufficient guarantee that it will be continually and, sooner or later, successfully attacked, for such is the law of our nature.
If, as we have seen, the wage system represents, from the point of view of security, an advance over previous forms of association between capital and labor, it still leaves too much to chance and uncertainty. Of course, the worker knows what to count on as long as he has a job, but how long will he have a job, and how long will he have the strength to do it? This is what he does not know; this is the frightful question that hangs over his future. The uncertainty that faces the capitalist is quite different. It is not a question of life or death. His problem may be stated thus: “I shall in any case get some interest on my principal, but will it be more or less?” This is the question that is asked concerning labor that has already been performed.
The philanthropic sentimentalists who see in this situation a shocking case of inequality that they would like to destroy by artificial—and, I might add, unjust and violent—means do not stop to consider that, after all, we cannot change the nature of things. Labor already performed cannot fail to enjoy greater security than labor still to be performed, because finished products cannot fail to be surer resources than products still to be made; because services already rendered, received, and evaluated are on a sounder footing than services that are still up for sale in the open market. If you are not surprised that, of two fishermen, the one who, having worked and saved for a long time, owns lines, nets, boats, and a supply of fish, has less fear for the future than the one who has absolutely nothing except a willingness to go fishing, why are you surprised that, to a certain extent, the same differences are to be seen in the social order? In order to justify the envy, jealousy, and sheer spitefulness with which the worker regards the capitalist, the latter's security would have to be one of the causes of the worker's insecurity. But the contrary is the case, and the very fact that capital is available to one man means that the other man is guaranteed his wages, however inadequate these wages may appear to you to be. Certainly if it were not for capital, the worker's risk and uncertainty would be much more imminent and ruthless. And if the hardships of risk and uncertainty were made worse so that they might be made equal and common to all, would the worker in any way be better off?
Two men have run risks equal, for each one, to an amount that we may represent as 40. One of them by his labor and foresight succeeds in reducing his risks to 10. At the same time his companion's risks, through the mysterious effects of association, have gone down, not to 10, but to 20. What could be fairer than that the one who has earned it should get the larger share of the reward? What could be more surprising and gratifying than that the other should profit from his brother's virtues? Now, this is just what the philanthropists reject, on the ground that it is contrary to the ideal of equality.
The old fisherman said to his companion one day:
“You don't have a boat or nets or any other implement for fishing except your two hands, and you run a great risk of having a poor catch. Besides, you don't have any provisions, and yet you can't work on an empty stomach. Come and join me; it's to your interest as well as mine. It's to your interest, for I will give you a part of our catch, and however much or little it may be, it will still be better than what you could do on your own. It's also to my interest, for the additional amount that I will get with your help will be more than what I shall have to give you. In a word, your labor, my labor, and my capital combined will bring us a surplus over what these would bring us separately, and the sharing of this surplus explains how the association can be profitable to both of us.”
And thus the agreement was made. Later the younger fisherman preferred to receive a fixed number of fish every day. Thus, his variable and uncertain profit was turned into wages, but without endangering the advantages of the association and most certainly without dissolving it.
And it is in such circumstances that the socialists, in the name of their so-called philanthropy, rant against the tyranny of boats and nets, against the fact that the situation is naturally less precarious for the man who owns boats and nets, because he has made them for the very purpose of having some degree of certainty! It is in such circumstances that they try to persuade the destitute fisherman that he is the victim of his voluntary arrangement with the older fisherman, and that he should hasten to return to his isolation!
Yes, the capitalist's future is less precarious than the worker's; which is equivalent to saying that he who already owns something is better off than he who does not yet own anything. Such is the way things are, and such is the way things should be, and that is why every man aspires to become an owner.
Men tend, therefore, to emerge from the status of wage earners to become capitalists. This is a tendency that conforms to the nature of the human heart. What worker does not desire to have his own tools, his own working capital, his own store or workshop or farm or house? What workman does not desire to become the boss? Who is not happy to give orders after having long taken them? It remains to be determined whether the great laws of the economic world, whether the natural play of the social machinery, encourage or militate against this tendency. This is the final question we shall consider on the subject of wages.
And who can have any doubts on this score?
Let us recall how production always and inevitably develops: gratuitous utility constantly replacing onerous utility; human efforts constantly becoming less in comparison with the results they obtain, and, as they are freed from one task, embarking upon new enterprises; every hour's labor corresponding to a steadily increasing quantity of satisfactions. From these premises how can we fail to deduce that there is a constant increase in usable goods and services ready to be distributed, and, consequently, continual improvement in the workers' condition, and, consequently also, a steady advance within the frame of their relative improvement?
For here, the effect having become a cause, we not only see progress continuing, but accelerating as it gathers momentum. In fact, from age to age saving becomes easier, since labor's compensation becomes greater. Now, saving increases capital, stimulates the demand for more hands, and raises wages. The rise in wages in turn encourages saving and the transformation of the wage earner into the capitalist. There is a constant action and reaction, therefore, between wages and saving, and this is always favorable to the working classes, always a factor in relieving them from the yoke of pressing need.
It will be said, perhaps, that I present here everything that can bring a gleam of hope to the workers' eyes and that I hide everything that can plunge them into discouragement. If there are tendencies toward equality, I may be told, there are also tendencies toward inequality. Why do you not analyze them all, in order to explain the workers' true situation and thus bring the science of political economy into accord with the melancholy facts that it seemingly refuses to see? You show us gratuitous utility taking the place of onerous utility, the gifts of God falling more and more into the common domain, and, by that very token, man's labor receiving a steadily increasing compensation. From this increased compensation you conclude that saving becomes easier and easier; and from the increased ease of saving you deduce a new increase in compensation, bringing still further increases in savings, and so on through all time to come. It may be that this order of things is as logical as it is optimistic; it may be that we are not able to refute it scientifically. But where are the actual facts to support it? Where may we actually see the emancipation of the proletariat being carried out? In the great manufacturing centers? Among the agricultural workers? And, if the predictions of your theory do not prove true, are there not perhaps, in addition to those economic laws that you cite, other laws, working in an opposite direction, that you fail to mention? For example, why do you say nothing about the competition that takes place among laborers, forcing them to accept lower wages; about the urgent need to gain a livelihood, which exerts a constant pressure on the worker and compels him to accept the capitalist's terms, so that the most destitute, the hungriest, the most isolated worker, and consequently the one least able to refuse any offer, sets the wage scale for all the others? And if, despite all these obstacles, the status of our unfortunate brothers does happen to improve, why do you not show us how the law of population interposes its disastrous operation, multiplying the already teeming multitudes, intensifying competition, increasing the supply of labor, winning the day for capital, and constraining the worker to accept, for a twelve- or sixteen-hour day, only the irreducible minimum (such is the classic phrase) for subsistence?
If I have not taken up all these aspects of this problem, it is because it is impossible to put everything into a single chapter. I have already set forth the general law of competition, and we have seen how far it is from giving any class, especially the least fortunate one, serious reason for discouragement. Later, when I explain the law of population, it will be evident, I hope, that, in its general effects, it is not at all ruthless. It is not my fault that the solution of every great problem—for example, the fate of a large percentage of the human race—is to be found, not in the operation of a single, isolated economic law, and consequently, in a single chapter of this book, but in the operation of the sum total of all these laws, that is, in the entire book.
Then too—and I call the reader's attention to this distinction, which most certainly is not a mere quibble—when we are confronted with a certain phenomenon, we must be careful not to attribute it to general and providential laws if on the contrary it is produced by the violation of those laws.
I certainly do not deny the existence of the calamities of all possible types—drudgery, insufficient wages, insecurity, the sense of inferiority—that assail those of our fellow men who have not yet been able to rise, by the acquisition of property, to a more comfortable condition. But we must recognize that insecurity, want, and ignorance constituted the starting point for the entire human race. That being the case, the question is, it seems to me, whether: (1) the general laws of Providence do not tend to lighten this triple yoke for all classes; (2) the achievements of the most advanced classes do not ease the way for the more backward. If the answer to these questions is in the affirmative, we may say that the fact of social harmony is established, and that the ways of Providence are justified, if indeed Providence stands in need of justification.
Furthermore, since man is endowed with initiative and free will, it is certain that the beneficent laws of Providence are of service to him only in so far as he conforms to them; and although I affirm that he is perfectible by nature, I certainly do not mean that he advances even when he misunderstands or violates them. Thus, I say that transactions that are carried out among the parties concerned freely, voluntarily, without fraud or violence, promote progress for everyone. But this is far from saying that progress is inevitable, and that it will be achieved through war, monopoly, and fraud. I say that wages tend to rise, that this rise encourages saving, and that saving, in turn, raises wages. But if the wage earner, through habits of debauchery and dissipation, prevents this progress from being initiated, I do not say that its results will still be evident, for the contrary is implied by my statement.
In order to put the scientific theory to the test of actual fact we must compare two different eras: for example, 1750 and 1850.
First, we must ascertain the proportion of proletarians to property owners on the two dates. We should find, I expect, that during the last century the number of those who have some working capital has grown greatly in comparison with those who have none.
Next, it would be necessary to determine the exact status of each of these two classes, which can be done only by observing the satisfactions they enjoy. Most likely we shall find that in our times both classes derive far more real satisfactions, the one from its accumulated labor, the other from the labor it is still performing, than was possible in the days of the Regency.
If this twofold progress has not been respectively or relatively all that could be desired, especially for the working class, we must ask whether its course has not been more or less retarded by error, injustice, violence, misunderstandings, passions—in a word, by some fault on the part of man, by accidental causes that must not be confused with what I call the great and constant laws of social economy. For example, have there not been wars and revolutions that could have been avoided? Have not these atrocities first drained off, then dissipated, incalculable amounts of capital, thereby diminishing the funds available for wages and postponing for many workers' families the hour of emancipation? Have they not also diverted labor from its natural end, demanding of it, not satisfactions, but destruction? Have we not had monopolies, privileges, discriminatory taxation? Have there not been absurd expenditures, ridiculous fashions, wasted efforts, which can be attributed only to childish impulses and prejudices?
And what does all this prove? That there are general laws that men may either obey or disobey.
It cannot be denied that the French in the last hundred years have often run counter to the natural and orderly evolution of society; nor can we fail to hold continual warfare, periodic revolutions, injustice, privilege, dissipation, and all manner of folly, responsible for a frightful waste of our energies, our capital, and our labor.
Yet, on the other hand, despite all these facts that are only too evident, we observe something else, namely, that during this same hundred-year period the property-owning class has been recruited from the proletariat, and that both classes now have respectively available to them a greater number of satisfactions.
If we follow, then, a rigorously logical line of reasoning, we arrive at this conclusion: The general laws of the social world are harmonious, and they tend in all respects toward the improvement of mankind.
For, in the final analysis, if after a period of a hundred years during which these laws have been so frequently and so flagrantly violated, mankind has moved ahead, we must conclude that their action is beneficent enough to more than counterbalance the effects of disturbing factors.
And how could it be otherwise? Is there not something equivocal or, rather, redundant in the expression “beneficent general laws”? How can they fail to be beneficent? When God implanted in every man an irresistible impulse to achieve the good, and, in order to enable him to discern it, an inner light capable of correcting his errors, from that very moment He decreed that mankind was perfectible, and that, despite all gropings, errors, miscalculations, oppressions, and waverings, mankind would ever advance toward the endless promise of a better world. This advance, with the errors, miscalculations, and oppressions eliminated, is what we mean by the general laws of the social order. The errors and the oppressions are what I call the violations of these laws and the disturbing factors that work against them. Hence, the laws cannot fail to be beneficent, and the disturbing factors to be baneful, unless we go so far as to question whether the disturbing factors may not have more lasting effects than the general laws. Now, this is contrary to our premise that our intelligence, though fallible, is capable of correcting its errors. It is clear that, the social world being constituted as it is, sooner or later error is held in bounds by responsibility, and that oppression sooner or later is broken against the rock of solidarity; hence, it follows that the disturbing factors are not permanent by nature, and that only those phenomena whose action is disturbed by them merit the name of general laws.
In order to conform our actions to general laws, we must know what they are. Let me, therefore, dwell somewhat upon the relations, so poorly understood, that exist between capitalist and worker.
Capital and Labor cannot get along without each other. In constant mutual confrontation, they enter into arrangements that are among the most important and interesting that the economist can observe. And—make no mistake about it—observations on this subject that are poorly made, if they become widely accepted, can give rise to inveterate animosities, bitter conflicts, crimes, and bloodshed on a vast scale.
Now, I declare with the firmest conviction that for some years the public mind has been saturated with the most completely false theories on this subject. It has been alleged that free and voluntary transactions between capital and labor must give rise, not accidentally, but necessarily, to monopoly for the capitalist and oppression for the worker. Consequently, it was boldly concluded that freedom must everywhere be stifled; for, I repeat, when such theorists accused freedom of creating monopoly, they professed, not to be merely observing a fact, but rather to be formulating a law. In support of this theory they cited the effect of the machine and of competition. M. de Sismondi was, I believe, the originator, and M. Buret∗ the propagator, of these gloomy doctrines, although the latter is most timid in his conclusions, and the former has not ventured to draw any conclusions at all. But others have come along who were bolder. After stirring up hatred for the words “capitalism” and “landlordism,” after persuading the masses of the absolute truth of the so-called discovery that liberty leads inevitably to monopoly, deliberately or not, they stirred up the people to lay violent hands on this accursed liberty.7 After four days of bloody rioting, liberty was rescued but is still not secure, for do we not see the state, in compliance with popular prejudice, ready at every moment to interfere in the relations of capital and labor?
The role of competition has already been deduced from our theory of value. We shall do the same in showing the effects of the machine. Here we must limit ourselves to setting forth a few general ideas on the relations between capitalist and worker.
The fact that first forcibly strikes our gloomy reformers is that the capitalists are richer than the workers. They obtain more satisfactions; hence, they allot themselves a larger, and consequently unfair, portion of the commodities produced by the joint efforts of both. This is the conclusion suggested by the more or less intelligently and impartially prepared statistics that present the situation of the working classes.
These gentlemen forget that absolute poverty is the inevitable starting point for all men, and it inevitably persists as long as they have acquired nothing, or nobody has acquired anything for them. To make the blanket observation that capitalists are better off than simple day laborers is merely to note the fact that those who have something have more than those who have nothing.
The questions for the worker to ask himself are not: Does my labor bring me a great deal? Does it bring me very little? Does it bring me as much as it brings another? Does it bring me what I should like?
Rather, he should ask: Does my labor bring me less because I have put it at the service of the capitalist? Would it bring me more if I performed it on my own, or if I joined my labor with that of others as destitute as I am? My situation is bad. Would I be better off if there were no capital on earth? If the share that I receive as a result of my arrangement with capital is larger than my share would be without it, what grounds do I have for complaint? And then, if transactions are free and voluntary, what are the laws determining whether there is to be a rise or a fall in the amount of our respective shares? If the nature of these transactions is such that, as the total to be distributed increases, my share in the increase becomes steadily larger,8 then, instead of vowing eternal hatred against the capitalist, ought I not to look upon him as a good brother? If it is well established that the presence of capital is advantageous to me, and that its absence would mean my death, am I very wise or prudent in abusing it, intimidating it, requiring it to be frittered away or forcing it into hiding?
It is constantly alleged that, in the bargaining that precedes the contract, the situations of the two parties are not equal, since capital can wait while labor cannot. The needier party, it is said, must always be the one to give in, with the result that the capitalist is able to dictate the wage rates.
Undoubtedly, if we look at things only superficially, the one who has laid up provisions and, by reason of his foresight, can bide his time has the advantage in the bargaining. If only an isolated transaction is considered, the one who says: Do ut facias, is not so hard pressed to reach a conclusion as the one who responds: Facio ut des. For when one can say do, one owns something, and when one owns something, one can wait.
We must not, however, lose sight of the fact that the principle of value is the same whether it is related to a service or to a product. If one of the parties says do, instead of facio, it is for the reason that he has had the foresight to perform the facio in anticipation of the want. Essentially, service is in both instances the measure of value. Now, if every delay means suffering for current labor, it means a loss for labor previously performed. We must not think, therefore, that the one who says do, the capitalist, will take any great delight in delaying the bargain, particularly if we take into account all his other transactions as well. As a matter of fact, do we see much capital lying idle for this reason? Are there very many manufacturers who stop production, shipowners who cancel their sailings, farmers who delay harvesting their crops, solely to depress wages, by subjecting their workers to the pressure of hunger?
But, without denying that in this respect the capitalist's position is more advantageous than the worker's, do we not have something else to consider in regard to their arrangements? Is there not an advantage for current labor in the fact that accumulated labor loses value through the mere lapse of time? I have already referred to this phenomenon. However, it is important in this connection to call it again to the reader's attention, for it has a great influence on the pay that current labor receives.
What, in my opinion, renders Smith's theory that value comes from labor false, or at least incomplete, is the fact that it assigns only one element to value; whereas value, being merely the expression of a relationship, necessarily has two elements. Besides, if value came solely from labor and represented only it, value would be proportional to labor, which is contrary to all the facts.
No, value comes from service rendered and received; and service depends as much, if not more, upon the pains it spares the one who receives it as upon the pains taken by the one who performs it. The most commonplace facts confirm this reasoning. When I buy an article, I may well ask myself: “How long did it take to make it?” And this is undoubtedly one of the factors that figure in my evaluation; but also and above all else I ask: “How long would it take me to make it? How long did it take me to make the thing asked of me in exchange?” When I buy a service, I ask not only how much it will cost the seller to perform it for me, but also how much it will cost me to perform it for myself.
These personal questions and the answers they elicit are so essential a part of the evaluation as to be usually the determining factor in it.
Try to buy a diamond that someone has happened to find. You will be asked to pay for little or no labor, but the price will be high. Why will you consent? Because you will take into account the labor you will be spared, the labor that otherwise you would be obliged to perform, in order to satisfy your desire to own a diamond.
When, therefore, previously performed labor and current labor are exchanged, the amount of time or effort they require is not considered, but rather what is considered is their value, that is, their mutual service, the utility each offers the other. If the capitalist were to say, “Here is a product that cost me ten hours of labor,” and if the worker were in a position to reply, “I can make the same product in five hours,” the capitalist would be forced to yield the difference. For, once again, it matters very little to the present purchaser to know how much labor the product used to cost; what he cares about is how much labor the service he anticipates from the product will save him today.
The capitalist, in a very general sense, is the man who, having foreseen that a given service will be in demand, has prepared it in advance and has incorporated its fluctuating value in a commodity.
When labor has thus been performed by way of anticipation, with a view to future remuneration, there is nothing to assure us that at a particular future date it will perform exactly the same service, spare the same pains, and, consequently, retain a uniform value. Such a situation would, indeed, be most unlikely. It may be very much in demand, very difficult to replace by any other means; it may render services that are more highly or more widely appreciated and acquire an increasing value with the passing years; in other words, it may be exchanged for a steadily increasing amount of current labor. Thus, it is not impossible that a given product, like a diamond, a Stradivarius violin, a painting by Raphael, a vineyard in Château-Lafite,∗ may be exchanged for a thousand times more days' labor than it originally required. This means nothing more nor less than that previous labor is very well remunerated in this case because it renders great service.
The opposite is also possible. It can happen that what once required four hours' labor is now sold for only three hours of equally strenuous labor.
But—and this seems to me most important from the standpoint and in the interest of the laboring classes, which so ardently and understandably long to emerge from the present precarious situation that so fills them with dread—although both alternatives are possible and do successively occur, although accumulated labor may sometimes gain and sometimes lose value as compared with current labor, yet the first case is rare enough so that it may be considered as accidental and exceptional, whereas the second is the result of a general law that has its origin in the very nature of man.
There is no gainsaying the fact that man, with his capacity to learn through reason and experience, is by nature capable of progress, at least in industrial matters (for, from the moral point of view, my assertion may be open to challenge from some quarters). There is certainly no question that, thanks to new and improved machinery, to increased use of the gratuitous forces of Nature, most things are today accomplished with less labor than they used to require; and we may confidently assert that in any ten-year period, for example, a given amount of labor will, in most cases, produce greater results than the same amount of labor could produce in the previous decade.
And what is the conclusion to be drawn from this? That previously performed labor is constantly depreciating in relation to current labor; that, in exchange, without any injustice and in order to achieve parity of services, the former must offer more hours than it receives in return. This is an inevitable result of progress.
You say to me: “Here is a machine; it is ten years old, but it is still new. It cost one thousand days of labor to make it. I will let you have it for the same number of days' labor.”
I answer: “In the last ten years new tools have been invented, new techniques have been discovered, so that today I can make, or have made (which amounts to the same thing), the same kind of machine for six hundred days' labor; therefore, I will pay you no more.”
“But I shall be losing four hundred days' labor.”
“No, for six days of today's labor are worth ten of yesterday's. In any case what you offer me for one thousand I can get elsewhere for six hundred.”
Here the debate ends. If time has depressed the value of your labor, why should I bear this loss?
You say to me: “Here is a piece of land. To bring it to its present state of fertility, my ancestors and I spent one thousand days' labor on it. In fact, my ancestors knew nothing of axes, saws, or spades and did it all with their own bare hands. Nevertheless, give me first one thousand of your days' labor to match the one thousand I give you, then add three hundred for the productive powers of the soil, and the land is yours.”
I answer: “I will not give you one thousand three hundred days' labor for it or even one thousand, and here are my reasons: There are on the surface of the earth an indefinite number of productive powers that are valueless. And besides, today we do know about spades, axes, saws, plows, and many other ways of making labor easier and more productive; so that with six hundred days' labor I can either put uncultivated land into the same state as yours or else (which amounts to absolutely the same thing for me) obtain through exchange all the advantages you derive from your land. Hence, I will give you six hundred days and not one hour more.”
“In that case,” you answer, “not only do I fail to benefit from the alleged value of the productive powers of this soil, but I do not even get back the actual number of days of labor my ancestors and I devoted to its improvement. Is it not strange that I should be accused by Ricardo of selling the productive powers of Nature; by Senior of engrossing the gifts of God; by all the economists of being a monopolist; by Proudhon of being a thief; while in fact I am merely a dupe?”
“You are no more dupe than monopolist. You receive the equivalent of what you give. Now, it is neither natural nor just nor possible that hard labor done by hand centuries ago should be exchanged on an equal day-for-day basis for the more intelligent and productive labor done nowadays.”
Thus, we see that, through the admirable working of the social mechanism, when previous labor and current labor are brought together for comparison, when it is a question of determining their relative shares in the product of their joint efforts, the specific superiority of each is taken into account: they share in this distribution according to the comparative services they render. Now, it may well happen sometimes, under exceptional circumstances, that this superiority is on the side of previous labor. But man's nature and the laws of progress cause it to fall, in the vast majority of cases, on the side of current labor. Progress comes to the aid of labor; capital deteriorates.
Aside from this result, which shows how empty and vain are the rantings inspired in our modern reformers by the so-called tyranny of capital, there is another consideration still more fitted to extinguish in the workers' hearts that deplorable and unnatural hatred against the other classes that people have tried with some success to kindle.
The consideration I refer to is this:
Capital, no matter how high it sets its claims and whatever its success in realizing them, can never put labor in a worse position than would be its lot in isolation. In other words, the presence of capital is always more favorable to labor than would be its absence.
Let us recall the illustration I used a little while ago.
Two men are reduced to gaining their livelihood by fishing. One of them has some nets, a line, a boat, and a few provisions to last him until he brings in his next catch. The other has only his two hands. It is to their mutual interest to associate.9 Whatever may be the terms on which they agree to share the catch, neither the richer nor the poorer man will find them detrimental to his own situation; for the instant either one of them finds the association less to his advantage than isolation, he may return to isolation.
In the life of the savage, as in the life of a pastoral, an agricultural, or an industrial society, the relations between capital and labor always conform to this pattern.
Thus, doing without capital is always a final way out for labor. If the demands of capital were to go so far as to make joint action less profitable for labor than isolated action, labor would be free to turn to isolation as a refuge, always available (except in slavery) against a voluntary association that seems disadvantageous; for labor can always say to capital: “I prefer going it alone to the terms you offer.”
Someone objects that this refuge is an illusion and a mockery, that, for the worker, going it alone is completely impossible, and that without equipment he would die.
This is true, but it confirms the truth of my statement to the effect that even if capital carries its demands to the most extreme limits, it still is beneficial to labor by the very fact of their joint association. Labor enters a condition worse than the worst joint association only at the moment when the association terminates, that is, when capital withdraws. Cease, then, apostles of doom, to cry out against the tyranny of capital, since you agree that its action is always—to a greater or lesser extent, no doubt, but always—beneficial. A singular tyrant indeed, whose power is a help to all who turn to it and is harmful only when withheld!
But, the objector may insist, although this might have been true at the beginning when society was first formed, today capital has invaded everything; it occupies all the positions; it has taken possession of all the land. The worker no longer has air to breathe, room or land on which to set foot, or a stone on which to lay his head without the permission of capital. He is therefore subject to the dictates of capital. You give him as a refuge only isolation, which, as you admit, is death!
This statement reveals complete ignorance of economic law and deplorable confusion.
If, as is said, capital has taken over all the forces of Nature, all the land, all the space on earth, I ask: For whose profit? For its own profit, of course. But how is it, then, that a simple laborer, with only his two hands, can procure in France, in England, in Belgium, a thousand, a million times more satisfactions than he could obtain in isolation—not on the social hypothesis that you find so revolting, but on that other hypothesis, so dear to you, of a society in which capital has not yet been guilty of any usurpation?
I shall keep returning to this fact in our debate, until you, with your new scientific theories, can find some other explanation for it, for, as far as I am concerned, I feel that I have already accounted for it.10
Yes, take the first workingman that comes along in Paris. Ascertain what he earns and what satisfactions he enjoys. When you have both properly railed against the curse of capital, I shall step in and address this workingman in the following terms:
“We are going to destroy capital and all its works. I am going to put you down in the middle of a hundred million acres of the most fertile land, and I shall give you full and complete ownership of everything in it both above and below ground. You will be elbowed by no capitalist. You will enjoy unrestrictedly your four natural rights of hunting, fishing, gathering fruits, and grazing. It is true that you will have no capital; for, if you did, you would be in exactly the same position that you criticize in the case of others. But, after all, you will not have to complain of landlordism, of capitalism, of individualism, of usurers, of speculators, of bankers, of profiteers. The land will be entirely yours. Decide if you wish to accept.”
At first, the workingman will dream of a life as monarch of all he surveys. Yet, as he reflects, he will probably say to himself: “Let's see. Even when you have a hundred million acres of good land, you still have to live. First, let's calculate the bread supply in the two situations. At present I earn three francs a day. With wheat at fifteen francs I can have a hundredweight of it every five days. That's the same as sowing and reaping it myself. When I am the owner of a hundred million acres of land, the most I can have, without capital, is a hundredweight of wheat in two years, and in the meanwhile I can starve to death a hundred times. Therefore, I'll settle for my wages.”
The truth is, we do not pay enough attention to the progress humanity has had to make even to assure the poor pittance our workers now live on.11
Improvement in the workers' status is to be found in the wage system itself and in the natural laws that govern wages.
Corollary: Moving from the status of wage earner to entrepreneur becomes increasingly less desirable and easier.
[∗][See chap. 5, p. 147.—Translator.]
[∗][These are the mutual insurance associations best exemplified in Bastiat's time by the English Friendly Societies.—Translator.]
[∗][Richard Cobden (1804–1865), English manufacturer, member of Parliament, and champion of free trade, known personally to Bastiat and much admired by him.—Translator.]
[†][Sir Robert Peel (1788–1850), English statesman, member of the Conservative Party, and Prime Minister in the 1840's.—Translator.]
[∗][Antoine Eugène Buret (1810–1842), brilliant and, as Bastiat implies, pessimistic precursor of French socialism. Author of De la misère des classes laborieuses en Angleterre et en France, 1840.—Translator.]
[∗][Located in Pauillac, renowned for its vineyards producing Bordeaux wine.—Translator.]
[1.][Chap. 1, p. 7, and chap. 2, pp. 20–21.—Editor.]
[2.][See the later chapter on “Responsibility.”—Editor.]
[3.][See, in Vol. IV (of the French edition), “The Law,” and particularly, pp. 360 ff. (Selected Essays on Political Economy, chap. 2).—Editor.]
[4.]It is to be noted that Mr. Roebuck belongs to the extreme Left in the House of Commons. In this capacity he is the natural enemy of all imaginable governments; yet at the same time he advocates absorption by the government of all rights and all functions. The proverb is therefore false that says, “Never the twain shall meet.”
[5.]Quoted from La Presse, June 22, 1850.
[6.][See Vol. III (of the French edition), pp. 442–445.—Editor.]
[7.]The riots of June, 1848.
[8.]Chap. 7, p. 193.
[9.][See chap. 4.—Editor.]
[11.][The manuscript brought from Rome ends here. The short note that follows was found among the papers that the author had left in Paris. It indicates how he had proposed to end and sum up this chapter.—Editor.]