Thomas Mackay “The Interest of the Working Class in Free Exchange” (1894)
Note: This extract is part of The OLL Reader: An Anthology of the Best of the OLL, the table of contents of which can be found here. It is from "Part X: The Critique of Socialism and Interventionism".
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Thomas Mackay, A Policy of Free Exchange. Essays by Various Writers on the Economical and Social Aspects of Free Exchange and Kindred Subjects, edited by Thomas Mackay (New York: D. Appleton and Co., 1894).
- "The Interest of the Working Class in Free Exchange" </titles/314#Mackay_0135_446>.
The text is in the public domain.
VII. The Interest of the Working Class in Free Exchange by T. Mackay
'THE property which every man has in his own labour, as it is the original foundation of all other property, so it is the most sacred and inviolable.' Such is the axiom in which Adam Smith proclaims the charter of human freedom. It is a pregnant phrase, and the corollaries which follow from it are far-reaching and important. A man's property in himself gives him a right of exclusive use in his own labour, and, as under the present subdivision of labour its principal use will consist in being exchanged for wages, it gives him also a right of Free Exchange. To argue that exchange should be other than free is to countenance slavery. This monopoly, or exclusive power of sale over his own labour, is sacred and inviolable. It can only be exercised by the free will of the seller, that is to say, in Free Exchange. This universal right vested in every seller of labour does not confer on any one man a right to compel others to purchase his labour, for such a forced exchange would be a violation of our axiom, in that it compelled other men to part with their labour, or the results of their labour, against their will. The axiom gives, therefore, no guarantee of employment, no droit au travail; it merely affirms each man's exclusive right to take his own labour and services to market. Further, if the greater may be held to include the less, each man has the same right of property over all that he obtains in exchange for his labour. In other words, within the limits set by an enlightened jurisprudence, a man is entitled to dispose of his wages as he thinks fit. In the infinite series of exchanges here foreshadowed, labour is 'the original foundation of all other  property.' To complete our view of the organizing influence of exchange, another deduction must be drawn, which seems to follow naturally from the axiom above stated. It is, that if a man has a right of sale he has also a right of gift. Hence the jurisprudence of the civilized world, recognizing that economically as well as physiologically the life of the child is a continuation of the life of the parent, has sanctioned, what it is probably powerless to forbid, the right of inheritance and bequest, as being on the whole the simplest and most equitable method of passing property from one generation to another. Every man, then, has property in his own labour, his own mental efforts, and in the values which neighbours freely give him in exchange for these. Liberty and Property, or, as relatively to an industrial society it may more suggestively be stated, Free Exchange and Property are two inseparable ideas.
It is hardly necessary to depart from the precedent of our axiom, and to complicate the question by considering the case of property held in virtue of alleged acts of illegal appropriation in a prehistoric past. Practically speaking, at the present day all property rests on a title of labour bestowed, or on some legal act of exchange or bequest. The current controversy as to the 'unearned increment,' that is, as to the right of private ownership in an undertaking like the New River Company, or in ground-rents in the city of London, has nothing to do with the validity of the original title. The point raised is whether the State should not retain to itself any increment of value which may arise from a future concentration of demand on a particular water supply or a particular bit of land. Our answer to this will depend on our judgement as to the ability of the State to forecast the course of demand, and as to the wisdom of leaving speculation in land to private persons. If we admit that the State should be a speculator in land values, there is no reason why now or at any other time it should not, with a view of lightening future taxation, purchase at the market rate land which, its advisers think, is likely to rise in value. It is well, however, to remember that if by chance it finds itself in possession  of a site of enhanced value, it can only do what the private owner does, namely, let it at a rack rent. To let it under its market value, as fixed by the intensity of the demand for it, is at once jobbery and favouritism, and has further the mischievous consequence of concentrating population where the high price of land, if left to itself, would tend to disperse it. This intense concentration of demand on particular articles is an unavoidable incident so long as men naturally or by fashion continue to desire the same thing. It has, however, this convenience, that the values which it creates are a kind of natural consols. This is appreciated by the poorer classes, as is evidenced by the fact that their own provident institutions invest a large amount of their funds in ground-rents. All this, however, has nothing to do with the question of title, and for the purpose of this discussion it is proposed to accept the proposition that the property which every man has in his own labour is the original foundation of all other property.
One assumption has been made, that a man has a monopoly in his own labour and in the values for which he exchanges his labour. If this be conceded, we have a justification of the principle on which, though there are many lets and hindrances to its full influence, the present basis of society mainly rests; we have also an acknowledgement that these lets and hindrances are contrary to justice; it remains to be shown that we have found a principle, which, if these lets and hindrances could be removed, is capable of 'moralizing' the whole organization of social life.
All things in process of evolution are of necessity imperfect, and if we are analyzing society with a view of discovering the principle of association most conducive to its welfare, we waste our time if we search for one which has attained a paramount ascendency. If there is any principle which at this moment has a complete and undisputed authority, the present imperfect condition of society will be its conclusive condemnation. If we are looking for a principle to which we can without misgiving entrust the progress of the race, it ought to have some of the following characteristics. It ought, in the first place, to be a force already at work. It ought to be a rule  of conduct which has already established some authority for good over human nature. It were hopeless to try to reorganize society by a force which in the past mankind has consistently ignored. Further, if we wish to recognize the influence which makes for social progress, we should look for one which has power to transform the lower and purely selfish motive into the higher and social motive. To adopt the epigrammatic phrase of Mr. Huxley's Romanes lecture, we must look for some principle which, in itself, is a 'pedagogue to virtue.'
All these conditions seem to be present in the principle of Free Exchange. Without doubt it has played, and is playing, a great part in the social economy of the civilized world. It has not permeated, it is true, to every corner of society. It has been restricted by the nature of things, and by human artifice. Still, to those who permit themselves to indulge in ideals, it is a principle capable of exorcising from human character the instincts of the 'tiger and the ape,' by making mutual interchange of service the all-pervading motive of our associated life.
Even under our present subdivision of effort, no activity of the economic man is entirely self-regarding. Men labour and exchange their labour, or the products of their labour, for the labour or products of other men. The man, therefore, who wishes to receive much in exchange, must strive to perfect his capacity for the service of his fellows. This influence affects not only manual labour, but every act of capitalization, for the application of capital to production can only bring reward to its author, so long as it ministers to the requirements of the public. Capitalization, as we shall presently see, is essentially a process of exchange. In this blending of the private with the public motive, we may perceive the birth of a new sentiment and a new rule of conduct awakened, as it were, by this elementary lesson of the 'cosmic pedagogue.'
On the other hand, it is acknowledged that this process of evolution is incomplete, that the lower nature of the 'tiger and the ape' is by no means eradicated. Is it not conceivable, however, that the slowness of our progress is due to the inherent difficulty of the subject, to the dullness and obstinacy  of the pupil, rather than to any defect in the teaching of the pedagogue?
It is the purpose of the following pages to trace the development of the principle of Free Exchange, more especially as it has affected the property and savings of the working class. How far has it already been the foundation of social welfare? To what further heights of prosperity does it seem to beckon us? To what extent is it a 'pedagogy' creating competent social habits and character in the beings that live within its organizing influence?
To the poor man, his most important, as well as his most sacred, possession must ever be his own labour. His savings are in all probability of small amount, and their rise upon the original foundation of his labour has been of recent date. The labour market, therefore, is to him of the highest importance. To the man who has anything to sell, more especially to the man who deals in a commodity, which, like labour, will not keep, it is an advantage to be brought into contact with the largest possible number of buyers. This is the function of a market or exchange. In a great organized market, prices are fixed in an automatic fashion, into which no personal element can enter. In the general extension of the open market which has been going on for many years under the influence of free trade, some things tend to rise in value, others to fall in value. To which of these classes does labour belong?
A sovereign will exchange for a greater quantity of wheat or for a greater quantity of clothing than fifty years ago. On the other hand, it will purchase a less quantity of labour. The rule would seem to be, that those things which can be produced practically at will, tend to depreciate in value; while those things of which the supply is more or less incapable of being immediately increased, tend to appreciate in value. There would seem to be reason for thinking that in the past, at all events, the value of labour has been enhanced.
We are hearing a good deal nowadays of the alleged appreciation of gold. It is argued that the value of gold has  risen because the number of exchanges in which it has to serve as a measure has increased far more rapidly than the production of gold. This, of course, is denied by some who are of opinion that the annual production, and the economies in the use of bullion effected by various expedients of credit, have kept pace with the public requirement for this precious metal. No opinion is here offered on the question, it is cited only to bring out the general admission, that if an article of universal demand is supplied in limited quantities, its value relatively to other exchangeable commodities, which increase less rapidly, must be enhanced. The universal demand for gold consists largely in the right of mintage afforded by the governments of the gold-using countries of the world. By means of the mint, gold bullion is assured of its market, and passed into the currency of the country. It is the object of civilization to organize a similar market for labour.
Let us pursue the comparison a little further. Labour even more than gold is a necessary element in most operations of industry and exchange. Credit can serve as a substitute for gold, but no substitute can be found for labour. Improved machinery does not dispense with labour, on the contrary, it makes a higher demand for skill and trustworthiness and for the higher forms of labour. Labour, moreover, unlike gold, can be applied to an infinite variety of purposes. Every increase of the labour population ought, and to a certain extent does, create a demand for its own employment. Given a number of employable but unemployed labourers, a well-organized market ought to afford them an opportunity for a profitable exchange of services. A glut of gold in the bullion market, owing to fresh discoveries, is a conceivable thing, and indeed has happened before now, bringing with it a depreciation in the value of gold. No operation of the mint could prevent this. On the other hand, with a really effective labour exchange, and a real mintage for labour, an excessive supply of labour is impossible.
I argue that this certain market for labour can be organized, not by a recognition of any droit au travail,but by the operation of the principle of Free Exchange, and by that only. 
The foregoing comparison between the gold and the labour market establishes a presumption in favour of the view that, in an absolutely free market, the price of labour must tend to rise. The trade unionist, however, will not trust himself to the open market, and seeks to raise the price of his labour by combination and by various restrictions on the right of Free Exchange. Let us consider this opinion somewhat more in detail.
The attitude of the trade unionist would seem to rest on a certain phase of the Malthusian terror. As a general proposition, the doctrine attributed to Malthus has lost its force. If a really effective labour exchange were established, all labour would be passed into currency. Malthus' theory can only be true in markets which are artificially limited. There is unfortunately congestion of population in certain industries, and when relief is sought, as it too often is, by action which results merely in limiting production, it may occasionally be true that population increases more rapidly than subsistence. Still, if there is no absolute mobility of labour, there is certainly no absolute immobility, and Mr. Henry George is, I think, right in arguing, not perhaps that subsistence actually does increase more rapidly than population, but that with a better organization of the labour market it certainly would so increase. The idea of the trade unionist that there is a limited amount of work to be done, is parallel to the Malthusian fallacy that there is a limit to the increase of subsistence. There is no truth in either proposition so long as no artificial impediment is put on those Free Exchanges which at once employ labour and increase subsistence.
To what extent under existing circumstances are labour, and the capital necessary to its employment, distributed in the industries most proper to them by the operation of Free Exchange?
Dr. G. B. Longstaff, in an elaborate paper on Rural Depopulation, read before the Statistical Society on June 20, 1893, sums up the matter as follows. 'Reduced to a sentence, what does this mean? It means that the dream of the free-trader is being fast realized. That we are more and more learning  to do in each place that for which each place is most advantageously circumstanced.' As between the town and the country we have already reached a point where it is a somewhat nice calculation to determine whether the higher wages of the town are really preferable to the lower wages, lower rents and allotments of the country. The migration to the town has to some extent levelled up the rate of wages all over the country. An expression of this opinion does not debar one from thinking that a greater freedom of exchange in the matter of land values might turn the tide of migration back again to the country. The phenomenon of labour and capital migrating in search of greater freedom of enterprise is nothing new. It is the motive of the colonization of America and Australia. Hitherto these countries have for the most part taken our unskilled population only. We have preserved our market for skilled labour, because of our international free trade. It is suggested, however, by Mr. Maitland, that in the event of the United States adopting a policy of Free Trade, the greater internal freedom of American industry would attract both skilled labour and capital to a country where a career is open to talent, just as in mediaeval times industry deserted the chartered towns, where it was protected and regulated, for the open villages which grew to be the great manufacturing centres of to-day.
Nor in this connexion should it be forgotten that the worst incidents of our feudal laws of settlement lasted down to the end of the last century, and that up to 1795 no poor man could come into a parish in search of work without being liable to removal to the place of his settlement, not because he was chargeable to the poor rate, but lest he should become so.
Considering the many impediments to its mobility, the wonder rather is that labour has acquired even its present measure of fluidity. When we speak of the mobility of labour as between the town and the country, we do not, of course, mean that each labourer is able to transfer his labour from one market to another. A curious demographer might find in a Dorsetshire village a labourer who had never heard of  Yorkshire, but there is probably not a village in England from which there has not been some migration, some dispersion of the young labour that comes each year to the market, and this is all that is needed to relieve an overstocked market.
Again, it is sometimes argued that the great specialization of employment in modern industry is inimical to the mobility of labour. This, however, seems by no means to be the case. Some interesting information on the subject has been collected by Mr. Llewellyn Smith, in a pamphlet on 'Modern Changes in the Mobility of Labour.' From this it would appear that ability to manage machinery increases rather than diminishes a labourer's power to change his employment. A remarkable instance of this is mentioned, in which, at the close of the American war, a gun factory was turned without change of staff into a sewing machine factory. Although we are still very far from the time when there is one market and one price for all competent and employable labour, those who see no other solution of our social difficulties than that which involves a natural organization of society on a basis of Free Exchange may find some comfort in the progress already made.
Before leaving this aspect of the question, it is worth noticing that there is an alternative to the mobility of labour, it is the mobility of capital. We shall have occasion later on to discuss the question of popular banks. I may, however, so far anticipate, as to suggest that the Dorsetshire labourer who never heard of Yorkshire may be a competent and trustworthy agriculturalist, that if by means of a co-operative bank he could obtain the use of capital, his ignorance of geography would not interfere with the profitable cultivation of his allotment any more than the Lord Chief Justice's indifference to the fame of music hall singers stands in the way of the due discharge of his judicial functions. The Dorsetshire labourer may refuse to move, but the capital may come to him. The thing required is not mere mobility, but a certain character of economic competence. The career opened to the humblest agricultural talent by the system of popular co-operative banks in Germany and Italy is an element in the problem worthy of careful attention. 
The following practical instance will illustrate my contention that Free Exchange is the best available distributor of labour, and that it is to the interest of the labourer more than any one else to allow his labour to be directed by its influence.
The wages of domestic service are a familiar but often neglected instance of the rapid rise in the value of labour in an open market. Within the experience of many people still living the wages of domestic servants have at least doubled. This result has come about in a market in which transactions have all been made in detail. No person willing to accept wages has been prevented from so doing by any labour organization. Undoubtedly here and there persons have served for very low wages, but the general result has been a great advance in the average price paid for the various qualities of domestic labour. No harm has come to the interest of labour, because some transactions, rather than not take place at all, have taken place at a very low rate of exchange. The tendency of the market has been upward, and continues to be upward. The balance of advantage is certainly with the servant rather than the housekeeper.
This, I contend, is largely due to the fact that domestic servants have done their bargaining in detail, and in a free market. The free bargain in detail, far from being a cause of low wages, is the only method by which an impersonal market can be organized without at the same time depriving it of its sensitiveness and power of expansion. The wages of a good cook or housemaid are just as well understood, and just as impersonal, as if they had been settled by the arbitration of a chamber of commerce or a long series of strikes. Servants' agencies, the advertisement columns of the papers, the good offices of friends, are sufficient to constitute an open labour exchange in which domestic servants have more than held their own. Any other organization of the market would have deprived it of its sensitiveness, for wages rise not because the whole bulk of the labour in a particular trade can at once command a higher price, but because in virtue of the bargain in detail the better class of labour gets a rise first, and establishes a precedent which others follow. Any other  arrangement would have prevented the expansion of the market, and this perhaps is the most important point of all. If, by means of a trade union combination, attempt had been made to force the market in order to give to the servant something over the free market rate, it would of course have prevented many people from employing servants. This actually has occurred in America, where the high wages of labour, and the greater equality of condition, have justly enough enabled domestic servants to set up higher pretensions. As a consequence, hotel life has been adopted by many American households which otherwise would have employed servants. In America this is a natural and legitimate adjustment, for the free market enables those who would otherwise be servants to make a better use of their labour. In this country the conditions are different. To have kept persons willing to enter domestic service out of the market, without providing them with some equally good occupation, would have been most mischievous.
The modern trade unionist is inclined to overlook these advantages of the free market, and to ignore the objections to the organization of the market by forced combination.
Looked at from another point of view, it may be said that the favourable conditions of the domestic service market are due to the fact that the demand has always been in excess of the supply. This, again, is due to the continuous increase of wealth, and to the ever-growing number of persons who can afford to keep servants. This same increase of wealth gives rise to greater demand for all articles of consumption. Under a proper organization, therefore, there should be no break in the continuity of demand, for then the man who 'demands,' makes his demand effective by 'supplying' something in exchange. Only a free self-adjusting employment of labour and capital can discover what that 'something' is, and what quantity of it is required. If by coercion of the market a higher price is kept up, say in miners' wages, than employers can for long afford to give, we lose the valuable warning of the free market which says, 'there is too much labour here already, let it be diverted elsewhere.' If, as must, I think, be  conceded, wealth, and consequently demand for something, is increasing, what is required is that new population shall be diverted to the making of this something, and not to producing more coal, which in the case considered is not wanted. Even under present restrictions demand does grow, but how much more rapidly would it grow if we really gave ourselves up to the free market, and allowed it to direct both labour and capital to the supplying of the thing that is really required. It is much to be feared that our present policy is rather in another direction. I may be wrong in thinking that labour will find its most profitable market in the entire absence of all combination, but if so, such combination as there is should surely not ignore the fact that all increase of wages must come from increase of supply, and that to restrict the supply of a thing that is not wanted is not as advantageous as to discover the thing that is wanted, and to set to work to create a supply of it.
The strong belief which exists in most quarters as to the efficacy of combination to increase the wages of labour, is based on the indubitable fact that when an industry is unprofitable, single sales of labour at a reduced price will come more rapidly than when labour is combined in one great association which stands and falls together. This is precisely the point on which I am insisting, namely, that the market is more sensitive if left uncombined. It should, however, be observed that what is true of a fall is true also of a rise of wages; both will come more rapidly in a sensitive and free market. I have already given my reasons for thinking that labour will of necessity have an enhanced value in proportion as the productive transactions, in which it forms a part, increase in number and in efficiency. If, then, the tendency of the price of labour in a free market is to rise, it might be argued that it is more important to keep the market sensitive for the sake of the rise that is inevitable, than to restrict the market for fear of the fall which is very unlikely. Further, though the values of gold and ground-rents are subject to fluctuations, it is clear that under a free organization of labour there can be no fluctuation, but only a growing  intensity of demand for the proper things produced in their proper quantities and places.It is only through the organization of an ever-increasing freedom of exchange that we can discover what these things are, and how and where they are to be produced.
India is a country where the enterprise of Free Exchange is not very highly developed, yet during normal times, the staple foods of the country are circulated with unerring precision to the places where they are required. In times of famine it becomes the duty of the executive to provide maintenance for a starving population. The Indian Civil Service consists of a body of the most disinterested, most able, and most highly trained officials that the world has ever seen. Yet how inferior to the free principle of exchange have been their attempts to distribute the food of the people. In some famines they have failed utterly to gauge the requirements of the people, and wholesale starvation has been the result. At another time they have fallen into the opposite extreme, and there are instances on record where the grain has either rotted away, or where dealers have gone up into the famine districts in order to purchase the superfluous supply which the government had carried up at vast expense. So it is with the labour supply; no human ingenuity can devise a system so likely to distribute it to advantage as that of an absolutely Free Exchange.
While, therefore, I argue that a fall in wages is an event under a free system not likely to occur, there is something to be said for allowing the labour barometer to be extremely sensitive of the causes that tend to a fall of wages. Far from being matter of regret, it is on every account most desirable that labourers should have timely warning that too much enterprise of capital and labour is being applied to some particular industry. This indication they receive when wages show a tendency to fall, and the sooner this tendency makes itself felt the better. In each instance in which by a warning of this kind labour is diverted from one industry to another, a step is taken towards the perfecting of the market. Nothing but congestion of industry can follow from  a neglect of these signs; in one market a glut of supply which no one will purchase; and elsewhere capital lying idle, and labour starving, because we have broken the machinery which would have attracted them to a point where they could have co-operated with profit.
To those to whom the matter presents itself in this light, the wisdom of putting down coercively exchanges of labour which do not conform to Trade Union pattern will appear very doubtful.
It will, for instance, appear to them manifestly unjust and by no means conducive to the object in view, to prevent an old man taking service at the best wages he can command, because those wages do not happen to be trade union wages. I have been informed that, as a consequence of obtaining a contract with the London County Council, which has fallen in with the views of trade unionists in this matter, a certain firm had to choose between dismissing a number of old workmen whose ability was failing, and employing them at a rate of wages which they were unable to earn. This crusade against the aged has without doubt thrown many very worthy persons out of employment, and in some places has increased the rate of pauperism. A similar policy is pursued with regard to the young and the less competent. Young men just out of their apprenticeship, and those who have not established a reputation for competence, are occasionally dismissed or rejected because the employer does not see his way to employ them at the wages of a fully competent man. This denial of a right of market prevents them from ever becoming competent, and they are left to deteriorate in the ranks of the unemployable. Society is then left face to face with the insoluble problem of how to employ an aggregation of the least competent labourers collected from all points of our industrial system. This difficulty of the unemployed is of our own creation. Collectively, the unemployed are the unemployable. Remove these restrictions, and in small numbers, here a few, and there a few, this residuum will be distributed throughout our national industries by the ordinary action of Free Exchange. All will not exchange at the same price, for there are different qualities of labour, but all will exchange at a price which at the moment is an advantage to all concerned, and that price must always be an upward tending price.
The trade unions have a difficult and responsible task to perform, and for their main objects they have the sympathy of all fair-minded men. The question at issue, of course, is whether this restrictive policy is really conducive to the end desired. Even if the wages-regulating policy of the unions could be proved a mistake, they could still render great service to their constituents. They could enlarge, unify and give publicity to the labour exchange; they could increase the sensitiveness with which labour allows itself to be distributed by Free Exchange. They could advise as to the best methods of dealing with savings, and take part in breaking down the imaginary line which separates the labourer and capitalist. They could make the labourer's life cease to be purely proletariate, purely dependent on the daily hand-to-mouth sale of his labour; they could do much to hasten the time when every labourer shall also be a capitalist.
The trade union, however, is not the only impediment to Free Exchange. The absurd jealousy of Parliament has, as Mr. Acworth has shown, brought railway construction to a stand-still. In a letter to the Standard of June 20, 1893, Miss Octavia Hill points out that the action of the London County Council in threatening to use the ratepayers' money to build eleemosynary dwellings is restricting private enterprise. Earlier restrictions on our system of land transfer have in recent years brought things to such a pass that we are now vainly trying to correct the results of former error, by using public money to enforce sales and leases of land which earlier legislation had rendered impossible. He is a sanguine man who looks for anything but confusion worse confounded as the result of this empirical homoeopathy.
Looking at the situation generally, it is not too much to say that the larger forms of enterprise have been practically closed to the present generation by reason of the confiscatory threats of the well-meaning but half-educated controllers  of votes who now contrive to call the tune from all political parties. The extension of the larger forms of enterprise under an enlightened acceptance of the principle of Free Exchange would be practically endless. As it is, unless they can be undertaken by a municipality drawing its supplies from reluctant ratepayers, they are left unattempted, and as a further result there is a congestion of labour and capital seeking employment, and battened down in those smaller enterprises where already competition is far too keen.
The terms 'competent' and 'employable' have been used more than once in the foregoing argument, and a word may here be said as to the important qualification thereby introduced. Labour becomes competent by practice; if it is denied a market it is bereft of an indispensable element of technical education. It is not, perhaps, irrelevant to point out that in the domestic service market, the freest portion of the labour exchange, the employer has practically to provide for the technical training of the employed. Servants enter on their calling untrained. How far our present compulsory and uniform system of popular education is a bar to a voluntary but real system of technical education it is beyond the purpose of this paper to discuss. Certain it is that we have not, and probably never can have, a general system of technical education other than that which is to be gained in the workshop. This fact, together with the right claimed by some, if not by all, trade unions to limit by various expedients the number of workmen in various trades, must have an appreciable effect on the distribution of labour. One result is that an undue proportion of the young labour becoming available each year in the towns is driven into the ranks of clerks and unskilled labourers. The limited application of free trade principles under which we live is not able to work miracles. It cannot organize industry with an excessive supply of clerks and unskilled labourers; it looks for some assistance from the intelligent and responsible human beings, whose operations it seeks to direct to the best advantage.
There is no subject more keenly debated at the fireside of the labourer than the question 'What are we to do with our boys?'  Parents are extremely anxious to direct their children to the career open to talent; but the restrictive policy of the time obscures the signs of the market and obstructs elementary arrangements for technical education. Much of the competence of labour must always depend on this exercise of parental responsibility. In the interest therefore of a better distribution of labour, artificial monopolies of the right to labour, as claimed by a certain section of Trade Unionists, ought to be strenuously resisted.
Again, when a man passes from parental control he still must study his market and seek to offer the quality of labour most in request. He must not simply deposit himself as a lump of unskilled labour, or think that society is disordered because permanent and profitable employment does not come to him unsought. He will be wrong to assume that the world has use for nothing but his mere labour, that it is not prepared to give additional reward to intelligence, sobriety, trustworthiness and skill. One of the few points on which all economists seem to agree is that effective and highly paid labour is the cheapest to the employer. The practical man has never doubted the fact. The testimony of the elder Brassey has long been on record. Even in the matter of agricultural labour, often erroneously described as unskilled, superior quality is appreciated and sought after. Very recently I was assured by a skilful agriculturist that there were labourers whose labour he could not profitably employ, even if he got it for nothing. He preferred, he said, looking merely to his own interest, to hire the very best men and to secure them by paying as much as 25 per cent. or 30 per cent. over the market rate. It is these transactions which pioneer the way to higher conditions for all. The attempt to restrict competition, with the object of obtaining for the less competent labour the same wage as for the more competent, is a policy likely to defeat itself. It prevents the pioneer movement of the best, and in the long run is by no means a benefit to the inferior workman. Competition makes war on the person of no man, it acts rather as a friendly pedagogue for the repression of unprofitable habits and for  the inculcation of serviceable social character. To withdraw a class from the educative influence of this force is to leave it at the mercy of those ever-present lower motives of selfindulgence which in the interest of progress should be controlled if not eradicated.
Important as these considerations are, the coping stone cannot be set on the edifice of industrial competence till the labourer learns something of the art of capitalization. Under certain conditions responsible character, even such as is attainable in the humblest ranks of labour, is capital. Under the popular banking system already mentioned the German and Italian peasant is enabled to exchange his mere promise to pay for the most material form of capital, paid in the currency of the country. This is an effort of industrial enterprise, a triumph of social organization, to be distinguished from thrift and saving. The development of working-class credit is still in its infancy; but it is obvious that, if a reputation for character and skill can give a man a command of capital, the property which every man has in his own labour has received a vast addition to its value.
A sound system of commercial business, based on the willingness of a successful banking association to give cash on equitable terms in exchange for the poor man's mere promise to pay, is, perhaps, the most highly developed harmony of a system of Free Exchange.
The ordinary thrift of the working class is, however, distinct from this. In depositing in a savings bank it is the poor man who makes what the Roman lawyers called an emptio spei, the purchase of a hope; and to complete our survey of the causes that affect the value of labour something must be said of the advantages which accrue to labour from the responsible temperament gained by the practice of frugality and thrift and from the stronger position in the labour market which savings give to their possessor. The point is best illustrated by the following comparison.
It has been contended (and there cannot really be much doubt about the matter) that outdoor relief, more especially as paid in former times to the able-bodied man and now to the able-bodied  widow with children and to persons only partially disabled from work, has a tendency to lower the wages of unskilled labour. Some keen but not very wise controversialists have argued that this is excusable, on the ground that the same result is brought about by the work of those in possession of a small amount of savings, and of married women and others not wholly dependent on earnings for their support. Even if this were true it would be no justification for supplementing wages out of the poor rate; but, of course, it is the very reverse of true. In nine cases out of ten, application to the poor rate comes from a class accustomed to live a purely proletariate life, from hand to mouth. Those who have had anything to do with the pauper class know that the whole problem of pauperism is one of character and not of income. When the expectation of a class has for long been fixed on the rates as a source of income, it is extremely difficult to detach it and to indoctrinate it with any appreciation of the advantages to be derived from saving and self-control. To have nothing is the well-advertised qualification precedent to receiving something from the rates. To the class, therefore, which has not detached itself from the influence of the Poor Law there is an artificial impetus given to the natural tendency to consider the present rather than the future. An addition, from whatever source, to the income of this class is, unfortunately, no occasion for rising to a higher level, for it is used merely to allow the hand-to-mouth life to be for the time a little more lavish.
When, however, the imagination is detached from reliance on poor law relief, and is exercised in the accumulation and management of savings, an entirely different tone is created. The possession of savings as a possible source of income is a cause of firmness rather than of weakness in the labour market. The possession of savings makes men, as it is termed, 'very independent.' I have argued that it is to the interest of labour to preserve a sensitive market by allowing transactions both at higher and lower prices to take place freely. The use of a common strike fund, a perfectly legitimate weapon, is apt to destroy this  sensitiveness. What is required is something of the nature of a universal privatestrike fund at the disposal of every man. This is supplied potentially by the savings bank account. The personal independence of the units of which labour is made up, is a securer basis to build upon than any conceivable form of combination imposed from without.
Leaving, then, the question of the property which every man has in his own labour and the various influences which affect its value, let us now turn to a consideration of the other property in which the working class is interested and see how far in this matter also it is to their interest to rely on a policy of Free Exchange. Labour, though the most important of a man's possessions, is not coextensive with his life. There are times when he is sick and old and unable to work. Labour, moreover, is an expenditure of force more or less painful; and he therefore desires leisure and rest. These are legitimate motives urging him to action. To satisfy them he has again made use of the principle of exchange. He has long outgrown the stage when, to provide for periods of sickness, old age and leisure, he has hoarded provisions. He now makes use of a pure form of exchange. To take the simplest instance: he goes to a savings bank and exchanges a portion of his wages for a credit. His property in the coin deposited ceases, and he accepts as an equivalent the bank's promise to pay. He goes to a friendly society or to an insurance company and he exchanges a series of premiums paid and to be paid by him for the promise of the association to pay him an allowance in sickness or a round sum on his attaining a certain age or at death, as the case may be. The purchase of a share in a railway company or in a co-operative store is of essentially the same nature.
It is most important to realize that all this creation of saving is effected by a series of exchanges. The only new feature in the transaction is the willingness of the wage-earner to exchange the material of his wages for some immaterial instrument of credit. The motive which impels men to this form of activity (which is just as much a phase of human  energy as manual labour) is common to all the race. It is a desire to purchase the power of deferred consumption or to economize the painfulness of labour.
This juncture is important, for it is at this point that the Socialist raises his revolt against the principle of Free Exchange. It has not been possible to deny a man's right of exchange over his own wages when used to buy articles for immediate consumption. The attack is on what, with invidious intent, is called 'Capitalism.'
Obviously two men cannot eat the same portion of food or occupy the same cubic space of shelter. In the act of consumption complete private property is ipso facto established. In the act of consumption a common enjoyment of property is an unthinkable condition. No one, as far as I am aware, has been bold enough to deny a man a right of exclusive use in his own dinner and in his own clothes. The contention of the Socialist is, however, that private property in capital is something different and for a variety of reasons a thing to be prohibited.
A man may exchange his wages for his day's dinner; may he, one is tempted to ask, exchange them for to-morrow's dinner? If so, at what point does it become wrong for him to exchange his wages for a promise of another man to pay the wherewithal to purchase dinners twenty years hence? Or again, it is permissible to purchase and use exclusively a suit of clothes. Is it permissible to buy a diving dress or a spade, to make or cause to be made a bit of labour-saving machinery or an irrigation work, and to retain the exclusive use and benefit of such action? If not, at what point between the suit of clothes and the erection of a factory does the illegality come in?
In truth there is no logical distinction to be drawn between the simpler and the more complicated forms of exchange. The Socialist, seeing what we all admit, that the beneficent action of Free Exchange is not perfected, rejects its assistance altogether, and seeks for some different, and, as he thinks, more equitable principle. He proposes, therefore, the socialization of capital. He ignores the socialization which is being brought about by the slow and certain organization of society on the absolutely democratic basis of Free Exchange. 
Let us see what it is that he is really proposing. At present the advantage gained by successful capitalization is enjoyed in right of an inheritance or in right of thrift and saving. This, says the Socialist, can be improved upon. The work of capitalization should be carried out by public bodies, whose duty it would be to put some men among the overseers and many others among the overseen. For every one man who under this system was obliged, ninety-nine would be disobliged. The causes which at present give success in life are in part, it is true, beyond our control; we think them unjust and we grumble at the partiality of fortune; but should we be better pleased (we, that is, who are set to do hodman's work and to belong to the ranks of the overseen) if our fate was entirely decided in the lobby of the bureaucracy set to rule over us?
The duties of life are not all alike pleasant. If the rewards of life are arbitrarily made equal, the work of the poet—even if he is confined to dithyrambs on municipal sewers—will still be esteemed a pleasanter occupation than that of the scavenger. In every conceivable form of government each man must be guaranteed the exclusive use of the benefits due to him in the performance of his office. We have not, therefore, got rid of inequality or of the fact that one man draws more than another out of capitalization. All we have succeeded in doing is to distribute these inequalities at the fiat of a corruptible bureaucracy instead of on the principle of Free Exchange. When a large proposal of this nature is made, we are entitled to look round to see what are the effects of any existing experiment on the principle suggested. Our present poor law system allows guardians the power to give to one pauper a preferential form of relief, viz. outdoor relief, and to confine another to the workhouse. This is exactly analogous to the power of making some men overseers and others overseen. The poor law is most unpopular, and precisely for this reason—that it passes the wit of man to minister justice indifferently under such conditions.
Be the arguments in favour of a prohibition of private 'capitalism' what they may, in practice they have been  disregarded, and the working man has exercised his liberty to acquire a right of deferred consumption in a great many ways. The following table, taken from the last Statistical Abstract, shows that the total of working class savings amount to a considerable sum, and that during the fifteen years included in the Abstract that sum had as nearly as possible doubled. The fact emphasizes a point which people are sometimes apt to forget, namely, that the hope of those of us who have no property must be in the creation of new wealth and not in the redistribution of wealth which is already in existence.
In order that some idea may be given of the rate at which these investments are growing, I have made out a second list, showing the state of affairs fifteen years earlier.
In following the history of popular savings we shall find that the material as well as the educational advantages of these provident institutions is for the most part proportionate to the liberty of action which they enjoy.
No more remarkable illustration of this truth is to be found than in the history of the savings bank.
The labourer takes his surplus earnings to the bank, and exchanges them for a credit. With a laudable desire to make this credit a safe security to the poor man, it is laid down by Act of Parliament that these sums shall be placed by the Post Office and Trustee Banks in the hands of the Commissioners for the reduction of the National Debt for investment in consols, Treasury bills and other Government securities. All the petty savings of the provinces are in this way carried up to London, a small portion is placed in Local Loan Stock three per cent., and in a sense a percentage of this finds its way back to the country. It has been held, no doubt rightly, that a Government department cannot undertake the whole function of a banker. Our savings banks, therefore, are merely the reservoirs in which petty savings may collect. They make no pretence to be dealers in credit; and if a full exercise of the function of a banker is an advantage to the community society has to that extent been a loser.
An interesting description of the advantage of banking and of the exchange of credits in which it consists will be found in the following passage from Mr. Mac Leod's Elements of Economics. He describes how it is part of the Scotch banking system 'to open or create credits to certain amounts in favour of respectable and trustworthy persons. A cash credit, therefore, is a drawing account created in favour of a customer upon which he may operate in precisely the same manner as on a common drawing account; the only difference being that, instead of receiving interest on the daily balance at his credit, as is very common in Scotland, he pays interest on the daily balance at his debit.....Almost every young man commencing business in Scotland does so by means of a cash credit.....These credits are granted to all classes of society, to the poor as well as to the rich. Everything  depends upon character. Young men of steadiness and judgement get their friends to become sureties for them on a cash credit—this is as good to them as money; and then they have the means placed within their reach of rising to any extent that their abilities and industry permit them....Not only has Scotch agriculture been raised to its present tate entirely by these cash credits, but also public works of all sorts—roads, canals, railroads, docks—in fact everything has been created by the same means. It was stated that the Forth and Clyde Canal was executed by means of a cash credit of £40,000 granted by the Royal Bank....All these marvellous results, which have raised Scotland from the lowest state of barbarism up to her present proud position in the space of 150 years are the children of pure credit....The express purpose of these banks was to create credit, incorporeal entities created out of nothing, for a transitory existence; and then, having performed their function, vanishing again into the nothing from whence they sprang. And has not this CREDIT been CAPITAL?...But their solid results have by no means faded like "the baseless fabric of a vision."...On the contrary, their solid results have been her far-famed agriculture; the manufactures of Paisley, Glasgow and Dundee; the unrivalled steamships of the Clyde; great public works of all sorts—canals, roads, bridges, docks, railroads; and poor young men converted into princely merchants. What the Nile is to Egypt, that has her banking system been to Scotland.....'Mr. Mac Leod is here defending the note issue system of Scotch banks, but his panegyric covers the whole system of legitimate banking.
Compare this picture to the restricted operation of the savings bank. It will be said at once that our commercial banking system already affords the necessary facilities for credit to those persons who are entitled to it, and that the poor man is not a person entitled to credit. If there is any justification for this view it consists in the fact that the character of the poor man is not such as to warrant a banker in making a loan to him. The Scotch banking system has done much to popularize credit; but it has not  succeeded in reaching the humblest class. Is, then, the thing impossible?
The experience of the People's Banks of Germany and Italy has shown that the poor man can, under certain conditions, convert his promise to pay into an article of exchangeable value. The main condition is simply that the exchanges must be effected on the mutual or co-operative basis, which is able to solve a difficulty otherwise insoluble. The reason for this is at once obvious and extremely instructive, and, as we shall have occasion to point out, it has its analogy in insurance business and possibly elsewhere. A Scotch farmer or a Scotch tradesman is a person who has had some experience of the mechanism of business; he has learnt that character is capital, or at least can give its owner the command of capital. To such a responsible person a bank, knowing that the risk is not great and that the enterprise in which he is engaged is a reasonable one, can afford to lend at a moderate rate. When we go a little lower in the social scale the character of the people is less trained in this particular form of trustworthiness. They are less familiar with the principles of business. They have a greater disposition to evade their liabilities, and individually their transactions are very small and are supposed to be unworthy of the attention of the high finance. The risk of lending money to them is therefore great, and money lending has degenerated into usury. The inherent disability of a poor man's loan institution, not based on the mutual principle, is aptly summed up in a little story told by Mr. Wolff, to whose interesting volume on People's Banks the reader is referred for much valuable information on the subject. Speaking of a small English experiment in People's Banks, he remarks: 'Nothing seems more striking in the experience of this society than the conscientious honesty and punctuality with which the poor people make a point of repaying loans, once they are constituted trustees of their own interests—even those who would otherwise make no bones of keeping back rich men's money. One man, who sent in his instalments with most praiseworthy regularity, had previously  borrowed £2 from the vicar. "How is it that you pay the society, and never offer to pay me?" "Ah, you're the vicar; you don't want it," was the reply.' This puts the case of self-help versus patronage in a nutshell. Responsibility is not a natural but an acquired virtue, and the want of it brings its own punishment. The operations of the 'vicar' or other charitable person to whom no one repays are naturally limited; and if a tradesman undertakes the task, he can only do so by charging a rate of interest proportionate to the risk. Hence the 'Gombeen' man and the village usurer. This last was, and I suppose still is, a familiar feature in every German village; but an instrument has been invented by which the peasant is educated in responsible character and set free from the grinding extortion of the usurer.
The history of the People's Banks of Germany as developed by Schulze-Delitsch, and in an even more successful form by Raiffeisen, has been written in an interesting volume by Mr. H. W. Wolff. The element which has made these banks a success has been the mutual or co-operative element. Some of them, particularly the Schulze-Delitsch banks, have shareholders in whose interest a profit is earned. This fact has a tendency to convert an institution originally co-operative into a purely commercial undertaking. The commercial undertaking, to our view, is a simpler and less cumbersome and more fully perfected method of transacting exchanges than the co-operative institution; and when, as between the Scotch banks and their customers, the parties to the exchanges are trust-worthy and therefore competent persons, it has, without doubt, a higher efficiency and an equal degree of equity. In dealings with the very poor, however, this condition does not exist, and for this reason Mr. Wolff gives a preference to the Raiffeisen form of bank, where the shareholder element is carefully repressed, and the whole responsibility of making and collecting the loans is put on the members. Under this system in Germany and Italy the savings of the poor form a banking capital which, aided by the credit enjoyed by these banks, is educating the people in one of the most essential  of human activities and spreading the advantages of capital among the very humblest classes.
'If,' asks Mr. Wolff, 'Germany can, by the aid of her People's Banks, raise annually somewhere about £150,000,000, circulating in commerce, of which not a shilling remains idle, of which every penny takes effect—stimulating trade, developing agriculture, feeding home industries—what could not we accomplish with our proportionately larger population, our ampler wealth and our more abundant facilities?'
It is said, and said truly, that an increase of capital is one of the necessary conditions for an improvement in the status of the labourer. Here, under this system of People's Banks, is a means of increasing capital, not in the hands of the rich, but in the hands of the poor, to whom a career is thus opened to talent. The development here foreshadowed, discloses an endless vista of progress both material and moral.
Surely this justifies the assertion that the advantage to be derived from our banking system is proportionate to the freedom of the exchanges on which it is based; further, that the principle of Free Exchange is the true solvent of social congestion and incapacity.
Compared with this our present savings bank system, with all its security and other advantages, is a sterile system. Those who have made themselves acquainted with the extraordinary ingenuity and extraordinary success with which English working men have dealt with the much more difficult and complicated problem of sick insurance cannot for a moment suppose that they will fail where German and Italian peasants have succeeded. Compared to sick insurance banking is a simple matter, but it is capable of being made a much more important matter—for it may bring within the reach of the humblest a stream of capital which, as Mr. Mac Leod has put it, may fitly be compared to the fertilizing waters of the Nile.
An analogous experience has arisen with regard to sick insurance. It is a humiliating but also an encouraging fact that the mutual supervision of interested members is the only power which can preserve an association insuring against  sickness from speedy insolvency. Commercial companies have undertaken, but have all abandoned, the business of sick insurance. The limited scheme of the German Government is, without doubt, on its way to break up over this difficulty. Even Canon Blackley seems to have given up the idea that a Government sick club could escape ruin from excessive sick claims. The patronized county societies find the difficulty very pressing. The excellent Hampshire society, at its last meeting, had to adopt some stringent new regulations to check this leakage. Centralized and admirably managed societies, like the Hearts of Oak, do not altogether escape. It has been stated with regard to this society that if a number of concentric circles were drawn round the office of the society, in Charlotte Street, it would be found that the percentage of sickness increased in each zone in proportion to the distance from the centre. It is by the locally constituted and locally managed lodges of the affiliated orders, such as the Manchester Unity of Odd Fellows and the Ancient Order of Foresters, that malingering is most successfully controlled. As M. Léon Say has remarked, 'L'usure ne peut être combattue que de près.' Usury—and, to complete the saying, we may add malingering—can only be overcome at close quarters.
The history of life insurance and endowment insurance for making a provision for old age, among the working class, is also very instructive. Here the mutual principle has not to any great extent been called in to assist. The increased intelligence of the workman and the pure competition of business men competing for his custom is bringing about a great improvement.
The gigantic system of industrial insurance has been very hotly condemned on the score of its costliness. It has in the past been a choice of evils. Without the collector—as witness the experience of the Post Office—no insurance would have been done. With him a vast business has sprung up, undoubtedly of a very costly nature to the insured. The cost of collection has of late years somewhat decreased. It is still very high relatively to the amounts collected. Roughly speaking, it costs on an average about a halfpenny to collect the  weekly penny. According to the best information I can obtain on the subject, it does not appear to me to be possible to reduce the cost of management and collection much below 40 per cent. of the premium revenue; and it is only one large company that has succeeded in doing this. This, however, is not all. Intelligent working men are very well aware of the costliness of this collecting system, and they have with avidity availed themselves of cheaper and perfectly unexceptionable terms of insurance, without weekly collection, offered by the same associations which also transact the collecting business. The expensive collecting system still, it is true, continues to increase; but what is very remarkable, and also very satisfactory, is, that ordinary insurance on exactly the same terms as can be obtained by the middle and upper classes, is spreading much more rapidly among the working class.
To take the figures of one well-known Insurance Company, which does about three-quarters of the industrial life insurance of the whole country. The premium revenue for the year 1892, in the Ordinary (i.e. non-weekly collection) Branch, shows an increase of £222,865 over that of 1891; while the increase in the Industrial (i.e. weekly collecting) Branch was £160,819. The total premium revenue of the Ordinary was £1,665,611, as against £3,849,157, in the Industrial Branch; and is only a question of time for the Ordinary business to overtake the Industrial business.
It is worth noticing that while this very enterprising company had succeeded, on December 31, 1891, in placing through its Ordinary Branch something over 170,00020 endowment policies—a majority of them, without doubt, for the purpose of making provision for old age—it had only succeeded in inducing twenty-three persons to subscribe for a deferred annuity. This fact, combined with the failure of the Post Office to popularize this form of investment, seems to me to be a conclusive comment on the fatuous proposals for compelling  or bribing people to provide for their old age by means of deferred annuities.
I have dwelt on the satisfactory development of insurance business under the natural competition of a free market, in order to show that, even without the aid of the mutual principle, the tendency of Free Exchange is towards a maximum rather than towards a minimum advantage to all concerned.
There is a controversy at the present time within the co-operative movement which has some bearing on the attitude taken up by the working class toward capital. The most successful part of co-operative enterprise has been what is known as distributive co-operation. All over the country there are small co-operative stores, their capital subscribed by shares, on which, as a rule, a fixed interest is payable. Any profit made is paid back to the purchasers in proportion to their dealings with the store, and is known as dividend on purchase. These local stores purchase most of their supplies from Wholesale Co-operative Associations in London, Manchester and elsewhere. The capital of the Wholesale is subscribed by the retail stores, and any profit made by the Wholesale over and above interest on capital is returned to the retail stores as dividend on purchase. The Scottish Wholesale Society pays a part of its profits to its workpeople, but as a rule no share in the profits is in the English societies paid to the employé. This, in the opinion of a section of the co-operators, is a falling away from true co-operative orthodoxy. Resolutions have from time to time been passed at the Co-operative Congress in favour of giving to every workman a share in profits. These resolutions have never been generally acted on, and it seems clear that, in the executive at all events, the dividend-on-purchase party has the majority.
To some of us, the expedient of having a deferred element in every exchange will appear an unnecessary complication. At the same time there is no reason why persons selling their labour or buying their groceries should not stipulate for a percentage of profit; and under certain conditions of society there is a considerable advantage in this plan. 
The advocates of the two systems raise several practical considerations. The dividend-on-purchase party point out that the system makes an unbroken phalanx of co-operative purchasers. They stick to the stores, and the stores stick to the Wholesale, and the Wholesale has been able to enter largely into manufacture, and, as a constant and calculable demand is assured, with considerable success. The enthusiasts of the party contemplate a system under which all production shall be carried on by this affiliation of co-operative enterprise. The rate of interest allowed in the English Wholesale Society is 5 per cent. on share capital and 4 per cent. on loan capital. The obvious comment on this is, that if co-operative enterprise can convert all capital into a 4 per cent. preference and a 5 per cent. ordinary stock, perfectly safe, the capitalist will regard its spread as a great boon, and even in its present development it is an immense advantage to the working class to have a safe investment always open in which they have to act as their own trustees. At the same time the more venturesome form of enterprise, involving costly experiment and culminating, perhaps, in something which may be either a Panama or a Suez Canal, is not to be carried on by the necessarily centralized and cautious policy of a Wholesale Co-operative. It is, however, from this class of enterprise that mankind derives the largest benefit; but it is also in this class of enterprise that more fortunes are lost than won.
The dividend-on-purchase advocate, when pressed by the school which wishes to pay a dividend on wages, says, and says truly, that the labourer has an advantage as consumer in the good quality of the store goods and in the cheapness brought about by the dividend on purchase. This, however, is not the advantage which the orthodox co-operator wants. He objects, and, I think, naturally objects, to seeing the system which his enthusiasm has helped to raise turned, as he thinks, into a species of Frankenstein. What he looked for from the co-operative movement was emancipation from the duress under which, as he conceives, the labourer is forced to sell his labour. He wishes to direct and manage his own industry, and he has no wish to be absorbed into one vast and all-pervading  association, governed by a 'Vehmgericht' in whose election he has, perhaps, one millionth share. With these feelings it is impossible not to sympathize. At the same time the difficulties which have to be overcome before his ideal can be realized are not to be overlooked. It is made a point against him by his opponents that the difficulties of conducting manufacture under co-operative management have almost invariably proved insuperable unless the manufacturing association is affiliated in the way described with the Wholesale Societies, and through them with the consumer. There seems to be some truth in this criticism. Many attempts at co-operative manufacture have failed, and the successful manufacturing businesses owned by workmen are constituted for the most part on the joint stock principle; and, as Mr. Hardern informed the Royal Commission on Labour, the workmen in those Oldham spinning, mills which are owned by the working class, are not as a rule shareholders in the mill where they work. There is an obvious practical difficulty in putting management into commission; it has been overcome in some instances, and it is to be hoped that as business intelligence grows among working people the difficulty may grow less. This solution of the labour problem is a legitimate and honourable one; but in all this controversy there is a neglected element, which both parties appear to overlook.
The fullest and most perfect co-operation is to be found, not in the clumsy expedient of a deferred payment, either to consumers or workmen, but in an equitable and complete exchange in an open market. The educative value of the mutual principle is cordially acknowledged. Just as in the banking and friendly society problem, so here this narrower and more elementary form of co-operation is training the labourer in experience and competence, fitting him to take his place without fear in the open market. There are some forms of enterprise which possibly will always be better done under the mutual form of co-operation than under the automatic co-operation of independent units in an open market. There is, however, no antagonism between the two systems. In the co-operative movement the labourer is gaining experience  and property, either in the form of share capital paying 5 per cent., with or without a bonus on wages and purchase, or, passing outside the co-operative movement as in the so-called Oldham Limiteds, he is becoming a holder of shares in a joint stock company, and learning to deal with his property in exactly the same way as a Peabody or a Rothschild. He is, in fact, breaking down the imaginary barrier which divides labour from capital and entering on the true path to emancipation. If he can enter the labour market fortified by a modicum of these two conditions, personal competence and private property held on the tenures recognized by the civilized world, the 'duress' of the market is at an end, his independence and his liberty will not suffer because he sells his labour to an employer and does not direct it himself.
Accident or some, to me at all events, incomprehensible reason has made a certain section of the Socialists throw their influence into the side of the dividend-on-purchase party. This admirable device for accumulating capital in private hands, with comparative safety and at 5 per cent. interest, seems to them to realize some of the conditions of Socialism.
If they would extend their view a little further they would see that a complete organization of society on a basis of Free Exchange would probably reduce the normal interest on capital employed in safe industries to something under 5 per cent., that ample capital would still be forthcoming to experiment in more venturesome enterprises, and that the demand for, and consequently the value of, labour would constantly be increased. In its comparatively restricted sphere, the co-operative movement has not suffered by being confined to enterprises in which a safe 5 per cent. can be looked for; but the useful, cautious financier who organizes safe investments suitable for trustees and widow ladies is not the sort of man who has built up the civilization of the world. The originators of our railway system were venturesome speculators (I use the term in no invidious sense), and until they broke the ground, and had made and lost fortunes over it, the modern railway director with his debentures and preferred stock was an impossibility. So it is surely absurd to suppose that the  great industrial revolutions of the future are to be carried out as safely for the capitalist as an investment in consols. As an attractive incitement to the thrift of poor people, a promise of a safe 5 per cent. in a domestic industry is admirable; but it is childish to talk of it as anything else than a very ingenious phase of 'capitalism,' or to argue that there is anything revolutionary in its principle. Another ground of this temporary alliance between the Socialist and the dividend-on-purchase co-operator is the objection which the Socialist seems to entertain against labour-profit-sharing in any form whatsoever. It is conceivable, he argues, that a man may as a trade unionist find himself at issue with himself as a profit sharer or capitalist. A mere statement of this terrible contingency seems to him sufficient to condemn profit sharing and the ownership by workmen of industrial property.
The argument, which I do not think I state unfairly, reminds one of the sophisme économique—that it is to the interest of glaziers that the windows of the community should be broken every week. Even glaziers, however, have windows; and the working class is rapidly acquiring capital. It is not to their real interest to prevent the accumulation of capital in the hands of capitalists, much less is it their interest to prevent its accumulation in the hands of their own class. To insure that there shall be plenty of employment for us to-morrow by destroying or hindering the work we have to do to-day is surely topseyturveydom in excelsis. The co-operator is a man of a very practical turn of mind; and this, like many another fallacy, is being exposed ambulando. It is not for a moment to be supposed that the co-operator will be deterred from applying his savings to such honest investments as come in his way, or that, having done so, he will be induced by the rhetoric of the new trade unionism or Socialism to destroy his own hard-earned savings.
The honest indignation which rails at the imperfections of society may at times stir men up to justifiable and salutary rebellion; but mere revolt can never be constructive. In a recent work M. Rostand, one of the most energetic advocates  for the introduction of People's Banks into France, has drawn a comparison between the life of one of the worthies of our English co-operative movement and that of the 'tragicomedian' Lassalle: 'Quelle différence même dans leur influence posthume. L'un continuant l'action féconde par l'exemple contagieux, par l'imitation de types créés, par les nobles semences répandues un peu partout; l'autre propageant de sa tombe l'antagonisme stérile, poussant des milliers et des milliers d'êtres à demi éclairés dans le trouble mental et moral, les faux emplois d'énergies, les gênes accrues, l'envie qui assombrit et fait souffrir, la colère qui n'enfante rien.' The revolutionist knows, he tells us, some road to progress other than through the development of personal responsibility, cheerfully undertaken and successfully discharged—but to what single achievement can he point? Theirs is a record, as M. Rostand puts it, of sterile antagonism. They ignore the remedies within reach; they do nothing to help in their organization; but continue to harp on the barren theme that thrift is a crime, a mere rushing into new privations. Compare with this the silent life-work of a man like Raiffeisen or the quiet unostentatious action of the now happily numerous band of labouring men who devote themselves to the honest and successful management of friendly societies and co-operative stores. It is these influences, and not the arts of declamation, which combat and conquer poverty at close quarters.
<p><a id="lf0135_footnote_nt020" href="#lf0135_footnote_nt020_ref">20.</a></p>
I have, by the courtesy of the manager of the company, been allowed to satisfy myself by personal inspection that a very large proportion of these Ordinary insurances are taken out by members of the working class.