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 ^/^^/ USE AND ABUSE V^Av^^ 
 OF MONEY 
 
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LIBRARY OF CONGRESS. 
 
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 UNITED STATES OF AMEEICA. 
 
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 UNIVERSITY EXTENSION MANUALS \ ^ ^ \ 
 EDITED BY PROFESSOR KNIGHT 
 
 THE USE AND ABUSE 
 
 OF 
 
 MONEY 
 
THE USE AND ABUSE 
 
 OF 
 
 MONEY 
 
 
 ¥ 
 
 BY 
 
 W/ CUNNINGHAM, D. D. 
 
 VICAR OF GREAT ST. MARY S, AND UNIVERSITY LECTURER, CAMBRIDGE 
 
 'Q>vr"'%\ 
 
 O.i .1 lo-l 
 
 ^A 
 
 
 NEW YORK 
 
 CHARLES SCRIBNER'S SONS 
 
 1891 
 
 \^All rights reserved.'] 
 
W3 ni 
 '5 
 
 COPYRIGHT, 189I, 
 BY CHARLES SCRIBNER'S SONS. 
 
PREFACE. 
 
 This book is intended for those who are already 
 famihar with the outUnes of the subject, and it is meant 
 to help them to think on topics about which everybody 
 talks. Primers and elementary manuals of economic 
 science usually make a general assumption about 
 human nature, and take for granted that man is actuated 
 by a single motive, — the desire of wealth. But if we 
 examine in greater detail the personal qualities and 
 various motives that influence conduct in regard to 
 economic affairs, we shall obtain a more complete ex- 
 planation of the observed phenomena, and we shall also 
 be better able to bring our knowledge to bear on actual 
 occurrences. 
 
 I cannot hope that those who read this Manual 
 will agree with all the conclusions reached. It deals 
 throughout with subjects on which there are many 
 conflicting opinions, and it deals with them from a 
 single and well-defined standpoint. It aims at working 
 
vi Preface 
 
 towards a consistent treatment of social difficulties, 
 not by propounding any new doctrine, but by recog- 
 nising that each of the conflicting doctrines has some 
 elements of truth, and by suggesting the questions 
 How far, and within what limits is this opinion true? 
 
 The subject discussed is Capital in its Relation to 
 Social Progress. When first entering on economic 
 studies we are advised to lay aside all other matters, 
 and confine our attention to wealth as something we can 
 isolate from other social phenomena. And this is the 
 simplest way to begin and the best way to go on for 
 examining some problems, but not for examining all. 
 It is necessary for some purposes to look at these mat- 
 ters in another way, and to consider an economic force, 
 not apart from, but in its relation to the other sides 
 of human life and interest. In the present day, when 
 Capital dominates in so many directions, it is not un- 
 interesting to select this particular factor, and consider 
 the part which Capital has played and its bearing on 
 the material progress of the race. Thus we shall traverse 
 a field which affords us an opportunity of surveying the 
 strong positions occupied by modern socialists. 
 
 But though this is its subject, the book is called, 
 The Use and Abuse of Money, I wish to lay stress on 
 the element of personal responsibility. Much has been 
 written about the duties of landowners, and it seems 
 worth while to say a little about the responsibilities of 
 moneyed men for the manner in which they employ their 
 capital and spend their income. When people discuss 
 economic matters as if the changes were due to a play 
 
Preface vii 
 
 of forces that act on men and so impel men, the import- 
 ance of the part played by the man himself is obscured. 
 Man in his highest aspects, and the best of all he does, 
 is not susceptible of thorough treatment by economic 
 science, so long as it concentrates attention on the play 
 of measurable motive forces. As has been well said, 
 ' much of the best work of the world has no price, and 
 evades altogether the economic calculus.' Mill's great 
 achievement as an economist was in his attempt to 
 combine a careful study of the higgling of the market 
 with a full recognition of the importance of the nobler 
 elements in human nature, and a study of the increase 
 of wealth with discussions of the improvement of society. 
 Though recent economists have done much to correct 
 his solution of particular problems, it is not clear that 
 they have been wise in deliberately rejecting the exam- 
 ple he set them of bringing into prominence ' the human 
 as opposed to the mechanical element in economics.' 
 The present sketch simply follows out some of the sug- 
 gestions made by Mill, with the view of raising the 
 question. Whether a full recognition of the hiunan ele- 
 ment in economics may not be the best means of attaining 
 to clear definitions of economic terms, and to the distinct 
 statement and thorough discussion of fundamental economic 
 problems ? 
 
 As one of the pioneers of the University Extension 
 Movement in 1874, I found great advantage in provid- 
 ing a careful syllabus. I have thought it worth while 
 to prefix a similar syllabus to this Manual. It mentions 
 the names of several books which will enable readers 
 
viii Preface 
 
 to pursue their studies further; but I have not insisted 
 on burdening the pages of a popular treatise with de- 
 tailed references to authorities in regard to every matter 
 of fact to which allusion is made. 
 
 W. C. 
 
 Trinity College, Cambridge, 
 November, 1890. 
 
SYLLABUS OF THE SUBJECT AND 
 BOOKS FOR REFERENCE. 
 
 PART I. 
 SOCIAL PROBLEMS. 
 
 CHAPTER I. 
 
 POLITICAL ECONOMY WITH ASSUMPTIONS AND WITHOUT. 
 
 I. 
 
 1. Adam Smith made an advance on his predecessors, because he 
 did not discuss the maintenance of national power, but concentrated 
 attention on one element — wealth. He stated the problems re- 
 garding political prosperity in a more general form than either 
 mercantilists, physiocrats, or other writers had done . Page I 
 
 2. He assumed the existing social order and current motives. 
 Most economists have followed him in taking for granted the facts 
 of human nature and of the physical world. Mill, Political Econo?jiy, 
 P- 13 2 
 
 II. 
 
 For some purposes it is convenient to start with such assumptions, 
 but, 
 
 1. It is difficult to make the most convenient assumption about 
 changing nature, and still more so to state precisely what has been 
 assumed. Mill, Political Econotny, II, iv. § I . . . 4 
 
 2. It may be confusing, since it is not easy to divest ourselves of 
 these fundamental assumptions when we try to do so, as our very 
 language involves them 5 
 
 3. It is disappointing to find that we have made so little advance 
 towards the scientific treatment of questions which lie beyond our 
 assumptions, and require us to recognise changes in human nature 
 itself 6 
 
X Syllabus of the Subject 
 
 III. 
 
 We are therefore forced, in order to apply our economic laws, if 
 for no other purpose, to enter on an economic investigation of a 
 purely empirical character Page 8 
 
 1. Such empirical investigations may be possible when the hypo- 
 thetical method is least applicable 8 
 
 2. Each method of investigation supplements the other, but they 
 may be contrasted for the sake of distinctness. We cannot dispense 
 with either, but it is important to understand at each step how we 
 are proceeding, and what is the value of our results . . 9 
 
 3. The hypothetical method of investigation follows the analogy 
 of Mechanics, and gives 1 1 
 
 {a) Results which are universally valid . . . .11 
 
 (J?) It reduces all human desires to their most general form, 
 
 Jevons, Theory of Political Econojny, 31, and rejects rigid 
 
 definitions of terms. ^2Lg€^<:)\., Economic Studies, d^() II 
 
 (f) It applies conceptions drawn from Mechanical Science 12 
 
 4. Empirical investigation results in statements of what is actually 
 true, over a larger or smaller area and for a longer or shorter time; 
 and it requires precision in the use of the terms employed to 
 analyse personal motives 13 
 
 IV. 
 Object and method of the present enquiry regarding the use and 
 abuse of capital 14 
 
 CHAPTER II. 
 
 INDUSTRY WITHOUT CAPITAL. 
 
 I. 
 
 1. Capital is commonly regarded in the present day as a fund of 
 wealth which can be realised in money, and from which the owner 
 expects to derive an income in money . . . . .16 
 
 2. Villagers who do not use their hoards regularly, but merely 
 keep them as a reserve for times of special need, and tribes that do 
 not form hoards, have no capital 17 
 
 3. And since they are able to produce the supplies they need, 
 it is not true to say that capital is a requisite of production in all 
 times and places 17 
 
 4. There may be something analogous among primitive peoples, 
 but we must beware of extending the use of terms by analogy . 18 
 
 5. It is especially necessary to be careful with economic terms, so 
 that we may be able to discriminate the various stages in a con- 
 tinuous process 19 
 
Syllabus of the Subject xi 
 
 11. 
 
 1. Man and his environment act and react on each other. We 
 may describe the process of national progress in terms drawn from 
 the nature of man (^personal) , or in physical terms drawn from his 
 surroundings ......... Page 19 
 
 2. Physical circumstances mark the barriers which limit farther 
 progress, until an increase of skill enables man to pass these limits 20 
 
 3. Physical circumstances enable us to describe the extent of the 
 difference between savage and civilised peoples; personal qualities 
 are the powerful factors in effecting progress .... 21 
 
 4. Condition for the formation of hoards of money. 
 
 («) Regular trading communications and a circulating medium 
 are necessary physical conditions for the formation of 
 capital 21 
 
 (3) Friendly intercourse, skill, and foresight are necessary 
 personal qualities. Brooke, Ten Years in Sarawak, i. 
 156 22 
 
 5. Conditions for the use of money-hoards as capital. Working 
 for sale and a profit, not directly for livelihood. The gradual intro- 
 duction of capitalistic organisation in different industries . 24 
 
 III. 
 
 1. Economists have been accustomed to treat capital employed 
 in industry as the typical if not the only form of capital. Bohm- 
 Bawerk, Kapital und Kapitahins, II. Abtheil. 38. This must lead 
 to giving too narrow a definition of capital, and may lead to a mis- 
 understanding of its functions 27 
 
 2. Capital is an ' historic ' category, as the economic conditions 
 which render it possible have appeared in historic times. But these 
 conditions are so deeply seated that it may be regarded as likely to 
 be a very permanent factor now that it has come into being. Marx, 
 Das Capital, 128. Diihring, Geschichte der Nationalokonomie u. 
 des Socialismiis, 480 27 
 
 CHAPTER III. 
 
 CAPITALIST ERA. 
 1. 
 
 The Capitalist Era in England. 
 
 1. Capital permeates the whole of our industrial life; this change 
 has taken place since the fifteenth century, both in manufacturing 
 and in industry. See my Growth of English Industry and Commerce, 
 391 30 
 
 2. It also exercises great political power . . . .31 
 
 3. And many philanthropists urge the wider diffusion of capital 
 as a means of social reform 32 
 
xii Syllabus of the Subject 
 
 II. 
 
 The Capitalist Era in Rome. A. Deloume, Manieurs d' argent. 
 
 1. Contractors farming the taxes, and carrying on all great undertak- 
 ings. Polybius, i^zj/. vi. 17; Qicexo, Pj^o lege Manilla, 6, "j. Page 2,3 
 
 2. Contracts as distinguished from loans .... 34 
 
 3. Political power of the moneyed class at Rome; comparison 
 with East India Company. Plutarch, Lucullus. Cicero, Ep. ad 
 Q. Pratrem, I, 1 1, 12 34 
 
 4. Decline of the power of the Equites under the Empire . 36 
 
 CHAPTER IV. 
 
 MATERIAL PROGRESS AND MORAL INDIFFERENCE. 
 
 I. 
 
 Material Progress. 
 
 1. Capital is a very important factor which contributes to material 
 progress, but is such progress a good thing? .... 38 
 
 2. Increased power over nature gives the opportunity for increase 
 of population, unless the standard of comfort is raised. 77ie State- 
 ment of the Malthusian Pj-inciple in Macmillan^ s Magazine, 1884 39 
 
 3. The fact that population overtakes the new ground opened up 
 by invention need not make us fear its pressure if there were a pause 
 in progress. Marshall, Principles, I, 223 .... 40 
 
 4. Material progress is a good thing (even though it facilitates 
 increase of population), because it gives opportunities for intellectual 
 and artistic culture. Ratzinger, Volkswirthsschaft, 52 . . 40 
 
 5. The fact that wealth may be misused does not show that 
 wealth is a bad thing or that the pursuit of wealth is necessarily 
 selfish and wrong 42 
 
 6. But material wealth only gives opportunities; it is under the 
 influence of a high ideal that we learn to use these opportunities 
 wisely 43 
 
 7. It is well to afford opportunities as widely as possible in the 
 present (without sacrificing posterity), but this is a different thing 
 from enforcing equal opportunities. ..... 45 
 
 II. 
 
 Capital is an important factor in progress, but it is a very 
 dangerous power. 
 
 1. The capitalist as such is indifferent to political, artistic, and 
 moral considerations, but looks for pecuniary gain ... 47 
 
 2. The danger of this indifference, even when it is not reckless 47 
 
 3. The reasons for this indifference 48 
 
Syllabus of the Subject xiii 
 
 CHAPTER V. 
 
 THE CONTROL OF CAPITAL. 
 I. 
 Different modes of administering capital according to different 
 objects to which it is devoted Page ^i 
 
 1. National purposes, and national administration of capital. 
 Importance of 
 
 («) Good judicial administration . . . . '52 
 
 (b^ Security from rebellion and attack . . . .52 
 
 {/) Intercourse with other nations, and consequent necessity to 
 
 be prepared for war, which, whether successful or not, is 
 
 costly 52 
 
 (d) General education 53 
 
 2. Municipal purposes: Sanitation, recreation, and technical 
 education 54 
 
 3. Private enterprise and individual management . . 55 
 
 4. Joint Stock Companies ....... 56 
 
 II. 
 Are any of these modes of administering capital likely to super- 
 sede the others? 57 
 
 1. Apparent increase of national management (^The Progress of 
 Socialism in England, in Contemporary Review, 1 879), but there 
 are also signs of international and cosmopolitan arrangement in 
 economic matters 57 
 
 {a) Postal Union and Bimetallism 57 
 
 If) Economic argument : world as unit and transfer of capital. 
 
 58 
 
 2. Private enterprise and selfish jealousy of State interference. 
 Bagehot, Lombard Street, 10. The interest of the State is that of 
 the citizens as a body ........ 60 
 
 3. Municipal life and decentralisation. Petty rivalries. Strength 
 of national feeling 61 
 
 III. 
 
 Our present social system gives scope for using any one of these 
 three methods of administration, wherever it is likely to answer 
 better than the others 63 
 
 1. Socialists complain of the waste by competition, and propose 
 to substitute organisation 64 
 
 2. But what method of organisation? Any single type is unsuit- 
 able for some purpose or other 64 
 
 3. Material wealth gives the opportunity for moral welfare, and 
 we cannot count on increased welfare under any arrangements which 
 diminish wealth 65 
 
Syllabus of the Subject 
 
 PART IL 
 PRACTICAL QUESTIONS. 
 
 CHAPTER VI. 
 
 THE FORMATION OF CAPITAL. 
 
 I. 
 
 Conditions for the formation of capital . . . Page 66 
 
 1. Social conditions: security is a negative condition. Delisle, 
 Operations financieres des Templiers. Mem. Acad. Belles Lettres et 
 Inscriptions, XXXIII 67 
 
 2. Personal qualities, are the effective force. The power of post- 
 poning enjoyment and of saving varies in different characters and 
 among different races. It depends on 
 
 {a) The moral qualities and power of will ... 70 
 (j)) Intellectual qualities, imagination . . . -71 
 (a) Wish for reserve fund. 
 
 ifi) Wish for an increased income. Of these the former is 
 
 the more important motive, and the possession of a 
 
 reserve is the great class distinction of the present 
 
 day. 
 
 {c) Facilities for helping those to save in whom the disposition 
 
 is weak 73 
 
 3. Opportunities for saving. 
 
 {a) Good harvests, or high profits, or diligence give an oppor- 
 tunity. Bohm-Bawerk, A'a/zVa/, II. Abtheil, 130 . 74 
 (J)) Suitable commodities for hoarding .... 75 
 (a) Precious metals. 
 ()8) Credit; Co-operative Stores. 
 
 (7) The case of improving properties distinguished. Wine. 
 
 MacCulloch, /'r?;za)>/d'j, 4th Ed. 372. 
 
 {c) It is in the mind of the possessor that the distinction between 
 
 capital and non-capital really lies. Mill, Polit. Econ. 
 
 I, iv. I, and it is in the purpose of the possessor that the 
 
 explanation of the genesis of capital is found . 77 
 
 II. 
 
 The things which capital denotes 78 
 
 1. 'Personal capital,' so called by analogy. But 'skill 'is not a 
 fund, nor is it even a possession, except in the case of slaves . 78 
 
Syllables of the Subject xv 
 
 2. ' National capital,' so called by analogy . . . Page 80 
 
 (a) Is better described as National resources . . . 8l 
 
 (J?) Or if it be used in another sense, as the aggregate of private 
 
 capital together with remunerative public works. . 81 
 
 III. 
 
 Dependence of the State on borrowed capital ... 82 
 
 1. Lack of opportunity and of will to form capital . . 2>Tf 
 
 2. This would present a difficulty in maintaining industry and 
 replacing waste if capital were once successfully nationalised . 84 
 
 IV. 
 The definition re-considered 84 
 
 1. Analogies discarded 84 
 
 2. The landed interest and the moneyed interest. How far is 
 there a justification for the popular distinction? ... 85 
 
 The ordinary landlord's interest in his estate, and purpose 
 in purchasing it, differs from that of the ordinary mer- 
 chant or manufacturer. Rent is determined by different 
 principles from those which explain interest and profit 85 
 
 3. The importance of Mill's principle 87 
 
 CHAPTER VII. 
 
 THE INVESTMENT OF CAPITAL. 
 I. 
 The moneyed man desires to invest his capital safely so as to pro- 
 cure a regular income, which is the extra inducement he obtains for 
 consenting to lie out of his money for a time .... 88 
 
 1. Lending money and bargaining for interest ... 89 
 (a) Taking security. Orderic Vital, vi. Duchesne, Hist. Norm. 
 
 628 89 
 
 {F) Public and wealthy bodies can borrow on easy terms . 90 
 {c) Convenience to the lender 90 
 
 2. Employing money in any enterprise in the hope of profit 
 which arises . . ....... 91 
 
 {a) Through combining natural processes. Farming. Mill, 
 Political Economy, I, i. I 92 
 
 {h) Through using natural forces to render some industrial or 
 commercial process more rapid. Division of labour and 
 saving of time and skill ..... 92 
 
 11. 
 
 The flow of capital and the machinery of investment . . 94 
 
 1. According to personal preferences, the * desire of wealth ' will 
 
 take very different forms 94 
 
xvi Syllabus of the Subject 
 
 (a) Desire of large income — high rate of return . Page 94 
 (i5) Desire of increased capital — low price ... 94 
 (^) Desire to be fully acquainted with the details of business 95 
 
 2. The transference of capital by means of — • • • 95 
 {a) Bankers. Rae, Country Banker, 48 . . '95 
 \})) Foreign bills. Ba.geh.ot, ZomOa^'d Street, 21 . . 96 
 (^) The Stock Exchange, apparently ' anti-social,' but facilitates 
 
 the flow of capital, and thus subserves a social purpose 
 of great importance. Report of Commission on London 
 Stock Exchange, ^"1^. (), 10 . . . . -97 
 
 3. The fluidity of capital is not an unmixed good, as . -91 
 {a) It gives opportunity for the waste of capital. 
 
 (J?) It appears to intensify the fluctuations of trade. 
 
 III. 
 
 The preference for lending and for borrowing capital, rather than 
 employing it personally in enterprise, appears to be increasing, and 
 raises important social and ethical questions .... 98 
 
 1. The cosmopolitan influence of capital in breaking down 
 nationalism 99 
 
 2. The diminished personal responsibility of the lender for evils 
 that arise in connexion with the use made of his money . loo 
 
 CHAPTER VIII. 
 
 CAPITAL IN ACTION. 
 I. 
 The services of capital to the public loi 
 
 1. As viewed by the Manchester school. Senior, Political Econ- 
 omy, 58, Plutarch's Life of Cato, by Langborne, ii. 483 . loi 
 
 2. Discounted by those who have approached the subject from 
 the side of the influence of capital on the labourer . . 102 
 
 3. Its service consists in saving time and thus enabling mankind 
 to enjoy more in a given time . . . . . .103 
 
 {a) Great works could be done without it, but not so easily, or 
 so as to be enjoyed by those who began them. Jevons, 
 
 Theory. 3rd Ed. 234 103 
 
 if) Service of capital illustrated from English history, (a) the 
 supply of foreign products, (fi) more rapid work, and 
 (7) diminution of risks. Turner, Domestic Architecture, 
 
 I, 97-104 105 
 
 II. 
 The destruction of social organisations of a simple kind . 106 
 
 1. Self-sufficing villages 106 
 
 2. Mediaeval cities 107 
 
Syllables of the Subject xvii 
 
 3, The loss is real, even though the ultimate gain through 
 material progress is so great that we do not venture to try to 
 check it P(^ge 107 
 
 III. 
 
 Capital renders labour a less important factor in production. 
 
 1. The introduction of machinery. Nicholson, Effects of Ma- 
 chinery on Wages 109 
 
 2. The former importance of skilled labour and the industrial 
 revolution in England. — Marx, Das Capital, xiii. . . .110 
 
 {a) Lengthening of hours IIO 
 
 lb) Increased strain of work 1 1 1 
 
 (<r) Relative depression of labour, distinguished from absolute 
 depression of labourer i n 
 
 IV. 
 
 The tendency of capital to depress labour in England and in 
 Rome compared 113 
 
 1. The condition of Roman slaves. — Wallon, Hist, d^esclav, 
 dans Vantiq. II, 213, 223. Plutarch, Lives of Cato and Coriolanus 1 1 3 
 
 2. In England the labourer now possesses . . . .114 
 
 {a) Political freedom 114 
 
 (^) Freedom for emigration 1 15 
 
 (J) And has some support for public opinion. This is chiefly 
 
 of active in preventing evil, and it is important in dif- 
 fusing better ideals of human life . . . -US 
 {d) Trade organisations 118 
 
 3. At the time of the Industrial Revolution the labourer had not 
 the same safeguards 119 
 
 (a) No fluidity of labour. Adam Smith, Wealth of Nations y 
 I, 10 119 
 
 (J)) Public opinion was callous. Parliamentary History^ 
 XXXIV, 1427 119 
 
 (tr) Laws against combination . . . . . 1 20 
 
 {d) But the Poor Law marks the contrast with Roman prac- 
 tice even then ....... I2I 
 
 4. How far was the misery of the time due to the greed of private 
 capitalists, and how far to the want of adaptability in national 
 regulations? 122 
 
 5. The moral forces which have tended to correct the evils which 
 accompanied the industrial revolution . . . . .123 
 
 (a) The individuahsm of Locke. Held, Zur socialen Geschichte 
 Englands, 45 . . . . . . .123 
 
 (Ji) Christian philanthropy .123 
 
xviii Syllables of the Subject 
 
 CHAPTER IX. 
 
 THE REPLACEMENT OF CAPITAL. 
 I. 
 The manner of replacement Page 12^^ 
 
 1. Loaned capital 125 
 
 2. Capital engaged in commercial speculation is replaced . 125 
 
 {a) By the public .126 
 
 {b) By successive transactions — turning over capital . 126 
 {c) Rapidity in turning over capital, and extension of busi- 
 ness . . ,126 
 
 3. Capital employed in carrying on an industrial process . 128 
 (a) The requisites for continuing the process, materials, tools 
 
 and food. — Columella, i. 6, 9 . . . .129 
 (J)) The means of hiring labour is a necessary part of capital 
 
 (as defined above) when employed in industry . 129 
 (<:) Extension of business — manufacturing on a larger scale 
 
 and at less cost. Marshall, Principles, I, 339 . 133 
 
 11. 
 The rate of replacement — bad times and prosperity . -134 
 
 1. Lent capital . . . 134 
 
 2. Commercial capital 134 
 
 3. Industrial capital . . . . . . . .135 
 
 {a) Stagnation and stoppage 135 
 
 {b) The various causes of stagnation; destruction of purchasing 
 
 power 136 
 
 {c) The meaning of a glut, and the possible means of relief 136 
 {d) When industry recovers it may probably take somewhat 
 
 different lines from those before . . . -137 
 
 4. The meaning of prosperity and of bad times. Bagehot, Lom- 
 bard Street, 122 138 
 
 («) Rapidity of replacement 138 
 
 {b) Waste of capital from different causes . . .138 
 (J) Exhaustion and depression 140 
 
 5. But prosperity, though good in its way, is not the only thing 
 to be considered 140 
 
 CHAPTER X. 
 
 THE DIRECTION OF CAPITAL. 
 I. 
 Fluidity of Capital and of Labour. Bagehot, Economic Studies, 2 1 . 
 1. The withdrawal of capital; relatively fixed, and circulating 
 capital 141 
 
Syllabus of the Subject xix 
 
 2. The capitalist's forecast of public demand . . Page 142 
 
 3. Loss of labourers, when there is a change of the direction in 
 which capital is used, is minimised by . .... 143 
 
 (a) Opening up new employments. 
 
 (b) Increasing the adaptability of, or 
 
 (c) Facilitating the emigration of labour. 
 
 4. Forecasting demands 144 
 
 5. Doomed industries, and the reluctance of labourers to relinquish 
 them. Burnley, Wool and PVoolcombers, i^g . . . . 145 
 
 ((2) Hand-looming weaving 145 
 
 (b) Peasant farms — for ordinary agricultural produce . 146 
 
 II. 
 
 Productive and unproductive consumption .... 147 
 
 1. Replacement of capital when there is no change in the char- 
 acter of public demand 147 
 
 2. When there is a change in the character of the public de- 
 mand 147 
 
 («) Increase of demand for articles of productive consump- 
 tion 148 
 
 ((5) Increase of demand for articles of unproductive consump- 
 tion. War 149 
 
 (<r) The two directions of change contrasted . . . 149 
 
 3. Rich nations can afford a large amount of unproductive con- 
 sumption, without touching on the supply of the requisites of pro- 
 duction 150 
 
 {a) The production of more »bjects of wealth is less important 
 than the question whether unproductive consumption is 
 of a useful or of a useless kind . . . -150 
 
 (3) Kinds of expenditure which are most useful, although un- 
 productive 151 
 
 PAJ^T III. 
 PERSONAL DUTY. 
 
 CHAPTER XI. 
 
 PERSONAL RESPONSIBILITY. 
 
 Political economy is wrongly charged with being immoral, but it 
 commonly claims to be non-mooal, and to follow out tendencies as 
 they exist, without pronouncing on right and wrong . .152 
 
 Questions of economic duty were much discussed by the school- 
 men, but under different aspects from those they now present 152 
 
XX Syllabus of the Subject 
 
 The schoolmen tried to detect cases where men, in pursuing gain, 
 fell into sin; and the cases they considered were comparatively 
 simple, as, P^g^ 153 
 
 I. 
 
 They could generally fix the direct responsibility for wrong doing, 
 while we have to consider degrees of responsibihty . -154 
 
 1. Direct and indirect responsibihty. King James I, Works. 
 True Law of Free Monarchies 154 
 
 2. This distinction illustrated in the cases of shipwright and 
 factory owners 155 
 
 3. Indirect responsibility, and responsibility as citizens for not 
 doing our best to cure evils 156 
 
 {a) Government interference is certainly desirable to prevent 
 the waste of national resources by the deterioration of 
 the population 157 
 
 (b) It is not so obviously a duty to interfere by legislation in 
 
 order to give better opportunities to any class. But 
 
 w'hen this is done it is least likely to fail when it takes 
 
 the form of giving better conditions in connexion with 
 
 • work 158 
 
 {c) The death-rate, as giving an objective test of positive mis- 
 chief which should be removed. Making men moral 
 by Act of ParHament 159 
 
 4. Indirect responsibility of consumers for causing the evils of 
 sweating. How far is an individual consumer bound to inform him- 
 self about the conditions of production? The letting of contracts 160 
 
 II. 
 
 1. The schoolmen could isolate single transactions and judge of 
 the fairness or unfairness, according to the form of the contract 161 
 
 {a) Remuneration to merchants engaged in carrying was 
 allowed, but not to forestallers who tried to get gain at 
 the expense of someone else. Rot. Pari. II, 48; III, 254, 
 27 Ed. Ill, c. 5, 7 161 
 
 (J?) Transactions which gave opportunity for extortion. En- 
 grossing. Secured loans and definite return as distin- 
 guished from partnership in a venture with contingent 
 gain. Aquinas, Summa 11% II"«, q. 78, a. 2 . 162 
 
 (<r) The meaning of extortion as taking advantage of another's 
 need. Charitable loans 164 
 
 2. The revolution in opinion in the sixteenth century legislation 
 against an extravagant rate of interest. Malynes, Lex Mercatoria 
 II, 10. The need of maxims for personal guidance in the present 
 day, as to (a) The direction of the employment of capital, {b) The 
 fair return on capital, {c) The right expenditure of income . 165 
 
Syllabus of the Subject xxi 
 
 CHAPTER XII. 
 
 DUTY IN REGARD TO EMPLOYING CAPITAL. 
 
 There are some kinds of business which it is not wrong to pursue 
 diligently, and in regard to which the ethical questions are wholly 
 as to the manner of conducting them .... Page 1 68 
 
 And there are kinds of business which are immoral, and are there- 
 fore not allowable i68 
 
 I. 
 
 By what standard shall we discriminate? . . . .169 
 
 1. The law and public opinion stigmatise some conduct as wrong, 
 but this standard is necessarily low, and does not distinguish what 
 is right 169 
 
 2. Hence we need an ideal to show us what to aim at; and a 
 man's ideal gives him a conception of what is right for him . 169 
 
 3. This ideal may be expressed in terms of. . . . 171 
 (a) External circumstances, when it is a mere dream; for it 
 
 gives no help in regard to the means that must be used 
 for introducing it, and there is no security that it could 
 maintain itself if it were introduced; or in terms of 171 
 (J)) Personal motive, when it gives a direction to our aims, and 
 enables us to test each of our actions . . . 1 72 
 
 4. Difference in the attitude we take towards others, according 
 as we cherish an external or a personal ideal . . . -173 
 
 II. 
 
 1. Duty with regard to the purpose for which a loan is re- 
 
 quired 173 
 
 («) The opinion that all loans are immoral may be waived, to 
 be discussed in connexion with the terms on which 
 loans are made. Benedict XIV, Opera, XV. 592, Vix 
 
 pervenit 173 
 
 (J?) Loans to a government, for an immoral purpose, and for a 
 national undertaking that fails. Stanley, In darkest 
 
 Africa 174 
 
 (f) Loans to a private individual, which give scope for ruinous 
 extravagance . . . . . . .175 
 
 2. Duty in regard to the choice of an investment. How far is the 
 manufacturer to be blamed for the misuse of things he makes? 176 
 
 (a) Manufacture of images 176 
 
 (U) Translations of the Christian Fathers . . •177 
 
 8. Though the evil lies not in the thing, but in the misuse of the 
 
 thing, can the manufacturer disclaim responsibility in a case where 
 
 the article is habitually misused? 177 
 
xxii Syllabus of the Subject 
 
 (a) Brewing is a useful and honourable calling . I'a^'e 177 
 
 (^) But beer is much misused, and it may be so difficult to take 
 
 precautions against misuse, or to avoid reaping gain 
 
 through misuse, or even so tempting to abet misuse, 
 
 and discourage legislative efforts to check it, that the 
 
 scrupulous man may well prefer to refrain from engaging 
 
 in this business . . . • , . . 1 78 
 
 4. Advantage and difficulty of carrying on such business as a 
 
 state monopoly. Temperance Legislation, Contetuporajy Review, 
 
 1886 180 
 
 III. 
 
 1. But supposing a man desires to clear out of a business about 
 which he has conscientious scruples, he must either . . 181 
 
 {a) Wind it up, to his own serious loss and the profit of other 
 houses; or 181 
 
 (3) He may sell his interest, and thereby introduce some one 
 else to the business which he is himself discarding on 
 conscientious grounds 1 81 
 
 2. The former course may be heroic, but it is not obligatory on 
 him, and the latter course does not appear to be wrong . .182 
 
 3. How far is it right to enjoy property which was originally 
 acquired by means of which the conscience disapproves? . 182 
 
 (a) When that property is inherited . . . .183 
 
 (^) When there is no possibility of restitution, and the property 
 
 was acquired without fraud at first . , .183 
 
 CHAPTER XIII. 
 
 DUTY IN REGARD TO THE RETURN ON CAPITAL. 
 
 The ordinary analysis, interest, insurance, and wages of manage- 
 ment is very insufficient for our purpose, and it leaves many forms 
 of capital out of account 184 
 
 I. 
 
 1. Wages of management cannot be easily defined, as it is im- 
 possible to separate superintendence from other work, but in most 
 companies the majority of the partners take no share in the manage- 
 ment 184 
 
 2. Superintendence is rewarded on a very liberal scale. High 
 salaries, htdust^nal Remuneration Conference Report, 7&2. . 186 
 
 3. We are only concerned with the return an employer gets as 
 capitalist, not with his earnings as superintendent . . .186 
 
 II. 
 
 The return on capital is either obtained — . . . .187 
 {a) by exercising a right to levy taxation, when it is definite in 
 
Syllabus of the Subject xxiii 
 
 amount, and certain so long as the bargain is kept, 
 or ... o ... . Page 187 
 (J)) by catering for the public and reaping gain which varies in 
 amount and is contingent on the success of the busi- 
 ness 188 
 
 A. 1. To take the case of government loans as typical, the lender 
 does a real service, and some pecuniary gain is allowable, but there 
 is always a danger of taking extortionate and excessive gain . 188 
 
 2. Remuneration taken, not according to the cost to the lender, 
 but according to the need of the borrower, is extortionate . 189 
 
 3. Hence the market rate of interest may mean that many people 
 are in great need, and, though a transaction is public, it may not be 
 free from extortion 190 
 
 4. Extortion as shown by the exhaustion of a country to meet the 
 demands of creditors. Egypt. New Zealand . . .190 
 
 5. Excessive return as compared with the average rate of profit 
 on ordinary enterprise 191 
 
 6. The average rate of profit on ordinary enterprise gives an indi- 
 cation of what it costs the owner of money to make a loan (Jucfum 
 cessans), Aquinas, Summae II*, II"«, q. 62, a. 4, but allowance must 
 also be made for greater or less risk {pericuhwi sortis) . .193 
 
 B. 1. The return to the capitalist engaged in business, say to a 
 manufacturer, accrues from successive transactions, some of which 
 are more, some less successful. There is no regular rate (though we 
 may strike an average rate for any period), so we cannot discuss 
 what rate is fair, but what division of the produce is fair . 193 
 
 2. The division is between capital and labour, and it is right that 
 the capitalist should have some share, since he plays an important 
 part in production , . . . . . . . .194 
 
 3. Just division of the gross produce according to the relative 
 importance of each factor in production. The relative depression of 
 labour and the decrease in the proportion of the labourer's share of 
 the produce. The increasing separation between rich and poor 194 
 
 4. Division as practically made — 
 
 («) Outlay on plant and buildings 196 
 
 (<5) Outlay on hiring labour 196 
 
 (r) The difference between this outlay and the value of the 
 
 product is profit 196 
 
 (i) Profit must afford (on an average) the necessary 
 remuneration which will induce the capitalist to con- 
 tinue in business, and which is roughly indicated in 
 any country by the return obtained on capital invested 
 
 in land 197 
 
 Grave loss to labourers if capital does not obtain 
 this remuneration and the business is wound up . 197 
 
xxiv Syllabus of the Subject 
 
 (ii) Profit will also afford from time to time more or less 
 additional or exceptional gain. Attempts to secure 
 exceptional profits by agreement. Rings. Pools. 
 Edwardes' on Trusts, Consular Reports, July, 1890. 
 C. 5896-32 Page 198 
 
 5. Schemes by which the labourer may obtain a share in the 
 necessary remuneration and especially the exceptional profits of 
 capital 199 
 
 {a) Industrial partnerships 199 
 
 (Ji) Bonus to labour. Sedley Taylor, Profit Sharing . 199 
 {c) Sliding scales and lists. Price, Industrial Peace . 200 
 
 6. Attempts to reduce the outlay under pressure of competition, 
 and especially the outlay on labour 200 
 
 {a) Danger of grinding down the labourer, and of absolute 
 (as well as relative) depression .... 201 
 
 {]}) Relative depression is compatible with absolute improve- 
 ment; but has this occurred as a matter of fact, or has 
 capital persistently ground down labour? . .201 
 
 (f) There is no evidence of absolute depression since the 
 fifteenth century, whether we consider the condition of 
 the employed or the numbers and condition of the 
 unemployed. Growth of English Industry, 346. Denton, 
 Fifteenth Century, 103. Hunter, Hallamshire, 148 204 
 
 {d) That the standard of comfort has not been raised more is 
 fully accounted for when we see how population has 
 increased 205 
 
 {e) Still there is a real danger of grinding down the labourer, 
 and it is a matter of material importance to guard 
 against any symptoms of it 206 
 
 III. 
 
 1. The varying rates of necessary remuneration and the flow of 
 capital to different countries 207 
 
 2. Difference in the rate of moderate interest in old and in new 
 countries 208 
 
 3. Risk of accidental extortion. Mortgage. Government loans 
 
 208 
 
 4. The mass of public debts and increasing burden of interest. 
 Danger of exhausting a country. Public debts. Wilson, World in 
 Pawn, Fortnightly Review, '^'Y.^sN 209 
 
 5. While public opinion may support a man in exercising his 
 legal rights, the scrupulous man will endeavour to avoid gain which 
 accrues through the exhaustion of a country or by grinding down 
 the labourers 210 
 
Syitabiis of the Subject xxv 
 
 CHAPTER XIV. 
 
 THE ENJOYMENT OF WEALTH. 
 
 I. 
 
 Right and wrong in enjoyment. Devas, Groundwork of Economics, 
 454 Page 212 
 
 1. The prospective enjoyment of wealth underlies the whole sub- 
 ject of the means of procuring wealth . . . . .212 
 
 2. The duty of diligence in work involves the recognition of en- 
 joyment in rest and recreation as right . . . . .213 
 
 3. While enjoyment that unfits for work is dissipation and is 
 wrong 213 
 
 4. Further, enjoyment that facilitates any improvement of mind 
 or body is good in its way 214 
 
 5. Also enjoyment that promotes friendly intercourse . .215 
 
 II. 
 
 The neglect of opportunities and waste of wealth . . 215 
 
 1. Setting class against class 215 
 
 2. Getting his money's worth 216 
 
 III. 
 The sacrifice of enjoyment, and its bearing on material progress 
 
 216 
 
 1. In charity 217 
 
 2, By self- discipline , , 218 
 
PART I. 
 SOCIAL PROBLEMS. 
 
 CHAPTER I. 
 Political Economy with Assumptions and without. 
 
 I. Assumptions made by Adam. Smitli and others. 
 
 1. Adam Smith's greatness as an economist is very 
 striking when we compare the Wealth of Natio7is with the 
 works of his predecessors, and see what he did. It is still 
 more striking when we compare his book with the writings 
 of those who have followed him, and see how little they 
 have accomplished in the way of amplifying his work, and 
 supplying what he left undone. We may recognise the 
 importance of Malthus, Ricardo, and Jevons ; they have 
 given us fresh light on particular doctrines, as to population 
 or rent or value ; but the fact remains that the Wealth of 
 Nations is not only read as a classic, but is still used as a 
 text book of the whole subject. 
 
 Adam Smith left his predecessors behind, because he gave 
 a new turn to the old enquiries. The statesmen and politi- 
 cians of different nations had been each trying to work out a 
 practical problem ; each had enquired how to develop the 
 resources of his own country in such fashion as to promote 
 the power of that state. The problem had taken one shape 
 in Germany with its petty principalities, and administrative 
 science. It had taken another form in France with its grreat 
 
"1 Political Ecofio7ny with Assumptions and without [Ch. 1. 
 
 agricultural resources, and physiocratic doctrine. It had 
 taken yet another in England with its facilities for commerce, 
 and mercantile system. Adam Smith stated the matter in a 
 more general form than any of these writers had done by 
 concentrating attention on wealth, — something which was 
 required in all these diiferent countries alike. The first books 
 of his great work really deal with a topic which might be 
 regarded as of common interest to all nations ; it is only in 
 the last books that questions of policy, of using the wealth 
 for the support of the state, come into prominence. The old 
 writers began with power and worked back to the sinews of 
 power; they were politicians first, financiers next, and 
 economists last of all. Adam Smith felt that wealth could 
 be dealt with apart from considerations of political power ; he 
 treated the subject in a more abstract fashion, and also in 
 such a manner that his results were of more general appli- 
 cation. He attacked the mercantilists chiefly, but he 
 superseded the German school and the physiocrats as well. 
 So much for what he did. 
 
 2. But he left much undone, for he classified the diiferent 
 topics with which he dealt in a rough and ready fashion ; he 
 never stated precisely what he assumed, and he took the 
 phenomena of society as the ordinary superficial observer 
 recognised them. It was clear to him that even the poor in 
 civilised countries ' enjoy a greater share of the necessaries 
 and conveniences of life than it is possible for any savage to 
 acquire.' He finds that the chief reason for this lies in the 
 larger ' proportion of useful labour,' and that the large 
 number of useful labourers is due to the ' quantity of capital 
 stock which is employed in setting them to work.' But he 
 simply took these factors, as they were familiarly known in 
 England in the eighteenth century, and traced out their 
 working; he hardly set himself to resolve them into their 
 elements, physical and personal. He never explicitly re- 
 cognises that the free labourer is the product of a highly 
 complicated civilisation, and that capital is only found in 
 small quantities, if at all, among savage or backward peoples. 
 
 Adam Smith might have tried to trace the genesis of both 
 
Assumptions ??tade by Mill 3 
 
 of these factors in the production of wealth; but for his 
 immediate object it was not necessary to do so. He was 
 writing a book for the English pubHc in the hope of 
 accomplishing a practical reform, and in that object he 
 succeeded beyond his highest expectations. Had he aimed 
 at mere formal correctness he might never have caught 
 public attention, and he exercised a wise discretion in 
 avoiding scholastic precision. Perhaps the very greatness 
 of his success has prevented others from thoroughly inves- 
 tigating the facts and principles which he assumed ; his 
 followers have done much in re-stating truths for modern 
 society in better terms and with greater precision, but they 
 have been inclined to imitate him by accepting, as normal, 
 phenomena which only show themselves in a highly com- 
 plicated society. 
 
 Modern economists like Mill assume the 'facts of human 
 nature and of the physical world,' and postulate them as the 
 basis of the science ; but after all this basis is not secure, 
 for the facts of human nature are continually changing. It is 
 not very convenient to fix on any one type of character to the 
 exclusion of the rest, at least for enquiries that have to do 
 with distant places or distant times. If we take the average 
 nineteenth century Englishman, — and how shall we strike 
 that average? — but if we take him as typical, it will not be 
 easy to apply any of the results we reach to a country 
 inhabited by Hindus, for we do not know how to make the 
 necessary corrections. There is a similar difficulty even in 
 drawing on our modern experience for explanations of 
 industrial changes in by-gone days in England. Human 
 nature is very complicated and is constantly changing, and 
 we seem to narrow the range of our enquiry unnecessarily if 
 we confine our attention to a single type. How and when 
 are we to deal with the other types ? 
 
 It might appear at all events that we may assume the 
 facts of the physical world as constant ; the changes in the 
 material universe are so slow that the phenomena may be 
 regarded as permanent when compared with the duration of 
 human life on the globe. But this is scarcely so ; for 
 
4 Political Economy with Assumptions and without [Ch. i. 
 
 economic purposes the consideration which is important is 
 generally speaking, not what physical nature is, but how far 
 it is understood. As men increase in their knowledge of phy- 
 sical facts and in their power over them, the industrial and 
 commercial character of the physical world wears a different 
 aspect. There is no range of acquaintance with physical 
 nature and no definite type of human character which 
 remains unmodified for many generations in any period of 
 progress, and it is inconvenient to have to assume some 
 definite range and definite type when we are discussing the 
 causes and the course of material progress. 
 
 II. Difficulty of Stating and of Working from these 
 Assumptions. 
 
 1. That this is a real difficulty might be seen more clearly 
 if we were to review the various attempts that economists 
 have made to state the precise assumptions they are 'making. 
 Nothing can be of greater importance than that the funda- 
 mental assumptions, the very basis of all subsequent 
 discussion, should be clearly stated; but the difficulty of 
 doing this well appears to be insuperable. Thus it is 
 common for economists to assume free competition, and Mill 
 seems to hold that economic phenomena cannot be scienti- 
 fically investigated without the aid of this assumption; but 
 there is very great difficulty in stating precisely what it 
 means. Some writers scarcely attempt to define it, while 
 others would tell us that the phrase ' free competition ' 
 describes a state of society when every man pursues ' a 
 course which, without entering into combination with others, 
 he has deliberately selected as that which is likely to be of 
 the greatest material advantage to himself and his family.' 
 The assumption of free competition in this form may be 
 fairly convenient for dealing with many commercial questions, 
 but it is ludicrously unsatisfactory as a means of approaching 
 the examination of the struggle between organised labour and 
 capital. Yet it would be very difficult to restate the definition 
 so as to include competing associations and corporations as 
 
Assiwiptions unconsciously retained 5 
 
 well as competing individuals. The consideration of this single 
 instance may show that while it is often useful to proceed by 
 the help of assumptions, there is a double difficulty with 
 which we have to contend ; on the one hand it is very hard 
 to think out the particular hypothesis we shall assume, and 
 on the other it is very hard to state precisely what we are 
 taking for granted. 
 
 2. There is, however, another point of view from which we 
 can see the difficulties which attend this method of procedure. 
 Unless we know what we have assumed and can state it quite 
 clearly, we may fail to divest ourselves of these presupposi- 
 tions, even when we try to do so. Thus, as has been noticed 
 above, Adam Smith assumed existing social arrangements 
 and classes — landlords, capitalists and labourers — in his 
 treatise, and other economists have followed him in this; 
 even in cases where the assumption appears to be laid aside, 
 it is still implicitly present. Economists, when describing 
 the growth of industry or commerce, are not always ready to 
 face the real problem and examine the change from savagery 
 to civilisation as it has actually taken place in any part of the 
 world; they appeal instead to the probable experience of a 
 Robinson Crusoe, — a man with all the industrial habits and 
 modes of thinkings of a modern Englishman. These fancy 
 illustrations tell us at best what a modern Englishman would 
 try to do if he found himself in an isolated position, or when 
 he came in friendly contact with savages ; but they do not 
 throw any light on the question as to the steps by which 
 a primitive people, with no ideas of exchange and no habits 
 of saving, emerges from barbarism. So long as the termi- 
 nology of economics is framed on a rough and ready scheme 
 drawn from the phenomena of modern society, our treatment 
 of history is necessarily superficial, because, by the language 
 we use, we read into primitive times the very habits and 
 practices of which we profess to trace the origin and growth. 
 
 A similar defect may even be detected in the writings of 
 some of those who have ranged themselves in opposition to 
 the existing order, and desire to introduce something very 
 different. The Labour and Capital of which they write are 
 
6 Political Economy with Assumptions and without [Ch. I. 
 
 still Labour and Capital as known in modern society ; the 
 communist would reconstruct all the conditions of life, but 
 he appears to assume that Labour could be directed and 
 controlled, in these new circumstances, as effectively or more 
 effectively than it is at present. The motives to work, the 
 manner of work, the training for work, would all be altered ; 
 it is a complicated speculation to guess how Labour would 
 be affected by these changes. Could society count upon 
 laborious drudgery being regularly done if effect were given 
 to the great principle of the gratuitousness of service? It is 
 a large assumption, (whether it is a justifiable one or not), 
 and it sometimes seems to creep in by mere implication, 
 when language framed in accordance with the present state, 
 is used to describe the possible economic conditions in some 
 future Utopia. Just as some economists are apt to be super- 
 ficial when they write of the past, because their language 
 makes use of the very things they profess to explain, so 
 other economists are apt to be superficial when they write of 
 the future because their language implies the retention, 
 under changed circumstances, of much that might have 
 passed away. 
 
 3. There is a further inconvenience in basing the whole of 
 our scientific treatment on some particular assumption about 
 human nature. In so far as the assumption fails us we are 
 left without any help for conducting a reasoned and scientific 
 investigation. It may be the most convenient, or even the 
 only possible, mode for treating certain modern problems, 
 when we can be sure that human beings will continue to be 
 the same for all practical purposes. For short periods, 
 during which there is no modification in human habits, it 
 may answer admirably; but where human motives change 
 in character, or human habits are altered, our fundamental 
 assumption becomes untrue, and we have no scientific means 
 of correcting our results, so as to make them apply to the 
 changed condition. The inadequacy of ordinary economic 
 reasoning has been brought to light during the last decade, 
 when attention has been increasingly directed to social 
 problems which force us to recognise the fact that there have 
 
Gradual chatiges m Htunan Nature 7 
 
 been and may be fundamental changes in human nature 
 itself. There is at present a wide-spread dissatisfaction 
 with the existing social order, and schemes for mending it, 
 or even for ending it, are eagerly welcomed in many quarters. 
 There is also an increasing interest in the social life of bygone 
 days, or of primitive peoples, and the diffusion of ' village 
 communities,' whether free or not, and of gilds of different 
 types, has impressed the popular imagination ; but for 
 describing the practice of these bodies in detail our ordinary 
 economic terminology does not serve satisfactorily. There 
 is another reason for pushing our examination a little 
 further than was done by Adam Smith and has been ac- 
 cepted by his successors. In taking modern English society 
 as normal they found a plain, but not high, view of the rela- 
 tions of morality to commerce. They found that some kinds 
 of conduct were prohibited by law, and that certain actions 
 were commonly regarded as discreditable breaches of business 
 etiquette, but they did not raise questions of right and wrong 
 within these wide limits. Those who hope to elevate the 
 public standard, to distinguish fairness from unfairness in 
 different transactions, are forced to try and find distinctions 
 which are commonly ignored — that is to say, they must try 
 to analyse more minutely. 
 
 The rough and ready acceptance of modern society as 
 normal, and of its phenomena as typical, serves for the 
 discussion of practical fiscal questions in the present or 
 immediate future. There is an immense number of prob- 
 lems connected with currency and finance and tariffs which 
 can be conveniently dealt with on the ordinary assumptions ; 
 but there are others, and these for the most part are wider 
 and more important questions, which can only be treated 
 satisfactorily when they are examined in another light. 
 Those who are anxious to understand the history of the past, 
 or to raise the tone of commercial morality, or to forecast 
 the course of society, will not be satisfied to look at all 
 economic questions through the medium^ of modern society, 
 or with the aid of any assumption about the dominant factors 
 in human nature. 
 
8 Political Economy with Assmnptions ajid without [Ch. I. 
 
 Since economic science assumes a certain type of human 
 nature, its results simply become irrelevant if we wish to 
 understand a long period of the past, during which human 
 nature has been altering, or to forecast a future, in which, 
 as we hope, human nature will be different from what it is 
 now. The principles that economists have formulated, the 
 terms they use, cannot be applied directly and easily to 
 the changed conditions; in order to apply them at all we 
 should have to enter on a diiferent kind of enquiry, — to 
 analyse human nature more carefully, to state how far e. g. 
 the nature of the Hindu in a village community corresponds 
 to, and how far it differs from, the type of human nature we 
 have assumed, and to see what probabilities there are that it 
 can be modified to any great extent in a given time. It is 
 only after some such investigation that we can attempt to 
 apply the principles of economic science in regions where 
 our fundamental assumptions about human nature do not 
 hold good. Unless there is a serious effort to do something 
 of the sort, our treatment of the widest and deepest economic 
 problems must be entirely haphazard, as it will depend on 
 the fashion in which our sentiments or our fancies induce 
 us to discard, or to retain, the conclusions which had been 
 accurately worked out for a different state of affairs. A 
 pessimist writer will take one view, an optimist another ; 
 there can be no argument between them, because neither 
 has any means of giving a rational justification for his con- 
 viction. 
 
 in. Empirical and Hypothetical Treatment compared. 
 
 1. In order then to examine social questions in the past, 
 or to forecast the future, or to see our way about possible 
 improvements, we must enter on a purely empirical in- 
 vestigation ; we must lay aside for the present, all postulates 
 about labour and capital, all hypotheses about free compe- 
 tition and formulas of supply and demand. We only require 
 to know the field w.e are going to examine, and to be very 
 careful about the terms in which we record our investigations. 
 The field of enquiry includes the manner in which human 
 
Human Energy 9 
 
 beings have used the resources at their command to satisfy 
 their needs ; in the progress of society these needs have 
 been constantly changing, and the available resources have 
 also changed. But the motive power in these changes has 
 not lain, directly at all events, in the circumstances outside 
 man, but in man himself. He has overcome nature ; he has 
 sometimes adapted himself to his environment, or he has 
 more often adapted his environment to himself, and made it 
 more comfortable or more productive. By observing, as 
 carefully as possible, the forces in human nature which have 
 been exerted to satisfy human wants, we shall get a view of 
 the means by which men have maintained themselves, and 
 of the means by which they have, at times, advanced to a 
 new stage of progress. To put the matter in this way is not 
 to neglect the assistance which is given by physical nature 
 in supplying products and forces to man, but it is to take 
 these physical factors into account in the right way ; by 
 noting how man's skill enables him to apply them to his 
 needs. The thorough examination of human nature, human 
 skill and human motives, on purely empirical lines would 
 give us, if it could be successfully attempted, the completest 
 account of our complicated society in the present ; it would 
 give us too the data by which we might enter on an intelligent 
 comparison with the past, or frame a rational forecast for 
 the future. 
 
 2. At the same time, though such empirical investigation 
 is most necessary, especially with a view to historical and 
 social enquiries, it would be an error to suppose that it can 
 enable us to dispense with the methods which have been 
 usually adopted by economists in discussing the industrial 
 and commercial phenomena of the present day. Just be- 
 cause our existing society is so complex, the attempt to 
 proceed empirically would be tedious and could never be 
 complete. By assuming certain conditions which are prac- 
 tically true at present, and neglecting the minor disturbances, 
 we may fix our attention on what is really important here 
 and now. We thus get a convenient method of statement, 
 and that in itself is the first condition for solving a problem. 
 
lo Political Econojny with Asstwiptions and without [Ch. I. 
 
 The volume of commercial transactions in the present day- 
 is so great, the machinery by which they are carried on is 
 so complicated and so delicate, that we may welcome any 
 method by which the questions to be considered are sim- 
 plified. The hypothetical method, which assumes certain 
 facts of human nature, and works on the basis of this 
 assumption, is most convenient for discussing all matters of 
 currency and banking, all questions connected with com- 
 merce or tariffs or the Stock Exchange. The empirical 
 enquiry, on the other hand, is the most convenient for dealing 
 with the distant past or the probable future ; even if we 
 merely rely on it in order to enable us to correct our hypo- 
 theses, and adjust results we have already reached, and 
 restate them so as to apply in other circumstances. There 
 are topics in regard to which there may be much doubt as 
 to which of the two methods is the more convenient ; such are 
 questions about labour and wages in the immediate future. 
 
 These two modes of treatment, then, are not inconsistent 
 and need not be opposed ; but it is desirable to distinguish 
 them, so that we may not flounder helplessly between them, 
 and thus fail to know the precise character of the results we 
 have attained. It is not easy always to distinguish them ; they 
 are closely connected, and neither can claim to occupy the 
 whole field of economic enquiry to the exclusion of the other. 
 The empirical enquirer, who would dispense with the assistance 
 of hypotheses, undertakes unnecessary drudgery in intricate 
 paths, in which he may easily lose his way. The economist 
 who betrays any jealousy of the progress of empirical enquiry, 
 as likely to do serious damage to the science, is self-con- 
 demned. After all, neither method of enquiry can be pursued 
 entirely apart from the other ; we cannot without empirical 
 enquiry reach the facts of human nature and of the phy- 
 sical world which Mill assumes ; and the tentative use of 
 hypotheses is an ordinary instrument in any empirical 
 investigation. Still, the two modes of treating economic 
 phenomena, though not mutually exclusive, and though 
 neither supersedes the use of the other, are yet so far dis- 
 tinct that it may be convenient to contrast them as to their 
 
Mechanics and Economics li 
 
 general modes of working, and the nature of the results 
 obtained. 
 
 3. The hypothetical mode of treatment is conducted on 
 the model which is given by mechanics. Mechanics ex- 
 amines the behaviour of a body moving under its own 
 momentum, and acted on by no force ; Economics examines 
 the behaviour of a man actuated by self-interest and un- 
 influenced by external considerations. The science states 
 how molecules or men regularly act under certain conditions, 
 and thus gives us the law of the phenomena. Economics 
 may then proceed to consider how various kinds of external 
 force interfere with the phenomena and modify the results. 
 To do this, recourse is still had to the methods of Mechanics. 
 A common denominator is taken of the widest kind, so that 
 all the various forces in human nature can be expressed quan- 
 titatively in similar terms ; some writers prefer to speak of 
 greater or lesser quantities of motive, and some of greater or 
 lesser quantities of the utility which attracts ; but they are 
 alike in this, that the whole method of conducting the en- 
 quiry is based on Mechanics, and the favourite conceptions 
 which are applied to economic phenomena, such as equili- 
 brium, are borrowed from mechanical science. 
 
 {a) The advantage of this method, Hes in the convenience 
 it offers for carrying on a difficult enquiry about the com- 
 plicated affairs of the present day; but it is not without 
 defect, so that it may occasionally be supplemented with 
 advantage. It states what holds good upon a given as- 
 sumption ; what is thus formulated is a universal proposition 
 which holds good anywhere and everywhere, so long as the 
 assumed conditions are present. It is valid for all time and 
 for distant planets, and indeed for any possible place that we 
 can ever think about, — because it derives its validity from the 
 very nature of our thinking faculty ; given the condition, the 
 consequent is necessary. But although it has this hypo- 
 thetical validity universally, it may not be actually true in 
 any single place, or at any known time ; it will never be 
 true unless the assumed condition is present. On the other 
 hand, though empirical investigation cannot give us econo- 
 
12 Political Economy with Assumptions and without [Ch. I. 
 
 mic laws which are vahd in other planets, it can help us to 
 learn what is actually occurring in the world where we live. 
 
 {b) Again, economists who have devoted themselves to 
 hypothetical enquiries find that they can proceed without any 
 detailed analysis of human motives. The various objects oi 
 human desire are sufficiently represented for their purpose 
 by greater or less quantities of utility, and we find that they 
 do not lay any stress on the need for analysing different 
 kinds of motive or for using accurate terminology. There is 
 even a disposition not to define the most important terms ; 
 it is taken for granted that everybody knows the sort of 
 thing to which they apply, and that no greater precision can 
 be hoped for than is attained in ordinary conversation. 
 Thus we are told in common primers that capital cannot be 
 separated from non-capital by ' a precise dividing line ' and 
 that ' productive labour cannot be divided off by a clearly 
 dividing line from unproductive.' But accuracy in the use 
 of terms is of the first importance in an empirical investi- 
 gation ; we must know what a name means, or we cannot 
 advance with a discussion of the things to which it applies. 
 In economics it is indeed comparatively easy to define the 
 names, the difficulty generally lies in the fact that our de- 
 fective powers of observation may render it hard for us 
 to know at once on which side of our precisely drawn line 
 an imperfectly understood object ought to be placed. 
 
 {c) In investigating movement within certain conditions it 
 is natural to apply mechanical analogies, as they may give 
 the most convenient method of summarising the facts we 
 wish to explain. Such conceptions as equilibrium or the 
 equation of supply and demand offer convenient modes 
 of exhibiting the influences which determine prices at any 
 one moment on the Stock Exchange, and they can be applied 
 to show the ordinary price of corn which ruled during a long 
 period, like a century. But for the most part they are 
 methods of stating, or it may be of illustrating, economic 
 phenomena, rather than methods of explaining the reasons 
 of the changes which have actually taken place. To apply 
 the conception of equilibrium we must break up the course 
 
Both methods of treatment ^tseflll 13 
 
 of events into longer or shorter periods ; and if we wish to 
 follow out a continuous change, whether of progress or decay, 
 it is generally more convenient to discard the analogies and 
 conceptions drawn from elementary mechanics ; growth 
 and decay and other ideas borrowed from organic life are 
 more likely to serve our purpose and to prove convenient 
 phraseology. 
 
 4. Since empirical investigation of economic phenomena 
 discards the assumptions with which Mill and many of the 
 other followers of Adam Smith have started, we must, in 
 pursuing it, forego the convenient aid which we may derive 
 by drawing mechanical analogies, and we must therefore 
 force ourselves to carry out our analysis as fully as may 
 be with the use of ordinary language ; and we must be 
 careful to employ our terms with precision. Above all, 
 we cannot hope to attain results which are universally valid, 
 but only statements which are true to the facts of actual life, 
 over a larger or smaller area, and for a longer or shorter 
 period, on the globe we inhabit. In so far as we notice the 
 operation of a motive — like the wish to have a reserve fund 
 — which shows itself in early races, and which is maintained 
 in a highly developed form among civilised men, we may 
 perhaps attain to a statement which is true very widely and 
 which is therefore very important ; in other cases we may 
 have to notice the influence of passing whims of fashion. 
 
 IV. Bespective Advantages of the Two Methods of Study. 
 
 It has seemed wise to endeavour to distinguish thus 
 clearly the method which is adopted in most treatises on 
 economic science from that which will be pursued in the 
 following pages. Each is good in its own place. However 
 highly we rate the importance of hypothetical enquiries, we 
 may yet feel that they require to be supplemented by 
 empirical studies. So too, while entering on an empirical 
 investigation, I may once more reiterate my repudiation 
 of the view that this is the only legitimate mode of economic 
 enquiry and that hypothetical statements are foolishness. 
 
14 Political Econo7ny with Assimiptiotis and without [Ch. I, 
 
 By the assumption of free competition we simplify many 
 problems and are able to examine affairs of present im- 
 portance, which could hardly be discussed at all, unless they 
 were artificially isolated so that we may observe them better ; 
 it affords a most valuable means of investigation with which 
 we cannot dispense. It supplies us with terms in which to 
 describe phenomena we observe, and general propositions 
 with which to compare our empirical conclusions. For all 
 that however, by adhering rigidly to this assumption we 
 condemn ourselves to think within a limited range ; it 
 may be desirable to try and break through this charmed 
 circle if we can. We must certainly do so if we wanted 
 to review the whole industrial life of our own time, to 
 see wherein it differs from that of bygone ages ; and how 
 it may be improved ; but this would be a very large under- 
 taking. It will more than suffice for the present to take 
 one factor, Capital, and examine it more closely, as it is 
 now, and see how it differs from the corresponding factors 
 in bygone days. When we have examined it thus we shall 
 be able to look at questions connected with the remuneration 
 of capital and the duties of the capitalist in a new Hght, or 
 at least in light derived from sources that have been too 
 much neglected. 
 
 In so far as the attempt to examine modern capital more 
 closely, and to name the personal elements which are con- 
 cerned with it, is at all successful, in so far we shall get 
 results that are more widely true than the statements of 
 modern . economists who have adopted such assumptions as 
 those of Adam Smith or Mill. These statements have 
 of course hypothetical validity of a universal character ; but 
 they do not hold good as convenient descriptions of the 
 actual course of industrial affairs, except for a few countries 
 and for these countries in comparatively recent times. They 
 assume free competition and trace everything to the indivi- 
 dual desire of wealth-in-general as an ultimate explanation ; 
 but there is only a small area of human life on this globe in 
 which the individual ' desire of wealth ' has free scope 
 enough to make itself felt as a dominant force. When we 
 
Elefneiitary Human Desires 15 
 
 take account of a variety of human motives in the present 
 day, and note the particular characters of each, we shall find 
 that some of them are forces which have been effective from 
 very early times and over wide areas, e. g. the desire not of 
 wealth-in-general, but of having a hoard. In so far as we 
 can succeed in tracing out the influence of some very ele- 
 mentary human desire which shows itself in very primitive 
 races, who have very little knowledge of nature or power of 
 controlling it, we shall reach an economic principle which 
 has held good in the most different times and places as an 
 explanation of actual life there and then. The desire of 
 wealth-in-general is a complicated product that shows itself 
 among men in highly civilised society ; we must look for the 
 simpler, because more particular, motives which are combined 
 in it now, and which have operated in earlier social conditions 
 as well. 
 
CHAPTER 11. 
 
 Industry without Capital. 
 
 I. Money and Capital. 
 
 1. A man's capital, as we talk about it in the present day, 
 is understood to be a fund of wealth from which he expects 
 to get an income. This is what is meant by the word in 
 ordinary conversation, and it will serve for the present as 
 a definition of the thing. The precise force of the various 
 terms in this phrase will be brought out in subsequent dis- 
 cussion, at present it may suffice to point out that this income 
 will be received in money and pass through the owner's ac- 
 count at the bankers ; there is probably no part, or only a 
 very small part, which is paid to him in kind. The fund 
 itself at any time consists of property of different sorts ; but 
 it is constantly estimated in terms of money, and this esti- 
 mate states the amount of money which could be obtained 
 for it at that time. It is ordinarily assumed that a man can 
 realise his capital in money, and subsequently reinvest it in 
 some other property. He may indeed sink it in land; but 
 when he does, common opinion rightly regards him not as 
 a capitalist but as a landlord, for his wealth no longer exists 
 as capital, since it is merged in an estate and cannot be 
 realised apart from that estate (p. 85). The wisdom of the 
 capitalist lies in making judicious investments, in weeding his 
 investments from time to time, or holding an improving 
 property. A man's whole capital will very rarely actually be 
 in the form of money, but it is always potential money ; and 
 many judicious capitalists dislike investments in which their 
 
No Money, no Capital 17 
 
 money is so locked up that they may be unable to realise it 
 when they desire to do so. This is one of the reasons why 
 so many private firms have been reconstructed as joint stock 
 companies ; the partners can more easily withdraw a portion 
 of the capital, if, e.g. it is necessary to divide the estate 
 among heirs. Hence capital, as we habitually think of it, is 
 a fund of wealth, realisable in money, and from which the 
 owner expects to derive a money income. 
 
 2. From all this it follows that capital, as we speak of it 
 to-day, can only exist where money is generally known and 
 used, or, to put it in another way, where the exchange of 
 wealth is regularly practised and men are familiar with the 
 use of a medium of exchange. You may have a hoard of 
 goods, but unless you can employ it in the expectation of 
 income, it is not capital, properly so called. The Bombay 
 rayat, who has a store of corn (beyond what he needs for 
 seed), who cannot sell it, but holds it against a famine year, 
 does not expect to get any income from it ; it is a reserve 
 fund rather than capital, it is wealth which is lying idle. If 
 those who merely keep their hoards as a reserve and do not 
 use them are not capitalists, it is still more obvious that those 
 who do not even form hoards at all but merely live from hand 
 to mouth have no capital. In any state of society where 
 everybody lives from hand to mouth there is no capital ; 
 a tribe that lives solely by hunting wild animals or fishing, 
 and which has no store on which it can fall back, has no 
 fund of wealth and therefore has no capital. 
 
 3. While it thus appears that there are many peoples who 
 have no capital it is also true that there are tribes which con- 
 tinue to live in this hand to mouth fashion, and manage on 
 the whole to obtain supplies, and satisfy their needs from 
 day to day ; it is also true that there are many villages which 
 are almost entirely isolated, which do not rely on trade for 
 the supply of any of their regular wants, and which yet 
 maintain themselves in moderate comfort from year to year ; 
 they produce all that is necessary for subsistence year after 
 year. They may be very industrious, and practise all sorts 
 of useful arts, but they have not reached the social conditions 
 
1 8 Industry without Capital [Ch. II. 
 
 which are implied in the very nature of capital. But if tribes 
 of hunters, or self-sufficing villages, procure what is needed 
 to satisfy their wants without capital, it is perfectly obvious 
 that capital, as we know it, is not a requisite of production 
 in all times and in all places. To say that capital is a re- 
 quisite for production in a capitalistic era is a mere truism ; 
 and since modern society is capitalistic it is true to say that 
 capital is a requisite of production in modern society ; but 
 the fact that capital is necessary for carrying on industry as 
 it is organised in Europe in modern times does not show 
 that capital is necessary for production at all times and in 
 all places. 
 
 4. ' But surely,' it may be said, ' industry could not go on 
 unless there were something similar to capital in these primi- 
 tive circumstances, something that discharged similar func- 
 tions.' Very likely it could not ; we shall be better able to 
 discuss the matter if we can arrive at a clear view as to the 
 precise function that capital performs; in the meantime it 
 may suffice to point out that a thing may be similar and not 
 the same ; the very question we want to discuss is just this — 
 How far are they similar? If we begin by calling them by 
 the same name, we are begging the whole question, and as- 
 suming that they are so closely similar, that we may use the 
 same term for both. Birds fly and bats fly and so do flying 
 fish and butterflies, we may say that they have all got wings 
 and leave the matter there ; but there are great differences 
 between their wings, as birds fly with their arms and bats 
 with their fingers; the wings of the others have even less 
 resemblance to the limb with which the bird flies ; there is 
 a certain likeness between them all, but when we think for 
 a moment we see that the resemblance is very slight. The 
 use of the word wings suffices for popular talk and for poetry, 
 but we have to discard it if we wish for scientific accuracy. 
 It is true that the tribes of hunters possess certain imple- 
 ments, and that agricultural villages have not only imple- 
 ments but a store of food ; but here the likeness to capital 
 ends. To call these implements and stores capital may serve 
 in travellers' tales, but it does not conduce to clearness of 
 
Primitive Implements and Stores 19 
 
 thought and accuracy of language. There is a constant 
 danger of expanding the application of a term by analogy 
 till it loses all definite signification and becomes a mere 
 metaphor. No one would seriously contend that the ' Flying 
 Scotchman' must have wings, or that it goes on 'the wings 
 of the wind ' ; but economists have sometimes strained ana- 
 logies, and used words in loose senses until they have fallen 
 into strange absurdities. 
 
 5. There is much greater danger of confusion, if we allow 
 ourselves to take liberties with economic terms, than there 
 can be in pursuing any branch of natural science. The dis- 
 tinction between the wing of a bird and that of a bat is clearly 
 marked when once it is recognised ; but the implements and 
 stores of a primitive people not only correspond to the capital 
 of modern society, but they may also be said to be unde- 
 veloped forms which give rise to capital as it is used in 
 modern industry; they are related, somewhat as the cater- 
 pillar and the moth. Capital supersedes the primitive ar- 
 rangements for industry and takes its place ; it does this 
 very gradually. Just because the process is slow and con- 
 tinuous we need to have clear terminology in order that we 
 may be able to discriminate the stages in the process. The 
 caterpillar and the butterfly have one continuous life, but that 
 is no reason for saying that the caterpillar is a butterfly and 
 calling them both by the same name. The industrial life of 
 the English people has been continuous from the time when 
 their separate villages were each practically self-sufficing, but 
 that is no reason for saying that the requisites of production 
 now were the requisites of production then, and calling 
 them by the same names. Both for the sake of under- 
 standing the nature of capital, and in order to trace the 
 development of society, we shall do well to avoid the vague 
 use of terms and to try and discriminate the real differences 
 between these early societies and our own. 
 
 II. Physical Circumstances and Personal Qualities. 
 
 1. There are two distinct points of view from which we 
 may look at the diff'erences between primitive and civilised 
 
20 Industry without Capital [Ch. II, 
 
 society, and therefore two distinct sets of phrases and terms 
 by which we may describe them, or different sets of elements 
 into whicli we may resolve the forces that work in them. 
 Man and his environment act and react on one another ; we 
 may fix our attention on man's physical surroundings, and 
 describe the changes in the material conditions of his life ; 
 or we may attend chiefly to man and describe the changes 
 in his powers of overcoming nature and improving his cir- 
 cumstances. We are apt to vary, in a somewhat haphazard 
 fashion, between these modes of statement ; sometimes to 
 use one set of phrases and sometimes another, but the state 
 of affairs to be described is always affected by both elements. 
 Travellers who write about the North American Indians and 
 other such tribes are fond of laying stress on their improvi- 
 dence — a personal quality. They have abundant food one 
 day, but they never attempt to save it, and if they have bad 
 luck they may soon be reduced to the direst straits. But 
 though the improvidence is so noticeable, it may also be said 
 that they hardly have any suitable materials for hoarding; 
 that the flesh on which they live is not easy to preserve, and 
 that the whole physical circumstances of their life make it 
 diflicult for them to be very provident. 
 
 In regard to agricultural communities we may note 
 something similar ; they do not exchange their goods regu- 
 larly and habitually, and we may say that they have no roads 
 or other means of communication and that physical circum- 
 stances are against them. On the other hand it appears that 
 they have no great wish to break down these obstacles and 
 have not enterprise enough to try and open up trade ; they 
 would regard it as a doubtful boon. 
 
 2. Now though these physical and personal traits appear 
 to be distinct, they are after all very closely related and are 
 separate vi^ays of stating the matter. Certain physical cir- 
 cumstances are a limit to certain men, because they have not 
 the wish or the wit to overcome them — a personal defect; to 
 other men with more personal resources these same physical 
 obstacles cease to be an insuperable barrier. As human 
 skill increases, the old limits which circumstances set to 
 
Description and Explanatioft 21 
 
 human welfare are passed; no such physical circumstance 
 can be an absolute bar to further progress, though it is a 
 barrier that is insuperable until human intelligence improves. 
 It may be said that the physical circumstances which prove a 
 barrier in any society show the high water mark of the skill 
 and enterprise of that society. The two are closely related, 
 ■and in accounting for the low condition of any race we may 
 lay stress either on physical circumstances or on the cha- 
 racter of the people — their wishes and habits. We may say 
 that it is impossible for them to do otherwise because of 
 their surroundings, or we may say that it is impossible for 
 them to do otherwise because of their habits and dispositions ; 
 the two are correlative. 
 
 3. For some purposes one mode of statement is more 
 convenient, for others another. We may notice that for the 
 purpose of describing how great the difference is, we do well 
 to keep to the physical circumstances, because we can note 
 and describe them ; but we may make a mistake in speaking 
 positively about inherent disposition and character because 
 these are after all matters of inference. Although the physi- 
 cal conditions are most easily described, it does not follow 
 that they are the most potent factors and that human cha- 
 racter is really formed by them ; the whole history of civilisa- 
 tion refutes such a supposition ; wherever human powers are 
 improved, and men become more skilful or energetic, or self- 
 reliant, or able to co-operate with one another, they are sure 
 to obtain a greater command over nature, and a better means 
 of supplying their wants. And here we may perhaps say 
 that while the material adjuncts of any state of society may 
 often give us the best means of estimating the stage of 
 progress it has reached, the personal elements of skill and 
 character supply an ultimate explanation of any definite 
 progress in the arts of life. It is ultimate so far as economics 
 are concerned, for it takes us outside the sphere of wealth 
 altogether, and to carry the matter farther we should have to 
 enter on a fresh enquiry and to examine the growth of mind 
 and character. 
 
 4. {a) By looking at their physical conditions and ap- 
 
22 Industry without Capital [Ch. II. 
 
 pliances we find plain features which distinguish societies of 
 human beings, where there is no capital, from others. They 
 have no means of communication or regular commerce and 
 no sufficient medium of exchange. Unless there is an 
 abundant medium of exchange it is impossible to accumulate 
 a fund of such wealth as can be transferred from one kind 
 of employment to another ; there may be hoards of food or 
 other wealth, but these hoards cannot be realised or em- 
 ployed at will in any kind of industry or direction of com- 
 merce. It is when there is money, or a circulating medium, 
 that the men who have masses of money, have a fund of 
 wealth which is readily transferable, and thus it appears that 
 habitual commerce and the use of a medium of exchange is 
 a necessary condition, without which the formation of capital 
 cannot take place at all. These are not the sole conditions, 
 for the general accumulation of capital may not take place 
 even though these conditions are present, as the history of 
 mediaeval England shows ; but where these phenomena do 
 not appear, capital cannot come into being. 
 
 {b) The absence of trade is a plain fact, the explanation 
 of the fact is found in the personal characteristics of the 
 people. If we wish not only to call attention to the differ- 
 ence but to ask for the reasons why some races have no 
 regular commerce and medium of exchange, we may note 
 three personal qualities which must all be present before 
 trade becomes habitual. They must (a) be so far on friendly 
 terms with their neighbours that they can meet and drive 
 bargains. (/3) They must be able to produce or procure 
 something to exchange, and (y) they must be able to keep 
 and stow things to exchange. Neighbourliness, Skill, Provi- 
 dence — if any one of these personal qualities is absent, there 
 can be no regular commerce; possibly all three traits may 
 alike be wanting in the case of mere hunters or the most 
 savage races ; but if any one were absent, regular commerce 
 could hardly be developed, and travellers ought possibly to 
 be more careful before ascribing the backward condition of 
 any race to some one personal characteristic, as e. g. im- 
 providence ; it must be a matter of inference which personal 
 
Neighbourliness^ Skill, Providence 23 
 
 quality is lacking or how far all are weak. It is, however, 
 clear that where these three personal qualities are present in 
 the people of adjacent social groups which have dissimilar 
 productions, commerce is likely to arise ; and the more 
 friendly relations, skilful production, and patient foresight 
 are cultivated, the more widely and securely may regular 
 commerce be extended ; it is hardly necessary to show that 
 it goes on more easily and advantageously when a medium 
 of exchange is understood, and money dealings have taken 
 the place of barter. 
 
 It is not very clear whether it is possible for regular 
 commerce to go on without the use of a circulating medium. 
 It appears that the Dyaks of Borneo are accustomed to 
 barter one thing for another, but cannot grasp the advantages 
 of a three-cornered exchange or the use of a medium. ' A 
 Dyak,' according to Mr. Brooke, ' has no conception of a 
 circulating medium. He may be seen wandering in the 
 bazaar with a ball of beeswax in his hand for days together, 
 because he cannot find any one willing to take it for the 
 exact article he requires. This article may not be more than 
 a tenth of the value of the beeswax, but he would not sell it 
 for money, and then buy what he wants. From the first, he 
 had the particular article in his mind's eye, and worked for 
 the identical ball of beeswax with which and nothing else to 
 purchase it.' There are other cases too, such as the com- 
 merce of half-agricultural, half-piratical traders who used 
 slaves as a means of measuring wealth, — where it is not quite 
 clear that these human chattels are properly spoken of as a 
 medium of exchange ; their importance chiefly lay in their 
 capacity for labour, and their use as a measure of wealth was 
 secondary. Of the precious metals it may be said that they 
 are, over a large surface of the globe, chiefly used as media 
 of exchange, and that the other employments are subsidiary ; 
 at any rate they are media of exchange which can be readily 
 hoarded, as slaves cannot. When skill and intercourse so 
 far advance that men use metalhc money, or a kind of money 
 which can be accumulated, then it appears that, as far as 
 physical conditions are concerned, capital may be formed 
 
24 hiditstry withoitt Capital [Ch. II. 
 
 and funds of wealth accumulated and used in the hope of 
 obtaining an income. But where there is no commerce and 
 no money, there may of course be hoards of food or wealth, 
 but there is no opportunity for forming or investing capital. 
 
 5. Besides the conditions which are requisite for the 
 formation of hoards of money, there are others which must 
 be present, before the owner can expect an income or be 
 willing to employ his money. Even in societies where there 
 are considerable hoards of money, there may be a compara- 
 tively limited field for using them as capital. The man who 
 has a fund of money will not wish to let it out of his keeping 
 unless he sees his way to be a gainer by doing so. He will 
 not wish to employ it in any direction in which he cannot be 
 sure of an income — a return in money. But even when 
 society has made great advances there may be difficulty in 
 procuring this, for neither agricultural nor industrial pursuits 
 will serve his turn so long as they are pursued for the sake 
 of livelihood or convenience, not for sale in a market for 
 profit on the sale. The mediaeval estate in England was 
 managed as an independent group; and a comparatively 
 small proportion of the produce was sold. The bailiff would 
 endeavour to provide seed corn and food for the household, 
 together with supplies for the lord and his retainers; he 
 would sell any balance he could spare and improve the 
 buildings or condition of the estate with the receipts in good 
 years ; he would have proved that the estate was well main- 
 tained by showing that the wealth under his charge had not 
 diminished in any separate item ; the estate paid its way and 
 prospered. Only when the whole produce was brought to 
 market and turned into money did it become natural to 
 calculate out the relation between the worth of the estate 
 and the annual return ; only then too did market considera- 
 tions come to be dominant, and the owner began to use the 
 land in the way that would pay best— for sheep farming or 
 for growing corn, as the case might be. In the old days he 
 had managed his estate as the source of provision for his 
 household — as an isolated and, so far as might be, self-suffi- 
 cing whole and sold the surplus he could spare. Not till 
 
Selling a Surphis or Workmg for a Market 25 
 
 landowners managed their estates in such a fashion as to 
 yield the best return, has agriculture assumed a shape in 
 which it can be taken up as a suitable field for the operations 
 of the capitaUst. The change took place when the latifundia 
 superseded the citizen farming of Rome, and reappeared 
 when sheep-farming was substituted for arable cultivation in 
 Tudor England. 
 
 Similarly there was a long period in English industry when 
 the artisans were ready to work up the materials which 
 others supplied, and obtained a living by their labour, but 
 they scarcely made money. They did their work, and took 
 a respectable place in their calling and trained their sons to 
 follow them, but they fingered very little money and they did 
 not grow rich. One English industry appears to have taken 
 a new form in the fifteenth century ; the clothiers were rich 
 men who could buy up the wool and let it out to craftsmen 
 to work up in their cottages, while they received the finished 
 goods and sold them to retailers or exporters ; they did not 
 themselves work for a living, but they tried to meet the 
 market, and their operations were profitable or not, according 
 to the prices which ruled in distant marts. Here too the 
 possibility of turning a profit determined the fashion or 
 materials of the work that was done ; the clothiers, by setting 
 men to work, obtained an income for themselves ; when this 
 occurred we may say that the staple trade of England had 
 assumed a shape in which capital might be attracted to it. 
 
 So long as men pursue their calling with the view of 
 providing for their own wants, or getting a living, and only 
 sell an occasional surplus, they may continue to carry on 
 industry, but they cannot make annual money payments 
 such as the capitalist desires. It is quite another matter 
 when the produce is all taken to market, and the possibilities 
 of getting a price and making a profit determine the scale 
 and the direction which the industry shall take. Where any 
 business thus becomes interpenetrated with pecuniary con- 
 siderations, it assumes a form in which the capitalist may 
 invest in it. So soon as the prospects of getting a price are 
 the ruling considerations which affect the conditions of pro- 
 
26 Industry withoitt Capital [Ch. II. 
 
 duction, it is possible for the capitalist to intervene. But 
 when any one carries on an employment as a bye-industry, 
 or works for regular rations allowed by another, or makes 
 goods that he means to use himself, the variations of price 
 in the nearest market for the articles he produces will affect 
 him but little. Hence we need not expect to find, even in 
 countries where capital has been formed very largely, that it 
 is used in all industries alike. Some trades may be carried 
 on by persons who have little or no capital, and work for 
 their living, while others are organised with reference to 
 a regular market, and managed by capitalists. Or we may 
 have the two types side by side in the same employment, as 
 is the case with dressmaking and cooking. A lady's maid 
 and a domestic cook have no capital, but there must be 
 many thousands invested in some large establishments in 
 Regent Street or in such firms of caterers as Spiers and Pond. 
 In England, at the present day, capital has come to be used 
 in connexion with every sort of industrial operation as well 
 as in agriculture and in commerce, and this is therefore pre- 
 eminently a capitalistic era. But it would not be a little inter- 
 esting to trace the steps by which this has come about and to 
 see how capital has invaded first one field and then another. 
 There are then two sets of conditions, one having relation 
 to the formation of hoards of money, another to the possi- 
 bility of using these hoards so as to obtain an income, which 
 must be taken into account. When both are generally 
 present in any society we may say that it has entered on the 
 capitalistic era. On the other hand, there are some societies 
 in which there is no capital at all, because there is no fund of 
 money, and in others the role of capital is very limited, 
 because there are so few employments which provide an 
 income. If a circulating medium is used and the conditions 
 are present which render the formation of capital possible, 
 there can be little doubt that it will be possible to employ it 
 in commerce ; the opportunity of applying it to industry and 
 to agriculture will generally follow later when these employ- 
 ments are taken up not merely as means of livelihood, but 
 for the sake of profit. 
 
Co7ninercial Capital 27 
 
 III. Gradual Introduction and great Importance of Capital. 
 
 1. This fact that capitaHst organisation has only been 
 applied gradually and bit by bit to different spheres of 
 commercial and industrial life renders it necessary to call 
 attention to a defect in the mode which many economists 
 have adopted in treating the subject. They have taken 
 capital employed in industry as typical : some -have dealt 
 with it exclusively and others have regarded it as the 
 ordinary form which deserved primary attention. But 
 capital may be engaged in commerce, or regularly employed 
 for lending, in lands where it is never used in connexion with 
 agriculture or industry. The application of capital to com- 
 merce is earlier as well as more widely diffused than the ap- 
 plication of capital to industry. Those who fix their attention 
 on a special form of capital may attach undue importance to 
 some accidental feature, and this may affect their treatment 
 of the whole subject. The functions of capital are less 
 likely to be clearly seen when we confine our attention to a 
 special and later development. 
 
 Thus if it be said that capital is wealth used for the pro- 
 duction of more wealth, the definition will hold good of all 
 capital applied to industry, but it is not true of all capital 
 as such. The goldsmiths lent Charles II money to enable 
 him to pay his way till the taxes could be collected, and not 
 at all to enable him to engage in industry and produce more 
 wealth. It was capital belonging to themselves and their 
 customers from which they hoped to get an income, and the 
 stop of the Exchequer threatened them with ruin by depriving 
 them indefinitely of their capital and their interest. It is 
 absurd to define capital by mere reference to one of the 
 possible uses to which it may be applied. Popular language 
 regards the goldsmiths' wealth as capital, even though it was 
 not applied to productive industry, and it is wise to frame a 
 definition so as to include a fund of this kind. 
 
 2. The account which has just been given of the conditions 
 which are necessary for the formation of, and the employment 
 of capital may also serve to throw some light on the question 
 
28 Industry withoiU Capital [Ch. II. 
 
 which has been so much debated as to whether capital is an 
 ' historic category ' or not ; an ' historic category ^ may be 
 said to be a conception which is applicable to mundane 
 phenomena at some stage of progress, but which is not 
 applicable to them as they have been at all times and in all 
 places. There is certain implied argument which has given a 
 tinge of acerbity to the discussion ; for it seems to be assumed 
 on both sides that if an economic form has come into 
 existence, it cannot be a permanent element in our indus- 
 trial life. Those who regard capital as a factor of the first 
 importance in existing industry are disposed to deny that 
 there could ever have been a time when it did not exist, or a 
 time when it will cease to be. Those who regard capital as 
 the ' enemy ' are inclined to insist that industry was carried 
 on for centuries without its aid, and therefore to assert that 
 no serious loss would ensue if it were to disappear as a 
 separate factor. Certainly no one who accepts the doctrine 
 of evolution will deny that capital has come into being 
 somehow, and is not a part of the eternal nature of things. 
 In the preceding pages an attempt has been made to in- 
 dicate the conditions under which it is called into being; 
 they are conditions of life and habit which are very widely 
 diffused, and so long as they subsist, capital is likely enough 
 to be maintained. If we fell back upon barter, or if men 
 broke up society into self-sufficing communities which each 
 worked for a hvelihood and did not trade, capital could not 
 in all probability long survive. But it is a powerful factor in 
 industrial life and progress at present, and is likely enough 
 to be permanent so long as the conditions survive. 
 
 All permanence in phenomena as known to us is only 
 relative at best ; it is at least conceivable that matter and 
 its properties are historic categories, and that the material 
 universe was at one time composed of ether which had not 
 yet been formed into vortices. After all, the important thing 
 is, that matter exists now, and that since matter has been 
 formed, the movements of the planets take place according 
 to the law of gravitation. It is strange if any one is pre- 
 pared to contend seriously that capital is not an historic 
 
Progress of Opulence 29 
 
 category which has become applicable in the progress of 
 society, and to argue that it is an eternal existence. But 
 the plain fact that capital has come into existence within 
 historic times in no way diminishes its importance in these 
 societies where it does now exist, and gives no reason to 
 suppose that it might be swept away, without injuring 
 industry. The earliest forms of animal life possess neither 
 stomach nor heart, but that does not prove that the stomach 
 and the heart are useless organs in the anthropoid apes, and 
 might be removed without serious damage. But experience 
 goes to show that any society, in which the necessary con- 
 ditions are present, is better provided with the necessaries and 
 comforts of life, when its members form capital and proceed to 
 apply it to commerce and industry and agriculture as oppor- ^ 
 tunity serves. Capital comes into being in what Adam Smith 
 called the ' natural progress of opulence,' and there need be 
 no expectation of its disappearance unless it can be shown that 
 the natural progress of opulence proceeds better without it. 
 
CHAPTER III. 
 
 Capitalist Era. 
 
 I. Capitalist Era in England. 
 
 1. Capital may be formed in any country where the use of 
 money is familiar and habitual, it may be applied in any 
 direction where commerce or industry are so organised that 
 a money-income may be expected. There have been lands 
 where it was unknown, or where the sphere of investment 
 was small, but we live in a time when it permeates the whole 
 of our economic life. There is no kind of business into 
 which capital may not be drawn, and all the affairs of the 
 day are affected by its influence, as business of every kind 
 is organised on capitalistic lines, and it exercises a con- 
 siderable amount of political power. 
 
 In the fifteenth century the capitalist was just beginning 
 to make his presence felt in connexion with industry, and 
 there were wealthy clothiers. In the present day capital is 
 the dominating power in all kinds of work. This is largely 
 due to the introduction of machinery ; in old days a trade 
 prospered if the workmen were skilled, and it could scarcely 
 be transplanted without the migration of men who could 
 practise the art; skilled labour was the most important 
 factor in production. But in our days machinery does the 
 work more accurately and more cheaply than labourers can, 
 and the capitalists who own the machinery have a very 
 superior position in administering any branch of production ; 
 the dominant power is theirs. 
 
 In agriculture too we have similar phenomena. The old- 
 
Capital permeates Industrial atid Political Life 31 
 
 fashioned idea of living on the land and selling the surplus 
 has completely gone out; the landlord may be a capitalist 
 who purchases an estate as he might buy any other property, 
 in the expectation of making it pay ; and the English farmer 
 is generally a capitalist who works for a return in money. 
 It has been a common complaint in recent years that though 
 the crops are good the farmer cannot get a remunerative 
 price, and that he is therefore carrying on his business 
 without any profit. Many of those who have remedies for 
 the depressed state of agriculture are inclined to blame the 
 farmer for not meeting the market better by trying fruit 
 farming or something else than corn growing. Both the 
 complaints and the proposed remedies serve to show how 
 completely the agricultural interest is interpenetrated by 
 capital, and how generally the conditions which Ricardo 
 assumed in his theory of rent, hold true in England at the 
 present time. 
 
 2. Capital too supplies the means by which the govern- 
 ment of the country — whether national or municipal — is 
 carried on. National borrowing often provides for mihtary 
 and other expenses, and municipal borrowing secures the 
 use of capital for urban improvements. The power of 
 national creditors may sometimes be an element of danger ; 
 certainly the hold which English capitalists have upon other 
 countries, and their desire to protect their interests in Egypt 
 or Turkey, may lead to difficult complications. At any rate 
 it is clear that this economic factor interpenetrates the whole 
 of our political life. 
 
 Indeed the variety of the directions in which capital plays 
 a part becomes obvious in a moment if we look at the com- 
 plicated but delicate machinery by which its movements are 
 effected. The whole of the banking system of England, 
 connected as it is with the banking system of the world, is 
 largely engaged in the transfer of capital; the Stock Ex- 
 change, with all the vast numbers of shares and securities 
 which are constantly dealt with, shows the immense amount 
 of capital which is available for carrying on business of any 
 kind or engaging in new enterprises. 
 
32 Capitalist Era [Ch. III. 
 
 3. Several of the different remedies which are proposed for 
 the social difficulties of the time also indirectly serve to illus- 
 trate the acknowledged power of capital ; philanthropists very 
 often propose to rectify the wrongs of our times by a more 
 widely diffused possession of this factor in production. Some 
 adjure the working classes to be thrifty by means of Post 
 Office Savings Banks ; some advocate the co-operative 
 societies, where the consumers of goods become partners 
 in a business for supplying one another; others suggest 
 that shares in the capital of a business should be assigned to 
 the employes so that they may honestly be sharers in the 
 profits. But all these remedies are expedients for inducing 
 the artisan to exercise capitalistic virtues and thus to become 
 a sharer in capitalistic gains. 
 
 Since capital is so dominant in industry and agriculture 
 as well as in commerce, in politics and social reform, it 
 seems to deserve very special study. There is no other 
 influence in our day that is so all pervading, there is no other 
 economic factor that is so powerful, whether for good or for 
 evil. It is the very life-blood of our existing civilisation, and 
 hence the attacks of those who wish to see this ended are 
 concentrated on capital; while those who hope for the 
 modification and improvement of our present society are 
 bound to look closely for defects in this quarter. More than 
 this, the dominance of capital over other interests is a com- 
 paratively new thing in our land, and it is not unreasonable 
 to hope that we shall at least get clearer light on the pro- 
 blems that are new and pressing in the present day when we 
 concentrate attention on this special feature. But though 
 comparatively new in the history of our race it is not new in 
 the world. There has at any rate once before been a time 
 when capital was all pervading, and its influence strikingly 
 felt — not in building up the greatness of England, but in laying 
 the foundations of the Empire of Rome. From the time of 
 the Punic Wars the sinews of Roman strength were not sup- 
 plied by the valour of peasant citizens, but by the enterprise of 
 wealthy capitalists ; it was through their organisation and 
 resource that the Roman Republic became mistress of the 
 
• Republican Ro7Jte 33 
 
 world. In the failure of the Equites to maintain a leading 
 position under the Empire there was a final judgment upon 
 their failure as administrators, and the rule which they had 
 done so much to build up finally succumbed because of 
 weakness which was inherent in their policy from the first. 
 
 IT. Capitalist Era in Rome. 
 
 1. In Republican Rome, as in England to-day, there was a 
 very wide field for the investment of capital. One of the 
 earliest opportunities for employing it was found in a system 
 copied from Greeks and Orientals. This consisted in farming 
 out the taxes, a mode of collection which is always apt to be 
 extortionate, as there can be no proper check on the rapacity 
 of minor officials. Great companies with shareholders 
 {socitis, particeps) in Rome and factors {itegociatores) in 
 the Provinces undertook the collection of the customs or of 
 the tithe ; but they were also engaged in industrial as well 
 as fiscal undertakings. In the province of Asia — one of the 
 few provinces which not only paid the internal expenses but 
 yielded a large money income to Rome — there were great 
 gangs of slaves owned by Roman capitalists, and engaged in 
 the salt pits or in agriculture. Mining enterprise was carried 
 on in the same fashion ; while the importation of corn for 
 largesses, the equipment of the armies, and the construction 
 of public works, all gave scope for the operations of con- 
 tractors. The whole business of state was let out to capita- 
 lists, and these capitalists were organised in companies 
 consisting of many shareholders, some of whom had large 
 holdings (^partes), while others had but small investments 
 {partiailae). The forum and the basilicas were the chief 
 haunts of these capitalists, and the shares in the diiferent 
 undertakings were capable of transfer. The conquests of 
 Rome were made by armies fitted out by Roman capitalists ; 
 the provinces of Rome were administered and their resources 
 developed by Roman capitalists ; the city of Rome was em- 
 bellished, and the populace of Rome was amused and fed, by 
 
34 Capitalist Era * [Ch. III. 
 
 the enterprise of Roman capitalists. Affairs of every kind 
 were carried on by contractors, who manipulated the money 
 of the inhabitants of Rome and other towns, and executed the 
 work by means of armies of slaves. 
 
 2. There are some not unimportant differences in the 
 manner in which business was conducted by Roman and by 
 modern capitalists; their relations to the State were some- 
 what different, as the usual form in Rome was that of con- 
 tracting for a particular piece of work, not that of lending 
 money to the State to be administered by its own officials. The 
 London capitalist invests his money in the funds or in some 
 municipal loan; the Roman capitalist formed a company 
 to contract for some undertaking, as is done by gas and 
 water companies. The national debt has been chiefly raised 
 on the credit of the nation, and not, as in its earliest stages, 
 on the security of particular rights assigned to the lenders. 
 It was only in rare cases that Roman bankers would part 
 with their money on such terms ; and there was unusual 
 liberality in the conduct of the bankers who, without security, 
 lent money for the equipment of forces against Hannibal 
 after the battle of Cannae (b. c. 242) on being promised 
 indemnity from the risks of war and of tempest, and on the 
 understanding that they should be paid out of the first money 
 that came into the treasury. The credit system, altogether, 
 was much less developed, and the forms of credit did not 
 supply a circulating medium ; there were differences in the 
 forms under which companies were organised and in the 
 relations of the different classes of members, but on the 
 whole the two social conditions present interesting analogies, 
 because of the dominance of capital in both cases. 
 
 3. Capital was a political power in the Roman Republic, 
 however, in a sense in which it has never yet been in Eng- 
 land. There are some similarities, for commercial jealousy 
 led to the destruction of Carthage and Corinth — the two 
 rival mercantile powers, — and we have ample analogies 
 to these struggles in the history of our conflicts with Holland 
 and with France. But, in the extraordinary power of the 
 monied men in the State, Rome stands alone; their unexam- 
 
Equites and Modern Co?tipanies Compared 35 
 
 pled influence was the effect of the legislation of the Gracchi, 
 who desired to raise a counterbalancing influence to the 
 patricians. The eqitites, or monied men, thus acquired judicial 
 power ; while the small shareholders whom they influenced 
 were so numerous that they also controlled the legislative 
 power in the comitia. The distributions of corn which began 
 at the time of the Gracchi rendered tillage unprofitable near 
 Rome, and opened up a field for the profitable employment 
 of capital in pasture farming in Italy, and in the importation 
 of foreign corn. Capitalists had replaced citizen farmers in 
 the land, they controlled the food supply of Rome, and they 
 were the agents by which the military system and provincial 
 governments were administered. They had vast economic 
 powers, and they were to a large extent irresponsible in the 
 way they exercised them, till the empire diminished their 
 overweening influence ; for they administered the law as 
 judges, and they could control the legislation through the 
 voting power of the members of joint stock companies. 
 
 The closest analogy which we have to the Roman system 
 is in the story of the East India Company ; but that company 
 was after all closely and jealously watched by an English 
 parliament and public, many of whom had no interest in the 
 great monopoly, and who maintained a jealous criticism of 
 its character. Whatever abuses may have been perpetrated 
 by those who shook the pagoda tree, they were abuses of 
 the system, not parts of the system ; the good government 
 of the people of India has been kept in view, with whatever 
 failures and whatever ignorance, throughout the whole period 
 of the company's political dominion ; and the friendly rela- 
 tions of many leading men with natives have no parallel in 
 the story of Roman governors or publicans and provincials. 
 Roman dependencies were administered by joint stock com- 
 panies, the judges were drawn from the leading financiers, 
 the laws were passed by the shareholders ; it was as though 
 the whole affairs of government were handed over to the men 
 of Capel Court or of Wall Street, to be carried on according 
 to their own traditions. 
 
 Stock Exchange morality in England is said to be low ; at 
 
36 Capitalist Era [Ch. hi. 
 
 Rome it was lower still. When during the second Punic war 
 the contractors, who had an indemnity for risks at sea, sunk 
 the ships which were taking supplies to the Roman army 
 and obtained large profits by the transaction, the whole power 
 of the financial interest was employed, and at first success- 
 fully, to shield them from any punishment for a notorious 
 crime. If this were feasible in regard to a fraud which was 
 perpetrated in regard to the most pressing interests of the 
 Roman people, we may fancy how little control was exercised 
 over those who administered distant provinces or trafficked 
 with half civilised peoples. The Verrine orations show what 
 it was possible for Roman greed to accomplish even in a pro- 
 vince which had special constitutional privileges, and how 
 utterly that fertile province had been exhausted. But there 
 is something more instructive in the story of a man like 
 Lucullus, who had set himself to repress unjust exactions in 
 Asia; he earned the dislike of the Roman capitalists and 
 their eloquent spokesmen, and his public career was de- 
 stroyed. It is scarcely an exaggeration to say that Lucullus 
 was disgraced because he had not done the things of which 
 Warren Hastings and Impey were accused. Under these 
 circumstances it is perhaps strange, not that the provinces 
 suffered so much under these administrators, as that they 
 did not suffer more. But assuredly the picture is black 
 enough ; on one hand we find traces of grinding tyranny, 
 on the other there are pictures of horrible outbreaks against 
 the oppressors. Such were the massacres at Cipta (b. c. 112), 
 at Genabum, or the still more terrible risings in Asia, where 
 thousands of Italian merchants were destroyed. When Rome 
 recovered from the financial crisis which ensued, she set 
 herself to redeem these losses, and the overthrow of Jugurtha 
 and of Mithridates, gave her still wider provinces to 
 drain. 
 
 4. With the rise of the Imperial power, the capitalistic 
 power which had been concentrated at Rome became some- 
 what more diffused in difTerent parts of the Empire. The 
 development of equitable jurisdiction, and the strength of 
 the military despotism, reduced the importance of the monied 
 
Capitalist Era in Rome 37 
 
 interest in the State, and diminished the worst abuses which 
 had flourished under its regime. For us, however, the period 
 from the Gracchi to the fall of the Republic is of great in- 
 terest, as it furnishes instructive analogies, and contrasts 
 with the capitalistic era in which we live. 
 
CHAPTER IV. 
 
 Material Progress and Moral Indifference. 
 
 I. Material Progress and Increased Opportunities. 
 
 1. The facts that capital is so dominant now and was so 
 dominant under the Roman Republic are sufficient to bring 
 into clear relief its extraordinary power. The conquest of 
 the world, the great aqueducts and roads, the very ruins 
 that remain, demonstrate the vast industrial forces which 
 Roman capitaHsts were able to bring into operation ; it was 
 with their help that the city was transformed and raised from 
 its humble estate as the mere centre of a little district to be- 
 come the mistress of the world. In similar fashion England 
 has been transformed since the opportunity for the general 
 accumulation and investment of capital began. Since Tudor 
 times there has been an expansion of England far greater 
 than the expansion of Roman power in the last centuries of 
 the Republic. Our command over machinery has effected 
 a revolution in industry of every kind of which they could 
 not dream, and our commerce gives us the means of pro- 
 curing commodities from lands they never heard of. It has 
 all come about under a capitalistic regime and with the as- 
 sistance of capital, and though we may for the present defer 
 the enquiry ' Wherein does thy great strength lie ? ' we are 
 warranted in assuming that capital either possesses or sets 
 free immense industrial energy. 
 
 This is still more noticeable if we look at the changes 
 which are being promoted in new countries in the present 
 day. There is a general cry that they require capital in 
 
Material Progress and the Popjdatioji Problem 39 
 
 order that their resources may be developed, and the country 
 may be opened up. They are inclined to borrow capital, 
 often rather recklessly, so as to make harbours and railways, 
 and bring as large an area of the territory as possible within 
 the range of international commerce. The power of capital 
 is obvious in the past, and it is recognised in the present as 
 a primary factor without which the progress of even the 
 most fertile country must be indefinitely delayed. 
 
 Perhaps however we may ask the questions, Why should 
 these resources be opened up? Why should progress not be 
 delayed? There are optimists who are continually rejoicing 
 over the rapidity of progress ; and those who feel that mate- 
 rial progress is a good thing can hardly entertain a doubt that 
 the faster the progress goes on the better it is. But there 
 are also pessimists among us v/ho are oppressed by a sense 
 of the numbers of the population, and who fear thr.t it is in- 
 creasing with leaps and bounds so as to strain the food-pro- 
 ducing power of the globe. It may be true that material 
 progress is a good thing, and that the more rapidly it takes 
 place the better; but it is also true that material progress 
 gives opportunities for the increase of population, and that 
 rapid progress gives opportunities for rapid increase. This 
 fact may make it worth while to consider the question whether 
 there is not another side to the shield. 
 
 2. What do we mean by material progress? It surely is 
 a greater command over nature, an increase of our skill and 
 enterprise which enables us to make use of things that were 
 hitherto denied us. We pass the old limits. But at present 
 it is usual for human beings to utilise their increased power 
 over nature by securing more sustenance, and to increase in 
 numbers as the limits are removed by the march of progress. 
 It is perfectly clear that every step in progress makes room 
 for an increase of population ; and it is also true that some- 
 where there is an absolute limit to the possible production of 
 food, and that the earth is physically incapable of supporting 
 more than a given number of millions of inhabitants — what- 
 ever their skill might be. There is, somewhere or other, an 
 fibsolute limit to the possible production of the globe, and it 
 
40 Material Progress and Moral Indifference [Ch. iv. 
 
 may be guessed that if the present numbers were quadrupled 
 we should be nearing the absolute Umit of the possible popu- 
 lation. Every step in material progress brings us nearer the 
 absolute limit of possible production, and the more rapidly 
 we advance the sooner we shall reach that absolute limit. 
 
 Perhaps it might be well if we went more slowly ; if pro- 
 gress were more gradual there would be room for a change 
 in the standard of human comfort, and the margin which in- 
 vention offered might be used for increasing the well-being 
 of those who now exist rather than in increasing their 
 numbers. 
 
 3. But this is an idle dream ; and when we look more 
 closely at the conditions which brought about material pro- 
 gress we need not despair. There is no evidence that the 
 mere increase of numbers has lowered the standard of com- 
 fort, though there is ample evidence that any population, 
 with a given standard of comfort, will soon people up to the 
 margin marked by any new step in progress. The pressure 
 of population could never alter the limit ; skill and enterprise 
 alter the limit and then population fills up the gap that is 
 left. In an age of rapid material progress, population may 
 be expected to increase — not because of any inherent and 
 necessary force, but because material progress has given it 
 room to expand. There have been long periods when there 
 was little material progress, and when, so far as can be seen, 
 there was no serious ' pressure of population ' and no lower- 
 ing of the standard of comfort. In the present day popu- 
 lation increases fast because material progress goes on so 
 fast ; but we are not forced to conclude that if progress were 
 checked, the pressure of population would go on remorse- 
 lessly and become increasingly severe. Each step of pro- 
 gress leads us nearer an absolutely stationary state, which 
 is indefinitely distant. It is not quite easy to see why this 
 should be a matter for great self-gratulation, but it is at least 
 a goal which we may contemplate without serious foreboding. 
 
 4. Indeed, material progress is a good thing, and we are 
 not justified in setting ourselves to delay it, even if we are 
 alarmed by some of its accompaniments. It is easy to 
 
IVeaUh and Opp07'tnnity 41 
 
 inveigh against luxury and the evils of misspent wealth, and 
 no one would deny that wealth, like other good things, may 
 be misused ; but for all that, wealth is a good thing, and 
 chiefly good on this account, — that it gives the opportunity 
 for making the most of human faculties and powers. The 
 ordinary man who is engaged in drudgery all the day long 
 has no vigour left to devote himself to intellectual pursuits ; 
 the woman who is eaten up with anxiety as to the next day's 
 dinner or the next quarter's rent has no heart to cultivate 
 artistic tastes. A genius here and there may rise above 
 these depressing conditions, and though he may be a stronger 
 man because he has risen, he may also be a harder man 
 because he has had to go through so much. The hero is 
 the man who rises despite his surroundings, and there will 
 always be scope for heroic virtue ; but the good man is 
 called to make the most of his opportunities, and the greater 
 his opportunities the fuller and richer may his personal life 
 become. The man with many opportunities who makes the 
 most of them is not more meritorious than the man with few 
 opportunities who makes the most of them ; but though not 
 a more meritorious man he is in many ways a better man, — 
 more richly endowed and more highly cultivated. 
 
 In a very poor community — say a new colony — there can 
 be very little time and very few facihties for mental culti- 
 vation, and the opportunities of attaining a high degree of 
 personal development are wanting ; those who wish for such 
 opportunities are forced to seek them by visiting, at what- 
 ever cost, an old country. In a savage tribe the possibilities 
 are still more remote. Every advance in material wealth 
 in the community will give greater opportunities to the 
 individuals who compose it. 
 
 This becomes clear if we contrast the England of the 
 present day with England four hundred years ago. Now 
 there are plenty of books available at low prices, or in free 
 libraries; then there were but few, and these so inaccessible 
 that many men had never the opportunity of reading, and 
 felt no privation in not possessing the power. Again, there 
 are now opportunities for travel, with all its effects in en- 
 
42 Material Progress and Moral Indifference [Ch. IV. 
 
 larging the mind, which were absolutely wanting then. In 
 old days comparatively few people journeyed far from their 
 birthplace, but now few of the artisans of our midland 
 towns have never seen the sea; and a very large number 
 of rustic folk have paid one visit to London. On the other 
 hand, while gardening was almost unknown in the fifteenth 
 century, the Londoner has now a constant opportunity of 
 seeing the most beautiful flowers of all lands. Cheap 
 printing and cheap travelling have opened up new worlds 
 of interest and thought to the whole population, and thus 
 the great material progress of those four centuries has given 
 the opportunity for great intellectual progress too. 
 
 Wealth which is used as a means of increasing mental 
 power or of cultivating artistic refinement is not wasted ; and 
 even when it is so used without conscious regard for others, 
 it is not always without a beneficial influence upon the lot of 
 others. Two centuries ago the country squire lived a 
 narrow and coarse life ; the elevation in the tone and culti- 
 vation of the gentry has given a new direction to the 
 aspirations of the simple. His attempts at imitation do 
 not end in his being as drunk as a lord ; and a real effort 
 is being made that the poor should be able to enjoy in 
 public gardens, in museums, in libraries or in clubs, those 
 opportunities of intellectual and artistic improvement which 
 the rich possess in their own homes. It is private wealth 
 which gives these opportunities to the rich, and it is only 
 where the material wealth of the community is large that 
 such opportunities can be afforded to the poor. 
 
 5. It is easy to disparage material wealth, to insist that 
 many poor people are more meritorious than many of the 
 rich, to scoff at misused wealth, and to urge that it is a far 
 nobler thing to be virtuous and poor, rather than rich and 
 vicious. Of this it need only be said that it is always wrong 
 to misuse opportunities ; that great riches give great op- 
 portunities, and that from those to whom much has been 
 given much will be required. Each class in society is too 
 ready to criticise the manner in which others misuse their 
 opportunities ; the artisan may misuse the opportunities 
 
Mo7iey may be a Power for Good 43 
 
 given by higher wages and shorter hours, but for all that 
 they are good things, and things he will learn to use. There 
 is no question as to the wickedness of those who misuse 
 wealth, or the fact t^at- many do misuse it. Still it remains 
 true, that wealth may be well used and does afford great 
 opportunities of improving human tastes and powers. 
 
 And since wealth may be well used, the pursuit of wealth 
 is not necessarily an evil. It just depends. It is an evil 
 if wealth is pursued for its own sake, and without any care 
 as to how it shall be used ; it is not an evil if it is pursued 
 as a means to nobler ends. It is not wrong to be rich, 
 though it is always wrong to be selfish and covetous, whether 
 this selfishness takes the form of amassing wealth like a 
 miser, or of coveting the goods of others like a thief. Money 
 is a power for good that we need not despise, though we 
 would do well to remember that the love of money as such, 
 and for its own sake, is the root of evil. In the case of 
 individuals wealth is often pursued selfishly and greedily 
 for its own sake ; — though the ' money-grubbing ' of those 
 who desire to give their children a better education and 
 position than they themselves possessed is humanised and 
 redeemed from much of its baseness. But in the progress 
 of a community as a whole even the wealth amassed by the 
 self-seeking of individuals is sometimes merged indirectly 
 and ultimately in a general gain, and the effects of wealth 
 in providing more general opportunities for personal cul- 
 tivation are very notable. Material wealth is a good thing 
 in so far as it provides material conditions for improving the 
 intellect and tastes of man. 
 
 6. There is, however, an element of truth in the disparage- 
 ment of wealth, to which it is most important to direct 
 attention. It has been said above (p. 21) that it is not in 
 material surroundings, but in personal elements of skill and 
 character, that the ultimate reason of any step in progress 
 lies. And hence it is true that though favourable material 
 conditions are most important, as without them a high 
 condition of culture cannot be diffused or maintained, they 
 are passive and need to be used by man, for in themselves 
 
44 Material Progress and Moral Indifference [Ch. iv. 
 
 they are powerless to produce an elevating influence. That 
 can only come from a personal power that cherishes a higher 
 ideal than is given in its surroundings, and sets itself to 
 actualise that ideal in bettering its surroundings. The poet 
 or the artist or the saint who maintains a purer ideal of life, 
 inspires men to try and live for something better, and thus to 
 take advantage of the opportunities afforded by material 
 wealth. The most worthy ideal is that which holds up the 
 noblest conception of life, one that is never superseded, and 
 yet a conception which can be used as a guiding motive for 
 life. It is in this fashion that the Christian conception of the 
 Kingdom of God upon earth has been such a power in the pro- 
 gress of civilisation. And he who tampers with his ideal, or 
 deliberately sacrifices it, is to be blamed as a renegade, because 
 he has been content to enjoy an easy lot instead of seeking to 
 be true to the best that was in him, so as to teach others to 
 make a better use of the opportunities they possess, what- 
 ever they are. Spiritual power, which recognises the divine 
 ideal for man in fullest measure and maintains it, is an active 
 principle, by which material goods may be turned to the 
 best account. And since in the individual human being 
 there is a conflict between the flesh and the spirit, between 
 present comfort and aspiration after a purer, worthier life, 
 there is a truth in the asceticism which would keep the body 
 in subjection, and maintain complete self-mastery lest the 
 love of an ideal nature or of a supernatural Being should 
 be dimmed and decay. 
 
 The artist who contemns vulgar excess, and the ascetic 
 who despises mere material comfort for himself, who cul- 
 tivates the highest aspirations in himself and seeks to rouse 
 them in others, are after all the chief active elements in 
 human progress. They cultivate power of will, moral power, 
 spiritual power. Hence are drawn ideals, in the pursuit of 
 which ordinary men may most fitly use their possessions ; 
 but these must remain mere ideals unless there are material 
 conditions which render it possible to actualise them, for 
 others to enjoy as well. Enthusiasts have the moral 
 energy, and they give the stimulus which makes other men 
 
Present and Futit?-e Opportunities 45 
 
 long to rise ; but though the noblest men may discipline 
 themselves to be independent of wealth and of various 
 comforts, and may thus cultivate moral power of their own, 
 it yet remains true that it is wrong to despise worldly goods 
 with the cynic, and foolish to ignore the external means for 
 good which material wealth supplies, and the opportunities 
 for intellectual and artistic self-development which it affords. 
 The moral power is obtained not by avoiding external goods 
 but by victory over self; and a forced privation of any 
 material good gives no moral power ; it may but strengthen 
 the force of passions and desires. It is well to practise self- 
 discipline, but it is also well to remember that all the ma- 
 terial things that God haS' created and made are good if 
 men will use them aright, and that we dare not be wiser 
 than He, or seek to restrain the children of men from 
 enjoying the earth which He has given them, with all that 
 it affords. 
 
 7. It is well that opportunities of cultivation should be as 
 widely available as possible, and therefore it is well that 
 the material progress of backward countries should be 
 rapid ; it is also desirable that every member of a com- 
 munity should have the largest opportunities for personal 
 self-cultivation ; subject only to this one condition, — that 
 care shall be taken that these opportunities shall not be 
 diminished for posterity. This is the motive of a good 
 father in providing for his family ; and it ought to be borne 
 in mind by a well organised community. But the largest 
 opportunities, present and future, involve a maintenance and 
 increase of material wealth, and we shall be unwise if we 
 endeavour to enjoy the opportunities of the present without 
 a due regard to providing greater opportunities, and there- 
 fore greater material wealth, in the future. 
 
 Hence, while advocating the largest diffusion of oppor- 
 tunities, I feel much hesitation about the wisdom of the 
 demand for ' equal opportunities.' Equal opportunities ap- 
 pear to imply equality of material wealth ; but this would 
 be futile without a further guarantee of equal capacity for 
 taking advantage of these opportunities. To take the 
 
46 Material Progress and Moral Indifference [Ch. 
 
 IV. 
 
 simplest case ; the first few years of a child's life are of the 
 highest importance for its future, but some have good homes 
 and some have bad; there can be no real equality of 
 opportunity unless there is similarity in homes ; unless, 
 indeed, all be reduced to equality in a foundling hospital. 
 Those who have the worst homes would be benefited, but 
 all who might have had it would lose the advantage of a 
 mother's care and of family life. Such equality of op- 
 portunity could only be obtained by cutting down, and 
 depriving some of the best conditions for well-being, without 
 thereby improving the lot of the others. We want to give 
 larger opportunities by levelling up, and we ought to want 
 to do it without cutting dowa. The man who inveighs 
 against milHonaires, and desires that they should be treated 
 as public enemies to be pillaged, is only giving utterance 
 to a greedy, envious spirit, which is ready to cut down the 
 opportunities of some in the present, without considering 
 the danger of sacrificing the possibility of larger oppor- 
 tunities for all in the future. 
 
 Progress in the past has not taken place all along the line 
 at once ; those that believe that the advance in the future 
 would be better and faster if all ranks of society kept step, as 
 it were, are bound to show a reason for their belief. There 
 has been an individual use of opportunity here and there, 
 which has kindled similar tastes, until the whole of society 
 has been leavened ; the world is richer for the art-patronage 
 of the trading companies of Florence ; and the musical en- 
 thusiasm of some of the wealthy in this country has given 
 rise to progress in that art by which our whole generation is 
 the better. Material progress is a good thing when it is used 
 for such ends ; it is worth seeking because it gives a greater 
 possibility of striving for such ends. 
 
 II. Moral Indifference and its Dangers. 
 
 If it be admitted that material progress is a good thing it 
 seems to follow by implication that what contributes to such 
 progress is also good. There can be no question but that in 
 
Politics, Art, and Morality 47 
 
 recent material progress capital has been a very great power, 
 but it is also true that it is a dangerous power, if it is not 
 properly controlled. The story of its action under the Roman 
 Republic is a sufficient illustration of this statement, but it 
 may be worth while to insist on it at some length. 
 
 1. The capitalist's chief thought is for the security of the 
 fund he possesses, and his next will be for as large an income 
 as may be ; these are the points that come before him in 
 investing his capital. His attention is concentrated on the 
 precise bargain he is making, and the indirect effects of that 
 bargain are so distant and uncertain that he leaves them out 
 of account, and is ordinarily quite indifferent to them. 
 
 Thus the capitalist is quite indifferent to political con- 
 siderations in his management of his money. He may be 
 prepared to join in an outcry against the manufacturer who 
 sends improved patterns of guns to a rival power — say to 
 Russia. But he would feel no scruple in lending his capital 
 to Russia, and thus giving that rival power the means of 
 purchasing the improved arms. There is no great difference 
 between the cases, but he is blind to the possible results of 
 his own action, and thus is indifferent politically. 
 
 Again, the capitalist is indifferent to artistic considerations ; 
 the craftsman may have an honest pride in his work and dis- 
 like sending out goods that he feels are not worthy of him ; 
 but if there is a public demand for inferior goods, and capital 
 finds that they pay, it will not scruple to cater for a debased 
 taste and take the profit that accrues. 
 
 In similar fashion it may be said that capital is indifferent 
 to the moral and spiritual welfare of those who are employed ; 
 it is clear that the directors of joint-stock companies are not 
 legally warranted in spending the property of the shareholders 
 in building churches or schools. And again, capital as capital 
 is indifferent to the manner in which land is employed so long 
 as it yields a return. The old-fashioned landlord may have 
 an attachment for his retainers, but the mere speculator is in- 
 different whether the land produces corn, or sheep, or deer, 
 so long as the investment pays. 
 
 2. Yet, after all, these matters, patriotism and good work- 
 
48 Material Progress and Moral Indifference [Ch. IV. 
 
 manship, and culture, are well worth attention ; to say that 
 capital is indifferent to them seems like bringing a charge 
 against the owners of capital. But it is not said that they 
 are reckless, only that they are indifferent ; it is not contended 
 that the power of capital is misused, only that it may be 
 abused by mere neglect. There have indeed been times 
 when capitalists were not only indifferent but reckless, were 
 willing to make a profit out of national disaster, and ready to 
 grind the lives out of unhappy slaves. There is no need to 
 quicken the sense of danger by hunting for cases of similar 
 recklessness now ; it is surely clear that if the higher aims of 
 life are habitually left out of account, there is real danger we 
 shall suffer. That they are habitually left out of account can 
 hardly be questioned ; but before we set ourselves to denounce 
 capitalists for this neglect, two points have to be considered, 
 — how far the neglect is really criminal.? and next, how far the 
 individual capitalist is responsible and therefore to blame? 
 
 3. Much moral indignation has been expended by socialists 
 and others on the indifference of capitaHsts ; and demonstra- 
 tions are commonly current that conduct in regard to econo- 
 mic matters must be judged by standards of right and wrong. 
 But this no capitalist, however 'hardened,' would ever deny; 
 some conduct in connexion with the investment of money is 
 criminal and some is dishonourable, it has an ethical character 
 plainly enough, and there is severe punishment for fraud. The 
 difficulty is this, — supposing the transaction is above-board 
 and public and fair as between man and man, the conscience 
 of the capitalist is satisfied, and he does not usually feel 
 bound to inquire into the indirect and remote and ulterior 
 effects of the transaction. He does not deny that his con- 
 duct must be judged by an ethical standard ; but so long as 
 it is a fair and open transaction, he feels that he is not called 
 upon to indulge in any further subtleties. 
 
 There is a parallel which easily presents itself; no one 
 would deny that there is a right and wrong about matters 
 of food, but the ordinary conscience is satisfied if its owner is 
 neither greedy nor a glutton. The plain man who means 
 well does not feel called upon to inquire too closely as to the 
 
Reasojis of this Iiidifference 49 
 
 qualities of different foods and their bearing on disposition 
 and character? how far he will be a more intelligent man if 
 he eats fish, or a less passionate man if he abstains from 
 meat? These seem to the ordinary man to be over-refine- 
 ments, and to show a sensitiveness which is unhealthy and 
 morbid. In much the same way the want of patriotism in 
 which the capitalist may be involved by subscribing to a 
 Russian loan is indirect and uncertain ; it seems to be a piece 
 of hyper-sensitiveness to take it into account. And such 
 neglect, though it may be disastrous, is hardly criminal ; the 
 man honestly feels that he has acted fairly in the matter 
 himself, and in the bargain he made about transferring the 
 money, and that he is not to be held responsible for the use 
 to which other people put it ; the extent of his blameworthi- 
 ness depends on his means of knowing, and the reasons 
 for believing, that a hostile use could be made of it. 
 
 There are cases, however, where wrong arises directly and 
 immediately in connexion with the administration of capital. 
 A certain company earns large profits and deals oppressively 
 by its hands ; the shareholder secures the profits, say twelve 
 per cent., and his capital doubles or trebles in value because 
 of the success of the enterprise. But if this business is 
 oppressively managed, is he not to blame for receiving 
 'blood-money'? In regard to this too, many honest-minded 
 individuals will feel no scruple, because they have not the 
 time or knowledge to understand the details of the manage- 
 ment ; each man feels that his own personal share is small, 
 and that he must leave these matters to others. He believes 
 perhaps that newspaper criticism is more effective than the 
 utterances of a single shareholder at a big meeting ; his per- 
 sonal part in the administration is practically nil, and he 
 consequently feels no responsibility. 
 
 Even in the case of a man who is sole manager of the 
 business in which his capital is invested ; he may be a 
 sweater, and know that he is ; at the same time he may 
 think, and it may be true, that the public demand for cheap- 
 ness is such, and the competition of other sweaters is so 
 keen, that his margin of profit is very small, and that any 
 
50 Material Progress and Moral Indifference [Ch. IV. 
 
 attempt to re-arrange the system on which his business is 
 conducted would do no good to the employees, and would 
 certainly effect his own ruin. He is hemmed in by a crowd 
 of circumstances which keep him from exercising any real 
 responsibility as a matter of fact. He may regret the state of 
 affairs, but he feels that he cannot help it. 
 
 It thus appears that the enormous power of capital, which 
 may work so much mischief, if it is not properly controlled, 
 is very imperfectly controlled indeed. Some owners feel no 
 responsibility for distant and indirect results, though these 
 may be of fatal importance ; some feel unable to exercise any 
 real influence on affairs that come under their own cognisance 
 and pass through their own hands. It seems under these 
 circumstances necessary for us to consider the different 
 fashions in which capital is actually administered and con- 
 trolled in the present day. 
 
CHAPTER V. 
 
 The Control of Capital. 
 
 I. The Different Modes of Administering Capital for 
 Different Objects. 
 
 It might at first sight seem that the control of capital, like 
 the control of other property, would rest entirely with the 
 owners of capital, — subject of course to such general rules 
 about fair dealing as any government felt it necessary to en- 
 force. But the difficulties to which attention was called in 
 the last chapter serve to show that the owners of capital are 
 not always as a matter of fact able to exercise a complete 
 control over the manner in which it is used. Capital is 
 sometimes lent to other persons to use, and then the bor- 
 rower, not the lender, has the chief voice in directing it ; or 
 the force of circumstances may prevent a man from adminis- 
 tering it in the fashion he would personally prefer. It may 
 be convenient to look at the matter from another side, and 
 to see how one mode of managing capital or another may be 
 more suitable, according to the purposes for which it is used. 
 
 Capital is, as we have seen, a very vigorous factor in pro- 
 moting material progress ; we may try to note a few of the 
 chief elements in material progress, and may enumerate them 
 in order according as they concern the nation as a whole, or 
 larger or similar bodies of citizens. We may thus see how 
 the capital that is devoted to attaining one or other of these 
 several aims is actually administered. For this purpose we 
 may neglect the distinction between borrowed capital and 
 capital that is owned by the man who carries on the business 
 in which it is employed — a distinction which comes to be of 
 
52 The Control of Capital [Ch. v. 
 
 primary importance when we have to consider the remunera- 
 tion of capital. 
 
 1. Certain elements which are requisite for material pro- 
 gress are common to the whole nation ; they are facilities 
 which conduce to progress generally. Though some indivi- 
 duals may feel the importance of them more than others, it 
 is impossible to say that anyone derives no advantage from 
 them ; but the benefit can hardly be assessed, as it accrues 
 for the most part in the way of preventing mischief, and not 
 by furnishing positive gain. The advantage of living in a 
 civilised community where there is security for life and for 
 the enjoyment of possessions is obvious ; and for commercial 
 purposes it is also most important that merchants should be 
 able to reside and to prosecute their calling in distant lands. 
 In order to procure these conditions, which are so intimately 
 connected with material progress, there must be {a) good judi- 
 cial administration, {Jf) security from rebellion, war, and even, 
 if possible, from the fear of war, and (<:) effective agreements 
 with distant powers. Now the two first of these conditions 
 are most likely to be secured when people are self-governed, 
 or governed by men of their own race, and the last is most 
 likely to be secured in the case of a great nation which has 
 a high reputation for power. It thus comes about that loyalty 
 to the national government, or Patriotism, and care for the 
 national reputation, or Prestige, are well worth keeping in 
 view as underlying conditions which make for material pro- 
 gress. The depression of Greece, Carthage, and Spain when 
 they fell under Roman rule, of Granada, Portugal, and Flan- 
 ders under Spanish rule, are cases which seem to s-how that 
 the loss of national self-government may exercise a very 
 malign influence on national industry and commerce. Hence 
 it comes about that despite the terrible cost of war, and the 
 loss of life and dislocation of industry and trade which it 
 involves, it may be expedient to have recourse to war, rather 
 than lose that national independence or prestige which are 
 such important conditions for material progress. 
 
 Into the moral questions connected with war it is not neces- 
 sary to enter here ; it is enough to say that in so far as mate- 
 
Patriotism and Prestige 53 
 
 rial progress gives conditions wliicli render a better culture 
 possible, it is difficult to condemn absolutely any step that 
 leads to real material progress and thus to the possibility of 
 further moral advance. War that is unsuccessful has no 
 material justification ; it exhausts the country without any 
 real return, and the moral justification of such war is harder 
 to find. It may give a stimulating example of courage and 
 bravery which is a possession for all time ; it may be a monu- 
 ment of the folly and foolhardiness of some statesman. Even 
 if a war accomplishes its object, it may be at a cost which 
 proves that it was a curse to the country. The Scottish war 
 of Independence was successful ; Wallace and Bruce have 
 left inspiring memories ; but it sapped the one constitutional 
 power that was able to control a turbulent nobility, and 
 checked the development of the country till the time when 
 its fatal successes were undone. Such considerations seem 
 to imply that war is a desperate remedy, that the greatest 
 caution should be exercised before a nation has recourse to 
 it ; but they do not show that it is never necessary. Without 
 entering on the disputed question as to whether the Napo- 
 leonic wars were forced upon us or not, and fully recognising 
 their exhausting effects and the pressure of the burden of 
 debt they have caused, it may yet be contended that it was 
 worth while — according to the terms in which such things 
 can be assessed — for Englishmen to pay largely for the con- 
 tinued power of self-government, and the material prosperity 
 which they have enjoyed through their patriotism and the 
 prestige they acquired. 
 
 {d^ With reference to the national life as a whole, it may 
 be said that there are certain ideal aims which yet react so 
 closely upon material progress that they must be taken into 
 account ; in so far as capital is required to carry out opera- 
 tions that are expedient for the sake of patriotism or of pres- 
 tige, that capital is employed for an object that is common 
 to the whole nation, and may be most fitly administered by 
 the government of the country. What concerns all is the 
 business of all. In the same way it may be contended that 
 intelligence and skill are a benefit to the whole community, 
 
54 The Control of Capital [Ch. V. 
 
 and a benefit which is directly exhibited, even if it cannot be 
 accurately expressed, in terms of material wealth. The nation, 
 may be concerned both in promoting the advance of know- 
 ledge and research and encouraging discovery ; it may also 
 concern itself in seeing that the citizens partake in the know- 
 ledge which is brought within their reach, and expend money 
 on education. In all such matters there may be need for the 
 use of capital, and, when this is called for, it is most naturally 
 administered by public and national authority, since all are 
 concerned in its results. The nation, as a whole, is concerned 
 in these matters, and not any one locality only ; and there- 
 fore the administration of capital, so far as it is required for 
 the defence of the nation, the administration of justice, the 
 promotion of the intelligence and character of the inhabitants, 
 is naturally entrusted to the power which has the widest sway 
 within the land, and which determines our relations with 
 other powers. In some cases the maintenance of internal 
 communications with different parts of the realm might be 
 regarded as an object which distinctly concerned the realm 
 as a whole, and should be undertaken by the community as 
 a whole. But it is at least arguable that the maintenance 
 of communications involves minute care and supervision in 
 many districts of the country which are long distances apart, 
 and that this work can be best done, not as a centralised un- 
 dertaking, but by the separate action of district authorities 
 who have the requisite local knowledge. It seems obvious 
 that where certain things have to be done, but can be best 
 done under local supervision, it is simplest for the central 
 authority to work through the local powers and subsidise 
 them ; or at any rate to lay down instructions as to certain 
 conditions which it is necessary, in the interest of the whole 
 state, for each separate district to observe. For the present 
 purpose we may be satisfied to insist on the fact that there 
 are separate spheres for national and local government, for 
 State and for municipal authority, without attempting to define 
 these spheres. 
 
 2. There are, however, many conditions for material pro- 
 gress whigh can be best attended to by local authorities such 
 
Municipal and Private Management 55 
 
 as municipalities, not by the State. Such, for example, are 
 matters connected with the health of the inhabitants ; this 
 is clearly a prime requisite for material progress, but the 
 conditions which militate against it, or are required to pro- 
 mote it, differ according to -the physical character and even 
 the occupations of different localities. The best means of 
 water supply, the best methods of drainage, are obviously 
 problems which take a different form in different places. 
 The deleterious effects of certain gases are felt in the neigh- 
 bourhood of chemical works, and smoke is a nuisance of dif- 
 ferent degrees of intensity in different towns, and therefore 
 they may require' different modes of regulation in separate 
 cases. Similarly, provision for public recreation, the forma- 
 tion of parks and local museums and galleries, above all of 
 baths, may all be regarded as contributory to physical and 
 moral health, but as matters which are best attended to by 
 municipal rather than State authority. 
 
 It may also be the case that the machinery for technical 
 education — unlike that of general education — may be most 
 fitly provided for by local authority. The technical require- 
 ments of Leeds, with its textile trades, are very different from 
 those of Sheffield or of Stoke. And if these functions fall 
 within the purview of local authority the municipality will be 
 naturally charged with the duty of administering the capital 
 that is employed in the effort to promote them. 
 
 3. There is however in this country a strong feeling that 
 Government management and municipal management are 
 often extravagant, and that in the carrying on of ordinary 
 business operations, the supply of material wants of all sorts, 
 private undertakings are greatly superior. We frequently 
 hear of the cost that is involved in Government dockyards, 
 and municipal gasworks give rise to frequent complaints. It 
 certainly appears that in those cases where careful attention 
 to minute details is specially necessary, the work can be best 
 done by a private individual administering the affair himself. 
 Market gardening may be taken as a case in point ; the 
 supply of fresh fruit and vegetables is not a business which 
 the London County Council would be likely to manage better 
 
56 The Control of Capital [Ch. v. 
 
 than the gardeners who send their produce to Covent Garden. 
 It is one of the arts where there is comparatively little scope 
 for the introduction of machinery, and where skilful labour 
 and attention are the main elements of success. In such 
 cases it may be contended that the capital required for carry- 
 ing on the business will be best administered by a man who 
 is on the spot and keenly interested in turning it to account, 
 that is to say, by a private individual who has the capital 
 under his own control. Just as there is a sphere where state- 
 administration seems best, so there appears to be a sphere 
 where personal and individual administration is to be pre- 
 ferred. 
 
 4. Besides the enterprises where individual management is 
 apparently preferable, there are others where association of 
 one sort or another appears to answer best. Many enter 
 prises are on such a large scale that no single individual is 
 capable of understanding all the detail, and though there are 
 some giant industries in the hands of private individuals 
 there appears to be an increasing tendency to organise great 
 concerns by the association of several capitalists. The 
 tendency to turn private firms into public companies, what- 
 ever may occasion it, is one symptom of a preference which 
 is widely felt. The success of associations of consumers in 
 competing with retail shops, or the combination of rival 
 houses into 'trusts' so that all the business may be done on 
 the same lines, are other symptoms of the change. It appears 
 that there are numerous undertakings that can be most 
 conveniently conducted by means of associated capital ; and 
 it need hardly be added that when any association becomes 
 so powerful as to extend to the whole country, such a scheme 
 of organisation must have been developed that there need be 
 little difficulty in buying out the capitalists and conducting 
 the business as a department of state, if this were desirable. 
 As a matter of poHcy, however, it may be questioned 
 whether the public are not likely to be better served if the 
 company retains its separate existence, but is carefully 
 controlled by public opinion in the press and Parliament. 
 
 In existing society, then, there appear to be these four 
 
The Survival of the Fittest 57 
 
 different systems in which capital is administered — State 
 managejnent , Municipal management, Private manageme7tt, 
 and Associated management-^ and these four systems of 
 management appear to correspond to different kinds of 
 industry, or different classes of objects, for the attainment of 
 which capital is required. In our present regime all these 
 various methods may exist side by side, and each undertaking 
 may be organised on that method which seems most suit- 
 able, or which proves itself most suitable after repeated 
 experimeirt. 
 
 II. Is any one Method superseding the rest? 
 
 It is not easy to say, so far as experience goes, which of 
 these methods of management is the fittest and is most 
 likely to outlive the rest, or whether any one has so little 
 vitality that it is likely to be improved off the face of the 
 earth within a comparatively brief period. 
 
 1. At first sight it seems as if ' nationalism' were winning 
 in the race ; there are certain kinds of conditions which the 
 nation only can secure, and there is a steady movement in 
 the formation of giant companies and trusts, while consider- 
 able pressure is being exercised in the direction of having 
 these powerful monopolies overhauled or taken over by the 
 State. It appears as if private capital were giving way to 
 associated capital, and associated capital were giving way to 
 national or public capital, and that if this movement 
 continued or were accelerated the whole would pass under 
 the direct management of the State. 
 
 a. But there is another change which is also in progress, and 
 which must also be taken into account ; business is assum- 
 ing more and more of an international character every day, 
 and there is more international organisation for commercial 
 purposes. The postal union is a case in point, and bi- 
 metallists hope to furnish an instance of monetary arrange- 
 ments which shall extend far beyond the limits of any one 
 sovereign who mints coins for the use of his subjects. 
 These are forecasts of attempts to treat the world as a whole 
 for commercial purposes, and indeed this is habitually done. 
 
58 The Control of Capital ICh. v. 
 
 When we examine our food supply it is extraordinary to find 
 how much we are dependent on foreign sources not only for 
 bread-stuffs, or comforts like tea and coffee, but for fresh 
 fruit, butter, and eggs. Rapid communications by telegraph 
 or by rail and steamer have revolutionised commerce, and 
 enabled us to treat the world as a whole for business 
 purposes. Hence the monopolists who are dreaded now 
 are not the engrossers who forestalled goods coming to a 
 town and who were put down by municipal authority in 
 mediaeval times, not the chartered companies or patentees 
 who held a monopoly throughout England and who gave rise 
 to outcries all through the seventeenth century, but the 
 rings and trusts that control the total mass of copper or 
 cotton or oil in the world. In such cases there are business 
 operations that extend far beyond the limits and control of 
 any nation, and the question arises, how far is the nation 
 being superseded as the unit for economic purposes? In old 
 days the problems were set as practical ones — how may the 
 power of this nation be maintained? The subordination of 
 the pursuit of wealth to national power was taken for granted 
 by the mercantilists ; the power of the nation was the end, 
 they studied the means. With Adam Smith too the nation 
 was taken as ultimate, and those who have followed him 
 have written of nations as recognised economic groups, 
 within which there is a free flow of labour and capital. But 
 may we not now regard the world as one economic realm in 
 which there is an easy flow of labour and capital, — freer 
 perhaps than there was within the limits of England in the 
 time of Adam Smith? Can we assume that the nation is a 
 permanent economic organism, or is it destined to take a 
 subordinate place in the economic life of the future, as the 
 manor and the municipality do in the economic life of the 
 present? 
 
 b. There are other facts which seem to point in this direc- 
 tion ; economic policy is no longer guided with reference to 
 national objects ; philanthropy has a word to say, and may in 
 time come to have greater influence still. There are protests 
 against the destruction of native races, and the exploiting of 
 
Nationalis)n and Cosnwpolitaiiism 59 
 
 subject populations, and a cold-blooded policy of mere national 
 aggrandisement could hardly be pursued by any European 
 nation now as it was followed in old days by the Romans. 
 
 Further, it appears that the differences between nations are 
 being diminished and more connecting links are being forged. 
 This is chiefly due to the influence of capital ; English 
 capitalists have a large stake in the prosperity of nearly every 
 country in the world, and this is to some small extent a 
 pledge for friendly relations. The tie is being formed, not 
 by commercial intercourse breaking down tariffs, as Cobden 
 hoped, but by capitalists who take advantage of foreign 
 tariflfs to transfer their enterprise. Besides this, the intro- 
 duction of machinery is doing something to put different 
 lands more nearly on a level ; there is less specialisation of 
 industry, and therefore more possibility for the fluidity of 
 labour throughout the world. While on the one hand there 
 are signs of the formation of international organisations for 
 business purposes, there are on the other hand symptoms 
 that the barriers of nationalism— for economic purposes — are 
 breaking down. 
 
 Who shall strike a balance between these probabilities, or 
 prove the superiority of economic organisation of any single 
 type ? On the one hand we have signs of the State under- 
 taking more and more economic functions ; on the other hand 
 it appears that the existence of the nation, as a distinct 
 economic group, is threatened, and that it has far less im- 
 portance in the business life of to-day than it had a century 
 ago. It is ceasing to be the centre of economic organisa- 
 tion, in the way that political economists usually assume, 
 though the diminished importance now attached to problems 
 of international trade shows that the change is recognised 
 even by theorists. However long nations may continue as 
 the strongholds of common laws, and common language, and 
 common religion, of all the sentiment that binds men 
 together and gives a common culture, — and these differences 
 show little sign of disappearing, — the nation is no longer so 
 clearly distinguished as formerly as a well-marked economic 
 group. 
 
6o The Control of Capital [Ch. v. 
 
 2. At any rate it might seem that the individual control of 
 capital is passing away; but is it so? Apart from the 
 question of management and attention to details, it appears 
 that there is still a field for personal energy in breaking new 
 ground. It has been remarked by Mr. Bagehot that one 
 reason of the success of British commerce lay in the fact that 
 there had never been a great mercantile caste, or great 
 mercantile families of the Italian type, but there were also 
 interlopers who pushed their way from the ranks and broke 
 through the stereotyped habits and old traditions. It will be 
 shown hereafter that individual care is also instrumental in 
 the formation of capital ; and though with social changes the 
 scope of individual management may become narrower than 
 at present, it may yet continue to discharge certain functions 
 better than can be done by any other method, and to have a 
 real, even if a subordinate place, in economic life. The fact 
 that many businesses are being transferred from individual 
 to associated administration does not prove that the method 
 of individual management may not survive as the fittest for 
 certain purposes. 
 
 There are many people who are strongly impressed with 
 the value of individual energy, and who are constantly 
 deprecating any tendency on the part of the State to encroach 
 on the free play of individual vigour. They deprecate State 
 interference with individuals, and are constanly inclined to 
 lay down limits which the State ought not to pass. There is 
 one thing that may be said ; the State ought not to try to do 
 what individuals can do best for themselves ; but only 
 experience can determine, from time to time, how well this or 
 that can be done by the State, and how well by individuals. 
 The problem as to the respective spheres of the State and 
 the individual is not capable of general solution ; the State 
 and the individual are not definite things which always stand, 
 or ought always to stand in the same relations to one 
 another. The individual as he comes into being is formed 
 by the State, and is a man with certain rights and conceptions 
 because he has been born in a State where these were 
 current. The forms of States, too, change — tribal, municipal, 
 
state Interference and Private Concerns 6i 
 
 national, federal, and so forth ; there can hardly be any 
 general economic propositions which will apply to all such 
 types of State and all the members who go to form them, and 
 under whose influence they are in turn developed and 
 changed. 
 
 This, too, one may say ; the objects in which the Govern- 
 ment exerts itself are objects in which all the people have a 
 part ; it is with national projects that Government is con- 
 cerned, and with projects which, just because they are 
 national, concern all the citizens. Since they concern all 
 they may seem less pressing to each man than his private 
 affairs. It is because no man can assess the precise 
 advantage he derives from being an Englishman instead of a 
 native of the French province of Albion, or assess it in terms 
 of money, that the British voter is inclined to subordinate the 
 national projects, which concern everybody, to the petty 
 interests of his shop, which concern no one but himself. 
 And certainly if such a conflict of interests does arise there 
 can be no doubt which should be forced to give way. The 
 national projects concern the whole nation, present and 
 future ; it is far more important that such objects as England 
 has in view should be seen to, rather than this man's shop or 
 that man's shop should answer. State interference may be 
 unwise — it is human to err — but there are objects for which 
 the State may have to interfere with individual interests, or 
 even individual life, that are of paramount importance, and 
 that far outweigh any merely private concern. 
 
 3. There are many grounds for supposing that the munici- 
 pality may take a more important place in the future than it 
 has recently done in the past. In the thirteenth or fourteenth 
 century each European municipality was a separate isolated 
 institution, with its own customs and privileges, its own 
 relations with other municipalities, and but little share or 
 interest in the life of the nation in which it was placed. This 
 narrow isolation has been broken down by more frequent 
 intercourse, and the exceptional status of certain places has 
 been superseded by the common facilities which exist 
 throughout whole realms. In our own time there is a revival 
 
62 The Cojiti'ol of Capital [Ch. v. 
 
 of municipal esprit de corps \ the political power of the 
 provincial towns is very great ; the pride of citizens in the 
 place of their birth, or the place where they made their 
 wealth, shows itself in gifts of parks, and galleries and 
 churches and museums. And there is at the same time a 
 movement in favour of a decentralisation which may give 
 the power of administering capital for objects which have 
 been hitherto pursued by the State into local hands. How 
 far this decentralisation may proceed with advantage is a 
 difficult and disputed question, but it is admitted on all sides 
 that the power of peace and war must rest with the Central 
 Government ; and hence it follows that the administration of 
 capital, so far as this military power is concerned, must also 
 rest with the State. The economic functions of the munici- 
 pality — in which, for convenience, I include other forms of 
 local government — may be greatly increased, but the State 
 cannot be altogether superseded, so far as the necessity for 
 making provision for this contingency remains. 
 
 There are perhaps some who would contend that if 
 separate municipalities were formed, and nations superseded, 
 the causes of taking up arms would be diminished, and that 
 war may therefore be left out of account. But Plato, who 
 framed an ideal state in Greece, where there was no nation 
 but a group of municipalities, did not find in his experience 
 any grounds for supposing that war could be dispensed with 
 in his ideal repubhc. In fact, in such conditions as he knew, 
 or as existed later in Italy, there are more frequent reasons 
 for war ; more petty jealousies, more trivial rivalries. It is 
 easy to conceive that if the control of common national 
 interests and rule were removed, Liverpool might go to war 
 with Manchester about the ship canal, and destroy the 
 budding prosperity of Cardiff or the hopes of Milford Haven. 
 Intermunicipal war was waged when there were causes of 
 municipal jealousy, and national wars may continue to exist 
 so long as there are decided national differences which give 
 rise to international irritation. 
 
 Now, though the nation as an economic organism is less 
 important than formerly, there are few, if any, signs that it is 
 
Persistence of National Sentiinents 63 
 
 decaying as a political force. So long as there are differ- 
 ences of natural products there will be trade between different 
 countries ; and though such interconnexion gives ties between 
 distant nations it also may serve to occasion jealousies and 
 wars. Very many of the most terrible wars the world has 
 seen have been partly, at least, commercial wars ; and so long 
 as international commerce remains, there are likely to be 
 occasions for misunderstanding and irritation and quarrels. 
 
 National differences, too, which are due partly to differ- 
 ences of race and language and religion and history, show 
 but little signs of dying out. Some striking evidence on this 
 matter is alleged to be found in the United States. There is 
 no real proof of closer amalgamation between the black and 
 white races in the south. The half castes die out, and the 
 pure blacks and pure whites are perpetuated with but few 
 signs of fusion. In different parts of the States and of 
 Canada, French districts, or German districts, or Irish 
 districts, or Scottish districts may be found, and thus the 
 national differences of the Old World have reappeared in the 
 New. So far as the constitution and government of the 
 United States are concerned there has been every effort to 
 absorb these separate settlements into a government which 
 claims to rest on the freedom and equality of men. Even if 
 these different emigrant settlements do amalgamate com- 
 pletely in the course of time, we may yet feel that natural 
 differences which have been able to reappear in the New 
 World are likely to die hard in the Old. The municipality 
 may extend its economic powers at the expense of the nation, 
 but there is no likelihood that it will supersede it altogether. 
 
 ni. Industrial Organisation. 
 
 We thus are forced to recognise that each of these methods 
 of administering capital appears to be able to justify its 
 existence, and will probably maintain itself, as the best 
 method of fulfilling some function in our economic life. 
 Cosmopolitan and international organisations may grow from 
 the mere germs we now see, and municipal institutions may 
 
64 The Co7itrol of Capital [Ch. v. 
 
 expand, but it seems improbable that national economic life 
 will wholly disappear ; so too there may be some scope for 
 the individual capitalist, however much joint-stock companies 
 multiply. 
 
 The present social system gives opportunity for adminis- 
 tering capital according to any of these plans, whichever 
 answers best ; it also gives freedom for trying a new method, 
 if that seems likely to prove preferable. The respective 
 spheres of national and municipal and individual and as- 
 sociated administration are always changing, as new wants 
 or new discoveries affect the organisation of diiferent indus- 
 tries. Whatever is likely to be the best means of controlling 
 capital, so as to meet requirements then and there, can be 
 easily brought into play. 
 
 1. Those who are impatient with the social arrangements 
 of our own time are easily able to point out economic defects 
 in this or that direction, through the misuse or waste of 
 capital. There is a terrible waste which arises in the course 
 of reckless competition — in cutting prices and in bankruptcy, 
 even in advertising; there is waste, since there does not 
 seem to be any adequate return to the community. In the 
 same way it is often urged that there is no adequate return 
 to the community for all the wealth sunk in land, and that 
 landlords' rents and royalties would afford a far more general 
 return if they were held by the State or by municipalities. 
 There are many who desire to substitute organisation for 
 competition, and thus to do away with the recognised evils 
 of the present system. Of course, if it is really to supersede 
 competition altogether, the organisation must be very 
 thoroughgoing and complete, so as to leave no scope for any 
 individualistic passions and ambitions, and to call forth 
 feelings of quite a different type. This is, briefly put, the 
 aim of socialists, and there is much in their criticism of exist- 
 ing institutions which shows that there are many faults which 
 call for remedy. 
 
 2. We are, however, justified in asking any professed 
 socialist what type of administration he suggests as the basis 
 for the thoroughgoing organisation which he desires? In- 
 
The Details of Social Organisation 6^ 
 
 dividualistic and associated administration rest on compe- 
 tition ; these are apparently excluded; but does he favour 
 cosmopolitan or national or municipal organisation? 
 
 Now, just as it is easy to find flaws in existing social 
 arrangements, so it is easy to pick holes in any projected 
 one ; and socialistic schemes have had no immunity from 
 criticism. To such criticism of details the socialist is apt 
 to reply that after all these are mere minor matters which 
 could be arranged if the broad outlines of the scheme were 
 adopted. This is very true, but it is also true that there 
 must be some details; and the fundamental defect in 
 socialistic proposals is this, — that whatever scheme was 
 adopted it must in some of its details be inferior to the 
 present system. The thoroughgoing system must adopt one 
 type of administration; whichever type is preferred, and 
 carried out with rigid consistency, there would be a real loss 
 from discarding the other types, each of which shows itself 
 fitted for the administration of certain departments. If the 
 national type were adopted there would be loss through 
 over-centralisation ; if a municipal type, there would be the 
 loss of the control that is exercised by common opinions and 
 interests, and the jarring of pretty rivalries and antagonisms. 
 In either case there would be a loss of the enterprise which 
 displays itself in the individual and associated management 
 of capital. 
 
 3. The socialist may contend, indeed, that it is not the share 
 of material gain he looks to, but the moral advance. But, after 
 all, material progress gives the opporttmity of moral advance ; 
 if material progress is checked there will not be the same op- 
 portunity for moral advance. Is it possible for him to contend 
 that under socialism the lesser opportunities will be turned to 
 better account? That it gives a nobler ideal, a better disci- 
 pline for the individual, and therefore a deeper spiritual power? 
 Those who believe that perfect gifts come from above and are 
 received by men will not hope that any new method of organ- 
 ising society, any more widely diffused comfort, will in itself 
 call forth such noble aspirations, or discipline such unselfish 
 characters, as shall help man to rise to a really higher level. 
 
PART II. 
 
 PRACTICAL QUESTIONS. 
 
 CHAPTER VI. 
 
 The Formation of Capital. 
 
 Capital has been already defined as a fund fi-om which the 
 owner expects to get an income. It is not necessary to try 
 and justify this definition : it may sufiice for us to use it and 
 see how far it justifies itself. Capital is a word in popular 
 use ; if we wish to give more clearness and accuracy to dis- 
 cussions of popular subjects it is convenient to use the word 
 as nearly as possible in the sense which it commonly conveys, 
 but to use it with more precision. A great many economists 
 have not been sufficiently careful in either respect. They 
 have fixed attention on capital devoted to industry, and have 
 spoken as if a man's wealth ceased to be capital if it was not 
 devoted to the production of more wealth. Thus a man who 
 holds brewery shares has capital, but if he ceases to hold 
 these shares and buys consols, although he continues to 
 obtain an income, he would, according to many definitions, 
 cease to be a capitalist. Popular language does not recognise 
 this distinction ; the man has capital and changes his invest- 
 ment, but does not convert capital into non-capital thereby ; 
 and the text-books would have done better if they had tried 
 to adhere to popular usage in this matter. But there has 
 
Social Conditions — Security 67 
 
 also been some confusion, because after fixing on an accidental 
 quality to mark out capital, they have not always adhered to 
 that definition with precision ; there is an overwhelming 
 temptation to extend the use of terms by analogy till they 
 are emptied of all definite meaning. We shall do best if we 
 define capital not by what it generally does, nor what it 
 usually consists of, nor by the manner in which it is obtained, 
 but by what it brings to the owner. The owner may make a 
 mistake and use it in a way in which it yields no income, but 
 he always intends to get an income, and expects it when he 
 invests ; and the bringing in of an income is, subject to this 
 limitation, a feature which marks all capital, however it is 
 got, and however it is used. Taking then this definition, we 
 wish to see if we can keep strictly to it, and in so doing dis- 
 cuss the various questions connected with the formation and 
 use of capital with precision. In so far as this can be done, 
 the definition will have justified itself, for its two parts contain 
 references to each of these topics, — the formation of a fund 
 and the application of the fund so as to get an income. 
 
 I. Conditions for the Formation of Capital. 
 
 You cannot form a fund of wealth unless certain social 
 conditions are present, and unless there are certain personal 
 powers and certain opportunities. The same conditions 
 which are requisite for the formation of any fund of wealth 
 at all, will also favour the formation of larger and larger 
 amounts of capital, if they are present in increased force and 
 effectiveness. 
 
 1. There can be no question of saving up a fund of wealth, 
 unless there is some sort of security for enjoying it. Continual 
 warfare and pillage must produce a state of society in which 
 the possession of wealth is a mere temptation to attack, and 
 in many ages men have preferred to appear poor even when 
 they really were comfortably off, in order to escape the jealous 
 interference of powerful neighbours. The nature of the social 
 sanctions which give protection to hoards of property is not 
 always very intelligible. Certain Kafir tribes can leave under- 
 
68 The Fonnation of Capital [Ch. vi. 
 
 ground stores of food in tracts where other tribes wander 
 freely, without any apprehension that they will be pillaged, 
 though it is not easy to see what gives these pits immunity. 
 In the early middle ages, when private wars were so rife, 
 kings were glad to commit their treasure to the care of a 
 knightly order, and the Temple at Paris served as a bank of 
 deposit both for Philip Augustus and for John Lackland. 
 Every improvement in government which renders a man^s 
 property, be it large or small, more secure to him, gives an 
 increased facility for forming funds of wealth. Whether 
 this is brought about by greater security from hostile in- 
 vasion, by greater immunity from the attacks of thieves and 
 robbers, by greater care in the levying of taxes, or by improved 
 judicial administration, the result will be the same, and there 
 will be fewer obstacles to the formation of hoards of wealth. 
 
 2. But after all these are somewhat negative conditions ; 
 there are certain personal qualities which are the active force 
 in the formation of capital. Social environment counts for 
 much, but it is not everything. Just as we have seen that the 
 environment of physical circumstances affects the develop- 
 ment of society, while the personal qualities of skill and 
 enterprise enable men to take a further step forward beyond 
 the limits imposed by circumstances, so it appears that the 
 social environment is not unimportant (as it limits the exercise 
 of the power of saving, or on the other hand gives it scope), 
 but that the mainspring from which additional hoards arise 
 is found in personal dispositions and qualities. The man 
 who can look forward, who can put off till to-morrow what 
 he might enjoy to-day, is the man who forms a fund of wealth, 
 and this is the disposition which is the most active and 
 operative element in all formation of capital. 
 
 There are many men in whom this disposition is weak ; 
 there are others in whom by character and association it 
 seems to be wanting, and it differs curiously in different 
 races. In India there is a striking contrast between the 
 Parsee and the Hindu in this respect. The Parsee accu- 
 mulates wealth to use in trade ; the Hindu will gladly spend 
 his available wealth and run into debt at some family or caste 
 
The Effective Desire of Acciimidation 69 
 
 festival ; he wishes to be remembered as a man who behaved 
 handsomely, but he has no desire to rise in the world. He 
 wants to be well thought of in the circle in which he lives, 
 and does not wish to rise out of it. It is not necessary to 
 compare these two dispositions from a moral point of view ; 
 one may be more sociable and pleasanter than the other; 
 and the Parsee is never likely to be a popular man. It is 
 enough to point out that the Hindu is less likely to amass 
 capital than the Parsee, not because he has less opportunity 
 and the social conditions differ, but because his personal 
 ambitions and aspirations are of a distinctly different type. 
 There are many servant girls whose love of dress is so strong 
 that they can't save ; and there are many folk who are unable 
 to amass anything because of their love of eating and drinking. 
 Personal vanity or greed and sociability may be the grounds 
 of present expenditure which interferes with the formation of 
 hoards ; and the man who can't save may have many excel- 
 lent qualities which are denied to the man who can. He 
 may be a good Christian and a kind husband and father, a 
 just master, a generous friend, and an accomplished man, 
 but he does not become rich or get on. If we leave him on 
 one side with this tribute of respect, it is not because we 
 disparage him or think more highly of the men who get on, 
 but merely because the men who get on and become rich are 
 the topic before us, and the other people are not. The 
 generous friend who is badly off is a better human being 
 than the man who has money but who is not generous and 
 has no friends, but he is not the subject in hand. He is 
 left on one side not because he is despicable or unimpor- 
 tant, but merely because he is irrelevant. His economic 
 influence has been already alluded to as most beneficial in 
 helping to keep up our ideals, and thus to raise the whole 
 social tone of society. We want now to note the disposition 
 that is effective in forming hoards, and the man who does 
 not form hoards does not concern us for the present. The 
 whole series of moral questions may be left over till later ; 
 we do not wish to see whether hoards are right, or to what 
 extent they are right, or how they are to be formed in the 
 
70 The Formation of Capital [Ch. vi. 
 
 right place and the right time and with the right end in 
 view ; we are merely considering the practical question how 
 they are formed at all, and the active force which has most 
 effect in this respect is the power of postponing present 
 enjoyment for the sake of a larger accumulation in the 
 future, — what is commonly called the desire of saving. 
 
 This power of saving involves certain intellectual and 
 moral qualities. It requires a certain amount of imagination 
 to foresee the advantage which will accrue from the possession 
 of a hoard ; this is probably the difficulty with certain savages, 
 to whom the prospect of an entirely changed life, with 
 diminished liberty, offers no attractions, even though it should 
 afford more regular supplies of food. It might be more com- 
 fortable, but it would certainly be less diverting. Besides 
 this power of imagination, there must also be strength of 
 will ; the object in view is a distant one, and there is no 
 little difficulty in pursuing it steadily for a long time. This 
 is the quality in which children are often lacking ; there is 
 no deficiency of power to realise the things they can get by 
 saving. A boy desires a pair of pads, and he wishes for them 
 more keenly whenever his shins are hit by a fast ball, or 
 when he is bowled because he shirked it ; but it takes a long 
 time to save, and the attractions of caramels and butter- 
 scotch are strong. 
 
 a. But of these two elements, the power of imagination 
 and the power of will, the latter is far more important in our 
 state of society, or indeed in any state of society where there 
 is the hoarding not merely of wealth, but of wealth in a form 
 that is fluid and can be applied in any direction, that is, of 
 capital. What is required in this case is the accumulation 
 of money, — of many coins, or of a sum represented by four 
 figures at the bankers, — and that is an object which can be 
 grasped by a mind with very little imaginative or poetic 
 faculty. On the whole, in our modern life it is in strength of 
 will that the secret of accumulation lies, and the man who 
 has risen, the self-made man, the successful millionaire, is 
 likely to be distinguished by this quality and to value himself 
 highly upon it. And sentimentalists are merely foolish to 
 
The Desire of having a Reserve 7 1 
 
 disparage it because they do not find that it is always accom- 
 panied by other moral or intellectual qualities which they 
 appreciate better. 
 
 b. In so far however as the desire to save depends on 
 power of forecasting the future it is worth while to notice 
 that there are two distinct sorts of advantage in the future 
 which appeal to men of somewhat different types, or who are 
 somewhat differently placed. Some save because they wish 
 to have a reserve fund, and some save because they wish to 
 have an income, or to have a larger income ; so at least it 
 would seem. That the latter is a real and distinct motive 
 may be doubted ; on the other hand, it is often spoken of as 
 if it were the sole motive for saving. It is surely obvious 
 however that the chief motive in saving a hoard is the desire 
 to have a hoard to fall back on, and not the desire to have 
 an income. The desire to have an income is a potent force 
 in determining the investment of capital ; but the man who 
 saves, desires to have a fund of wealth apart altogether from 
 the way in which he uses it. Thus in primitive times a tribe 
 will hoard a reserve of food, as the Germans did in the days 
 of Tacitus. So with the artisan who makes small savings in 
 the present day; he is anxious to accumulate ;^5o, not 
 because he will be so much the better of twenty-five shillings 
 annual income, but because he will have a good round sum 
 to fall back upon in bad times. The investor must submit 
 at times to reductions of income, but he can hope that things 
 will take a turn ; what he really dreads is loss of the principal 
 or capital. Hence the chief motive in saving is not so much 
 the desire to have interest, as the desire to have principal. 
 It will yield an income, but it also affords a substantial 
 reserve on which it is possible for a man to fall back in any 
 case of necessity. 
 
 There are some cases in which the motive for saving 
 appears to be that of enjoying a larger income later on. 
 This appears to be the case when a man endows his life and 
 pays £\^o 2i year for five and twenty years in order to enjoy 
 the interest on ^^4000 in the last twenty years of his life, 
 >vhen his power of earning is decreasing ; but such postponed 
 
72 The Formation of Capital [Ch. VI. 
 
 enjoyment of income does not appear to be such an effective 
 motive as the desire to have a reserve to fall back upon. 
 This is the commonest motive for saving, even in pre- 
 capitalist times, and it is a very real motive for saving in the 
 present day. It is the motive to which all trades unions and 
 friendly societies appeal. They do not give their members 
 an annual income, although they exact annual payments ; 
 but they do give immunity from anxiety about a greater or 
 smaller number of the risks of life. Some will secure a man 
 against the losses consequent on ill-health or give him bene- 
 fits in old age ; others provide for him in cases where he is 
 temporarily out of employment. But the advantage which 
 accrues to the memiber is not that of a regular income, but 
 of a reserve on which he can draw in any of the ordinary 
 emergencies of life. 
 
 This is the real class distinction in the present day; the 
 most important distinction between the classes and the masses. 
 In old days no one was secure against physical risks ; his 
 wealth, however great, might disappear suddenly like that 
 of Job, or the Merchant of Venice. But the facilities for 
 dividing investment, so as not to put all the eggs in one 
 basket, together with the opportunities of insurance and 
 obtaining security against various specific risks, are so 
 numerous, that it is possible for the rich man to make 
 provision for wife and children so as to secure them against 
 all ordinary risks of falling into poverty at any period in the 
 whole course of their lives. But a considerable portion of 
 the artisan classes, and the whole of the unorganised 
 labourers, enjoy no such freedom from anxiety ; they rarely 
 can see their way clearly for more than a week or two, and 
 there are constant risks to health from exposure or accident, 
 which may throw them into the extremest poverty at any 
 moment. Only those who understand how great this risk is, 
 and how much their comparatively small reserves separate 
 the organised from the unorganised employees, can realise the 
 immense importance for comfort in life of possessing a 
 reserve fund, and how immensely important this desire is in 
 connexion with the formation of capital. 
 
Facilities for Saving 73 
 
 The assumption sometimes made that men save, not for 
 the sake of possessing a reserve fund but for the sake of 
 enjoying income, has been the basis of some argument that 
 seems to me illusory. It is said that the rate of interest is 
 declining, and that if it gets very low the motive for saving 
 will be gone, and that we can look for no more additions to 
 capital Even this does not appear to be conclusive ; if the 
 rate of interest falls, the man who desires to have a large 
 income will have to save more so as to enjoy the annual 
 return he desires. If interest falls on the best security from 
 3 to 2 per cent, he will have to save ;^ 15,000 instead of 
 ;^ 10,000 in order to enjoy ^300 a year, so that a fall of 
 interest might lead to increased efforts to save. But if the 
 chief motive to save, the one which has appealed to human 
 beings over the longest period, and appeals most widely to all 
 classes of the community, is not the desire to save but the 
 desire to have a reserve fund, then a fall in the rate of 
 interest will not affect the desire to save at all; this will 
 remain as strong as before, and accumulation might continue 
 unchecked even if the rate of interest were merely nominal. 
 It would only be appreciably affected if men were forced 
 to make payments in order to have their hoards securely 
 kept for them. 
 
 c. All human beings may be credited with a certain amount 
 of imagination, and a certain power of will ; but in many 
 these traits are but imperfectly developed. The object of 
 the facilities for saving, which are provided by governments 
 or by philanthropists, is to render the practice easier to those 
 in whom the disposition to save is not strong. The ordinary 
 goose club is the least pretentious and most generally 
 attractive of all such schemes, for the object appeals to the 
 uncultivated imagination ; the necessary saving is not unduly 
 prolonged, so that there is no great strain upon the resolution ; 
 and the amount of ' present enjoyment' which the man fore- 
 goes is overlooked in the attractions of the public house. 
 In fact it offers such complete facilities that it hardly calls 
 forth the faculty or helps men to form the habit of saving. 
 
 Many schemes for facilitating the habit of saving depend 
 
74 The Formation of Capital [Ch. vi. 
 
 for their success on the way in which they enable people to 
 take advantage of trivial occasions, and thus help them not 
 to miss the opportunities of saving that come within their 
 reach. It is of course impossible to say how far by providing 
 opportunities the latent disposition to save is called forth 
 and stimulated ; and those in whom the disposition is strong 
 will save on the smallest opportunity. At the same time, 
 though we cannot say how much is due to social, how much 
 to personal, and how much to physical surroundings, it is not 
 clear that the whole of the conditions which affect the result 
 can be stated in terms of any one of the three ; but for the 
 sake of completeness it is worth while to look at the matter 
 from the physical, as well as from the personal and social 
 side. 
 
 3. The opportunity to save occurs when a man is in 
 possession of a superfluity of wealth of a kind which he can 
 accumulate. He can take advantage of a time of plenty, and 
 he can take the fullest advantage of it if he can lay up a kind 
 of possession which will keep without spoiling. 
 
 a. In regard to the primitive saving of laying up a reserve 
 fund of food, it is obvious that it will take place at one time 
 of the year, after harvest ; and that, if the population has 
 increased up to the limits given by the available food in 
 ordinary years, it will only occur occasionally when food is 
 particularly plentiful. Without the seven years of plenty 
 Joseph could hardly have accumulated a store to serve during 
 seven years of famine. 
 
 Similarly in modern times the best opportunity for saving 
 occurs at times of prosperity ; if a man counts to get ten per 
 cent, on the capital in any business, and he finds that he 
 has made fifteen per cent., he is able to put away the sum 
 which represents five per cent, on his capital. If he only 
 gets his ten per cent, he will keep the business going, but he 
 makes no additional accumulations. This is the fact which 
 has been noticed by the Manchester school of economists, 
 who have laid stress on high profits as a sign of prosperity, 
 and treated high profits (and high interest) as a motive to 
 the increase of capital. Such a state of affairs does not give 
 
opportunities of Saving 75 
 
 a strong motive, but it gives an opportunity : everybody 
 knows that the high prices and large returns will not last for 
 ever, and that the additions to capital will not permanently 
 or even long secure an addition to income at this large rate. 
 But everybody in business sees that he can lay aside a large 
 sum (to be used in his own business or another), and he 
 makes the most of the opportunity while it lasts. In this 
 way high profits indicate a very real element of prosperity ; 
 they show a state of affairs when capital is being accumulated 
 by many men, and therefore they show that increased facili- 
 ties for industry and commerce are available on many sides. 
 When, on the other hand, the rate of profit is low in most in- 
 dustries, there may be many men who are anxious to save, 
 but who have no opportunity, or no opportunity of saving on 
 a large scale. From this point of view we may see that there 
 is an element of truth in the position taken by Rodbertus and 
 others, who have decried the assertion that capital is the re- 
 sult of saving ; no, they say, it is the result of diligence. It 
 is diligence which gives a man a superfluity of goods, and 
 therefore without diligence he would have nothing to lay 
 aside and hoard. Undoubtedly diligence is often, though 
 not always, the means of bringing a superfluity into exist- 
 ence, and thus it provides the opportunity for saving. But 
 there must be the desire of a fund in the future and the will 
 to wait for it, or the opportunity which diligence provides 
 will be allowed to slip. The virtues of thrift and diligence 
 often go together, but for all that the part which each plays 
 in the formation of hoards is perfectly distinguishable. 
 
 b. The possibility of amassing wealth also depends on the 
 kinds of commodity which are available. Keep a thing seven 
 years, it is said, and you will find a use for it, but there are 
 some things which will not last very long and cannot be 
 kept. It is impossible to hoard milk for long, even when 
 converted into cheese, and woollen goods are apt to be in- 
 jured ; the Tartar on the Steppes has no possessions which 
 will keep, and he cannot be expected to form stores. On the 
 other hand, if corn is kept dry and protected from rats, it 
 may be preserved without destruction for centuries, as in the 
 
76 The Formation of Capital [Ch. VI. 
 
 case of the Egyptian wheat; but the precious metals and 
 jewels are among the least destructible forms of wealth, and 
 they therefore lend themselves most readily to hoarding. 
 The precious metals from their divisibility too can be laid 
 aside as the opportunity occurs, and the man or woman of 
 thrifty habits will be able to accumulate the most trifling 
 sums till the stocking or the tea-pot contains a considerable 
 amount. So far as divisibility is concerned this holds good 
 of any kind of circulating medium, or of the forms of credit. 
 The most extraordinary example of this is found in the 
 history of the great co-operative societies ; they enjoy a 
 plethora of capital, but these large accumulations are chiefly 
 formed by laying aside the discounts for cash payments on 
 small purchases. The success of these societies is chiefly 
 due to the fact that they have given the artisan a new oppor- 
 tunity for saving, by enabling him to accumulate the money 
 that is due to him for paying cash ; these fractional sums 
 are scarcely missed at the time, and can therefore be easily 
 spared, but they accumulate to a large amount in the course 
 of years. 
 
 There are certain commodities which appear at first sight 
 to be specially adapted for saving because they can not only 
 be kept, but they actually improve by keeping. It is on this 
 account that some men invest in pictures by young and 
 unknown artists, in the belief that they will increase in 
 value as the men become famous. So, too, first editions, 
 early impressions, may all come to have a fancy value, and 
 they are on this account legitimate objects of speculation. 
 Another instance, which specially attracted the attention 
 of MacCulloch, was that of wine, which will, of course, im- 
 prove if it is judiciously selected and laid down. But these 
 cases rather fall under the investment of wealth than the 
 formation of hoards ; they are instances not of saving, but of 
 speculation. A poor man may gradually accumulate a very 
 valuable collection, by patience and skill, but collectors 
 rarely forecast public taste in such fashion as to make their 
 favourite hobby pay. The purchase of such objects are 
 generally speculations in which men engage who have some 
 
The Genesis of Capital yj 
 
 wealth, not means of accumulation, and commodities of this 
 kind are not by their very nature generally available as 
 offering opportunities for saving. They differ, too, from 
 other employments of capital, because the owner expects to 
 get, not so much an income, as a sum which may be equi- 
 valent to many years income ; there is no difference of 
 principle between this and any other commercial specu- 
 lation ; but the man who tries to get a gain by continuing 
 to hold an improving capital must be willing to lie out of 
 his capital for a long time. Thus the man who lays down 
 ;^ioo worth of port sinks his money; he does not receive 
 any income from it, and the gain only accrues when he 
 realises his investment and sells at a profit; his capital is 
 sunk, and just because it is sunk and the opportunity of 
 realising it may not easily occur, this form of investment 
 is one that many capitalists would eschew. These excep- 
 tional cases do not afford opportunities for forming hoards, 
 and the gain which comes from them differs in a marked 
 degree from the income which is derived from capital. 
 
 c. In whatever way the saving is effected, however, a fund 
 of commodities is formed or rights to use commodities are 
 acquired. This has, indeed, given rise to the opinion that 
 capital has no independent existence as an economic factor. 
 Its very existence is said to be owing to previous labour, and 
 the profits, it is urged, should go to the labour that made 
 it possible. All capital does indeed consist of commodities, 
 and labour is an element in the production of commodities ; 
 but by insisting on a quality which is common to all 
 commodities, we do not get help in distinguishing those 
 commodities which are used as capital from those com- 
 modities which are not. Without previous labour capital 
 could not be formed, for there would be no opportunity for 
 forming it; this may be admitted at once, but it is not 
 formed by labour alone, but by saving exercised upon the 
 results of past labour. Those who were anxious to find 
 some external note by which they might exclude land from 
 the scope of capital have been apt to say that capital con- 
 sisted of the products of past labour, and this has given 
 
78 The Formation of Capital [Ch. vi. 
 
 rise to the opinion that there is a mere juggle by which a 
 portion of the products of labour are somehow, without 
 undergoing further physical change, transmuted into a subT 
 stance called capital. But this transmutation, though it does 
 not affect the physical form of the commodities hoarded, is 
 not a mere juggle. Like all other economic and social 
 processes, it is primarily due to what human beings think 
 and determine ; it is in the mind of the possessor that the 
 distinction between capital and non-capital really lies, and it 
 is from the purpose of the possessor, and not from the genesis 
 of the material he hoards, that the formation of capital really 
 proceeds. The possession of material goods renders it 
 possible to hoard ; some kinds of goods lend themselves to 
 hoarding more easily than others, but they do not hoard 
 themselves ; there must be human foresight and human 
 determination, or goods will not accumulate. 
 
 II. The Things which Capital Denotes. 
 
 So far we have insisted on the fact that capital is a fund 
 of wealth, and have noted the conditions, the dispositions, 
 and the opportunities which co-operate for the formation of 
 capital. It remains for us to consider how far this view 
 of the formation of capital gives us any light in regard to 
 property or powers which are in some respects analogous 
 to capital, and about which there is much dispute as to 
 whether they are capital or not. 
 
 1. Personal Capital. — It is sometimes said that a man's 
 acquired skill is his capital. It may have analogies to capital 
 in that it enables him to get a larger income, but the analogy 
 is with capital sunk in land, not with capital as a separate 
 possession. Just as a man who improves his estate gets 
 an increased rental, so the man who improves himself gets 
 increased wages, but the gain comes as wages, and not as 
 income apart from wages. It is increased or diminished by 
 the causes that affect the rate of wages rather than by those 
 that affect the rate of profits. 
 
 But in any case skill is not a fund. It is not of the nature 
 
So-called Personal Capital 79 
 
 of a hoard on which a man can fall back in case of an 
 emergency ; it is not wealth that can be realised apart from 
 the man himself The man with capital who falls into bad 
 health and cannot work need not starve, but the man who 
 has skill but cannot work will not be able to subsist on his 
 skill. And it certainly is not got by accumulation ; by ex- 
 ercising his faculties, such as they are, a man learns to use 
 them better; but it is by using them and not by hoarding 
 them that the results accrue. There may be self-disci- 
 pline in acquiring skill as there is in acquiring capital, but 
 the opportunities that occur for forming capital will not 
 necessarily be opportunities for acquiring skill; it does not 
 arise through putting by a surplus. 
 
 In fact, though we habitually speak of a man as possessing 
 skill, it may be doubted whether skill is really a ' possession' 
 at all ; it is the man who is skilful, his skill is part of himself; 
 the term includes qualities of his mind or body ; a man can ex- 
 change his possessions for money, and when he does he parts 
 with them ; but when a man gains by the exercise of his skill 
 he does not part with it; he has it still. The man hires 
 him.self, and he receives larger or smaller hire according as he 
 is a skilful man or no ; but his skill is not a possession which 
 will bring gain apart from himself, or which he accumulates 
 by refraining from using his powers, or which supplies a 
 reserve fund in case of sickness or accident. The analogy 
 to capital is of the slightest ; it is most near, perhaps, in those 
 stories of mediaeval gentlemen who sold themselves to the 
 devil on condition of obtaining an income and living like 
 princes; they used themselves to purchase for themselves 
 a terminable annuity. 
 
 There have of course been many states of society where 
 human skill was a possession, but just because the human 
 beings were not their own masters, but were the slaves of 
 their proprietors. A inan may keep a training stable as a 
 source of income ; he may devote his capital to the breeding 
 and training of horses, and of course he is engaged in a 
 business like any other business, and the products he has 
 to sell are highly trained horses. In exactly the same way 
 
8o The Formation of Capital [Ch. VI. 
 
 a man may devote himself to the breeding and training of 
 slaves. It has rarely been a remunerative business, as the 
 breeders have had to compete in markets largely supplied with 
 the captives of war or piracy ; but it was a recognised de- 
 partment of rural economy on Roman estates, and Columella 
 describes the management of the baby farm as he did that 
 of the dairy farm or anything else. At any place or time 
 when human beings were recognised objects of exchange 
 owned by proprietors, they might be considered as a form 
 in which capital was invested, and a gang of slaves is a fund 
 of wealth. A gang of highly skilled and reliable slaves was 
 a much more valuable possession than a gang of stupid and 
 dishonest slaves, and represented a far larger capital. But 
 the skill of a free man is not an object he possesses ; it is 
 one of his own qualities, and it cannot be properly described 
 as part of his capital. 
 
 2. There is still more difficulty about the phrase national 
 capital. The national capital would by analogy consist of 
 all the national possessions from which the nation expects to 
 get an income ; all industry and commerce afford the sources 
 whence income is derived, and if all the elements that are 
 necessary to carry on national industry are regarded as national 
 possessions, the land and the population would alike be con- 
 sidered parts of the national capital. It may appear perhaps 
 that the citizens cannot be named the possessions of the nation, 
 but in so far as they can be called upon to arm in defence 
 of the nation, and to risk their lives, they certainly appear 
 to be very completely and perhaps unwillingly controlled by 
 the nation, and to be used by the nation for its objects. 
 They can even be the subjects of exchange, when a piece of 
 territory with its inhabitants is ceded to another power, as 
 in the recent cases of Elsass and Lothringen, of Savoy and 
 Nice, or Heligoland. Just as a man's capital consists of the 
 possessions alive or dead, slaves or beasts or steam engines, 
 from which he expects an income ; so by analogy the 
 national capital might be said to consist of all the pos- 
 sessions, alive or dead, from which the State directly or 
 indirectly obtains a revenue. 
 
So-called National Capital 8i 
 
 a. At the same time, when we follow out the analogy in 
 this way, it appears that national capital differs so much 
 from private capital that it is inconvenient to use the same 
 term for both. National Capital, strictly taken, would include 
 the land and its conditions of cHmate and soil, the popu- 
 lation and its various qualities, as well as the funds of 
 wealth which constitute the capital of individuals. It seems 
 better to discard a name which may give rise to such con- 
 fusion, and to speak of the sources of revenue as the national 
 resources rather than as the national capital. The kinds of 
 things that can be owned and possessed, and therefore that 
 can be parts of a fund of wealth, are pretty clearly marked if 
 we confine our attention to individual wealth in countries where 
 slavery does not exist. The resources of the nation include 
 many things which cannot be thus appropriated by individuals ; 
 and it is, to say the least, unnecessary to insist on expanding 
 the term capital by analogy to include national possessions, 
 which have a sufficiently good name of their own already. 
 
 b. Instead of following out the analogy in the thorough 
 manner adopted above, some writers think it convenient to 
 use the term national capital for funds of kinds of wealth 
 such as individuals might possess — material, exchangeable 
 goods. The question then arises whether the national capital 
 had best be taken to include the aggregate of individual 
 capitals, or whether it shall be limited to the fund of material 
 marketable objects from which the nation derives an income. 
 
 If we take it in the larger sense there is considerable 
 difficulty in adding up the total of individual capital so as 
 not to count the same funds twice over ; this is of course 
 due to the manner in which capital is lent. There is a 
 danger of reckoning the fund of wealth which Brown uses, 
 and then reckoning over again the fund of wealth which 
 Smith has lent him to use. Consols represent a large 
 amount of wealth lent to the Government ; this is part of the 
 aggregate of individual wealth, but it is a national debt and 
 not a national asset. The question is still further confused 
 by the individual wealth lent to foreign nations. Till such 
 difficulties as these are satisfactorily settled on some clear 
 
82 The Forination of Capital [Ch. vi. 
 
 principle, there can be little advantage in trying to sum up 
 the amount of the national capital. In any case ' the aggre- 
 gate of individual capital ' is a term which would serve the 
 purpose clearly. 
 
 The remaining sense of the term National Capital occurs 
 when it is applied to the fund of material marketable com- 
 modities owned not by individuals but by the nation, and 
 from which the nation derives an income. There is of course 
 much national property which does not fall under this cate- 
 gory ; the Houses of Parliament and the Tower of London 
 may be regarded as national possessions, but they are not 
 used as sources of income, except to a limited extent. The 
 various naval and military arsenals may be included by a 
 stretch of the term, as they save expenditure that would 
 otherwise be incurred. Public works like the great irriga- 
 tion canals in India are a source of revenue, but the capital 
 employed in constructing them is sunk ; they can hardly be 
 regarded as a form of capital, but as a form of property in 
 which capital has been sunk. As a matter of fact there is 
 very little such national capital in any nation. There is but 
 little in the way of national reserve funds ; and very little 
 national wealth is used for the purpose of securing more 
 national income. There are national resources which have 
 been improved with capital, but outside the organisation of 
 the Post Office there is very little remunerative ' national 
 capital ' in England. 
 
 III. The Dependence of the State on Borrowed Capital. 
 
 It is worth while to insist on this point, for it appears that 
 when a nation wishes to have capital with which to improve 
 its resources it is forced to rely on the capital of private 
 individuals. It may borrow the money, as is commonly done 
 now, or it may grant certain concessions to a capitalist or 
 capitalists as the Romans did. But such capital, though 
 applied to national purposes, has not ceased to be individual 
 capital. It is, after all, a fund which has been saved by 
 individuals : the property is vested in individuals, and in- 
 
Formmg Capital or Borrowing it 83 
 
 dividuals derive an income from it, though the nation expects 
 an advantage which may or may not be measurable in terms 
 of money. 
 
 1. The fact that tlie nation depends so much on obtaining 
 the use of their capital from individuals raises an interesting 
 question as to how far a nation as such is likely to be able to 
 accumulate hoards and form capital at all. There have of 
 course been large accumulations of treasure acquired by 
 governments at particular times, but that was for the most 
 part due to special efforts on the part of an individual 
 monarch like Henry VII, or special opportunities like that 
 which enabled Bismarck to secure a vast amount of gold at 
 the expense of France. There have been monarchs who 
 have been able to impress their thrifty disposition on the 
 policy of the realm, and there have been statesmen who 
 have seized the occasion of some military triumph to amass 
 a reserve ; but such monarchs and statesmen have been few. 
 The spoils of war not infrequently slip through the hands of 
 the successful soldiery in unproductive consumption, and the 
 motives which most generally call forth saving do not greatly 
 appeal to nations in their corporate capacity. The failure of 
 sinking funds and the slow progress made in the reduction of 
 the national debt during a period of unexampled prosperity, 
 show, only too clearly, that there is no strong enthusiasm for 
 relieving posterity from the burden of debt; far less are 
 there signs of any desire to maintain heavy taxes in the 
 present and so accumulate a reserve. It is not easy to get 
 the populace to do anything for posterity, for posterity has 
 never done anything for them. Hence a desire to form a 
 reserve, which is the effective motive in the formation of 
 private capital, does not appeal to the national imagination, 
 and it is difficult to keep the national will at this pitch of 
 heroic self-sacrifice. So long as there was an absolute 
 monarch who desired to found a dynasty, the motive for 
 accumulating treasure was similar to that of the private 
 individual who wishes to provide for his family ; but nations 
 have not very frequent opportunities to save, — they hardly 
 feel the motive at all. 
 
84 The Forination of Capital [Ch. vi. 
 
 2. This speculation as to the power of nations to form 
 hoards which can be used as capital is an important point 
 for socialists to take into account. The so-called nationali- 
 sation of railways, in so far as it has taken place, has been 
 effected, not by the extinction of private capital, but by 
 borrowing private capital to enable the nation to buy out 
 private owners. Of course the affair can be so financed that 
 the claims of the national creditors should be gradually paid 
 off and the railways remain with the State; but supposing 
 the existing means of production were thus nationalised, is 
 it clear that the State would be able to do more than keep 
 them going? Would it have the motive and the opportunity 
 for forming capital as a reserve fund, i. e. to be drawn on 
 for the expenses of government in case of the revenue falling 
 short, or for the purpose of attempting new enterprises? 
 The State has often had to rely on Jews or Lombards or 
 other bankers in order to pay its way, or to meet expenses 
 while taxes were being collected ; would it be so organised 
 as to dispense with occasional aid from capitalists, or would 
 it be able to form large reserve funds for itself ? Experience 
 seems to show that the State will not easily develope a faculty 
 for saving; and that just as the private capitalist may al- 
 ways survive as the most efficient administrator where there 
 are many petty details to be looked to, so too he will survive 
 as the organ by which new supplies of capital are most 
 readily formed, even though when formed this capital should 
 be borrowed by the State and used for public purposes. 
 
 IV. The definition reconsidered. 
 
 1. A brief retrospect may enable us to test the definition 
 with which we started, and see how far it has given us a 
 distinct idea of the nature of the economic power we are 
 about to examine in some detail. It is in some ways a 
 narrower use of the term than is current in text-books ; for 
 it hardly seems worth while to retain the division ' national 
 capital ' at all when we discard that term as a name for 
 national resources, and for the aggregate of private capital ; 
 
Misleading Analogies 85 
 
 there is very little to which the term can be applied. So 
 far as the nation uses capital it relies on private capital, and 
 additional supplies of capital are forthcoming, not from the 
 savings of the State as such, but from the funds of wealth 
 accumulated by individuals. In fact the phrase appears to 
 have been invented not as the name of any observed phe- 
 nomenon, but in order to give completeness to the subject, 
 and because the ordinary analysis of wealth seemed to 
 require it. ' If capital,' it might be urged, ' is a requisite 
 of the production of wealth, and there is such a thing as 
 national wealth, then there must be such a thing as national 
 capital to produce it.' Such appears to be the argument, 
 but capital is not always necessary to the production of 
 wealth, and even if it were, national wealth might be pro- 
 duced by the use of private capital. A similar ratiocination 
 may have given rise to the inconvenient phrase ' personal 
 capital,' — the labourer produces wealth, but if capital is a 
 requisite of production, there must be capital somewhere ; 
 and so that name is sometimes given to the labourer's skill. 
 
 2. It has been my endeavour to steer clear of these 
 dangerous analogies, and to keep to the common-sense mean- 
 ing of the term. What may perhaps seem least defensible 
 in popular phraseology is the manner in which capital sunk 
 in land is treated as merged in land, and lost in land, and 
 therefore not as capital at all ; but at least it may be said 
 that there is some confirmation for this view of the case. 
 The moneyed interest of capitalists is generally distinguish- 
 able, and often opposed to that of the landed interest, because 
 the one has a much more permanent stake in the country 
 than the other, and is interested in developing the resources 
 of the estate, or in enjoying it, not merely in deriving income 
 from it. The conditions which favour agriculture may not 
 be suitable for industry and commerce ; there are real 
 economic differences, to which is due a conflict of interest 
 that has broken out over and over again, from the time when 
 the distinction was first noticed in parliamentary politics to 
 the great struggle over the corn laws. But the capitalist 
 who retires from business and sinks his capital in land is apt 
 
86 The Forinatioii of Capital [Ch. vi. 
 
 to pass over from the moneyed interest to the landed interest ; 
 his tastes and wishes and expectations take a different 
 character. And hence while it is true that capital which is 
 sunk in land is still wealth, it is also true to say that since 
 it has been sunk in land it has ceased to be that kind of 
 wealth which is ordinarily called capital, and that the income 
 it affords to the landlord, which we call rent, is governed by 
 very different principles from those which explain the varia- 
 tions in profit or the interest on loans. 
 
 {a) Mill has pointed out that the distinction between capital 
 and non-capital depends on the intentions of the owner, and 
 the application of this principle requires that a distinction 
 should be drawn between ' Capital' and ' Land,' even though 
 both are in a sense wealth, and both afford income. The 
 landlord in England does not in a usual way work his estate 
 for income only, but partly as a means of social enjoyment, 
 and as giving prestige and so forth. He embellishes and 
 improves it, and spends, in planting it, money which he never 
 expects to see again, but which may provide a valuable 
 possession for his son. The whole range of motives and 
 interests is different from that of the millowner, who is trying 
 to push his trade, and who buys a bit of land, the site of his 
 mill, with the view of using it in connexion with his business. 
 The difference lies not in the things owned, but in the 
 intentions of the owner, and the way he deals with them. 
 There are many men connected with the land who are 
 capitalists ; farmers who work for an annual return in a sale- 
 able product, speculators who pick up properties in the hope 
 of selHng them again at a profit, and their economic action is 
 closely allied to that of other capitalists. There may be 
 landlords who work the estate simply as a pecuniary specula- 
 tion, and who have no interest in the land except as it yields 
 an income in money ; but so long as this is not generally the 
 case, and the motives which actuate a landowner are very 
 distinct from those which actuate manufacturers or merchants, 
 there is a justification for the popular usage which classifies 
 his property under a separate heading. It is further confirmed 
 by the fact that the genesis of economic rent is so different 
 
The Intentions of the Owner 87 
 
 from that of interest on loans or reward for enterprise, and 
 that the value of land accrues so differently from the increase 
 of capital that the two must be treated apart. Land might 
 be described for economic purposes as a property in certain 
 natural materials or powers which the owner continues to 
 hold partly for enjoyment and partly for the sake of income. 
 It therefore does not exactly fall under either half of the 
 definition of capital. 
 
 (^) Mill's principle calls attention to a point of fundamental 
 importance. It is true that capital consists of material 
 things, and not of mental powers, but it is also true that 
 material things have not the property of being capital in 
 themselves. They have no economic property in themselves, 
 but only in relation to human beings ; a thing has no use in 
 itself, but only if there is someone to use it ; it has no ex- 
 change value in itself, but only if there is someone who wishes 
 to obtain it in exchange ; there is no intrinsic usefulness or 
 intrinsic value in any material commodity. And in the same 
 way there is no intrinsic quality that renders any commodity 
 capital ; whether it is capital or not depends on the man who 
 owns it. The distinction could only be drawn with certainty 
 in all cases if we knew exactly the views and intentions of 
 each owner, but it is precise, so far as our knowledge of 
 circumstances enables us to apply it. That which is not a 
 material possession cannot be part of a hoard, and so cannot 
 be capital ; but as the forming of a hoard depends on 
 personal qualities, and as the use of a hoard as capital 
 depends on personal preferences, the distinction between 
 capital and non-capital can only be clearly stated when we 
 fix our attention on the minds of the possessor and not on 
 the things he possesses and uses. If he uses his wealth as 
 part of a fund from which he hopes to obtain income it is 
 capital. If he sinks his fund in lands so as to obtain more 
 rent it is sunk capital, and it gives an improved estate. If 
 he uses it to get a better education it is sunk in his own 
 improved faculties, and he can earn higher wages ; but in 
 neither case does it remain as capital. 
 
CHAPTER VII. 
 
 The Investment of Capital. 
 
 I. Xieuding Money and Engaging in Enterprise. 
 
 Though capital is wealth which can be realised in money 
 and transferred, it does not usually consist of money, but of 
 other forms of wealth in which it has been invested. We 
 may leave out of account for the present those kinds of 
 wealth in which it is sunk, and from which there is no ex- 
 pectation of getting a regular, but only an accumulated 
 income, — improving properties, such as building-land or wine ; 
 in these a wealthy man may speculate, but he locks up his 
 capital and does not look for annual income. We merely 
 want to consider the investments at which a man will look 
 who is anxious to obtain an income without sacrificing his 
 principal ; and it is obvious on the face of it that he will 
 expect to get some return. Stated in most general fashion 
 it appears that there is a superior attractiveness about having 
 a thing now, rather than having it next year. The child who 
 is asked whether it would rather have an apple now or two 
 apples next year would probably prefer the apple now ; and 
 the man who lends his money or invests his money now will 
 only consent to do it because he counts on having more 
 money or a bigger stock of goods next year. Ordinary 
 human nature is like Passion, and desires its good things now : 
 it requires an extra inducement to act like Patience and wait 
 for its good things till a future time. Capital is the fund of 
 wealth ; income is the extra inducement which proves suffi- 
 cient to make a man use his hoard as capital. It is not 
 necessary to consider now whether he ought to be paid for 
 
Lending Money on Security 89 
 
 doing so, or whether time is one of the gifts of God for which no 
 man has a right to charge. It may be enough to say on this 
 matter that he does not cliarge for time, but by time and in 
 terms of time for the use of his capital. The question of 
 right and wrong will be touched on below, and all that has 
 to be considered here is the practical matter ; men will not, 
 as a matter of fact, lend or employ, and so lie out of, their 
 money, unless they have not only satisfactory assurance that 
 their wealth will be restored to them in e.g. a year's time, 
 but also the extra inducement of something more in the 
 future than they have now; not only capital but a year's 
 income. Even in days when the taking of interest was 
 forbidden the justice of this feeling was fully recognised, for 
 it was universally held that to lend on good security, without 
 interest, was a piece of charity, a virtuous act, and one in 
 which some amount of sacrifice was involved. 
 
 There are, however, two different ways in which a man 
 may use his capital so as to get an income ; he may lend his 
 capital and bargain for interest, or he may employ his capital 
 in expectation of a profit. 
 
 1. If he lends his capital, he simply has as a man of 
 business to take account of the borrower, his probable ability 
 to pay interest and to repay the loan. He may not feel sure 
 as to the borrower's ability to do either one or the other, 
 especially if he is lending to a poor man, and in this case 
 {a) he will require security of some sort before he makes the 
 loan ; or he may feel doubts about the borrower's honesty, 
 and his willingness to pay when he can, and in this case also 
 he will require security. When the Templars in France 
 agreed to pay King John a sum of money in England in 
 silver, they first made him pay an equal sum of gold into the 
 Temple treasury at Paris. The excellent Bricstam, who made 
 gratuitous loans to the needy, was obliged to take pledges 
 from them because they were so very careless about paying 
 him back. The man who is wealthy can borrow easily, 
 because he has property he can pledge; and the wealthy 
 man with a good character can get loans on very easy terms 
 indeed. 
 
90 The Investinent of Capital [Ch. vil. 
 
 {b) In modern times we find that great bodies like munici- 
 palities and states, which have powers of levying taxes 
 and can borrow on the security of the rates, are able to 
 borrow most easily, and as they are anxious to continue to 
 do so, they are careful to keep a good character for the 
 punctual payment of interest. So, too, wealthy landowners 
 can borrow on mortgages, and great railway companies find 
 that the easiest way of obtaining capital is by issuing deben- 
 tures and borrowing on the security of the property of the 
 company as a going concern ; and hence there is a very 
 large amount of capital which is invested in this form, and 
 lent on more or less satisfactory security. 
 
 One curious consequence is that since public bodies are 
 so wealthy and so punctual in payment they can borrow on 
 particularly easy terms. Hence the Government can obtain 
 the use and control of additional capital more easily than any 
 one else — at 2| per cent. Similarly, big companies and 
 wealthy firms can borrow more, and more easily than smaller 
 ones; they can get the command of additional capital on 
 easier terms. This gives the large employers a great advan- 
 tage over small ones in the struggle for existence, and it gives 
 public bodies a distinct advantage over companies in carry- 
 ing on any undertaking. So far as management goes, public 
 bodies are apt to be extravagant ; but so far as the terms on 
 which they obtain the use of capital are concerned, they can 
 do it exceedingly cheaply. One of the incentives for the 
 municipalisation of gas works and water supply lies in the 
 fact that the town can procure the necessary capital on easy 
 terms. 
 
 {c) It is of course private capital still; the borrower 
 merely has the use of it, and will have to repay it ; but so 
 long as there are many private individuals with funds of 
 wealth, the Government or local bodies can procure capital 
 on easy terms, and use it as if it were their own. There is 
 on every side a tendency to rely in business on the use of bor- 
 rowed capital, as we shall see below. Borrowing is the easiest 
 way to get capital ; and lending is with many capitalists, 
 especially trustees, a favourite form of employing money. It 
 
Profits from Enterprise 91 
 
 is so very free from risks ; the capitalist lends his capital, he 
 does not hire it out as the landlord hires out a farm or a 
 house. The house will be somewhat deteriorated — he gets it 
 back subject to reasonable wear and tear ; so too with the 
 farm and its buildings. But the capitalist does not hire out 
 a piece of property expecting to get back the same piece of 
 property slightly worn but unimpaired ; he lends a certain 
 amount of value expecting to get back the same amount of 
 value when the loan is repaid ; he bargains himself out of 
 risks so far as the diminution of his principal is concerned. 
 Many capitalists, too, like to know what they can count upon 
 in the way of income ; they are willing to accept a very 
 moderate return for their capital, if they are sure to get it 
 regularly and to be spared the discomforts which arise from 
 the difficulty of adapting their mode of living to a fluctuating 
 income. It is, therefore, in many ways a favourite mode of em- 
 ploying money. The capitalist does not much trouble himself 
 about the reasons why any government or company or indi- 
 vidual wishes to borrow, or what use is made of the capital 
 he lends ; it is usually enough for him if he sees his way to 
 get repaid his principal without depreciation, and to obtain 
 an annual return that he can count upon with regularity in 
 the form of interest. 
 
 2. There are other capitalists who employ their money in 
 the expectation of profit ; they may get considerably larger 
 sums than those who are contented with interest, but they 
 have also to undertake risks which the lender bargains him- 
 self out of. There is the risk of depreciation of the capital 
 itself, and the uncertainty as to the amount of return that will 
 accrue in any given period. It may be large or it may be 
 small, or it may be nil ; but whatever it is, it is pretty sure to 
 vary, and not to continue steady for a considerable period as 
 interest does. It is thus a very diiferent thing from interest ; 
 the two are often, though not necessarily, connected, as the 
 lender in nine cases out of ten is able to get his interest 
 because the borrower has used the capital lent him so as to 
 earn a profit. Profit often lies behind interest : but the 
 bargain for interest is different in many ways, from the 
 
92 The Investment of Capital [Ch. VII. 
 
 enterprise of those who are looking for profits, and the two 
 kinds of emiDloyment for money are perfectly distinct. 
 
 There are two different ways in which the possibility 
 of profit seems to arise ; though they are often combined 
 together, still they may be stated apart. One lies in the 
 improvement of natural processes, the other lies in the 
 employment of natural forces so as to save time ; the great 
 difference between agricultural and industrial or commercial 
 pursuits seems to rest on this distinction. Of course, as Mill 
 pointed out, all human labour consists in putting things in 
 such places as to bring natural forces to bear on materials 
 furnished by nature ; but in some cases we cannot hurry 
 natural processes, we cannot get two wheat harvests in one 
 year off the same land in England. The arable farmer cannot 
 turn his capital over more than once a year. But in com- 
 merce and manufactures capital may be so used as to save 
 time ; every application of natural forces which brings about 
 a saving of time is a gain to the public, and to the capitalists 
 who cater for the public, as they may turn their capital over 
 many times in the year. 
 
 {a) The art of the farmer is to combine natural processes 
 in the most profitable manner. The natural process which 
 results in the production of wheat will exhaust the soil ; he 
 can stimulate it by bringing into play the natural process of 
 fertilisation which is effected by manures, or he may give 
 scope for the natural process of recuperation which takes 
 place when he follows a rotation of crops or lays down a field 
 for pasture. By high farming he will get more produce out 
 of the land in the course of the year ; but he will not get a 
 corn crop ripened more than once a year. He improves the 
 production, but he does not make the process of production 
 more rapid. 
 
 ((5) On the other hand the whole work of the capitalist, 
 manufacturer, or merchant consists in making the process 
 more rapid. The single labourer can make looo pins by him- 
 self and with tools he can handle himself; but he will make 
 looo pins in less time by the division of labour which capital 
 facilitates, and by the introduction of machinery which 
 
Biismess on a Large Scale 93 
 
 capital provides. Manufacturing industry lias been so often 
 taken as the typical form of capitalist production that 
 economists are inclined to treat this as a sufficient account 
 of the function that it provides intermediate products, and 
 thus brings to bear all sorts of forces that can be made to 
 facilitate or to hasten production. 
 
 The capitalist with a considerable business connexion can 
 cater for distant markets, and can therefore manufacture on 
 a larger scale ; he is therefore able to employ more hands 
 than the man who has only a small shop ; he can arrange to 
 have the division of labour carried further, and this is a great 
 saving of time. More can be done by dividing the labour 
 and assigning each man a special task in which he attains a 
 high degree of skill. Every business man would like to 
 enlarge the scale on which his business is done, but he is 
 limited by his capital ; he must have so much wealth invested 
 in materials and so much in buildings and tools, so much 
 money to pay his labourers wages, and he cannot work on 
 a larger scale without more capital to use in one or other, 
 perhaps in all these directions. Capital is a requisite of 
 production in modern society, where manufacture is carried 
 on for sale and with distinct reference to the size of the 
 market, and without it the division of labour cannot be 
 introduced or carried further. 
 
 It is equally clear that the use of machinery gives a saving 
 of time ; it enables the man who has a machine to produce a 
 greater quantity in a given time, or each article produced 
 involves less expenditure of time. If he can make 300 
 pairs of boots instead of 100 in the course of a year, with the 
 use of a machine, the machine saves two years of time. 
 Tools are means of saving time, and the better the tools are 
 the more quickly can a piece of work be done. By the 
 intervention of capital there are improved facilities given 
 for natural processes or there is a saving of time in the 
 production of goods, and this is the source from which the 
 profit comes. 
 
94 The Investmetit of Capital [Ch. vii. 
 
 II. The Flow of Capital and the Machinery of Investment. 
 
 1. It is already clear that the differences between human 
 beings are such that some capitalists may prefer to lend and 
 obtain interest, while others invest in the hope of getting a 
 profit. There is somewhat less of fluidity in capital invested 
 than in capital lent ; it may in many cases be very much 
 harder to realise. In the investments and securities which 
 are transferred on the Stock Exchange, and the shares of 
 which are quoted from day to day at a market price, there 
 are differences which render some attractive to one class of 
 inventors and some to another. 
 
 a. One man may like a large income and take the chances 
 of ultimate loss in the belief that he will be able to realise 
 before any serious mischief occurs. High profits are sure 
 to attract capital to any particular industry. It has already 
 been pointed out that secured high profits give the oppor- 
 tunity of forming capital fast ; it is also true that high profits 
 in any employment attract a flow of capital to that employ- 
 ment. Those who are in the trade already can borrow easily, 
 and others think that this trade is a promising field for 
 enterprise and start in it. 
 
 b. But it is also true that some men will invest in a par- 
 ticular stock not because the dividend is high — there may be 
 no dividend at all — but because the price is low, i. e. because 
 they expect that in a few months or years the enterprise 
 will pay or pay better. Anything is worth buying if you can 
 get it cheap. And the man who has faith in some project 
 may be induced to invest in it largely when the price is low. 
 If the industry revives, the rate of profit will be good, and he 
 can realise his capital at a much higher figure. 
 
 The same sort of thing may be seen in other cases ; during 
 a period of great depression in the cotton trade in Lan- 
 cashire it was noticeable that new mills were rising in all 
 directions even when the existing ones were running half 
 time. Those who believed that the trade would recover saw 
 that a time of general depression was one when prices of all 
 sorts were low, when building could be done on very easy 
 
The Motives of Ijivestors 95 
 
 terms, when engineers were ready to supply machinery at 
 little over cost price, and so forth. It therefore became 
 possible to build and fit mills with all the newest improve- 
 ments on specially advantageous terms, and the men who 
 had faith in the future of the industry took the opportunity 
 of bad times to invest more largely than before. 
 
 There are here two different types of mind ; in both cases the 
 ' desire of wealth ' is the motive force, but in one case it is 
 the desire of as large an income as possible now, in the other 
 it is the desire of an improving property. One man invests 
 for the sake of a high return, the other invests in the hope of 
 increasing his capital. 
 
 c. Men will be affected in different ways by the possibility 
 of understanding the details of the business in which their 
 money is engaged. Many capitalists unite the actual man- 
 agement of some business with the employment of their 
 capital ; they prefer to put their money in a business they 
 themselves understand, as they know more clearly what are the 
 real risks and net profits of the trade. - In such cases there 
 are individual tastes and preferences that limit the free flow 
 of capital. The nearness or the distance of the property 
 concerned will affect them, inasmuch as they feel they can 
 get little full information about an enterprise in distant lands ; 
 and the uncertainty of the view which may be taken of 
 shareholders' or bondholders' rights by foreign courts will 
 also prevent capitaUsts from looking eagerly at such invest- 
 ments. But, after all, there are always men who will take 
 the risk if they see a high profit, or fancy they can buy 
 cheap ; there is a slight barrier, but a very slight one, to the 
 free flow of English capital to the most distant places and 
 the least settled territories. The capitalist is indifferent to 
 the direction in which he invests so long as he is likely to be 
 able to control, or at least to realise, his principal and to 
 secure a return as income. 
 
 2. There exists in the present day a very elaborate ma- 
 chinery by which capital is transferred from one employment 
 to another. 
 
 {a) Capital when newly formed probably shows itself 
 
96 The Investinent of Capital [Ch. Vli. 
 
 in the form of a large credit in the owner's account at 
 his banker's, and while it is lying there it is available for 
 temporary advances to those who need it. The banker is a 
 money-lender on a large scale, and the man who wishes to 
 borrow capital in order to extend his business, or to tide over 
 a temporary emergency, can do it most easily through his 
 banker. It has been already seen that the forms of credit 
 are convenient aids to the formation of capital, and they 
 certainly afford every facility for the transfer of capital into 
 the hands of those who are able to use it. If the balances of 
 customers with their bankers are large, the bankers will be 
 able to lend on easier terms ; everybody who sees a prospect 
 of driving his trade will be able to procure the necessary 
 capital with unusual ease, and trade will be stimulated every- 
 where. 
 
 {b) It is also through the banks and bill-brokers that capital 
 is transferred to foreign lands. If a railway is being built in 
 Turkey by English capital, wealth will be transmitted in the 
 form of English exports to Turkey for which no equivalent in 
 goods will be brought here ; the equivalent is being con- 
 verted into a railway on Turkish soil; similarly when the 
 railway is made and the profits or interest are being trans- 
 mitted to the English shareholders, there will be imports of 
 Turkish goods into England for which no equivalent in goods 
 is exported. The value of the capital and the value of the 
 interest are alike represented by bills, and these bills can be 
 met in many cases by goods which are transferred in the 
 course of trade without the export and import of large sums 
 of money. But it is unnecessary to dwell here on the deli- 
 cate mechanism which has been so well described by authori- 
 ties like Mr. Bagehot and Mr. Rae. 
 
 {c) The whole Stock Exchange exists for the purpose of 
 enabling capitalists to transfer their capital from one invest- 
 ment to another. As an institution it has many critics; 
 much of the business that is done upon it is of a highly 
 speculative character, and those who gamble may be led 
 into other vices. But, apart from its bearing on individual 
 character, it is said that many of the dealings on the Stock 
 
The Stock Exchange ^y 
 
 Exchange are of an unsocial character. In other transactions, 
 it is said, each of the parties to an exchange gains, and there 
 is therefore a social advantage from the fact that the exchange 
 takes place ; but on the Stock Exchange one man's success 
 is simply and directly another man's loss, and each man gains 
 at somebody else's expense, and therefore as an economic 
 institution it is thoroughly bad. We are not concerned at 
 present with the morality of the Stock Exchange, or the 
 limits of legitimate speculation, but simply with the practical 
 question of its actual working and its effects on the adminis- 
 tration of capital. 
 
 It may be noticed in passing that the statement that one 
 man's gain is another man's loss is only true in degree ; that 
 in so far as men have different motives in investing, what has 
 ceased to be a desirable property for one man may have 
 come to be a desirable property for another, and each by 
 exchanging may obtain something that they want more than 
 the thing they had. But after all the social advantage of the 
 Stock Exchange does not accrue from the combined gains of 
 individual dealers ; it arises from the fact that by their 
 dealings — speculative dealings, it may be — they keep the 
 market going for capital, so that the man who desires to 
 invest can easily get the sort of thing he wants. If there were 
 no Stock Exchange with speculative transactions there would 
 be far less facility for the transfer of capital, and far greater 
 difficulty in finding the necessary means for floating new 
 enterprises. 
 
 3. It is undoubtedly an enormous social advantage of a 
 practical character that there should be easy means of 
 transferring capital to those persons or places who can make 
 it most serviceable, and who are therefore best able to pay 
 for it. It is an immense practical benefit that progress should 
 not be hampered, but that the enterprising man should be 
 able to float some ingenious project. But while these 
 advantages are fully recognised, and while they appear to out- 
 weigh any minor evils that accompany them, it is yet worth 
 while to remember that there are accompanying disadvantages 
 of a practical kind. 
 
98 The Investment of Capital [Ch. VII. 
 
 {a) In the first place, the great facilities for floating well- 
 planned enterprises also render it more easy to float ill- 
 considered and fraudulent enterprises ; they pave the way for 
 the most profitable employment of capital, but they also lead 
 to a very great waste and destruction of capital — a matter 
 which need only be mentioned here as it is examined at 
 greater length below. 
 
 ip) In the second place, the very fluidity of capital appears 
 to intensify the great industrial evil of the present day ; this 
 lies in the extraordinary fluctuations of trade. One year men 
 will be working many hours a day at over-time wages, and in 
 the next year things are slack ; they work half time or get 
 paid off altogether. Temporary high profits in any trade 
 lead to the rapid formation of companies to carry on this 
 kind of business, and the rapid production which ensues 
 leads to a glut and to depression. So, at least, it is said ; 
 how far this mischievous tendency has really occurred to any 
 considerable extent, how far it is connected with the Stock 
 Exchange, and not with the formation of small companies, 
 which never come to be quoted at all beyond the localities 
 where they are formed, are matters on which it is impossible 
 for an outsider to form an opinion. Similarly, it is not easy 
 to say how far the Stock Exchange as an institution is 
 responsible for the waste of capital ; or how far its regulations 
 have checked such frightful waste of capital as occurred in 
 the days of the South Sea Bubble. It may be enough to say 
 that the practical advantage of giving great fluidity to capital, 
 and of bringing it to bear in those regions where it can work 
 more effectively, is very great ; and the onus of proof appears 
 to lie with those who believe that this social gain is more 
 than counterbalanced by accompanying evils. 
 
 III. The Increase of Borrowing and its Effects. 
 
 So far we have considered the investment of capital and 
 the machinery by which it is accomplished. We have tried 
 to break up the ' desire of wealth ' into its different elements, 
 and to show how the play of distinct motives affects the 
 
Public Borrowing 99 
 
 investment of capital in various ways. The most complete 
 explanation we can hope for is obtained when we have found 
 the spring of action which influences the owner to prefer one 
 mode of employing capital to another. There seems to be 
 reason to believe that the convenience of the public and of 
 many who possess capital is best served when the owner 
 does not employ it himself but lends it to Government or to 
 companies ; and that the practice of borrowing capital is on 
 the increase. In closing this chapter it is worth while to 
 point out that the practical issues we have been considering 
 seem to show that tendencies are actually at work in the 
 present day which have a very close connexion with some of 
 the social problems to which allusion has already been made, 
 and with some of the ethical questions which will be discussed 
 below. At the risk of some iteration, which may appear 
 unnecessary, it is worth while to indicate here how they 
 arise. 
 
 1. The large investments of capital in foreign lands form 
 international connexions, and give rise to cross-relationships ; 
 they do something to break down the strong nationalism of 
 old days. The possession of capital abroad gives English 
 citizens a stake in the prosperity of other countries ; they no 
 longer regard them as mere rivals. Nor is this effect 
 confined to owners of capital only ; for the antagonism to 
 capital in distant lands rouses a sense of sympathy in the 
 labouring classes everywhere, and international agitation 
 becomes possible. One of the great obstacles to socialism 
 has lain in the existence of national rivalries and jealousies, 
 and the more those jealousies fall into the background the 
 less impossible does some sort of international economic 
 organisation appear. The opinion has been already expressed 
 that though national differences are less important econo- 
 mically than they were, they are still so real that it is absurd 
 to leave them out of account, even in regard to economic 
 affairs. But though this seems to be true, it is yet noticeable 
 that they are of less economic importance and of decreasing 
 importance. Capital appears to be undermining one of the 
 great obstacles to socialism. 
 
100 The Investment of Capital [Ch. vil. 
 
 2. The greatly increased facilities for the practice of 
 borrowing capital, and the favour which this practice finds 
 both with wealthy borrowers and with lenders who like a 
 regular income, raise very important questions as to the 
 personal responsibilities of the rich. The lender lets the 
 capital entirely out of his control, and feels no practical 
 concern in the use that is made of it ; this in a lesser degree 
 is true of those who have shares in the companies which are 
 now so easily formed under the Limited Liabihty Companies 
 Acts. And hence the moral question is coming more and 
 more to the front. How far are capitalists really responsible 
 for the manner in which borrowers use their capital, or for 
 the manner in which the business is done by a company in 
 which they have shares, while they exercise no appreciable 
 influence on the management? To this subject we must 
 return in a subsequent chapter. 
 
CHAPTER VIII. 
 
 Capital in Action. 
 
 I. The Services of Capital to the Public. 
 
 m 
 
 It needs no demonstration to show after what has been 
 stated above that capital renders great services to the public. 
 In so far as it is employed in enterprises it is used for facili- 
 tating natural operations and saving time in the production 
 of useful goods, i. e. of things people wish to use. It thus 
 confers benefits on the public, for it supplies them with the 
 goods they wish in greater quantities or with more rapidity 
 than could otherwise be the case. Much of the capital that 
 is lent is also used in this way so as to bring about public 
 advantage ; the money that is lent to industrial or commer- 
 cial companies, or used by Government for public works, is 
 used for the general advantage. In some cases a borrower 
 may obtain money which he merely squanders, and from 
 which no public advantage accrues, but on the whole it may 
 be said that the world or the nation or some smaller portion 
 of the public is greatly the better in all sorts of material wel- 
 fare because of the intervention of capital. 
 
 1. This is the side of the matter that has been observed 
 by economists of the Manchester School. Senior and others 
 speak with the highest enthusiasm of the national and com- 
 munal advantages which arise through the action of men 
 who save and employ capital. They are apparently regarded 
 as the greatest civic benefactors ; they seem to be possessed, 
 as Cato said, with an almost divine virtue ; for it could hardly 
 be doubted that men who conferred such benefits on society 
 
I02 Capital in Action [Ch. viil. 
 
 were possessed of excellent qualities, and their thrift and 
 abstinence were universally extolled. It cannot be denied 
 that the ordinary millionaire modestly concealed these virtues 
 under a sufficiently luxurious exterior, and did not appear 
 unto men to fast. The absurdity of this laudation is suffi- 
 ciently obvious in any case ; whether out of virtue or of self- 
 interest, the great capitalists had their reward. But there is 
 a danger lest the reaction against these absurd expressions 
 should lead us into an opposite blunder and make us forget 
 that, though the capitalist becomes rich, he does not become 
 rich at the expense of the public, but only because his enter- 
 prise and skill confer a real benefit on the public. If he 
 makes a railway which no one wants and nobody uses, he 
 does not become rich, but contrariwise loses his capital. His 
 chance of becoming rich lies in successfully catering for the 
 public, and it is just because the public are first served and 
 well served that he gets an addition to his wealth. Some 
 exceptions to this may occur in the case of monopolies, but 
 it is true on the whole. Capital does render a great service 
 to the public. 
 
 2. But because capital affords an advantage to the public, 
 in so far as it supplies consumers more easily, it does not 
 follow, as more recent economists have assumed, that capital 
 affords a great advantage to the labourer who produces. 
 Whether it does or does not depends very much on his point 
 of view. It may save his time, and it is then an advantage 
 to the man who works by the piece ; but it is not so clearly 
 a gain to the man who works by the hour and who does not 
 find his time fully occupied. To talk of the labourer obtain- 
 ing the use of capital on easy terms is to talk as if capital 
 were the labourer's servant, whereas it is often his master. 
 It is to assume a complete solidarity of interest between all 
 those engaged in the process of production ; there may be 
 this harmony over any period of years, but there is apparent 
 divergence of interest from day to day and week to week. 
 Conditions which favour the consumer need not necessarily 
 favour the producer ; or how could there be an outcry for 
 protective tariffs and fair trade and sugar bounties ? Because 
 
The Influence of Capital on the Labourer 103 
 
 the introduction of machinery or the investment of capital 
 renders a service to the public, it does not necessarily render 
 a service to the labourer too. It may save him drudgery by 
 enabling the work to be done more quickly and with less 
 exertion ; indeed it may enable his employer to dispense with 
 his services altogether. There is pure irony in saying of a 
 man who has all his time on his hands and can earn nothing, 
 that capital has rendered him the service of giving him a per- 
 petual holiday. 
 
 Hence it cannot be a matter of surprise that some social- 
 ists have been inclined to seize on this side of the action of 
 capital. They look at capital not primarily in its bearing on 
 the public as consumers, or not at all in this aspect. They 
 lay stress on the action of capital on the labourers as pro- 
 ducers, and they think that there is a tendency on the part 
 of capital to displace the labourer, to diminish his opportuni- 
 ties of employment, and to lessen the returns he receives for 
 his work. To such men the talk about the services rendered 
 to the labourer by capital seems as absurd as the old pane- 
 gyrics on the thrift and abstinence of the capitalist. They 
 contend, on the contrary, that the growth of capital has 
 coincided with the depression of the artisan, and that capital 
 is not the servant but the enemy of the labourer. There is 
 a sufficiently violent conflict of opinion here, and it will need 
 some pains to enable us to discriminate how far the various 
 antagonists are in the right. 
 
 3. As to the general assertion that capital does render 
 great services to the public — whether we mean the world, or 
 the nation, or some smaller community, — there can be little 
 doubt that capital enables us to have greater quantities of goods 
 and to have goods from greater distances. If we may be 
 sure that national welfare and progress is a good thing, then 
 we may be also assured that what renders that progress more 
 easy and rapid is also a good thing, {a) It is perfectly true 
 that men lived and worked, and lived well and worked well, 
 when little or no capital was employed in industry. Great 
 works were undertaken slowly, and big buildings erected with 
 the savings that could be afforded from each year's crops, 
 
I04 Capital in Action [Ch. Vlll. 
 
 without the accumulation of any store; but this was not 
 always the best way to do the work. In many cases there 
 is a loss that can be definitely assessed in money when some 
 work is allowed to drag on instead of being brought to a con- 
 clusion as fast as may be ; but the disadvantage of slow and 
 tedious work can be exhibited from another point of view. 
 We are apt to cry out in the present day about the whirl and 
 bustle of life, and to look back with regrets to times when 
 there was less hurry and more calm; and for self-develop- 
 ment in culture and the maintenance of high ideals some 
 retreat from the bustle of life may serve as a necessary self- 
 discipline which may ultimately react most favourably on 
 society. But in so far as the enjoyment of material goods 
 is to be regarded as an important element in human welfare 
 the greater rapidity of life is a distinct gain. 
 
 Because the world moves faster each man has during his 
 life a greater number and variety of things at his command. 
 He can command and use the products of distant lands, 
 because they are brought so fast and so easily ; he can spend 
 a holiday in another county, or even in another country, 
 because of the rapidity of travelling. To have work done 
 quickly is a good thing, because we are able to enjoy the 
 results of it sooner. There is a royal satisfaction in founding 
 a palace to perpetuate the name of a conqueror, but there is 
 also a satisfaction in finishing the palace before you die, so 
 as to be able to hve in it. Akbar and others built palaces 
 which they never lived to complete, and as their successors 
 did not care to occupy another man's foundation, they have 
 even failed to obtain the posthumous fame they hoped for. 
 Many Benedictine Abbeys took generations to complete, but 
 the Cistercians worked more rapidly because they procured 
 capital from the Jews in order to build their great churches ; 
 they wished to complete them in less time than was other- 
 wise required. It is perfectly true that all sorts of magnifi- 
 cent things can be accomplished without capital, and there 
 are some things, like the growth of a forest of oaks, which 
 capital can do very little to hasten ; but those who build 
 a big church may like to have it to use before they die, and 
 
Co7nmand of the Co ?n forts of Life 105 
 
 the benefit which capital confers is shown in their being able 
 to use it sooner. 
 
 b. The contrast betwixt England in the past and the present 
 brings out three great differences as regards the ordinary 
 comfort of life, — the vast expansion of foreign commerce and 
 the opportunity for enjoying foreign products, including corn ; 
 the greater rapidity with which work can be done, and the 
 diminution of risks of utter disaster and impoverishment. 
 Two of these are obviously connected with the use of capital 
 and the services it renders ; the third is largely due to the 
 fact that capital has been formed so largely, and that there 
 is an immense reserve of wealth to fall back upon. The 
 mediaeval burgess had to be content with a wooden house ; 
 he was constantly exposed to risk of fire. Capital enables 
 him to have a better house of less inflammable materials, 
 and some association of capitalists called an Insurance Com- 
 pany relieve him of the risks of being burnt out of all his 
 property. It has needed great capitals and large expenditure 
 to diminish the risks of flood in the midlands and the fens, 
 and life goes more smoothly as well as more swiftly because 
 capital has been formed and applied in these ways. The 
 greatness of the power of capital has been already illustrated 
 from the growth of the Roman Republic and of the English 
 Empire ; it would be also striking if we could really draw the 
 contrast between the daily life of men in our land in pre- 
 capitalist and in capitalist times. 
 
 If we were to compare the past and the present we should 
 find that there were such differences of taste in different 
 ages that no standard is available for us unless we are con- 
 tent with a purely sanatory one, and consider the extent to 
 which anyone could command the things that are requisite 
 for maintaining and prolonging human life. It is pretty 
 clear that a Norman baron, who had no floor to the hall of 
 his castle, no bed to lie on, no plates to eat off, and no glass 
 to drink out of, whose food was sometimes tainted and un- 
 wholesome, enjoyed a worse life, from the insurance company 
 point of view, than the modern pauper in a workhouse. Even 
 if we leave out all the risks and uncertainties which come 
 
io6 Capital in Action [Ch. vill, 
 
 from frequent fighting and occasional famines, we may see 
 that the rich noble fared but badly in old days, and could 
 not count upon the simple comforts which are now found in the 
 poorest houses. It may be that the twelfth century villan 
 was but little worse off in these matters than the twelfth 
 century baron; but in any case we may assume that the 
 poor man was not better provided with material comforts 
 than the rich one. The lot of the labourer to-day is bad 
 enough, but it will still compare most favourably with the 
 condition of those who drudged and totted as serfs before 
 capital had been formed and came into operation in con- 
 nexion with English industry. There is much reason to 
 believe that the formation and employment of capital has 
 been the means of conferring benefits on all classes of the 
 community, even when the fullest allowance is made for the 
 mischiefs which have accompanied it. 
 
 It is unnecessary to insist on this at greater length, 
 especially as we shall return to it later. We may now turn 
 to consider the nature of the evils which have attended the 
 growth of capital, and which may be seen, partly in con- 
 nexion with social organisations, and partly in their bearing 
 on individuals. 
 
 II. The Destruction of simpler Social Organisations. 
 
 1. The growth of capital has resulted in breaking down 
 social and economic organisation. There have been and 
 are various types of economic organisation. The simplest 
 is the village, or family group, which is practically self- 
 sufficing, and where the whole industry of each of the in- 
 habitants can be fitted in so as to subserve the general 
 requirements. There is a village weaver who exercises a 
 traditional art and weaves the necessary clothes for all the 
 inhabitants. But a time is sure to come when the isolated, 
 self-sufficing village is drawn into the circle of trade. The 
 villagers have the opportunity of buying cloth, made with 
 the help of capital, and brought to their doors by the help of 
 capital, and they find that it suits them better than the cloth 
 
Destruction of Village and Municipal Economy 107 
 
 supplied by the village weaver. His trade is ruined, his 
 loom is left idle, and the village has ceased to be a self- 
 sufficing economic organisation ; it is dependent on trade, 
 perhaps on trade with a distant country, for its supply of 
 cloths. The old village life, with its simplicity and its self- 
 centred neighbourhness, has suffered a serious inroad ; it no 
 longer forms a little world of its own, well-ordered and con- 
 tent ; it becomes a fragment of a great, struggling, and 
 competing world. 
 
 2. Or again, to take another type of economic organism, 
 we may have a city, in which the whole of the trade and 
 industry was regulated for the good of the town and by 
 means of an elaborate system of gilds. There is, we may 
 suppose, a tanning gild who make leather ; but when 
 capitalists who manufacture leather in places that are 
 specially fitted for the trade bring leather from a distance, 
 it may easily be that they will undersell the local tanners 
 and destroy their organisation. And in this there is serious 
 loss. It was much easier to supervise the quality of goods 
 when the producer and consumer lived in close connexion, 
 and any well-founded complaint could be the subject of 
 immediate investigation. The mere fact that the supply 
 comes from a distance renders it very much harder for the 
 consumer to get a sufficient guarantee of the quality of the 
 wares, while it also makes it harder for the producer to adapt 
 his output to the requirements of the case. The intervention 
 of capitalist traders and capitalist producers seems to have 
 done much to break down the old municipal regulation of 
 trade and municipal esprit de corps. Several of the flourish- 
 ing towns of the fourteenth century, in each of which a large 
 variety of crafts had been represented, only managed to sur- 
 vive in the seventeenth century because they had succeeded 
 in becoming the centre of a special branch of industry which 
 was organised by capitalists for the supply of a large area, 
 
 3. It is thus that the power of capital has broken down the 
 simpler types of economic organism, and, as has been stated 
 above, there is some reason to believe that the power of 
 capital is breaking down the national organisation of industry 
 
loS Capital in AcHon [Ch. VIII. 
 
 and commerce. Nor when we fix our attention on the better 
 sides of the institutions that have gone is it altogether easy 
 to reconcile ourselves to the loss of the simple village life, or 
 the strong esprit de corps that created the civic glories of 
 which such meagre vestiges survive. We may look back on 
 them and admire ; but we would also do well to consider the 
 cost which would have been involved in order that these 
 institutions, which at any rate look so well from a distance, 
 might be retained. Industrial organisation requires con- 
 ditions that are practically fixed, for changes may put the 
 machinery out of gearing; any little variation will set the 
 industrial organism wrong, however beneficial the ultimate 
 results of the change may be. Village life could only have been 
 preserved by forbidding all opportunities for intercourse with 
 other peoples, as so many of these villages have done and do. 
 The maintenance of the old town life could only have been 
 secured by checking the new development of industry and 
 commerce, as so many towns tried to do. These early forms 
 could only have been retained at the cost of sacrificing all 
 further progress. We cannot wish that the world were all 
 made up of village communities, with no greater possibilities 
 of cultivation than they possess ; or that it should have 
 stayed on the level of the life in mediaeval towns with their 
 narrow jealousies and bitter disputes. Human progress 
 has been a good to mankind, though at each stage there has 
 been a real sacrifice. Each period of transition has involved 
 some elements of loss, but the gain of greater command over 
 the means of life could not be secured without some measure 
 of loss. We cannot make sure of retaining the good in the 
 institutions of any period, unless we can so exclude change 
 as to interfere most seriously with the possibility of any 
 farther progress. 
 
 Objection has already been taken to the schemes of those 
 who desire more complete organisation of industry, from the 
 difiEiculty of selecting the best type of organisation to adopt 
 (p. 64). But the facts which have just been noted indicate 
 another difficulty, for we cannot hope under any circum- 
 stances for a completely self-adjusting organisation. Might 
 
Introduction of Machinery 109 
 
 we not have reason to dread that a nationahsed industry- 
 could only be maintained in working order if the elements 
 of change, and therefore of progress, were excluded? It is at 
 least important that any one who proposes the thorough- 
 going national organisation of industry and commerce 
 should be clear that his scheme not merely allows for 
 organising things as they are, or for organising things as 
 they may be when human powers are greater than they are 
 now, but that it is one which is so devised that it will 
 neither offer serious obstacle to future progress nor be itself 
 unable to stand the strain of the transition. 
 
 III. The Decreased Importance of the Labourer. 
 
 1. The action of capital has now to be considered as it 
 affects the individual prejudicially. The most obvious illus- 
 tration of this occurs in the introduction of machinery; 
 it is generally recognised that the rapid substitution of 
 machine production for production by hand is likely to 
 diminish the labourer's opportunities of employment, for 
 a time at any rate, and thus to injure him in his capacity 
 as a producer. Stated in general terms, it may be said that 
 machinery renders the labourer a less important factor in 
 production. If machines are introduced into a department 
 of industry which has been previously carried on by hand, 
 and by hand alone, then the man is no longer the only active 
 force in production. By means of machinery other natural 
 forces are introduced to do part of the work which has 
 hitherto been done by human muscles alone, and labour is 
 no longer the sole or even the principal agent employed. 
 More work is done, and probably more gain accrues by the 
 change, but the labourer who formerly did all the work, and 
 therefore got the full reward, now only does a part of the 
 work and therefore only gets a part of the reward. He may 
 in time find that the pay he gets for doing a part in a great 
 deal of work is as large as the pay he formerly got for doing 
 the whole in a smaller amount of production, or he may not. 
 But in any case there is a relative depression in his position 
 
no Capital in Action [Ch. VIIL 
 
 as a producer because he is a less important factor in the 
 process of production. 
 
 2. The half century which saw the great introduction of 
 machinery into the textile trades furnished numberless 
 illustrations of the injurious effects which may follow from 
 such a change. In the days before machine industry was 
 introduced, the skilled labourer was sought after as the one 
 means of introducing or perpetuating a trade. Parliament 
 would not allow English woollen weavers to migrate to 
 Ireland, and sought to prevent English citizens from seeking 
 employment abroad ; and if skilled workmen, the men who 
 practised the art and understood the secrets of the trade, 
 abounded here, the trade could hardly be transplanted else- 
 where. But with the introduction of machinery the skill of 
 the workman came to be of less account; children could 
 be employed to mind machines, and the deftness of the 
 'manufacturer' ceased to be of primary importance in the 
 trade. He might emigrate or not as he chose, and nobody 
 cared. 
 
 {a) In the middle of last century it was possible for the 
 weaver to plan his work as he liked ; the families engaged in 
 spinning and weaving had often some interest in agriculture, 
 and the two kinds of occupation could be carried on together. 
 But even when the weaver did not get the gain which a bye 
 employment gives he was less pressed ; he might have a short 
 day when he saw a chance of a little poaching, and make up 
 for it by a long bout at another time ; he was his own master. 
 But with factory industry all this is changed ; the machines 
 go on with relentless vigour, doing the regular day's work, 
 beginning at the regular time, and running till the mill 
 closes ; each hand must be there and put in full time. 
 There is a remorseless undeviating demand upon the energies 
 of the hands who attend upon machines. Besides this, there 
 has been a tendency to increase the hours of labour; the 
 machine does not need to rest, or, at any rate, needs very 
 brief rests ; every idle hour is a loss to the owner of the 
 mill, inasmuch as his machinery is not turning out the work 
 it; might do ; the more hours he can make it run the more- 
 
Tntejisity of Labour Hi 
 
 easily does he recoup himself for the outlay expended on the 
 machinery. Human beings, however, need to go from labour 
 to refreshment; but it is quite probable that the owner of 
 the machine will put pressure on the hands who tend it and 
 make them work, not merely the hours they can work and 
 get the needed rest, but hours that leave them no proper 
 intervals for food and sleep, in the hope of reducing the 
 time when the machinery is standing idle. There was a 
 great tendency to lengthen hours unduly, and no means 
 short of the intervention of Parhament in the Factory Acts 
 sufficed to check it. 
 
 {b) Another very important matter has come to the front 
 since a maximum has been fixed for the hours of labour in 
 factories. There is a desire to make the most of these hours, 
 and therefore to increase the pace at which the machine 
 works, or the demands upon the quickness of the hands. 
 The strain of work may be very greatly increased while the 
 hours of work remain the same ; this strain of work cannot 
 be easily measured, or the wear and tear of nervous energy 
 which it involves readily estimated. But it is obvious that 
 in all these ways there is a temptation to treat the machine 
 as the main element in production, and to make it the 
 measure of what the man ought to do, instead of regarding 
 the man as the first consideration and the machine as the 
 instrument which helps him ; the machine may be made the 
 primary consideration, and the man may be treated as a 
 mere slave who tends it. 
 
 {c) The question as to the change in the position of the 
 artisan is often regarded as a matter of wages. To the 
 reward of labour we shall have occasion to return when we 
 come to discuss the remuneration of capital. In the mean- 
 time it may be enough to point out that all these tendencies 
 indicate that there is a real depression in the position of the 
 labourer relatively to other factors in production, and that 
 the primary question is not as to changes in the reward of 
 labour, but as to the change in its importance. The artisan's 
 work does not count for so much as it formerly did, and on 
 the face of it one would expect that it would not be paid so 
 
112 Capital ill Action [Ch. VIII. 
 
 well ; not because capitalists are greedy and grind the men 
 down, for the force that displaces them is not the selfishness 
 of any master, but the skill which applies a new force to 
 procure the old results more quickly and more cheaply. It 
 is human inventiveness, not in the first instance human 
 greed, that has displaced the labourer. The employer cannot 
 force back the tide which is running ; in old days gilds tried 
 to check it and failed ; in later times Parliament shrank from 
 attempting the task, and now men see that it is hopeless to 
 keep the trade in its old groove by breaking machines or by 
 violence. The labourer suffers, not because anyone deliber- 
 ately seeks to grind him down, but because the world has 
 learned to dispense with the services he has been used to 
 render. Blame may attach to those who do not do their 
 best to habituate the labourer to the change, and to make 
 the transition as easy as may be ; but even if they are care- 
 less about this duty, the change has not been caused by 
 human selfishness, but by the skill that has so adapted 
 physical forces that machine labour has superseded the 
 necessity for so much human labour or such highly skilled 
 human labour. The man who can supply labour is not so 
 much sought after as he was, and can hardly be expected to 
 make such good terms. 
 
 There can, I think, be little doubt however that at the 
 time of the industrial revolution not only was there a diminu- 
 tion of the relative importance of labour as a factor in pro- 
 duction, but that the labourer began to* suffer greatly as to 
 the length of his hours and the intensity of work, not to 
 speak of the rate at which it was rewarded. Granting then 
 that he became of less importance tlian formerly, and that 
 his welfare was seriously injured by the changed condition 
 of his work, was this in any sense a necessary result, and 
 one that always attends the operation of capital? Is there 
 an iron law according to which capital, while introducing 
 improvement in production, necessarily grinds down labour 
 not merely to a less important position as an economic factor, 
 but to a lower level of material welfare ? 
 
 It appears to me that there have sometimes been social 
 
Roman Slaves 113 
 
 conditions in which increasing power of capital was neces- 
 sarily prejudicial to the labourer, but that there are other 
 social conditions in which no such injurious results occur. 
 The law may have hypothetical validity under certain 
 assumed conditions, but it is a law which only describes the 
 action of capital in so far as these conditions hold good. 
 
 IV. Slave Labour in Rome and English Labour. 
 
 1. Allusion has already been made to the condition of the 
 Roman Republic at the time when capital was the supreme 
 power, and we have ample evidence as to the view which 
 was commonly taken of labour in those days. Labour was 
 performed by slaves, who were viewed simply and solely as 
 labouring machines. Their lot was degraded, and they were 
 deliberatelv kept in a state of degradation so that they should 
 be less likely to join in revolt. The servile wars had given 
 the Romans a terrible warning, and they acted on it by 
 drawing the bands most closely on the thralls. The slave 
 was simply a human possession, to be used in such fashion 
 that the greatest possible amount of work should be got out 
 of him in a given time. There was no pretence of recognis- 
 ing any human ties, or any obligation to the slave ; he was 
 regarded not so much even as a domesticated animal, but 
 rather as an imperfectly tamed and savage beast that could 
 only be controlled by being kept under. The virtuous Cato, 
 as Plutarch describes him, in his later years ' never failed, as 
 soon as dinner was over, to correct with leathern thongs such 
 of his slaves as had not given due attendance, or had suffered 
 anything to be spoiled. He contrived means to raise quarrels 
 among his servants, and to keep them ever at variance, ever 
 suspecting and fearing some bad consequences from their 
 unanimity.' This period of frugal citizen life was afterwards 
 thought of as a time when the slaves were comparatively 
 well off, and enjoyed an amount of consideration which was 
 never shown them on the large estates of the great land- 
 owners of later times. ' In these times they treated their 
 slaves with great moderation, and this was natural, because 
 
1 14 Capital in Action [Ch. VIII. 
 
 they worked and even ate with them.' But the fact that he 
 shared their labours and their food did not kindle any 
 sympathy in the mind of the frugal citizen. As he weeded 
 his stock of cattle from time to time, so Cato recommended 
 the householder ' to sell such of his slaves as are old and 
 infirm, and everything else that is old and useless,' an 
 observation which moved the indignation of Plutarch, who 
 thought it indicated a mean and ungenerous spirit. Un- 
 fortunately it seems to be fairly representative of the ordinary 
 habit ; and despite the kindness which was lavished on 
 favourite slaves, or the responsible position which diligent 
 and faithful slaves might enjoy, there can be little doubt that 
 the mere labourer was simply treated as an absolute chattel. 
 The man who sent a valuable slave into a fever-smitten 
 region was held to be foolish in risking his own property 
 when he might have hired a labourer for the purpose; but 
 the old and worn-out slave was a useless property for whom 
 no regard could be shown. The writings of Cato and Varro 
 give us the impression that it was the recognised system of 
 good estate management to get all possible work out of the 
 slaves, and to keep them completely cowed and broken in 
 spirit. We cannot doubt that in such a state of society the 
 iron law would have had free play. Any invention which 
 rendered labour less important would have resulted in a 
 greater carelessness of slave life, and a more reckless asser- 
 tion of the powers of the master. 
 
 But even with all the evils of the present day, the misery 
 caused by the sweating system and all else, there is at least 
 an important difference. The unhappy condition of the 
 labourer to-day is regarded as an evil ; it is not maintained 
 as the necessary means of carrying on the work that has to 
 be done. There may be some hypocrisy in the commisera- 
 tion that is expressed ; but it is at least a tribute which 
 hypocrisy pays, and there is a public feeling which demands 
 the tribute. In Rome there was none. 
 
 2. {a) In England in the present day labourers are free, 
 and many of them have the rights of a citizen ; none are the 
 absolute chattels of a master. And hence the worst features 
 
Freedom of Labour e)- and Fluidity of Labour 1 1 5 
 
 of Roman slavery are not known ; there is no deliberate 
 eifort to keep the labourer in a state of mental and moral 
 degradation. On the other hand, both Church and State 
 devote much effort to educate and improve him. The whole 
 of the Home Mission work, which takes so many forms, and 
 which is largely maintained by the charity of the rich ; the 
 whole of the efforts to diffuse and improve primary education, 
 which have placed such a burden on the taxpayers and the 
 ratepayers — a burden that is for the most part willingly 
 borne, and is voluntarily increased by large donations, — marks 
 the difference between the English and the Roman era of 
 capital. 
 
 (J?) Again, this personal freedom introduces another safe- 
 guard in the fluidity of labour. The man can seek a new 
 master. He may find it hard to get employment, he may have 
 to tramp the country or to emigrate, and in thousands of 
 cases it may be practically impossible for him to have re- 
 course to either expedient. Still the fact that it is an 
 expedient of which many can and do avail themselves rather 
 than be put upon is not to be forgotten ; it marks an entirely 
 different condition of society from that which existed in the 
 time of Cato at Rome. The tone of public opinion is in 
 favour of encouraging a man to better himself when he can, 
 and there are numerous philanthropic and Government 
 agencies which are intended to assist him in seeking better 
 employment. 
 
 There are many cases too where the master is to some 
 extent in the power of his men. A great business would suffer 
 if the staff were broken up and a new set of hands who did 
 not know the ways of the place were at once introduced. If 
 his shops are at all busy the master dare not face the 
 difficulty of reorganising the whole concern. The very scale 
 on which business is now done gives the workers an extra- 
 ordinary pull if they use the opportunities they have of acting 
 together. 
 
 if) The freedom of the labourer and the fluidity of labour 
 render it difficult to treat the labourer as a mere producing 
 machine and entirely to ignore his character as a human 
 
ii6 Capital in Action [Ch. VIII. 
 
 being. And even if there were the will to do so, public 
 opinion is sufificiently awake and sufficiently disinterested to 
 be able to exercise a very real influence. The commercial 
 interest was, as has been noted above, absolutely supreme in 
 republican Rome ; and there was no philanthropic side from 
 which a practical protest was likely to be raised against the 
 maltreatment of the slave. In England at the present time 
 the power of public opinion is constantly felt as protesting 
 against gross and marked evils that attract attention. It is a 
 somewhat spasmodic and fitful mfluence, easily roused and 
 easily appeased ; it is not very discriminating, perhaps, but 
 it certainly is a very considerable power when it is brought 
 to bear, as the story of the Dockers' Strike shows clearly. 
 
 So far public opinion has made itself felt as a negative 
 influence. It is roused by this or that wrong, the popular 
 imagination is affected by great suffering and responds to 
 such appeals ; but it has never been able to devise an 
 effective scheme of what ought to be. The nearest approach 
 has been in the successive Factory Acts which have limited 
 the hours of labour ; they have laid down the limits of the 
 working day in a great number of industries, and the principle 
 is being applied more and more widely, so that the agitation 
 for a uniform eight hours day makes itself distinctly heard 
 and felt as a political power. How far a limit of this kind is 
 desirable, and how far the proposed limit is the right one, it 
 is unnecessary to consider here. The point to be noticed is 
 that we have a very distinct effort to assert the supremacy of 
 men as men over the mere mechanism of production, and to 
 insist that work shall be done on the conditions that suit the 
 man, not on the conditions that suit the machine. It is in 
 the assertion of the absolute value of human life that the 
 safeguard lies against the miserable results of the great era 
 of industrial advance. The world is infinitely richer, but it is 
 very little happier ; the strain and drudgery of the lives of 
 millions seem to be as great or greater than before, as Mill 
 sadly complained. It is by asserting the worth of individual 
 human life as such, by insisting that the man's hours shall be 
 such that he may do the best work he can and not be worn 
 
Christian and Pagan Ideals 117 
 
 out before his time, that a remedy may be found. In this 
 way he will perhaps have more leisure than he is likely to 
 spend in an ideal fashion at first, but at least he will have the 
 opportunity of learning to spend his leisure better. The 
 important thing is to secure that the conditions of labour 
 shall be such as are satisfactory for the life of man, and not 
 such as degrade him in mind or body ; and when Jhese are 
 secured the reward of labour is not likely to be the subject of 
 much complaint. For, after all, the conditions of work are 
 the main thing ; the advocates of shortened hours too often 
 speak as if the main thing were to give a man leisure ; but 
 idleness is a miserable ideal for an individual man, and it is a 
 hopeless one for the race. It is good for a man to have 
 work to do and to be able to do it ; to have his faculties of 
 mind and body exerted. They have the happiest lot in life 
 who are able to choose the work that interests them, and to 
 do it with hearty enthusiasm for its own sake. 
 
 There are many influences at work which tend to confuse 
 public opinion on these matters, to set a low value on human 
 life, and to idealise idleness rather than work ; to popularise, 
 in fact, a Pagan rather than a Christian view of life. And 
 whatever may be the other moralising influences at work 
 which shall serve to keep up the tone of public opinion on 
 this matter, there can be no doubt that Christian teaching 
 is a most important factor. There is no other creed which 
 attaches such high importance to the individual life as im- 
 mortal and undying, and also to the human body as the 
 instrument of redemption. There is no other religious system 
 where the duty of work has occupied a foremost place as a 
 personal discipline, as it did in the monastic rule, or as 
 affording the means of exercising charity. Paganism in all 
 its forms attaches so httle value to human life that it is ready 
 to sacrifice it, and to justify the degradation of some as 
 expedient for the comfort and culture of others. Paganism 
 has always contemned work as degrading, and idealised a 
 selfish idleness which shut its eyes to the needs and sorrows 
 of others. The more these Pagan conceptions affect our 
 ideal for society and for ourselves now, the less hope is there 
 
Ii8 Capital in Action [Ch. VIll. 
 
 of making the most of the great opportunities we possess for 
 the permanent welfare of society. 
 
 d. The influence of public opinion must not be overlooked, 
 but it is doubtful whether it can exercise an effective control 
 over all the work that is done throughout the country, and 
 see that the conditions under which it is carried on are as 
 satisfactory as may be. The little mediaeval towns found it 
 impossible for one body to supervise all trades ; it would be 
 still more difficult for a national parliament to understand 
 or give effect to the best possible regulations for each 
 trade in every part of the country. This point has been 
 already mentioned in connexion with the administration of 
 capital; there is at least equal difflculty in connexion with 
 providing improved conditions for labour, and it is at present 
 unnecessary for the State to attempt it for all trades in all 
 places. Organisations of labourers, to regulate the conditions 
 under which work is done, have accomplished much. Trades 
 Unions are not merely concerned with struggling for higher 
 wages ; they endeavour to control all the conditions of labour, 
 to see to the risks to life and limb, the irregularity of em- 
 ployment and so forth, as well as to the rate of reward. Just 
 as there seems to be need for the individual and associated 
 administration of capital in some departments, so it appears 
 probable that the conditions of labour are better seen to by 
 special associations like Trades Unions than they could be 
 by any general body. It may be doubted if the Social 
 Democracy could ever be organised so as to give such 
 effective control of each trade as the Unions now exercise, 
 or to offer such occasional interference and constant criti- 
 cism as is supplied by the organs of public opinion. 
 
 When we fix our attention, not on the miseries of the 
 present day — miseries which are due to many and compli- 
 cated causes — but on the facts with regard to labour which 
 distinguish English from Roman society, we may see that 
 the political freedom of the labourer, the fluidity of labour, 
 and the force of public opinion and of trade organisations, 
 place the modern artisan in an entirely different position 
 from the Roman slave. He may be badly treated, but he is 
 
TJie Iiidustrial Revolution 119 
 
 regarded as a man. How fast or how slowly the same or 
 similar influences may be brought to bear on the unskilled 
 labourer, and on woman's work, we need not pause to specu- 
 late. There is all the more reason for hope when we 
 remember how rapidly and effectively these forces have 
 come into play in improving the conditions for the work of 
 the skilled artisan. 
 
 3. {a) The time of the industrial revolution in England 
 approximated much more closely than might at first sight 
 appear to the conditions of society in republican Rome. 
 Not that there was the same recklessness in regard to the 
 life of the artisans, but chiefly because the institutions which 
 had been intended to protect him and to secure him favour- 
 able conditions had ceased to serve any useful purposes and 
 only hampered him instead. At any rate, while there is a 
 contrast between Rome and England in the present day, 
 there is a similar contrast between England a century ago 
 and the England of to-day. The artisan, generally speaking, 
 had no voice in the government of the country, and had not 
 the full powers of a free citizen. Fluidity of labour was very 
 seriously hampered by the law of settlement, and, as Adam 
 Smith has pointed out, the Englishman was put at a distinct 
 disadvantage by the obstacles which conspired to prevent 
 his going to seek employment in districts where it might 
 be obtained on more favourable terms. He had none of the 
 security which is given by political freedom and by the 
 fluidity of labour. 
 
 {b) Besides this it was almost impossible to arouse public 
 opinion on his behalf, for the public were inclined either to 
 trust to the efficacy of the old institutions, or to believe that 
 things would right themselves if the old institutions were 
 swept away. The artisans themselves appear to have been 
 satisfied with the protection the Elizabethan statutes gave 
 them, and only asked to have these statutes carried out, and 
 the Berkshire justices patched up the whole scheme of regu- 
 lation by using the poor rates to supplement starvation wages 
 by allowances. But the Elizabethan scheme had been 
 devised for a state of technical knowledg^e, when human 
 
I20 Capital in Action [Ch. VIII. 
 
 strength and skill were the chief elements in production ; 
 the old rules for apprentices and journeymen had no appli- 
 cation to the great factories and the running of machines. 
 To maintain the old system in its entirety would have been 
 to check the introduction of machinery and to condemn 
 English industry to the use of cumbrous and old-fashioned 
 methods. Thus, when the position of the hand-combers in 
 the worsted trade was first threatened by Cartwright's in- 
 vention, petitions were organised and a bill was introduced 
 into the House of Commons for the purpose of protecting 
 wool-combers from being injured in their manufacture by 
 the use of certain machines lately introduced for the combing 
 of wool. This failed to pass and measures were taken instead 
 to facilitate the introduction of machinery ; the annual saving 
 it caused was estimated at ^40,000 a year in 1798, and English 
 public opinion would not sanction the prohibition. Neither 
 those who desired to maintain the old safeguards nor those 
 who had hopes that the system of natural liberty would ex- 
 tinguish all wrongs were inclined to listen to the proposals 
 of Mr. Whitbread, who endeavoured to amend the old system 
 of regulating wages so as to make it effective for good in 
 the new circumstances, and to prevent them from falling 
 below a reasonable minimum. 
 
 Further, public opinion was deadened by the fact that there 
 had been a long period of unusually bad seasons, and then 
 a period of pressure caused by the exhaustion due to the 
 long wars. There was general misery both in town and 
 country ; if the artisan suffered greatly, he only seemed to 
 be bearing his share of the common lot, and public opinion 
 did not recognise anything distinctive or any special call for 
 interference in regard to his condition. 
 
 {c) While public opinion was thus callous, the sufferers 
 were themselves unable to give effective expression to the 
 misfortunes of their condition. Under the Elizabethan 
 system there had been a great code for the regulation of the 
 conditions of labour and the reward of labour. Those who 
 combined to upset the provisions laid down by public 
 authority were promoting disorde-r and attacking the whole 
 
Co7nbination Laws 121 
 
 social system, and thus conspiracy and combination in regard 
 to the terms on which labour should be done had been 
 stringently prohibited. Such compulsion is of course neces- 
 sary under some form or other wherever there is a complete 
 system of organisation. If public authority undertakes to 
 make arrangements it cannot allow the grievances of private 
 individuals to be an excuse for actively defying it. But the 
 peculiar evil of the period of industrial revolution was this, 
 that while the public authority no longer fulfilled its economic 
 functions and decided the conditions and terms of labour, 
 the laws which prevented the labourers from combining to 
 attain satisfactory terms for themselves were not repealed. 
 The current political philosophy saw no grievance in this ; it 
 was entirely concerned with securing free play for the indi- 
 vidual, and the political economy of the day was chiefly 
 occupied in struggling against the restrictions which ham- 
 pered individual action. It was only by degrees that the 
 world saw that individual action was hampered when the 
 labourer was forbidden to combine with other men to secure 
 his own interests ; but during a long period the artisan 
 received no assistance from the law, while it was constantly 
 invoked to prevent him from attempting to protect himself. 
 It thus came about that during this period of transition from 
 the Elizabethan to the philanthropic legislation, the English 
 labourer was temporarily placed in circumstances as regards 
 capital which corresponded more closely with those of the 
 Roman slave than with those of the modern artisan. 
 
 {^d) Bitter as the struggle was then, there is ample evidence 
 that the English labourer was never regarded merely as an 
 untamed beast, to be used as much as might be, and to be 
 rigorously restrained ; the English poor law, especially in re- 
 gard to settlements, added to the evil, but its existence marks 
 a difference between England and Rome at the time when 
 things here were worst. Still, it came about that for practical 
 purposes, so far as his work was concerned, the labourer was 
 treated as a mere instrument of production ; neither public 
 opinion nor labour combinations did anything to prevent it, 
 or to assert, the importance of conducting industry in such a 
 
122 Capital in Action [Ch. VIII. 
 
 fashion that the labourer should at least enjoy the old stan- 
 dard of comfort, and also have opportunities of attaining 
 something better. 
 
 4. There is however considerable room for difference of 
 opinion in the vi^ay the facts of the miserable story of the 
 English operative in the early period of the factory system 
 are interpreted. What is their bearing on the more general 
 questions of the relation of capital and labour? On the one 
 hand it is said that they demonstrate the evil of allowing 
 capital to be owned by private individuals ; that private 
 capital oppresses labour whenever it gets the chance, and 
 that there can be no security against the repetition of such 
 evils unless capital is removed from the hands of those who 
 deliberately grind down the labourer for their own advantage. 
 The suggested remedy would therefore lie in handing over 
 the control of capital to public bodies. 
 
 On the other hand, it may be urged that the degradation 
 of the labourer was due to causes which lay far deeper than 
 any special method of administering capital. The new appli- 
 cation of physical forces to the textile industries made him 
 a less important factor in production, and in whatever way 
 capital had been administered, he could not but be a less 
 important factor than he had been before. In the face of 
 this great change in the economic importance of the labourer 
 public authority was paralysed ; it could not enforce the old 
 system, and it could not see how to construct a new one. 
 Even in looking back it is difficult to suggest what could 
 have been done by the most enlightened and public-spirited 
 legislature in order to diminish the evils that were then dimly 
 understood. This at least may be said, — that the existence 
 of public regulation and authoritative arrangements for in- 
 dustry which could not be enforced, was one very obvious 
 reason for the misery. It shows that if a national system of 
 industrial organisation breaks down, the very existence of the 
 debris of that system delays the application of a remedy. The 
 misery which accompanied the breakdown of the old industrial 
 system is not more conclusive of the mischief wrought by 
 capital in private hands, than it is of the inability of public 
 
Reinedial Influences 123 
 
 authorities to adapt their arrangements to new economic con- 
 ditions. It gives us no reason to hope for immunity from 
 such disaster by substituting one method of administration 
 for the other. 
 
 5. There would be more interest in looking, not at the 
 suggested safeguards against a recurrence of the evil, but at 
 the forces which have come into play to remedy it; they 
 have improved the status of the artisan so remarkably, by 
 giving full political freedom, greater fluidity of labour, and 
 more opportunity of supporting his claims by means of public 
 opinion and by his own associations. These remedies must 
 be sought, not in any external conditions, but in the personal 
 convictions and aspirations which supply the springs of hu- 
 man action. It may surely be hoped that powers which 
 have effected so great a change within our own time will be 
 able to accomplish much in the future, unless their force is 
 exhausted. There are two influences which may be noticed. 
 
 {a) On the one hand there are the political doctrines which 
 had been formulated in England by Milton, Locke, and God- 
 win, and which acquired a new force from the triumph which 
 similar opinions obtained in the French Revolution. The 
 Reform Bill, the Chartist agitation, and much else may be 
 regarded as the practical expression of this long literary 
 tradition of political doctrine. 
 
 (J?) There was, however, another movement which affected 
 the upper and middle classes, and which must not be ignored. 
 The evangelical revival had given a considerable impulse to 
 philanthropy ; it had called forth action on behalf of African 
 slaves, and it had devoted itself to missions in heathen lands ; 
 it did not long continue to ignore the crying needs of sufferers 
 at home. Attempts to diffuse education emanated very 
 largely from men of this type, and the agitation in regard 
 to the Factory Acts was greatly strengthened by the energy 
 of Lord Shaftesbury. These two distinct influences, literary 
 and religious, have sometimes been ranged in opposition to 
 one another, but they have on the whole co-operated to work 
 an extraordinary change. Nor can it be said that either is 
 completely exhausted as practical forces in the present. So 
 
124 Capital in Action [Ch. Vlll. 
 
 long as Woman's Suffrage is a subject of contention the com- 
 monplaces of Locke's political theory are not likely to be left 
 to rest in silence ; and if philanthropy is not always wise it 
 certainly is not extinct. 
 
 The fact that there has been such a remarkable recovery 
 on the part of the artisan population of status and importance 
 is one that goes far to justify the wisdom of Parliament in 
 refusing to stop the introduction of machinery and the or- 
 ganisation of industry on wholly new lines. Material progress 
 gives the opportunity of gain of every kind, material and 
 moral and intellectual. It is a false policy to check a step 
 in advance, even though that step leads into dark places and 
 troublous times. Just as the maintenance of old organisations 
 was incompatible with progress, so too was the maintenance 
 of the old status of the labourer incompatible with progress. 
 But after all the progress was real, and the proof of it lies in 
 the fashion in which the artisan has recovered, not indeed 
 the precise economic importance that he had in the Eliza- 
 bethan regime, but a better status as a citizen and greater 
 opportunities as a man than he has ever enjoyed before. 
 
CHAPTER IX. 
 
 The Replacement of Capital. 
 
 I. The Manner of Replacement. 
 
 There are considerable differences in regard to the re- 
 placement of capital according to the different ways in which 
 it is employed. 
 
 1. So far as capital which is lent is concerned the 
 replacement of capital takes place when the loan is repaid. 
 The lender gets his capital back into his own hands, and the 
 transaction is completed. In other cases, as in money lent 
 to the Government, and included in the consolidated debt, 
 there is very little likelihood that the lender will survive to 
 be repaid by the borrower. But he may find some other 
 person who is willing to buy him out and to take his place 
 as a national creditor. He then sells his right to draw 
 2| per cent, on a certain sum, and by this means has his 
 capital replaced. The replacement of capital is a very 
 simple matter when it has been lent; for it is supplied as 
 money, and is repaid as money, and the lender has never to 
 consider it in any other form. 
 
 2. The replacement of capital engaged in a commercial 
 speculation is also comparatively simple. The picture-dealer 
 buys a certain number of pictures and keeps them ; his 
 business connexion enables him to sell them again, and the 
 growing reputation of some artists or the vagaries of public 
 taste may enable him to sell them for much more than he 
 gains. He makes a venture, and his capital is replaced when 
 he sells the wares which he purchased with it, and which he 
 
126 The Replacement of Capital [Ch. IX. 
 
 made up his mind to hold till he saw a chance of getting rid 
 of them advantageously. Here his capital is invested in one 
 particular kind of wares, and it is replaced, after a longer or 
 shorter number of years, and replaced with more or less gain, 
 according as the dealer is successful or not. And capital 
 engaged in trade is all replaced in some such fashion ; it is 
 laid out in the purchase of wares, tea or tobacco, or cotton, 
 or cloth, or anything else, and it is replaced when the wares 
 are sold. 
 
 {a) Whereas in the case of lent capital the replacement 
 takes place when the borrower pays, and the lender has 
 a definite claim upon some one individual, the position of the 
 trading capitahst is quite different. He expects that his 
 capital will be replaced by some individual or individuals 
 from among the public, but he does not know by whom ; he 
 may have a pretty shrewd suspicion as to which of various 
 clients is most likely to purchase the goods, but unless he has 
 a contract he has no claim upon any one of them to do so, 
 and he certainly would not refuse a good offer from a new 
 customer. It is thus true to say that the dealer caters for the 
 public, and that his capital is replaced by the public Inas- 
 much then as he cannot claim the replacement of his capital 
 by any individual in particular, his trade is due to enterprise ; 
 it is a speculation, for he carries it on in the expectation that 
 it will turn out all right. He caters for the wants of the 
 public as he understands them or can forecast them, and he 
 expects that somebody will purchase his goods, and that by 
 thus purchasing the public will replace his capital. 
 
 (b) When his capital is replaced he can start on another 
 transaction ; he can buy a new lot of goods and sell them again 
 so that his capital is again replaced, and every time he com- 
 pletes the process of buying and selling again he turns over 
 his capital. He invests money in goods, and sells the goods 
 for money, and thus turns the whole over. Now it is obvious 
 that he would not undertake the risk of catering for the 
 public unless he expected to be able to sell for a larger sum 
 than that at which he bought. In many cases his ability to 
 do so is due to the fact that he meets the convenience of the 
 
Rapidity in tunii?ig over Stock 127 
 
 public. He sells in small quantities and near their doors ; he 
 sells all sorts of different things that they want so that they 
 do not need to go about from place to place to get their 
 various requirements. Of course, in so far as he is engaged 
 in a carrying trade and brings things from a greater or less 
 distance he may be said to be engaged in a branch of in- 
 dustry and to be putting things where they are wanted. 
 The justification of such gains, and the possibility of dishonest 
 gains from trade, will be considered below. In the meantime 
 it may suffice to say that the trader expects when he turns 
 over his stock not only to have his capital replaced, but to 
 have it replaced with a gain ; and unless this expectation is 
 fulfilled, he cannot and will not think it worth while to 
 continue to undertake the thankless task of catering for a 
 public who do not wish to have the things he is ready to 
 supply. 
 
 {c) Now it is obvious that the more rapidly he is able to 
 turn over his stock and to get the accruing gain the larger 
 will his profits be. The man whose capital is engaged in 
 arable farming can only turn over his stock once a year ; the 
 flower-girl will try to turn over her stock once a day. There 
 may be the greatest difference in the rate at which re- 
 placement can take place in different trades. A Bond Street 
 jeweller cannot in all probability accomplish the feat in one 
 year, or indeed in several years, while the ordinary haber- 
 dasher will wish to turn over his stock twice or four times a 
 year, so as to provide the necessary variety for each season. 
 But in any case the desire is to turn over as rapidly as may be, 
 and not to keep on hand a mass of goods which have not 
 attracted public taste, and which are less likely to find 
 purchasers at remunerative prices if they are stored still 
 longer ; hence the sales at enormous sacrifices which force 
 themselves on our attention at the close of the season. It is 
 obvious, too, that the system of cash payment is advantageous 
 to the dealer, because he is able to get his capital replaced 
 more quickly, and thus either to turn over his stock more 
 frequently in the course of the year or to do business on a 
 larofer scale. 
 
128 The Replacement of Capital [Ch. IX. 
 
 This is, of course, an object at which he will aim, as in 
 most branches of commerce there is very little additional ex- 
 pense in carrying on the concern on a large scale. If there 
 is profit to be made at all, the more capital is available the 
 larger the sum obtained will be, and it may be secured at 
 the same or even at a better rate. A period of high prices 
 will enable him to expand his trade, as he not only has the 
 opportunity of saving and adding to his own capital, but he 
 can also obtain the use of capital more easily as he has better 
 credit for borrowing. But it is more important to lay the 
 foundations of steady growth. Hence the more a man can 
 force new business connexions, and find purchasers for his 
 goods in different districts or different parts of the world, the 
 more certain can he be of a regular trade, as he is less 
 exposed to the fluctuations which are due to severe local 
 depression. But whether he is dealing on a large scale or a 
 small, the gain accrues when his capital is replaced by pur- 
 chase. The precise gain he makes each time his capital is 
 replaced must of course be due to the success of his specu- 
 lation, or more properly to his skill in forecasting the require- 
 ments of the public and his success in meeting them. But 
 although his gain comes from a series of transactions, and 
 from turning over his stock in longer or shorter periods, it is 
 convenient for purposes of account to reckon the returns 
 annually, and thus the profit he makes in the course of a 
 year from all his dealings, be they many or few, may be re- 
 garded as the income from his capital, and an income which 
 accrues to him from his success in catering for the require- 
 ments of the public. 
 
 3. There is much greater difficulty about the replacement 
 of capital that is employed in industry ; for the manufacturer 
 does not, like the trader, use his money merely to buy certain 
 goods and sell again. The cotton-spinner is engaged in 
 carrying on a process, and he has to keep himself provided 
 with all the things that are requisite for this process. If his 
 business is to be kept going, each part of the process must 
 be organised on a scale which makes it fit in with the other 
 parts of the process, so that the whole undertaking from the 
 
Requisites for Co?iti?iued Productioft 129 
 
 time when the raw material is received till the finished goods 
 are delivered shall be carried on continuously as a going con- 
 cern. His capital is replaced through the sale of the goods, 
 but his stock-in-trade has to be maintained in all its various 
 parts, so that the complete process may be constantly pro- 
 ceeding. 
 
 {a) This brings us to consider the parts of which a manu- 
 facturer's capital consists at any given time. We shall find 
 it in the simplest form if we consider what the Roman capi- 
 talist had to provide who carried on the manufacture of wine. 
 He had, of course, to work the vineyard for the produce, and 
 this was done by gangs of slaves, who were chained as they 
 worked all day, and had no relief from their bonds when they 
 were driven to the miserable underground prison, with its 
 narrow windows, where they passed the night. The owner 
 had of course to supply them with clothes and food ; the 
 proper quantities of both are carefully calculated by Cato. 
 He also had to furnish the necessary buildings and instru- 
 ments for pressing the grapes and manufacturing the wine, 
 and the necessary casks for taking it to market. The whole 
 fund of wealth which was necessary for carrying on the pro- 
 cess may be roughly classified in three parts ; the materials 
 required, the tools, including the buildings, and the slaves, 
 with their food. In the case of free labour the workers cease 
 to be part of the property, and they are not to be themselves 
 included in the fund of the manufacturer's possessions. But 
 as he needs to be able to procure labour in order that the 
 process in which he is engaged may continue, he has to pro- 
 vide himself with the means of hiring labour with food or 
 with money. His capital will then consist of (i) Materials, 
 (2) Instruments, including buildings, all of which may be 
 named tools, and (3) the means of hiring labour, which we 
 may, for the sake of simplicity, specify Food. 
 
 (J?) There has been a good deal of discussion in recent 
 times as to this old-fashioned way of enumerating the things 
 that make up the capital engaged in industry at any given 
 time. It is obvious that the capital must include materials^ 
 and materials in every stage of the process, so that the work 
 
130 The Replaconent of Capital [Ch. IX. 
 
 may go on steadily and continuously, and it is equally obvious 
 that it includes all tools — the mill and the plant which is en- 
 gaged in the manufacture. But there is a difference of opinion 
 about \!^^food. It is said that the capitalist does not require 
 to provide for the payment of wages, because the labourers 
 have given him the value of their services before he pays 
 them anything. It is said that in paying wages he does not 
 draw upon his fund, but only restores in another form the 
 value he has already received by the labourers' work. 
 
 Now all this is perfectly true, and it has important bear- 
 ings on many matters connected with the remuneration of 
 capital. It is conclusive against those economists who said 
 that the capitalist deserved remuneration because of the ser- 
 vice he did to the labourers in making them an advance of 
 food. He does not make them an advance of food, and there- 
 fore he does not deserve to be paid for doing it. As a matter 
 of fact he is not paid for doing it, or for conferring any bene- 
 fit on the labourers ; he is not a salaried philanthropist. He 
 simply gets a gain from the public because he succeeds in 
 catering for the taste of the public and making things which 
 the public wishes to buy. But in order to carry on this pro- 
 cess he must have a fund of wealth of different kinds, and 
 part of it must be of a kind with which he can hire labour. 
 If he has not the means of hiring labour the process cannot 
 continue, and even if he has a stock of half-manufactured or 
 of finished goods he cannot hire labour unless he has some- 
 thing the labourer will bargain for — Food or Money. His 
 capital consists of the things that are necessary to carry on 
 the particular process of production in which he is engaged, 
 and he must have command of the means of hiring labor. 
 
 The difficulty on this point appears to have arisen because 
 economists have not kept clearly in view the two aspects 
 under which capital may be regarded— its services to the 
 public and its connexion with the labourers who are hired to 
 carry on industrial processes. The capitalist is the middle- 
 man ; it is he who comes in contact with the public ; the 
 labourer has not direct relations with the public, but only 
 through the middleman. The capitalist administers capital 
 
The so-called Wages Fund 131 
 
 so that the whole process of production may go on. He con- 
 fers a service if you like, not because he makes advances to 
 the labourer, but because he so administers the process of 
 production that there is a saving of time for the public. To 
 manage this he has to take account of the process in all its 
 parts. His success in catering for the public depends on his 
 success in hiring labour and in buying materials. His fund 
 of wealth gives him the means of doing both, and all that he 
 uses to keep the whole process in steady operation is rightly 
 considered his capital. 
 
 Nor is the matter altogether trivial, for a clear apprehen- 
 sion of this distinction may help to set other matters in a 
 true light and show us the absurdity of arguing that the men 
 may be fairly regarded as paying the capitalist by allowing 
 him profits for the service he renders to them. We ordinarily 
 say that the capitalist pays his labourers, and so he does ; he 
 very seldom pays them in advance, and those economists 
 who thought he always did made a great mistake. The 
 employer does not indeed set aside any fixed and unalter- 
 able quantity and call it a wages fund, any more than he 
 sets aside a fixed and unalterable quantity which he calls a 
 materials fund, and refuse to pay more or less. If materials 
 are dear he must pay more if he wants to get them ; and if 
 wages are high, he must pay more in order to hire labourers, 
 and he is quite prepared to pay more than he estimated for 
 either one or the other if he sees that he can make it answer. 
 But in any case, the payment made to the labourer for his 
 work passes through the hands of the capitalist and is ad- 
 ministered by him. It is true that work is put in before 
 money is paid out, but what the labourer wants is money, 
 and money is paid by the employer. 
 
 There appears to be an impression that since valuable work 
 is put in before valuable things are given to the labourer for 
 it, the capitalist's fund of objects of value is not liable to be 
 drawn on for the payment of wages. I cannot feel sure that 
 the precise time of payment affects the matter so greatly ; if 
 the employer hires his men on the understanding that they 
 shall ha,ve a week's notice, he is always liable for a week's 
 
132 The Replacemefit of Capital [Ch. IX. 
 
 payment beyond the remuneration for work done. The im- 
 portant thing is that they look to him for payment, and that 
 his stock for carrying on the business must include things of 
 the kind that they will accept as payment. The value of the 
 part of his stock which consists of half-manufactured and 
 manufactured goods would be of importance if the business 
 were to be wound up, but it does not afford the means of 
 paying labour and carrying the business on unless the em- 
 ployer uses it as security for obtaining a loan. The increased 
 value of some part of his stock does not enable him to dis- 
 pense with another part of stock altogether ; the process of 
 production cannot be understood if it is all stated in terms 
 of value. The capitalist does not produce abstract objects of 
 vame, he produces cotton-yarn or boots, or steam-engines. 
 The whole question is not as to the greater or less value of 
 the capitalist's fund at any time, but as to the precise things 
 of which the capital must consist ; it must consist of the ob- 
 jects of value called material in all its stages, and of the objects 
 of value called tools, and of the means of hiring labour, or the 
 process cannot go on. The precise terms of the bargain made 
 with the labourer do not alter the fact that the labourer looks 
 to the capitalist for his pay and that the capitalist must have 
 the means of paying him. 
 
 So far as the public is concerned the labourer's share of 
 the work is merged in the process which is carried on by the 
 capitalist ; it is only with the capitalist that the public have 
 to deal ; he is responsible for the whole affair. It is from his 
 relations to the public and his success in catering for them 
 that the capitalist engaged in industry derives his gain. The 
 whole of the things which are requisite to carry on the 
 process and thus to procure a return are the capital which 
 he uses to get an income. And the corn or money with 
 which he hires the labourers is an essential part of this fund. 
 According to the definition of capital with which we have 
 started there can be no doubt that this element ought to 
 be included. Only if we had limited the application of the 
 term to capital which is employed in industry and defined 
 it as 'wealth which is used to produce more wealth,' would 
 
Extensio7i of Busitiess 133 
 
 we be justified in excluding from the conception such wealth 
 as is used to reward the labourer who has already produced 
 more wealth. Here once again it may be said that our 
 definition justifies itself, since it accords with the common- 
 sense opinion as to the constituent parts of a mill-owner's 
 capital. 
 
 {c) When we thus notice the complex nature of the con- 
 stituent parts of capital employed in industry we see that 
 its replacement, or the turning over of such capital, is a 
 constant process ; it involves on the one hand purchases by 
 the pubhc of the products manufactured, and on the other 
 hand the restoration of all the various parts of the producer's 
 stock, — materials, tools, and food, — so that the process of 
 production may continue. But this at least is clear, un- 
 less the product is purchased the capitalist finds himself 
 stranded. He has a stock of finished goods which he cannot 
 sell, and till he can sell them he has no means of purchasing 
 more materials, of repairing his tools, or of hiring labour. 
 The sale of his goods is the primary means of replacing his 
 capital in the forms of money, and of thus supplying him 
 with the means of replenishing all the different parts of his 
 stock-in-trade. 
 
 It is perhaps worth while to add that the inducement for 
 the manufacturer to extend the scale on which his business 
 is done is even stronger than for the commercial man. The 
 trader in expanding his business can carry on more trans- 
 actions at presumably the same rate of profit, while the 
 manufacturer can in all probability complete additional 
 transactions at a higher rate of profit. The division of 
 labour can be carried further, there is more scope for the 
 introduction of machinery, and industrial business conducted 
 on a large scale will generally be more profitable than the 
 same business could be if it was less extensive. The supply 
 of manufactured articles at all events can generally be in- 
 creased at a diminished rate of expense, and hence there 
 is a constant tendency for the manufacturer to expand his 
 business when the opportunity occurs. A period of high 
 prices will give him the opportunity of manufacturing more 
 
134 The Replacement of Capital [Ch. IX. 
 
 largely and extending his connexions as the trader does. 
 He will make rapid sales and turn over his capital quickly, 
 and he will strain every nerve to make the utmost use of 
 the opportunity while it lasts, and supply goods which go 
 off so quickly and bring in such a satisfactory gain. But the 
 manufacturer will also seize any chance of so improving his 
 plant that he can produce more cheaply, and thus be better 
 able to hold his own if a period of depression should super- 
 vene. It is thus that success in any industry tends to an 
 increase of the supply of that kind of manufactured goods 
 not merely temporarily but for a considerable period, and 
 if the increased plenty brings it within the reach of a new 
 or a larger purchasing public, it will give the enlarged trade 
 a firm and permanent footing. 
 
 II. The Kate of Replacement. 
 
 1. If lent capital is not replaced, that is to say if the 
 borrower does not repay his debt, it is eventually wiped out 
 with more or less of personal inconvenience to the lender 
 and to the borrower. The history of proceedings in bank- 
 ruptcy affords numerous illustrations of this state of affairs. 
 The capital has gone, or most of it has gone, and there is no 
 use in crying over spilt milk. The immediate result probably 
 is that someone, be it the lender or be it the borrower, or 
 both, finds that less wealth passes through his hands and 
 that he has less power of spending. The bankrupt's credit is 
 gone and the lender's income is diminished, and neither one 
 nor the other can afford to be purchasers to the same extent 
 as formerly. 
 
 2. If commercial capital is not replaced, it does not merely 
 disappear ; it continues to be locked up in a stock of goods 
 which the dealer cannot dispose of. He might indeed force 
 a sale at a price which would not repay him for his original 
 outlay, but he has no motive to do this unless the stock is 
 actually spoiling on his hands ; for if he had the money he 
 would not know how to use it when trade is bad and no 
 purchasers are forthcoming. He would have to let it ' rot irj 
 
A Glut 135 
 
 the bank,' and he would practically forego all chance of 
 gaining anything by it beyond what is absorbed in his office 
 expenses. Hence it comes about that he is left with the 
 stock on his hands, and he in his turn ceases to be a pur- 
 chaser, for he has no money with which to enter into new 
 commercial speculations. 
 
 3. {a) Still further, if the capital employed in industry is not 
 replaced, the process of production must stop or can only 
 continue on a smaller scale. The manufacturer's warehouse 
 is glutted with finished goods which no dealer will purchase, 
 and the manufacturer is thus unable to obtain the money 
 with which to replenish the various kinds of stock he re- 
 quires. This may be the manufacturer's fault or it may be 
 his misfortune ; he may have entirely overestimated the 
 probable demands of the public for whom he caters, or rival 
 manufacturers may have done so and flooded the market 
 with goods ; or the public taste may change and leave him 
 with his stock on his hands, and a large portion of his 
 capital locked up in finished goods. And then the process 
 of manufacture may come to a standstill altogether. The 
 manufacturer in this plight will incur a loss by going on, but 
 he incurs a great loss also by reducing his business as he 
 is forced to do. He can neither repair his tools, nor pur- 
 chase materials, nor pay wages unless he procures money 
 somehow. Probably he will try and reduce every expenditure 
 and keep going somehow ; but this must be a serious loss 
 to him. Part of his plant must stand idle, and this is in 
 itself a loss, while the whole will deteriorate from want of 
 care and attention. He can expend but little on materials, 
 and he must reduce the sum he uses in hiring labourers, 
 either by hiring fewer or by paying each man less, or in 
 both ways. There must be a frightful shrinkage in the 
 fund he uses for carrying on the business, and in every 
 way his power of purchasing is greatly diminished. Both 
 the expenditure he himself makes on tools and materials 
 and the expenditure made by his employes on food and 
 clothes is necessarily cut down. The process of production 
 goes on slowly or comes to a stand-still, when the extent of 
 
136 The Replacement of Capital [Ch. ix. 
 
 the shrinkage of capital invested in tools may be measured 
 by noting the small sum which the works and plant will 
 fetch ; though the effects of the loss of that part of capital 
 which he uses to hire labour, — the misery of those who are 
 thrown altogether out of employment, with little hope of 
 finding it again in the depressed condition of trade. — cannot 
 be so readily assessed. 
 
 {b) As all branches of business are closely interconnected, 
 the disasters which affect one class of society run through 
 the whole ; but the connecting links through which the 
 mischief extends are most noticeable when we consider 
 the replacement, or rather the non-replacement, of capital. 
 The hitch may occur at any point. There may have been 
 a vast amount of wealth accumulated, and this may have 
 been borrowed by a foreign government ; perhaps it ceases 
 to pay interest, and leaves the creditors in doubt about 
 the principal. These creditors, with diminished incomes, 
 purchase less ; so too does the foreign government and its 
 overtaxed subjects. The dealers who usually supply them 
 have their stocks left on their hands, and cannot buy from 
 manufacturers, and they in their turn must diminish the 
 production. When things go as far as this, business of every 
 kind is likely to come to a standstill ; and no one knows 
 where to look for a revival of trade. On some occasion 
 it is a failure of credit and the loss of income on borrowed 
 capital that has reacted upon industry. Or the obstacle 
 which brings about this slackening and stoppage of trade 
 may come from the other side. There may be a succession 
 of bad seasons, so that (if corn cannot be imported) food 
 is dear, and even with the high price many farmers cannot 
 make both ends meet. Agricultural labourers have less to 
 spend, and all labourers have to diminish the amount of their 
 purchases of clothes and food. The capital of the farmer is 
 not replaced, nor that of the manufacturers who supply him 
 and his people, and thus industry receives a check from the 
 diminished consumption. 
 
 {c~) In either case the outward and visible sign of this 
 depressed condition will be found in warehouses packed with 
 
Depression of Trade 137 
 
 goods ; there is an apparent superfluity of wealth of every 
 sort, and it appears that the mischief must lie in over-pro- 
 duction. The error of capitalists in judging of the real 
 requirements of the public for whom they cater may — like 
 bad seasons or the faithlessness of borrowers — be the first 
 hitch which puts the whole machine out of gearing. But the 
 mischief is always due to some destruction of purchasing 
 power ; either the power of purchasing which rentiers possess, 
 or labourers or capitalists. Life is a process, and the accu- 
 mulation of fat, or the distention of some part of the body, 
 shows that the process is going badly. So the economic life 
 of any community is a process, and the material well-being 
 of all is most likely to be secured when that process is going 
 on smoothly and continuously and rapidly. The check to 
 the process, from whatever side it comes, is sure to lead to 
 gluts, as checking a stream is sure to lead to floods. 
 
 Hence the evil can only be removed by something that 
 sets the process going again ; thel)ld obstacle may disappear, 
 or some new channel may be cut by which the floods escape, 
 and the stream flows on once more, but in a different bed. 
 A good harvest may help to set things right, however the 
 evil has been caused, by giving some persons more means of 
 purchasing. The outbreak of a war may cause a sudden 
 and unexpected demand, and give a stimulus to certain 
 trades ; or some new enterprise may be devised which absorbs 
 a good deal of the existing stocks and gives a stimulus to 
 production. The stoppage of the process and the consequent 
 glut comes from a deficiency of purchasing power, and when 
 purchasing power is brought to bear, either through the enter- 
 prise of capitalists, or the necessities of Government, or the 
 bounty of nature, the process will continue once more. 
 
 {d) It is in this way that the action of capitalists who 
 take advantage of a period of depression to enlarge their 
 premises may be a means of removing the existing evil. 
 They purchase bricks and machinery, and this helps to set 
 the stream in motion once more ; stagnation is the evil ; the 
 least sign of a new movement indicates that the stagnation 
 is at an end, and gives those who are possessed of money or 
 
138 The Replacement of Capital [Ch. ix. 
 
 credit more hope of being able to use it to advantage, and 
 more willingness to try. But if the stimulus comes from a 
 new direction, and not from the quarter in which the original 
 obstacle occurs, industry will work on somewhat different 
 lines from those which it previously took. Some trade may 
 have ceased to be so profitable, say the ship-building trade, 
 and it does not recover, but capital finds remunerative em- 
 ployment in electric lighting or in making bicycles, and the 
 whole industrial process goes on as fast as before, though in 
 rather different forms. 
 
 4. {a) The economic difference between a prosperous and a 
 distressed condition of the community may be most easily 
 expressed by saying that the process of production goes on 
 very rapidly in one, and but slowly in the other. If things 
 are made fast they are plentiful, and they may even be used 
 to purchase the corn which cannot be supplied at home at a 
 faster rate. There is a great deal of work done in the year 
 in some place, and therefore there is much that is available 
 for human use. On the other hand, in bad times there is 
 very little done in the same time, and therefore there is very 
 little available for use. When trade slackens off the process 
 becomes slow, and everyone has to adjust his habits of life 
 to a condition when less is available for use ; it is here that 
 the shoe begins to pinch. The sign of the evil is in the glut 
 of goods, but the cause of the evil is in the checking or 
 slackening of the industrial process. So far as this is a 
 general evil in a community, it can only be cured by some 
 change that sets free some purchasing power ; in so far as 
 it is an evil that is special to one trade, and that arises from 
 misjudged production, it cannot be rectified by any change 
 that would perpetuate a slower method of production, — by 
 ' making work ' in any fashion, or maintaining hand-labour 
 to the exclusion of machine-work. This is to create new 
 obstacles, not to make the stream flow more rapidly, and 
 capital, with its funds for buying materials and for hiring 
 labour, will not turn to those directions where the stream 
 flows slowly. 
 
 {b) The consideration of a period of depression may have 
 
The Waste of Capital 139 
 
 helped to bring out the fact that in one way or another there 
 is an enormous amount of capital which is never replaced, 
 and which is accordingly wasted. Not merely does it cease 
 to be used to procure income, but it altogether ceases to be. 
 It is no longer used as capital, and it ceases to be wealth. 
 There is the waste of capital which is involved in injudicious 
 loans, and is represented by bonds that are not worth the 
 paper on which they are printed. There is the waste of 
 capital in stock that depreciates, and there is the waste of 
 capital that cannot be realised. Goods a man may always 
 be able to get something for, but money sunk in plant or in 
 buildings is much more difficult to realise. This is a most 
 obvious source of the waste of capital ; there are so many 
 enterprises that look well on paper, and that cannot be tried 
 without a large initial expenditure. Such is the preliminary 
 outlay in opening mines, which prove most disappointing, or 
 in building railways which do not pay their working expenses. 
 But more than this, every improvement in any process of 
 production involves the waste of a large amount of existing 
 capital. Old plant is superseded long before it is worn out, 
 or new inventions do away with the need for some old line 
 of business. The great scare about gas-shares when electric 
 lighting was first introduced, and the manner in which canal 
 traffic has shrunk as the railway system developed, are cases 
 in point. In all these cases there is a frightful loss to indi- 
 viduals and waste of capital, though the effects on the pros- 
 perity of the community are by no means the same when 
 capital is wholly wasted in opening a useless mine, or when 
 its use is superseded because some better means has been 
 discovered of doing the same work. 
 
 Partly then through bad faith or human error and mis- 
 calculation, and partly through new applications of human 
 skill superseding old ones, there is a continual waste of 
 capital, a waste of capital that is a terrible evil, but that 
 cannot be altogether avoided so long as man's legitimate 
 expectations are falsified ; it is part of the price we pay for a 
 further advance in progress. It is not easy to see that any 
 scheme could be devised which would get rid of these ele- 
 
140 The Replace?nent of Capital [Ch. IX, 
 
 ments of waste ; and herein lies the lasting importance of 
 the new formation of capital ; new capital is constantly 
 needed to repair the waste that is always going on. 
 
 {c) If there has been, in any serious commercial crisis, not 
 only a collapse of credit but a great waste of capital, the 
 depression that follows will be likely to continue for long. 
 The relief can only come by the introduction of some new 
 purchasing power, but if there is little capital seeking invest- 
 ment no new enterprise can be floated, no foreign govern- 
 ment can borrow, and the new impulse to industry cannot be 
 given. Similarly, since prices are so bad and trade is so 
 slack, it is very hard to form capital ; each man has to keep 
 his business going as best he can, but he has no opportunity 
 of saving, and enterprise is checked because it has not the 
 material means of trying its best. 
 
 5. It is thus by the purchase of goods, the replacement 
 of capital, the replenishing of stock of all sorts, that a time of 
 commercial prosperity is most clearly marked. It is not 
 merely the symptom of prosperity, as the barometer gives an 
 indication of fine weather, it is the thing itself. And hence 
 there have been attempts at many times to stimulate the pur- 
 chase of goods by arbitrary enactments, like the seventeenth 
 century statutes for burying in wool. Such enactments did 
 give greater prosperity to some one industry, and did attract 
 capital to it ; whether there was any advantage in changing 
 the direction of the employment of capital may well be 
 doubted; the statutes had the immediate effect that was 
 intended, and made that industry more prosperous for the 
 time. Similarly, when credit is inflated and prices are high, 
 there may be times of feverish prosperity when production 
 is going on most rapidly, all mills busy, and employers eager 
 to hire more hands ; it is real prosperity while it lasts ; un- 
 fortunately experience shows that such prosperity does not 
 last long, and that rapid production, though good in its way, 
 is not the only thing we have to look to. Commercial 
 prosperity is well, but there are also advantages in industrial 
 stability. 
 
CHAPTER X. 
 
 The Direction of Capital. 
 
 I. The Fluidity of Labour and of Capital. 
 
 1. Whenever the replacement of capital by purchase occurs, 
 there generally is more or less opportunity for either continuing 
 to use capital in the same direction as before or for applying 
 it differently ; it is comparatively easy to change the character 
 of commercial speculations, but it may be hard to withdraw 
 from an old industry or try a new one. If the man of enter- 
 prise has a great deal of capital invested in plaat and 
 buildings he will not be able to withdraw his capital suddenly, 
 but he may withdraw a good deal of it gradually, if the 
 business is not remunerative, by simply refraining from any 
 additional outlay. Every penny that he uses for repairs, or 
 for substituting new machinery for old, is a farther purchase 
 of stock for his old trade ; and in so far as he refrains from 
 locking up more capital in the business he is keeping himself 
 free to transfer his capital to some more profitable business 
 if he can find one. The distinction between capital that is 
 fixed in a particular trade and circulating capital cannot be 
 easily defined for all the different kinds of industry, rural and 
 urban, in precisely the same terms, because it depends on 
 things, and not on what passes in the man's mind. No form 
 of capital is absolutely permanent since all wears out in time, 
 and the distinction turns on the frequency with which a man 
 has to restore any part of his stock-in-trade ; his tools and 
 buildings are relatively permanent ; his fund for hiring labour 
 and his stock of material has to be constantly replenished, 
 
142 The Direction of Capital [Ch. x. 
 
 and the man whose capital is chiefly in the form of circulating 
 capital will have less difficulty in altering the direction in 
 which he employs it than the man whose capital is chiefly 
 fixed in tools or buildings of a permanent character. But 
 whatever the difficulty may be in diverting capital from an 
 employment in which it is already engaged, there is always 
 choice as to how to use new capital when it is formed, 
 
 2. So far as capital that is free to be directly or indirectly 
 applied to industry or commerce is concerned, the main 
 element in determining the owner as to the direction in which 
 he shall use his capital will be the public demand for some 
 article. If the public demand for any object is active, prices 
 will be high ; the manufacturer will be glad to employ more 
 capital in turning out goods as fast as possible, while new 
 men will set up as competitors in a profitable business. On 
 the other hand, the man of enterprise may fancy that he can 
 stimulate public demand by supplying requirements in a better 
 or cheaper fashion than has hitherto been done ; he hopes to use 
 his capital so as to call forth a public demand. In either case it 
 is the forecast of the capitalists — those who possess it, or those 
 who have credit enough to borrow it — as to the probable demand 
 and probable purchases made by the public, that determines 
 the direction in which they use this wealth. If they forecast 
 badly, and the public demand does not meet their expecta- 
 tions, it is so much the worse for them, and their wealth will 
 be wasted ; the fact that so much capital is wasted goes to 
 show how often there are miscalculations about the public 
 taste. But it remains true that the public requirements 
 and public purchasing determines the direction in which 
 capital is employed, even though capitalists are not always 
 perfectly wise in interpreting the probable wishes of the 
 public. One of the first great advantages of the co-operative 
 societies and their association in wholesale societies is that 
 they have the best opportunities of forecasting the tastes and 
 requirements of the working-class public for whom they cater. 
 It is obvious too that while rapidity in the replacement of 
 capital is the feature of a period of commercial prosperity, 
 facility in the change of the direction of capital is a condition 
 
Depressio7i of Trade and the Labourers 143 
 
 which enables the pubhc to have what it wants on the easiest 
 terms and at shortest notice. If the pubhc is fickle and 
 always changing in its tastes and requirements, there will be 
 a great waste of capital in the process of catering for it ; it is 
 an extravagance to be always chopping and changing, but at 
 the same time the possibility of doing so shows that the 
 economic organism is highly flexible as well as highly powerful. 
 It is ready to adapt itself to a change for the better or for 
 the worse in public requirements. 
 
 3. The waste which is involved in changing from one 
 direction to another is obvious when we consider the part of 
 the capitalists fund which is used for tools and buildings. 
 But the mischief is more noticeable when we look at the part 
 of capital which is employed in hiring labour. There is a 
 change in public requirements, and a certain trade — the 
 Coventry ribbon-trade — declines. Manufacturers withdraw 
 their capital so far as they can, and do not continue to hire 
 labour for this sort of production ; nobody knows at first 
 whether it is a mere temporary depression or whether it is a 
 permanent change in public requirements, except in those 
 cases where machinery supersedes labour and there is a 
 change, not in the public taste, but in the need of labour to 
 supply it. Some of those who earn their bread by the 
 industry are thrown out of employment, and others are hired 
 on such terms that they have to go short. It may be most 
 difficult for them to find any employment; they may be 
 highly skilled labourers with hands accustomed to fine work, 
 who dare not break stones or pick oakum. In the meantime 
 no wages are coming in, the home gets more and more bare, 
 and the man gets weaker in body and less fitted in habit for 
 work when employment becomes open to him. It is clear 
 that the sooner this state of things can be brought to an end 
 the better, and it can only be brought to an end satisfactorily 
 in one way, — by giving the greatest possible facilities for 
 labour to become fluid and to follow the direction which is 
 taken by capital. For though in times of general depression 
 there may be no fresh call for labour from any side, the 
 progress of enterprise is continually breaking 
 
144 The Direction of Capital [Ch. X. 
 
 directions. Capitalists may see some chance of planting a 
 new industry in the very place where the old has disappeared, — 
 as the cocoa-nut matting manufacture has been localised in 
 the room of the old Sudbury weaving, or as a cotton mill 
 and bicycle works have sprung up at Coventry. This is the 
 most satisfactory way out of the evil, because the opportunity 
 is opened for hiring labour in a place where unemployed 
 labour abounds. But it is not always easy to hit on a trade 
 which can be settled in the place of a decaying industry, and 
 the old hands may not have the training which will enable 
 them to learn and to work at the new craft. The technical 
 education given in secondary schools has in all probability 
 this one advantage over the old system of apprenticeship, 
 that it does something to give a man this facility of adapting 
 himself to a new employment that opens up. But when 
 capital cannot bring a new employment to the unemployed 
 men in a town it is necessary that they should be able to 
 migrate or emigrate to places where industry is flourishing, 
 or at least continuing, and where there is a fair chance that 
 they will be hired. Everything that promotes the fluidity of 
 labour, and that renders it possible for a man to take advan- 
 tage of new or of better opportunities of employment, is a 
 vast benefit to the artisan. Labour bureaus that tell him the 
 districts where work may be sought for do much to alleviate 
 the distress which arises from the fluctuations of trade or 
 the changes of trade. Great as the waste of capital may be 
 in any change of direction, capital is much more fluid than 
 labour, and flows more easily — with less loss and less priva- 
 tion — than the man who is out of employment and has to pay 
 his travelling expenses in looking for work, and who, when he 
 finds it, has to break up his home and move his household. 
 These evils are at least diminished by everything that 
 renders it more easy for labour to adapt itself to the chasnge 
 of public requirements, as shown by the change of the 
 direction of capital. 
 
 4. So far as fluctuations in trade and the depression of 
 trade are due to the failure of the capitalist to forecast the 
 public demand, they are a social evil which it is most desir- 
 
Doomed Ijtdtistries 145 
 
 able to diminish ; they lead to a waste of capital and terrible 
 privation to the labourer, and the more industry is organised 
 on a large scale under the management of one or two firms 
 who can feel the pulse of the whole trade the less likely is 
 this to occur. But some of the changes in the direction of 
 industry are due to real changes in public requirements, or 
 to new discoveries and inventions. The migration of many 
 iron works from the Midlands to South Wales has been 
 forced on by the desire of the owners to avoid costly railway 
 rates. The working out of certain natural products, — coal 
 or other minerals, or a change in the habits of fish, may 
 affect other districts ; while the progress of machinery is 
 continually superseding domestic and hand industry and 
 drawing the workers into factories. Progress involves 
 change, and change in the direction of industry as well as 
 change in other ways. While great mischief and misery 
 accompanies every such change, true philanthropy will not 
 endeavour to set limits to the change, but to enable the 
 labourer to adapt himself to the inevitable possibility of 
 change as readily as may be. 
 
 5. (a) From this point of view it appears that there can be 
 no greater mischief done to the labourer than that of in- 
 ducing him to cling to a doomed industry ; that is, an 
 industry which is being obviously superseded and must 
 necessarily die out. To help a man to drag on a miserable 
 existence as a hand-loom weaver and to encourage him to 
 train up his children to it is not a kindness ; there are parts 
 of the country, as Ceres in Fife and Church Stretton in 
 Shropshire, where it lingers on; and possibly through the 
 peculiarities of local requirements it may be continued in- 
 definitely in such places. But on the whole it is dying out; 
 and wherever it is a struggling industry it is unlikely to 
 revive. True philanthropy will endeavour to make the 
 change as easy as may be, and tide over the transition with 
 as little suffering as possible by temporary relief, if need be, 
 but it will never tempt men to condemn themselves to a 
 life-long and hopeless struggle by encouraging them to 
 remain in a decaying industry. 
 
146 The Direction of Capital [Ch. X. 
 
 {b) This matter is of considerable importance in regard to 
 certain branches of rural employment. The widening com- 
 merce of the present day has enabled us to draw our corn 
 from the most distant and fertile regions in the world, and 
 has thus caused the British farmer to feel the effects of a 
 fierce competition. This may possibly lead to considerable 
 changes in British agriculture, and give more scope for 
 market gardening and dairy farming, on one hand, and for 
 pasture farming on the other. It may lead to a change in 
 the character of British agriculture and a corresponding sub- 
 stitution of small holdings and large ranches for our present 
 farms. But in so far as our present arable farming continues, 
 it is not likely that the verdict of last century will be re- 
 versed, and that small holdings will prove superior to large, 
 or that a cultivating peasantry will weather the storm more 
 successfully than the capitalist farmer. But, if British agri- 
 culture is to undergo a change, it will be most likely to do 
 so in the outlying districts and poor soils which present the 
 greatest difficulties to the cultivators. The Skye crofter and 
 the Galway peasant have to bear the brunt of the struggle 
 under which many English farmers have succumbed, and 
 they have to bear it while they still practice such modes of 
 cultivation as proved the ruin of the English yeomanry. 
 Politicians may be wise who desire to root these men firmly 
 to the soil, so as to provide a population from which recruits 
 may be drawn for the British army. But it is not the part 
 of true Irish patriots to condemn the finest peasantry in the 
 world to a hopeless struggle for existence in order to attain 
 this imperial object. Philanthropists must know that if 
 men are unconsciously condemned to desperate and hopeless 
 poverty they have little opportunity of improving in moral 
 and intellectual well-being. They ought to be able to show 
 that the Galway cottier can compete successfully with the 
 American grower before they encourage him to attach him- 
 self more firmly to an unkindly soil. So far as the fisheries 
 or the kelp-burning have ceased to be remunerative, his 
 resources are diminished. If the foregoing forecast is correct, 
 it is clear that the cottier's position is nearly as hopeless as 
 
Changes of Public Demand 147 
 
 that of the hand-loom weaver, and that the case can only 
 be met by encouraging him to change, not by tempting him 
 to stay as he is. 
 
 II. Productive and Unproductive Consumption. 
 
 1. If there is no change in the direction of industry, the 
 public will continue to purchase, and the capitalists will have 
 their capital replaced. If this process goes on fast there 
 will be a time of prosperity, and if it goes on slowly there 
 will be a time of stagnation ; but the industry of the country 
 will continue along the same lines. But if public demand 
 changes it may alter in one of two ways ; there may be a 
 greater demand on the part of the public for the things that 
 are requisite for maintaining the processes of productien, or 
 there may be a greater demand for the things that are used 
 up without helping to further production. Technically there 
 may be an increased demand for articles of productive 
 consumption, and there may be an increased demand for 
 articles of unproductive consumption, — on the one hand for 
 tools and food, on the other for flowers and perfumes. If 
 either of these is an increased demand, and not made at the 
 expense of some existing demand, it will undoubtedly tend 
 towards increased commercial prosperity; it gives a new 
 opportunity of employing capital and a new occasion of 
 hiring labour, and in such a case the effects of all kinds of 
 expenditure are similar. 
 
 2. But we must also look at the case where there is a 
 change in the public demand, and the new things are sought 
 for in preference to something that has been previously 
 supplied. There will of course be all the evils that arise in 
 the change from one kind of employment of capital to 
 another, with the subsequent privation of the labourers in 
 adapting themselves to the new conditions. If people had 
 fewer hangings in their rooms and spent the money instead 
 in decorating more with cut flowers, there would be less 
 employment for the weavers of curtains than before and 
 more employment for gardeners. It is possible in such a 
 
148 The Direction of Capital [Ch. X. 
 
 case that the change would be from an industry in which 
 labour played relatively a small part, because machines are 
 much employed, to one where a large part of the capitalist's 
 fund consists of means for hiring labour ; such changes in the 
 direction of industry may be immediately beneficial by calling 
 out a demand for labour, entirely irrespective of the manner 
 in which the commodities obtained are eventually consumed. 
 In order to see the full significance of such a change, 
 however, we must try to view the matter in its ulterior rather 
 than its immediate effects, and to contrast the results of a 
 gradual change by which more and more productive con- 
 sumption is substituted for unproductive on the one hand, 
 or unproductive consumption increased at the expense of 
 productive on the other. 
 
 {a) If there is an increasing productive consumption, then 
 more and more capital will be directed into furnishing the 
 requirements for future production, that is to say, tools and 
 food. It may be assumed, since Malthus published his Essay, 
 that when more food is available population will increase ; 
 and thus there will be a steady tendency to provide the two 
 great forces which carry on the work of production, — tools 
 and food. It must be remembered, of course, that there 
 cannot be an infinite increase in the supply of food, or an 
 absolutely unlimited addition to the numbers of the popula- 
 tion ; but as capital and labour were set free by improvements 
 in any other direction, they could be applied with increasing 
 enterprise to wring more food from the soil. The continuous 
 increase of productive consumption at the expense of un- 
 productive would apparently lead, in so far as other social 
 habits were unchanged, to a larger and larger mass of 
 population on the globe engaged more and more strenuously 
 in the production of wealth, and peopling up to the limit 
 which each increase in production supplied. 
 
 If, however, we look at a smaller area, say at any single 
 country, we may say that the increase of productive con- 
 sumption at the expense of unproductive renders any country 
 rich in tools and buildings and in the means of supporting 
 labour. With these requisites the country will be able to 
 
Expendit2i7'e on Wars 149 
 
 supply its wants whatever they are, and to meet any un- 
 expected demand upon its resources, — such as a war, — more 
 easily than could otherwise be the case. It has a large 
 population on which to draw for recruits, and plenty of 
 appliances for equipping them satisfactorily. 
 
 {U) But the war itself is an unproductive expenditure ; 
 supposing it continues for some time, there will of course be 
 an active demand for munitions of war, and those who supply 
 them will enjoy great prosperity for the time which kindred 
 trades will share. But there will be a drain of men to go to 
 fight ; they will be diverted from cultivating the ground and 
 producing more food, and the arable area may decrease, 
 especially if the army is victualled abroad ; and the resources 
 of the country, instead of being devoted to the replenishing 
 of its stock of tools and appliances, will be blown away with 
 no material result. The war may be positively necessary, 
 but for all that it is costly, because it diverts the energy of the 
 nation into supplying means of unproductive consumption, 
 and thus leaves it less well supplied with a stock of buildings 
 and tools, and less well able to provide a proper supply of 
 food. Whether the expense of the war ifs met by heavy 
 taxes, or by borrowing and thus spread over a period of- 
 years, is unimportant from this point of view. All that has 
 to be noticed is that the expenditure, however wise and how- 
 ever necessary, is unproductive, and that the country is 
 exhausted by such expenditure, and less able to continue the 
 production of wealth at the old rate and in the old way when 
 peace returns. The decay of a territory like the Southern 
 States, where the struggle was waged with such severity, and 
 where, when it was over, there was difficulty in borrowing 
 capital to start industry afresh, may serve to illustrate the 
 nature of the enormous evil that is caused by unproductive 
 consumption. 
 
 {c) Comparing the two, then, it appears that an increase of 
 productive at the expense of unproductive consumption in 
 any nation tends to increase the facilities which it enjoys for 
 continuing to carry on the industrial processes as rapidly or 
 with increasing rapidity; while the substitution of unpro- 
 
ICO The Direction of Capital [Ch. X. 
 
 ductive for productive consumption tends to material 
 exliaustion and to a state where it can only carry on indus- 
 trial processes with difficulty and slowly. A change in public 
 requirements which turns capital from one direction to 
 another and to making articles of luxury instead of requisites 
 of production, tends towards national impoverishment ; unless 
 indeed the articles of luxury are produced for export and for 
 foreign consumption ; in such case this kind of industry may 
 be the easiest means by which a community can buy, and 
 therefore provide itself with certain requisites of future 
 production it cannot produce. The Sciily islanders may do 
 well to grow flowers in order to purchase corn and clothes 
 and spades. 
 
 3. But it is obvious that in every country there is likely to 
 be a certain amount of both kinds of production, and that the 
 tendency to exhaustion only arises when unproductive is 
 substituted for productive consumption, or, as we may say, 
 trenches upon it. We might also measure the wealth of any 
 community by noticing the amount of riches it can devote to 
 unproductive consumption without trenching on the supply 
 of the requisites of production. If the inhabitants of any 
 land are able to live in great luxury for a long period without 
 exhausting the resources of their country and its dependencies, 
 and without trenching on the requisites of future production, 
 it must be a very wealthy land. There was such exhaustion 
 in ancient Rome, for the wealthy citizens not only drained 
 the resources of Italy, but impoverished the provinces so 
 that they could offer no effective resistance to the barbarians. 
 
 {a) The possibility of unproductive consumption without 
 exhaustion is the great indication of a wealthy nation. It 
 would seem to follow that, since it is good to be wealthy, it is 
 good also to have a large unproductive expenditure. And 
 this is so. It is not the chief end of man to produce more 
 goods, or to provide the requisites of production in greater 
 and greater abundance. It is a good thing to have plenty to 
 spend, so long as you spend it well. The question of produc- 
 tive and unproductive consumption is important, for in it lies 
 the secret of the continuance of national prosperity ; but it is 
 
Useful but U7ip7'oductive Expenditure 151 
 
 not so important as the question whether the unproductive 
 consumption of the nation is wise or unwise, for therein lies 
 the secret of the improvement or the degradation of the 
 national Hfe. 
 
 {h) Expenditure on education and art and the cultivation of 
 taste and the improvement of human faculty is unproductive ; 
 only in slave countries can the training of human beings be 
 regarded as the production of marketable wares. The man 
 who teaches may be a useful person ; and even if he is not 
 he may deserve to be paid for doing his best to improve 
 human faculties and store human minds. All the expenditure 
 that is made in investigation, and on moral or religious 
 culture, is unproductive ; it is not therefore unwise, for indeed 
 it is the possibility of securing such things in fuller measure 
 that makes wealth worth having at all. 
 
 But the unproductive consumption that merely gratifies 
 passing whims, that ministers to selfishness on the one hand 
 and rouses bitterness and jealousy on the other, this is 
 indeed an evil; not because it does not tend to the pro- 
 duction of more wealth, but because it is a misuse of existing 
 wealth that breeds personal sin and social disorder. 
 
 Wealth is not to be pursued for its own sake but in order 
 that it may be well and wisely used. The wealth that is not 
 used for the production of more wealth is not necessarily 
 wasted ; it may be applied to much better purpose, as it may 
 be used for much worse. And here it would seem that the 
 consideration of the practical matters connected with capital 
 can take us no further, for we are brought face to face with 
 an ethical question as to the right and the wrong use of 
 wealth when we have got it. 
 
PART in. 
 PERSONAL DUTY. 
 
 CHAPTER XI. 
 
 Personal Responsibility. 
 
 It is a matter of common complaint in the present day 
 against Political Economy that it is either immoral or non- 
 moral. To the hasty reader it has seemed to advocate 
 selfishness, and there has been some excuse for this accusa- 
 tion. In recent times, however, economists have endeavoured 
 to evade it by assuming an attitude of rigorous and scientific 
 impartiality. They do not profess to tell us what ought to 
 happen but only what tends to happen under certain as- 
 sumed circumstances — in a regime of free competition ; if 
 they lay stress on self-interest, it is because self-interest is 
 so dominant in human nature as we know it. But after all 
 there are some of us who are eager not only to understand 
 what tends to happen in society as it is, but also to see how 
 far it is possible to hope that society may be kept from 
 falling to a lower level in matters of right and wrong, and 
 how individuals may be encouraged to struggle to live by a 
 better standard than that which is current, and which 
 economic science assumes as normal. 
 
 Nor in so doing are we called upon to break fresh ground. 
 
S. T/iomas Aquinas 153 
 
 Questions of duty in various economic relations were dis- 
 cussed with much acuteness for centuries before the laws of 
 supply and demand were formulated. The cases these 
 earlier students had to consider were very different from 
 those which occur in the present day, but it may serve as a 
 suitable introduction to the problems we have to face in our 
 complicated society if we try to understand the principles on 
 which the schoolmen decided the simpler questions which 
 they were called on to consider. 
 
 Those who have interested themselves in trying to trace 
 the history of economic doctrine in Christendom, find 
 familiar topics treated from a standpoint that differs curiously 
 from our own, when they turn to mediaeval writers like 
 Aquinas. Economic affairs are discussed not with the view of 
 practically promoting prosperity of the country as the mer- 
 cantilists tried ; nor, as modern economists do, with the view 
 of stating in general terms the principles on which people 
 do habitually act ; but rather with the intention of dis- 
 criminating right from wrong in personal conduct. These 
 students might perhaps have admitted that, as modern 
 economists assume, a man in driving his business tried to 
 secure as much gain as he could for himself, — that this tended 
 to happen ; and they knew that this was to some extent 
 natural, and that it was right for a man to do with his might 
 whatever his hands found to do. Yet they also knew that in 
 all these things there was a danger of falling into sin. They 
 wished to discuss how to draw a line which should show 
 where men were falling into wrong in their monetary trans- 
 actions, — for what actions they were to be condemned, and, 
 if they persisted in them, excommunicated. They thus came 
 to set themselves to define what was wrong. It was not 
 their business to lay down a hard and fast scheme of duty in 
 regard to industry ; they found the scheme of secular duty 
 for their day was fairly expounded by the example of the 
 monasteries — with a personal discipline of poverty, chastity, 
 and obedience, a corporate care for the dependents on their 
 estates, and a readiness to devote the gains of their trade 
 to the glory of God in the beautiful fanes they raised for His 
 
154 Personal Responsibility [Ch. XI. 
 
 worship. The cultivation of Christian graces in secular 
 affairs, charity and so forth, were not the subject-matter they 
 had primarily in hand in writing about economics ; but they 
 wanted to denounce what was wicked, and to show when 
 men were to be blamed for the manner in which they did 
 their business. 
 
 I. Degrees of Responsibility. 
 
 1. These questions of wrong-doing and blame were much 
 simpler in mediaeval times than they are now ; partly 
 because transactions of every kind were less complex, but 
 chiefly because in any case of wrong-doing it was much 
 easier to say who was to blame, while we must take account of 
 different degrees of responsibility. If work was badly done, 
 the fault could be brought home to a bad workman, and it 
 could be seen that he had been careless. But now that 
 goods are manufactured in distant places, or vamped up in 
 quantities to suit a public demand for cheap and inferior 
 articles, it is very hard to say that the fault lies with any one 
 in particular. No man is to be condemned for what he 
 cannot help and does on external compulsion; a hero may 
 resist the compulsion and perish, but a man is not neces- 
 sarily guilty because he has failed to show himself a hero. 
 In industry and trade as they were carried on in mediaeval 
 times it was generally possible to bring home to any frau- 
 dulent or extortionate dealer that he was the guilty person ; 
 whereas in our complicated social system to-day it is very 
 hard to say how far any man is free from external pressure 
 and therefore is personally to blame. 
 
 At the same time we may see that the difficulty of assigning 
 the direct responsibility for any mischief does not exonerate 
 us from the duty of trying to detect where the mischief lies ; 
 it only makes it necessary for us to examine the matter 
 more closely than the schoolmen were forced to do. If 
 wrong occurs, not through personal greed, but because the 
 habits of society or the law of the land is unsatisfactory, then 
 every member of society and every free citizen is indirectly 
 
The Responsibility of Good Citize?is 155 
 
 responsible for the mischief. We shall have to ask how far is 
 any wrong due to personal sin, and therefore to be corrected by 
 rousing the sense of personal duty, or by meting out personal 
 punishment? or how far is it due to social conventions and 
 customs and laws for which all citizens are indirectly respon- 
 sible ? Hence we may say that personal responsibility is not 
 less real than in old times. We are just as much bound 
 to discharge that responsibility, but it has to be discharged 
 in two distinct ways : not only in the affairs that practically are 
 under our own present control and where the responsibility is 
 direct and complete, but in affairs that can only be controlled 
 and remedied by altering the customs of society and the law 
 of the land ; then we are responsible in a less degree, because 
 indirectly, but our responsibility is none the less real. This 
 indirect responsibility could formerly be dealt with as the 
 duty of the Prince ; he was responsible for the good govern- 
 ment and the well-being of the people committed to his 
 charge, but it has now come to be the indirect responsibility 
 of each free citizen, as it was not in the times of feudal 
 monarchies. 
 
 2. There are many cases where the degree of responsibility 
 has to be considered before we attempt to fix the degree of 
 blame. Some years ago a considerable excitement was 
 caused by the testimony of a working shipwright at Liverpool 
 who explained the character of the very insufficient repairs he 
 had been ordered to make in a ship, which was sent out in an 
 utterly unseaworthy condition. It was said he ought not 
 to have done such insufficient work under any circumstances, 
 but the dishonesty was not on his part ; he earned what he was 
 paid to do, and he was not responsible for it, though he was 
 the agent by whom it was done. He did his own task ; the 
 evil was that he was set to do the wrong kind of work, and to 
 repair badly. But if he had played the heroic part, he would 
 have been thrown on the world, and the fraudulent repairs 
 would have been executed by someone else ; his heroism 
 would not have prevented the mischief being done. It seems 
 to me he was not to be blamed for doing the bad work under 
 protest ; for this he was not directly responsible, he was 
 
156 Personal Responsibility [Ch. xi. 
 
 acting under orders. He was also right in discharging his 
 indirect responsibility, and calling attention to the evil at 
 which others had connived, in the hope that it might be 
 remedied by such legislation as Mr. Plimsoll proposed. 
 
 Again, at the time of the first Factory Acts there were 
 employers who felt that the women and children were being 
 seriously injured by the drudgery to which they were exposed, 
 and that their hours ought to be shorter. They were, how- 
 ever, engaged in a business where the competition was keen, 
 and where they may have honestly believed they could not 
 alter the conditions of work without incurring certain ruin. 
 It might have been heroic to court ruin, but it would not 
 really have benefited the employers in that mill, and it might 
 have put obstacles in the way of a more general movement. 
 It may at least be argued that they were right to carry on 
 their business personally on the lines of which they did not 
 approve, and to endeavour to exercise their influence indi- 
 rectly, by urging that a restrictive law should be passed for 
 the whole country. 
 
 3. There is thus a distinct difference between any mischief 
 for which we are personally responsible, and any mischief 
 that arises out of our conduct, but for which we are not per- 
 sonally to blame because of external pressure. There is a 
 much more strict obligation in regard to duties that fall 
 within our own personal power than in regard to matters for 
 which we have, in common with many others, only an indi- 
 rect responsibility ; what is everybody's business is too often 
 nobody's business. We cannot rate too highly the import- 
 ance of the work done by those who make public business 
 their own business, and thus prove themselves to be really 
 good citizens. 
 
 On the whole, however, current opinion is incKned to 
 ignore degrees of responsibility and is satisfied with de- 
 nouncing the agents through whom any hardship is wrought, 
 without considering sufficiently where the ultimate responsi- 
 bility lies. There are plenty of people who go looking for 
 bargains, and purchase their furniture or their clothes at 
 prices that ought at least to suggest that there is something 
 
Cojisiuners and Starvatio7i Wages lyj 
 
 wrong somewhere about the means employed for pro- 
 ducing such goods. It is all very well to denounce 
 sweaters, but those who do so ought to be perfectly clear 
 that their own hands are clean, and that their preference for 
 cheap goods does not encourage dealers to cater for this 
 requirement, so that they themselves are ultimately, though 
 indirectly, responsible for some of the evil they deplore. 
 There is always this double responsibility to be looked to, 
 7'esponsibility for not doing our best to C2ire the evil, and 
 respo7isibility for its existence. In the present state of 
 society and in regard to the great mischiefs of the present 
 day — overcrowding, starvation wages, and so forth — it is 
 rarely that any individual can be definitely singled out for 
 blame. It is the divided responsibility, or the indirect re- 
 sponsibility, of many unthinking persons that makes the 
 whole so difficult to deal with. But in the simpler society of 
 mediaeval times there was no such divided responsibility ; 
 the King, and not the people, was responsible for bad laws, 
 and this or that man could be definitely pointed out as 
 blameable for bad goods or unfair gain. 
 
 There are very considerable difficulties about fulfilling this 
 indirect responsibility for the good condition of the country 
 in the obvious way, by using the influence each citizen 
 possesses in favour of governmental interference to prevent 
 wrong. But it may at least simplify the matter if we can see 
 a clear rule as to cases where government interference is 
 distinctly advisable. 
 
 {a) The life and effective vigour of the population is one of 
 the most precious of material resources ; and if any business 
 is so conducted as to be seriously injuring them, then there 
 can be no doubt that it is well to prohibit the continuance of 
 practices of the kind. Thus, if little children are worked for 
 long hours, and must necessarily, if they survive at all, be 
 miserable and weakly men and women, it is obviously wise 
 to interfere to prevent their working for such long hours. 
 Legislation which aims at removing a positive evil, the 
 economic effects of which are palpable, has very strong evi- 
 dence in its favour. It is difficult to conceive any reasons 
 
158 Personal Responsibility [Ch. XI. 
 
 for accepting such a state of affairs as inevitable, and for 
 refusing to try to alter it by any method that is available. 
 But the case is altered somewhat if the object is, not to 
 redress an obvious evil, but to provide better opportunities 
 for any class. Here we are at once brought face to face with 
 a speculation as to how the opportunities will be used. Some 
 men may make one forecast, and some another. It may be 
 that the reduction of manual labour to eight hours would give 
 the opportunity of a better life to many artisans, the oppor- 
 tunity of better work during working hours, and of larger 
 human interest in times of leisure. There is, after all, an 
 element of uncertainty ; it is not quite clear that the shorter 
 hours will be spent in more diligent and careful work ; it is 
 not clear that the hours of leisure will be wisely used, and it 
 is possible that there may be serious loss in consequence of 
 the change both to employers and employed. Are we wise 
 to run the risk? In such a question of practical politics as 
 this the whole decision must turn on the estimate we make 
 of certain probabilities. According to temperament, some 
 men will make a more favourable and some a less favourable 
 forecast; and the whole is removed from the sphere of 
 rational argument into sjDeculating on probabilities. There 
 can be no such plain duty to give better opportunities — the 
 value of which depends on the way in which they are used — 
 as there is to put down positive mischief. 
 
 {p) On the other hand, in so far as it seems desirable 
 to interfere, with the view of giving better opportunities, there 
 is on the whole less likelihood of misuse, when they are given 
 in connexion with work. Thus, the eight hours' day would 
 be a boon to the man who worked, but it would make no 
 difference to the man who did not work at all. On the other 
 hand, the distributions of corn among the Romans, and the 
 public provision for their amusement, were demoralising. 
 The custom gave them a good time, but it did not really fit 
 them to be more useful members of society. It is, of course, 
 good that people should be amused — it is a wholesome 
 thing ; if the monotony of life is relieved they will be brighter 
 and more cheerful. But how far is it right that they sliould 
 
Physical Tests of Oppressive Conditiojts 159 
 
 be amused at the public expense, i. e. that one set of people 
 should be taxed to provide amusement for others? It is 
 certainly doubtful. All that private munificence does for 
 public recreation is good, but how far is it a duty to provide 
 for recreation out of public funds ? How far is it demoralising? 
 All this has to be weighed carefully with special reference to 
 the precise form of each particular proposal, and there can be 
 no such plain duty to provide facilities for recreation as there 
 is to prohibit positive evils. 
 
 {c) It may appear that this is merely a verbal distinction, 
 and that every improvement in the condition of life might be 
 expressed in either fashion. They provide better oppor- 
 tunities just because they redress evils. Perhaps the distinc- 
 tion may be marked most clearly by appealing to a physical 
 standard. Where the death-rate rises, or where there are new 
 diseases, or where measurements show that the population 
 is deteriorating, there is positive evil, and we are bound to 
 seek for the causes and try to remedy them ; but where no 
 such evidence can be adduced a reform may be much needed, 
 but there is not the same plain call for governmental inquiry 
 and intervention. 
 
 This distinction, in so far as it can be clearly drawn, 
 illustrates the old adage that it is impossible to make men 
 moral by act of Parliament. All that legislation can do is to 
 give men better opportunities of making themselves moral. 
 It may remove crying evils, but it cannot do positive good ; 
 it can only provide the opportunity for good. If these new 
 opportunities are to serve any useful purpose there must be 
 some power of using them aright ; there must be higher 
 ideals of how to spend time and money, and force of will to 
 give them effect. It is too often assumed that all we have to 
 consider with the view of improving mankind is the possi- 
 bility of changing their circumstances ; but the real difficulty 
 lies in changing them so that they shall take advantage of 
 improved circumstances. The attractive force of personal 
 kindness and personal sympathy must not be left out of 
 account in this connexion, and private charity may call forth 
 new vigour where relief at the public expense would only 
 
i6o Personal Responsibility [Ch. XI. 
 
 degrade. It appears that public duty calls on us to prevent 
 retrogression, but that it is private benevolence and personal 
 sympathy that does most to elevate. 
 
 4. It is comparatively easy to take a part and use influence 
 in favour of some legislative measure when attention is once 
 directed to a crying evil; the constitution of the country 
 marks out the manner in which each man may exercise his 
 duty as a good citizen. It is far harder to know how to act 
 in regard to the other indirect responsibility which falls on 
 all those who consume goods which are produced by sweat- 
 ing. The ordinary purchaser is quite incapable of judging 
 accurately of the quality of the goods he buys, and has not 
 the means of informing himself as to the conditions of pro- 
 duction. He may feel that the rage for cheapness induces 
 traders to cut things as fine as may be ; but if he pays a 
 high price he will himself be poorer, and how can he tell 
 who will be better off? The single individual is so little 
 informed, and so little able to procure information, that he 
 can hardly be held to be bound to enquire for himself; 
 though he may feel it a duty to discontinue dealing with any 
 firm who are known to be guilty of oppressive conduct, and 
 he may also be expected to inform himself carefully before 
 he changes his custom from respectable traders who have 
 served him well, on the mere grounds that somebody else 
 will supply goods, called by the same names, for less money. 
 But the range of personal influence exerted in such fashion 
 is infinitesimal ; the mischief is to a great extent due to the 
 system of letting work on contract, and though this may be 
 a convenient method for guarding against fraud, it neither 
 conduces to the supply of good work nor to favourable 
 conditions for the producer. If large firms or public depart- 
 ments could so far count on honest service as to be able to 
 check the work done for them accurately, and to dispense 
 with the convenient method of letting contracts, the pressure 
 which has given rise to sweating would be very greatly 
 reduced. 
 
Gain made at the Expense of Others i6i 
 
 II. Sch-olastic Distinctions in regard to tlie Forms of Bargains. 
 
 1. This, then, is one broad distinction between the problems 
 about economic duty in mediaeval and in modern times. 
 The schoolmen dealt chiefly with direct responsibility, while 
 we have to deal with different degrees of responsibility ; and 
 we find it specially hard to fulfil our indirect responsibilities. 
 It is almost to restate the same thing in other terms when 
 we say they could concentrate their attention on the bargains 
 between one man and another, without following out the 
 indirect bearings of the transactions very far. Society was 
 less complex, and it was possible for men to isolate separate 
 bargains and examine the forms under which they were 
 contracted, and then to pronounce them to be fair or unfair. 
 Their idea of fair gain apparently was that it accrued because 
 of real work done; that a service was rendered, and the 
 man was remunerated for what he did ; but that gain was 
 unfair when it was secured without any corresponding 
 service, when it was obtained not by doing something for 
 someone, but at somebody's expense. 
 
 (a) For example, the merchant who brought wine to this 
 country might fairly be remunerated for his trouble in doing 
 so, and when it was sold in the interior of the country there 
 was an allowance for the cost of carriage. The Cambridge 
 dons were constantly inclined to complain that they were 
 charged more for their wine than the Oxford dons ; but the 
 excellence of the water-way from the great mart at London 
 doubtless favoured the University situated in the Thames 
 Valley, even though Cambridge had easy communication 
 with Lynn. The gain which the trader made in this fashion 
 was a legitimate return for the trouble he took in supplying 
 the English consumers in their own towns with a foreign 
 commodity ; they recognised the point which modern econo- 
 mists insist on, when they class those who are engaged in 
 the carrying trades among productive labourers. But if the 
 traders monopolised the whole supply of wine and sold it at 
 a dearer rate, with a profit that covered a great deal more 
 than remuneration for their trouble, then they were getting a 
 
1 62 Persojial Responsibility [Ch. XI. 
 
 gain at the expense of the consumer, and this was held to be 
 unfair; the whole of the legislation against forestallers and 
 engrossers rested on this principle. They tried to buy up 
 goods so that they might rule the market, and make a profit 
 at the expense of consumers, without any adequate exertion 
 or service which they themselves rendered. To gain by 
 ' making a corner,' or by creating an artificial scarcity, was 
 to be guilty of extorting from another ; this extortion, whether 
 practised by the wealthy against the poor, or by the labourers 
 against their employers, was condemned alike in all cases. 
 To take advantage of a man's need, or to aggravate a man's 
 need for the sake of getting more gain, was conduct which 
 they denounced in all its forms. 
 
 (Jf) The moralists and legislators of the middle ages 
 accordingly set themselves to prohibit transactions which 
 gave the opportunity for extortion, where it might lurk with- 
 out any one being able to check it and see for certain that 
 he was being fairly treated. The operations of middlemen 
 would often open larger markets and tend towards the benefit 
 of producers and consumers alike, while the operations of 
 engrossers, like corn-factors, tended to equalise prices over 
 any period. They did not work altogether for evil, and as 
 time went on, and the social benefits they conferred became 
 more obvious, free scope was given for their operations. 
 But dealings of this sort, though indirectly beneficial, did 
 give opportunities for unscrupulous men to make a profit at 
 the expense of the producer or the consumer, and hence for 
 many generations transactions of this sort were forbidden. 
 
 In regard to monetary affairs there was a special difficulty 
 in forming any estimate as to the fair equivalent which a man 
 with a fund of money might obtain for the services he 
 rendered, in whatever way he used it. He was hedged in on 
 every side. If he attempted to carry on business as an 
 exchanger, for profit, he was apt to infringe the privileges of 
 the crown and the mint. If he sought to lend money to 
 neighbours who needed it, and asked for interest on the 
 money, he found he was under the suspicion of trading on 
 their necessities. In all these various cases there was special 
 
Reimmeration for Risk 163 
 
 opportunity for taking advantage of men's ignorance or of 
 their need; there was the greatest danger that extortion 
 would be practised, and therefore mediaeval legislation, both 
 ecclesiastical and civil, discouraged or prohibited any one 
 from making hie living in such ways. But the restrictions in 
 regard to commerce were far less frequent than those for 
 other employments of money. On the whole it was possible 
 for the moneyed man to enter into partnership with others and 
 share the risks and the profits of a venture ; even here such 
 restrictions might be forced on him, in the interest of the 
 consumer, as to destroy all possibility of gain ; but this field 
 of enterprise was open to all who would take the risks. It 
 was only when a man tried to bargain himself out of risks, 
 and at the same time endeavoured to secure a gain for 
 certain, that they felt he was driving a one-sided and unfair 
 bargain. He was trying to secure himself against possible 
 loss, which was fair enough ; but he was also trying to secure 
 a gain for himself, however the venture turned out, and this 
 gave rise to the danger of extortion. 
 
 The lender, according to mediaeval notions, was perfectly 
 justified in trying to secure himself against loss of the 
 principal by taking a pledge for the return of his money. 
 But if he chose to secure himself against loss in the course of 
 trade, he had no fair claim to remuneration as well. Ap- 
 parently the schoolmen considered that the essence of the 
 service which the moneyed man rendered lay in his under- 
 taking the risks of business, and that if he bargained himself 
 out of the risks he had no claim to any gain from business. 
 He might make his choice, and have his principal secured to 
 him and get no gain, or he might risk his principal and reap 
 a contingent gain ; but he appeared to be dealing very hardly 
 if he insisted on both demands, — on securing himself against 
 possible loss, and bargaining for a definite and certain gain. 
 The man who lent his money on security without asking for 
 interest was doing a charitable thing, — it was a thoroughly 
 Christian act. The man who went into partnership in 
 business and risked his money in the hope of a contingent 
 gain, deserved the gain that accrued; but the man who 
 
164 Personal Responsibility [Ch. XI. 
 
 secured himself and demanded gain as well was making a 
 bargain by which he might gain at another's expense, and 
 he was falling into sin. 
 
 {c) They would not have denied that the lender did the 
 man who borrowed a real service ; they recognised that it 
 was a real charity to assist him in this way. The man who 
 throws a rope to a drowning man does him a real service, 
 but we should condemn the conduct of any one who tried to 
 bargain with the drowning man before throwing him the rope, 
 and charged, not an equivalent for his own trouble in render- 
 ing the service, but as much as the man could be got to pay 
 rather than lose his life. The schoolmen saw no means of 
 assessing in terms of money an equivalent for the service the 
 moneyed man renders, when he bargains himself out of all 
 risks ; they could frame no standard of what was fair, and 
 they knew that, as a matter of fact, moneyed men were only 
 too apt to take advantage of the needs of others so as to 
 make large gains for themselves. As has been pointed out 
 above, there was little scope for the employment of money 
 in ordinary business in mediaeval times. Those who bor- 
 rowed did not do so in order to trade, for they could hardly 
 have made much profit for themselves with money on which 
 they paid 40 per cent. They borrowed because there was 
 some special pressure, like unexpected demand for royal or 
 papal taxation, or because they wished to undertake some 
 great work at once, or fit out a military expedition. They 
 usually borrowed, because they had occasion for ready money 
 in order to meet some expense, and therefore they were more 
 or less in the power of the lender ; the pressure which forced 
 them to borrow at all, would also force them to agree to ex- 
 tortionate terms. In this way a man who was really wealthy 
 might, through a temporary need for ready money, get drawn 
 into a ruinous agreement by which his whole property should 
 be gradually drained. The temporary need might be con- 
 verted into a permanent and intolerable burden if the lender 
 made an unscrupulous use of his opportunity for extortion. 
 
 The vciQxtforvi of the agreement appeared to the school- 
 men to indicate sufficiently whether there was room for ex- 
 
Extortion and the Rate of Return 165 
 
 tortion or not. They did not feel it necessary to take account 
 of the rate of gain for which the lender bargained ; for they 
 held that if he was secured against loss he had all the con- 
 sideration he could fairly demand, and that any extra gain 
 only represented the need of the borrower, not an equivalent 
 of the service rendered by the lender. A man had a right 
 to require that his own should be restored to him and to 
 take security; he had a right to require that it should be 
 returned at a given date ; but in the circumstances of the 
 day, and with the very limited field for investment which was 
 then available, it seemed impossible to assign any rational 
 grounds for demanding more than this ; and therefore it 
 seemed impossible that a lender could justify such a de- 
 mand. That the borrower was willing to pay was perfectly 
 true ; but that did not make it right for the lender to take 
 advantage of his desire to escape from a present evil at the 
 expense of involving himself with future liabilities. Any bar- 
 gain which, while securing the principal, also demanded in- 
 terest, appeared from its very form to be extortionate, since 
 it seemed to show that the moneyed man was taking advan- 
 tage of the borrower's need. 
 
 2. In the sixteenth century, however, it began to be gene- 
 rally felt among business men, as had not been the case in 
 preceding centuries, that the old distinction which rested on 
 the form of the bargain was unsatisfactory. There were 
 many cases in which loans, though usurious in form, were not 
 extortionate as a matter of fact. If a merchant made on an 
 average 10 per cent, by the use of capital, he could easily 
 afford to borrow at 6 per cent. ; the man who bargained to 
 receive 6 per cent, from a merchant who gained more largely 
 still by the use he made of the capital borrowed, could not be 
 regarded as guilty of extortion. During the sixteenth cen- 
 tury there was an extraordinary stimulus given to English 
 industry and commerce, and many men were eager to borrow, 
 not for the sake of relieving themselves from difficulties, but 
 to enlarge their trade, or to commence trading. This was 
 a state of society which the schoolmen had not contemplated ; 
 and the modern conscience felt that there was no harm in 
 
1 66 Personal Responsibility [Ch. xi. 
 
 many bargains made in forms which they had condemned. 
 The Tudors and Stuarts attempted to draw a new kind of 
 distinction between extortionate and fair monetary transac- 
 tions by Hmiting the rate of interest. They passed permis- 
 sive bills which allowed men to bargain for definite gain on 
 secured loans, so long as the gain was limited to a compara- 
 tively low rate ; but this sort of regulation was indefensible 
 in principle and could not be enforced in practice, — though 
 it survived till Jeremy Bentham dealt it a death-blow. 
 
 The logic of facts has thus condemned these attempts to 
 distinguish between what is extortionate and what is fair in 
 regard to lending. The scholastic distinction, according to 
 the form of the bargains, prohibited much that was obviously 
 harmless : if it had been maintained it would have seriously 
 interfered with the expansion of our commerce and the de- 
 velopment of our West Indian colonies. The Tudor rule, as 
 gradually modified, was not susceptible of rational justifica- 
 tion, and was evaded in practice ; it was not merely useless 
 but often injurious, and served to aggravate the evil it was 
 designed to prevent. But even if it be impossible to draw 
 a distinction, which can be embodied in statute law, and to 
 draft a rule which can be enforced under penalties, it may 
 be possible to discuss the matter so as to give counsel for 
 personal conduct. If it were possible to frame some maxims 
 for personal guidance in the new circumstances of the day 
 we should at least have advanced a step ; a very little step, 
 but still a real one. There are many men who feel that the 
 strong condemnation of usury, not only in Scripture, but 
 among ancient moralists of all sorts, must mean something. 
 When the secret practices of money-lenders are exposed they 
 realise that the evil is not entirely a thing of the past, and 
 they are anxious to see that they themselves are free from 
 blame in this matter. 
 
 Nor is it possible to get satisfactory guidance from public 
 opinion. Public opinion is not inclined to condemn any 
 transaction that is concluded openly and in the light of day ; 
 but posterity may see in this, as we do in the stories of Roman 
 spectacles, a proof that society was corrupt, not that the 
 
Public opinion and Personal Duty 167 
 
 thing itself was right. Public opinion is apt to tend to a 
 lower level of morality, to accept as legitimate all that the 
 law refuses to condemn as criminal. Public opinion can 
 only be raised by those who set a higher standard for them- 
 selves personally ; they may in time impress the world with 
 the fact that theirs is a good standard, and the law may 
 secure the advance by condemning conduct that defies this 
 higher standard. But it is by personal effort to attain a 
 higher standard of virtue than that which is current, and 
 only so, that the tone of society itself can be raised. 
 
 The pages that follow contain some suggestions as to 
 maxims for personal guidance ; these can, of course, only 
 be put forward tentatively, and as suggestions. The distinc- 
 tions which the schoolmen drew are no longer applicable, 
 but the evil which they tried to avoid is not extinct. We 
 can no longer be content, as they were, with looking merely 
 at the form of the bargain ; they condemned much which our 
 consciences feel to be allowable ; it cannot be wicked to take 
 a money reward for doing what it is virtuous to do gratuit- 
 ously ; so long as we are sure that the money reward is rea- 
 sonable and not excessive. How shall we guard ourselves 
 against the possibility of being extortionate? They would 
 have eschewed all bargains that might become extortionate ; 
 can we draw the line in any other way? In their day, extor- 
 tion was commonly practised when the form of the bargain 
 gave the opportunity ; in our times it is perhaps exceptional. 
 Can we find maxims which will enable us to avoid these ex- 
 ceptional cases of the extortion which seemed to them to be 
 inevitably connected with lending money on security, and for 
 a definite rate of return? 
 
 There are three different questions of duty which demand 
 consideration ; we may enquire first of all, about right and 
 wrong as it concerns the manner in which capital is employed ; 
 secondly, right and wrong as to the rate of return received 
 from capital ; and thirdly, right and wrong as to the expendi- 
 ture of income and enjoyment of wealth, 
 
CHAPTER XII. 
 Duty in regard to employing Capital. 
 
 There are some kinds of business in which no one need 
 have any scruple in engaging ; there is no sort of productive 
 employment which adapts the gifts of nature to the use of 
 man that is a wrong way to use one's time and money. It 
 is a duty to do such business heartily and earnestly, and to 
 give one's mind to carrying it on as well as possible. The 
 ethical questions in regard to such an employment must all 
 be about the manner in which it is carried on ; whether in 
 developing the business, or in arranging its details, there are 
 any minor dishonesties or extortions. But there may be other 
 modes of using money which are wrong in themselves, not 
 because of faults in the way of conducting them, but because 
 the business itself is immoral. Thus it is illegal to keep 
 a gambling hell ; it may be profitable to do so, but it is 
 pandering to a violent passion, and the employment is 
 immoral, even if it is conducted with the most scrupulous 
 regard to honesty as between the managers and those who 
 frequent it. In the same way it is immoral to make money 
 by dealing in slaves ; this is apparently a very risky busi- 
 ness, and the profits on successful transactions are high; 
 but the misery it causes, especially in the kidnapping of 
 slaves, is overwhelming, and it is wrong to do it at all, and 
 of course wrong to make money by doing it. There are 
 some employments, then, that are plainly immoral, while 
 there are others that are plainly allowable. In regard to 
 the latter we have only to consider whether we are doing 
 
What the Law does not Condermt 169 
 
 a thing that is not wrong in the right way ; but in presence 
 of the existence of gambling hells, and of slave marts, we are 
 forced to ask how we are to discriminate the allowable uses 
 of capital from those that are to be condemned as wrong. 
 
 I. By wliat standard shall we discriminate ? 
 
 1. There is indeed some difficulty in seeing by what 
 standard we are to judge. There is of course a standard 
 given by the law of the land, which treats some employments 
 as criminal, or regards others as outside the pale of the law, 
 so that there can be no recovery for debts. Public opinion 
 may have a slightly higher standard ; it refuses to pay 
 much respect to a man who only just manages to evade the 
 law, and is guilty of sharp practice ; but, after all, the public 
 memory is short, and if the sharp practice is successful, 
 much will be condoned to the man who has risen to a 
 position of affluence, and a little generosity will silence 
 unfriendly criticism. But the standard on which the law 
 acts is necessarily a low one. It can only condemn what is 
 plainly wrong and what is proved to be wrong ; it cannot 
 take account of many forms of wrong-doing, because it is 
 impossible to obtain evidence without opening the way for 
 grosser mischiefs. It cannot blame a man for the indirect 
 and distant effects of action which was in itself legitimate. 
 It cannot adequately weigh motives and discriminate what 
 is well-intentioned from what is malicious. And so long as 
 this is the case we may feel that the standard it sets serves 
 to stigmatise what is wrong, but does not hold up an ideal 
 of what is right. We are bound to see that we do not fall 
 below the standard set by the law of the land ; but we are 
 not necessarily right if we keep up to it. Those who from 
 any motive allow themselves to infringe it are greatly to blame ; 
 they are, at all events, involved in the appearance of evil, and 
 are setting a bad example ; but it at best only marks out 
 what is allowable from what is wrong, it does not lay down 
 clearly what is right for me in my circumstances. 
 
 2. Hence we may see from another point of view the 
 
I/O Duty in regard to einploying Capital [Ch. xil. 
 
 importance of cherishing an ideal for human society ; it 
 keeps before us the goal towards which we are to move, 
 the aim which we are to keep in view. It is an inspiring 
 thing to have a high ideal, it is a duty to cherish it, and 
 never to be satisfied with meaner conceptions of life ; it is 
 right to endeavour to realise it. Here we may see the 
 influence which religion can exercise on economic action 
 and social life. It sets before us a nobler ideal, it gives us 
 strength to try and realise it, and to maintain it through 
 disappointment and discouragement. Such an ideal is a 
 personal power, inspiring personal effort; but as it takes 
 hold of one man after another, as it is less and less imper- 
 fectly realised by one and another, it raises the tone of 
 society. In so far as action is in accord with the ideal it 
 may be said to be virtuous ; and we ought to aim, not merely 
 at escaping the clutches of the law by avoiding what is 
 wrong, but at leading a virtuous life. 
 
 We may thus find a great difference of standard in regard 
 to almost every action of ordinary life. The law stigmatises 
 what is wrong, and leaves us to gather what is allowable ; 
 but the good man will not be satisfied with this standard ; 
 he has a higher ideal, and his conscience will not allow 
 him to ignore or forget it. He will try to do, not only what 
 is allowable because it is not wrong, but what is consonant 
 with his ideal and therefore right. His conscience takes 
 a stricter view than the law of the land, because it has the 
 means of taking account of motive and intention as well 
 as of word and deed. And there may therefore be frequent 
 cases where his conscience condemns, as not right for 
 him, what the law of the land and public opinion regard 
 as allowable conduct. And in such a case the man who 
 goes against his conscience and accepts the lower standard 
 is certainly wrong, even though society may find no fault 
 with him. 
 
 At the same time the decision of his conscience is a 
 personal one ; the action is wrong for him, with his ideal, 
 and his knowledge of the circumstances of the case. He 
 is called upon to guide his own conduct by his own sense 
 
Social Ideals 
 
 171 
 
 of duty, but he is not justified in applying it directly to 
 anyone else. In judging of others, we have no reason to 
 apply a different standard from that which is current, and 
 which is embodied in the law of the land, as set by public 
 opinion ; we are only justified in condemning them when they 
 fall below this standard and are guilty of doing something it 
 stigmatises as wrong. Herein lies the importance of the 
 principle which is so widely accepted at present, that busi- 
 ness of every kind should be above-board, and should bear 
 the light of day. So far as transactions are public, they 
 will not fall below the commonly recognised standard of 
 what is allowable ; and this is a good thing. But if no one 
 tries to rise above the standard, and thus helps to raise it, 
 there is a real danger that it will be gradually lowered. We 
 cannot condemn what is done publicly and above-board by 
 others, but we would do well to have a stricter conception 
 of duty to apply to ourselves. 
 
 But how, it may be asked, are we to bring our ideal to 
 bear on actual life? We may cherish an ideal of human 
 society where there shall be no poverty and no oppression, 
 where all shall be comfortable and none shall be surfeited 
 with luxuries ; but such an ideal is social. It can only be 
 realised in and by the community, and one human being 
 cannot make a little millenium all by himself in entire 
 disregard of his surroundings? What is the good of an 
 ideal which seems to be a mere dream ? If I cannot realise 
 it by myself it cannot serve as a guide to my conduct. 
 
 3. Here again we come on another instance of the dis- 
 tinction which has been insisted on so often. We may 
 frame our ideal for man in terms of his surroundings, or we 
 may frame it in terms that concern him. {a) To picture 
 the possible surroundings which men might have is simply 
 to let the imagination run riot. It is idle if we call in the 
 help of inventions and discoveries which have not yet been 
 made ; it is merely tantalising if we content ourselves with 
 picturing an immense improvement in human surroundings 
 which might be made with our present powers. Every 
 peasant with a fowl in the pot was the French King's ideal, 
 
172 DiUy in regard to employing Capital [Ch. xii. 
 
 and it was one which an absolute monarch could have 
 realised for a time, perhaps for a day, but he could not 
 guarantee its continuance. This is the defect of all ideals 
 which are framed in terms of human surroundings ; we need 
 to secure the diligence and self-restraint of the men, in 
 order that these ideal surroundings, when once achieved, 
 may be maintained. And hence it is simplest and wisest to 
 frame our ideals in terms of personal motive and character ; 
 for we may be sure that if the ideal of internal and personal 
 life were once generally realised, the externals would soon 
 be satisfactory too. ' Life develops from within ; ' and a 
 world that was peopled by unselfish and diligent men would 
 leave but little ground for complaint so far as the material 
 comforts of the population were concerned. 
 
 ib) It may be true that ideal circumstances would give the 
 best opportunity for training ideal men, but so long as oppor- 
 tunities are neglected and misused the ideal circumstances 
 would not ensure ideal men. It is best worth while to fix our 
 attention on personal character, and to frame our ideal in 
 terms of character, since in so far as that is attained, and the 
 springs of human action are aifected, the results of human 
 action in the shaping of human environment will follow directly. 
 
 Such a personal ideal, too, as it takes account of motives 
 and intentions, may afford immediate assistance in ordinary 
 life. We cannot make everybody comfortable, but we can 
 endeavour to see that our motives are unselfish, and we can 
 set ourselves to be diligent in our business. In this way 
 each single act, in this imperfect world, may be tested by 
 our ideal. We may be able to see that conduct that is allow- 
 able according to the standard of public opinion is wrong 
 for us, because it is inconsistent with our ideal, inasmuch as 
 it is a selfish endeavour to gain at the expense of others, or a 
 piece of lazy self-indulgence. An ideal expressed in terms of 
 man's surroundings is a mere dream, for there is no security 
 that it could be maintained even if it were introduced, and 
 it gives us no help in regard to the means that must be 
 taken for introducing it ; but an ideal expressed in terms of 
 personal characteristics is the greatest assistance to progress 
 
External and Personal Ideals 173 
 
 it gives us guidance at every moment of doubt, and thus 
 prepares the way step by step for a more complete realisation. 
 
 4. It is worth while to observe, too, that those who cherish an 
 ideal of comfortable circumstances, of easy competence and 
 comfort for all, are inclined to look for its realisation, not to 
 their own action, but to the doings of others. ' My modest 
 five hundred a year will do little to diffuse general comfort, 
 but my neighbour's five hundred a day might do much.' 
 Hence the natural attitude to take is that of criticising the 
 conduct of others instead of looking carefully to our own 
 doings. It is much easier to inveigh against the greed of 
 millionaires than it is to use ^500 a year in the right way. 
 But if our ideal is framed in terms of personal motive we 
 shall begin by seeing that our own motives are right, and we 
 shall be disinchned to waste our time in criticising the conduct 
 of those who are in other circumstances than ours, and of 
 whose motives and shortcomings we cannot judge. 
 
 It is not wicked to be rich, but it is wicked either for a rich 
 man or a poor one to be greedy and selfish. Our morality is 
 least likely to be confused if the ideal by which we correct 
 the vague permissions of public opinion turns our attention 
 to our own personal motives, which we know, rather than to 
 those of others, about which we can only speculate. 
 
 II. The mis-employment of Capital. 
 
 Such are the available means for judging of right and 
 wrong in economic affairs ; we may now turn to view ques- 
 tions connected with the employment of capital in the light 
 they afford. In doing so we shall have to distinguish the two 
 modes of employing capital which have been discussed above, 
 for there are at any rate different degrees of responsibility ac- 
 cording (i) as we lend capital to other people who misuse it, 
 or (2) misuse it ourselves by engaging in a kind of business 
 which our consciences do not approve. 
 
 1. {a) The preliminary objection that such loans are in 
 themselves wrong may perhaps be waived. This was un- 
 doubtedly the opinion of the fathers and schoolmen ; but it 
 is also clear that circumstances alter cases, and it would be 
 
174 Duty in regard to employ mg Capital [Ch. XII. 
 
 difficult to contend that such loans are always wrong at the 
 present time. A modern official utterance of the Church of 
 Rome did not make this bold and uncompromising assertion, 
 aild it does not seem possible to cut the Gordian knot and 
 solve all the perplexities in a rough and ready fashion. The 
 danger of extortion in connexion with loans, which was the 
 practical reason for the scholastic prohibition, can be con- 
 veniently dealt with when we are considering right and 
 wrong in regard to gain from capital, that is to say, the terms 
 on which loans are made. 
 
 {b) We may then look at the case of loans to a foreign 
 Government. According to the ordinary standard which is 
 set by public opinion, a man lends his money in the open 
 market, and gets his bond. The whole transaction is above- 
 board, and is perfectly straightforward and simple. 
 
 But the scrupulous man may not be so easily satisfied ; he 
 may feel that he is indirectly responsible for what the Govern- 
 ment do with his money, because he has supplied them with 
 the means of carrying out their purpose, whatever it is. It is 
 conceivable that the city of Geneva should desire to attract 
 wealthy folks from all nations by establishing gaming-saloons, 
 and that it would endeavour to float a loan so as to carry out 
 this scheme in the most magnificent fashion. Those who 
 knew the object to which the loan was to be applied, and 
 who lent their capital to enable the city to start the enterprise, 
 could hardy repudiate all responsibility in the matter. If it is 
 wrong to get money by keeping a gaming-saloon,it is also wrong 
 to lend money to some one else so as to enable him to do so. 
 
 But such a case is a mere fancy illustration ; in most cases 
 when a Government borrows, it borrows for some specific 
 object which is quite unexceptionable, like the laying of a 
 railway or other public works ; or it borrows for what may be 
 called general purposes, in order to continue to rule. In the 
 latter case the ethical question is not simply, Shall I enable 
 this Government to do some particular thing which my con- 
 science condemns? but. Shall I enable this Government to 
 exist? and. Can I trust it not to do more harm than good 
 with the resources with which I supply it? Even if after- 
 
Foreign BondJwlders 175 
 
 events show that the money was misused, and the schemes 
 of the statesmen utterly miscarry, it may not be easy to 
 blame him, still less to blame those who enabled him to 
 attempt it. We may take the case that has roused most 
 criticism against bondholders — the case of Egypt. Granting 
 that the Government of Egypt has been in many ways 
 extravagant and bad, and that the pressure of debt was so 
 heavy as to be almost intolerable, and recognising all the 
 complications which the attempt to protect the bondholders' 
 interests has brought about, we may still remember that 
 Mr. Stanley, looking back over all the ghastly failure, yet 
 speaks with enthusiasm of the great attempt to found a widely 
 extended Egyptian empire. It is difficult to say that those 
 who furnished the resources for that enterprise were to blame 
 for enabling Ismail to make the attempt. 
 
 After all, a bad Government is better than none ; it is very 
 unlikely that any Government which has credit to borrow is 
 so bad, so certain to use its resources cruelly and oppres- 
 sively, that it is wrong to supply it with resources. The 
 precise manner in which the loan is used, and the precise 
 results which follow from such expenditure, cannot be 
 definitely foreseen. There is the element of uncertainty 
 about this which renders all questions of practical politics 
 so fascinating to some minds, and so uninteresting to others. 
 We never can tell exactly how the matter will turn out, 
 and there is an element of speculation about the whole 
 affair. While a man would not be excusable who lent 
 money that he knew would be misused, there are few who 
 would hesitate to lend to a Government for fear that that 
 body should misuse it, or who, if the money was squandered 
 or worse, would feel that they ought to have foreseen it and 
 were personally to blame. 
 
 {c) The case of lending to a private person is not dis- 
 similar. If it is clear that if the money is going to be used 
 for a particular purpose of which the lender disapproves, he 
 is not justified in making the loan. And this may apply to 
 other cases than money used for immoral purposes. If 
 a man burdens his estate not in order to enable him to make 
 
1/6 Duty in regard to employing Capital [Ch. xil. 
 
 permanent improvements, but in order to maintain an ex- 
 travagant expenditure, he is at least acting foolishly, and it 
 is wrong to help him to make a fool of himself. The lender 
 can probably make such enquiries without much trouble 
 as will enable him to satisfy himself on this point. The fact 
 that the borrower wants the money because he likes living- 
 extra vagantly, and that he is willing to pay for it, or that 
 he will get it easily enough from someone if I refuse, does 
 not acquit me of my responsibility for supplying the loan. 
 I am to blame if I knowingly abet him in continuing in an 
 extravagant career, and in nine cases out of ten the enquiries 
 which are made as to the value of the security offered will 
 bring out the character of the borrower. 
 
 2. There are many cases, however, where a man manages 
 his capital himself, or chooses the direction in which he will 
 invest it. He does not lend it, but he enters into business 
 on his own account, or he becomes a partner by buying 
 shares ; if that business is immoral or mischievous he is to 
 blame. That someone else might engage in it if he did not 
 does not alter the case ; the question is as to my personal 
 duty with my information and as I judge of the influence of 
 a certain enterprise. I am not called to condemn another for 
 doing what I feel to be wrong for me — so long as society per- 
 mits it — but still less am I at liberty to correct my conscientious 
 conviction by appealing to the practice of these people. 
 
 {a) In regard to every sort of industrial enterprise which 
 is allowed by English public opinion, it may be said that it 
 is not wrong in itself, but that blame may arise because 
 of the habitual misuse of the articles produced, and which 
 might be used innocently. Is the producer to blame for 
 wrong done by the man who purchases the article ? Is 
 the wrong in making it, or in misusing it when it is made ? 
 The distinction may be illustrated by an extreme case, such 
 as the alleged manufacture in Birmingham of idols for export 
 to India. The 'idol is nothing; ' the manufacture of an ugly 
 image of an impossible monster is not wrong ; to manufacture 
 similar articles for nicknacks in drawing-rooms would be 
 catering for a harmless taste for grotesques; the mischief 
 
Brewing good Beer 177 
 
 lies in the wrong use of a material object, — in the idolatry. 
 At the same time, there can be so little doubt that the idols 
 will be used in connexion with heathen rites, that those who 
 manufacture them must be aware that they are aiding and 
 abetting in idolatrous worship. Where there is practically 
 speaking no ' use ' for an article except one that is wicked, 
 the manufacturer of that article is more blameworthy than 
 the man who ignorantly worships it. 
 
 {b) We might take an opposite case ; there may be a pub- 
 lisher who devotes large sums to the translation and pubUca- 
 tion of Christian writings, in the belief that a real service is 
 done to religion by disseminating such literature, and he 
 may find it a profitable enterprise. But in the descriptions 
 in which the fathers occasionally indulged of pagan society 
 and denunciations of pagan vices there is a great deal of 
 plain speaking on gross subjects. He might find that por- 
 tions of the works he had pubhshed were susceptible of great 
 abuse, and had, as a matter of fact, pandered to the depraved 
 tastes of vicious persons. How far is he to be blamed for 
 this misuse of an article which he has produced with the best 
 intentions? In such a case it may be possible to guard 
 against the misuse by excisions ; but the illustration may 
 at all events serve to bring out the point of the difficulty. 
 
 3. There is no material object which is bad in itself; it 
 only becomes an evil if it is badly used. The root of the 
 evil lies not in making the thing, but in the wrong use of the 
 thing ; but for all that, the scrupulous man cannot disclaim 
 responsibility for manufacturing articles which are persistently 
 and habitually misused, because he cannot but be aware that 
 he is pandering to probable misuse. 
 
 {a) There is one business which is carried on in this country 
 on a very large scale about which this question has come to 
 be of practical importance — the brewing trade. It is of course 
 obvious that good beer is a good thing ; and there is no 
 question here of bad beer or of adulteration, or of dishonest 
 trade, but only of the manufacture of a good article which is 
 in itself harmless. On the other hand, it is clear that in this 
 country there are many persons who misuse beer, and that a 
 
178 Duty in regard to employing Capital [Ch. Xil. 
 
 considerable portion of brewers' profits must be due to sale 
 which takes place not in connexion with the temperate use, 
 but in connexion with the intemperate misuse of beer. This 
 is so generally recognised that in one constituency recently 
 the voters insisted that their member should cease to hold 
 brewery shares ; they did not wish to be represented by a 
 man who derived profit from a business which they regarded 
 as not above suspicion ; and it is also rumoured that this 
 feehng has led to differences of opinion among the partners, 
 and alterations in the constitution of at least one great firm 
 of brewers. 
 
 (<5) Inasmuch as beer has a legitimate use, brewing is a 
 perfectly legitimate business which is in itself thoroughly 
 unexceptionable and honourable, like any other industrial 
 undertaking ; that need not be a matter of argument, though 
 there are Manichaeans who would contest it. At the same 
 time the personal responsibility of the brewer, as a man, does 
 not necessarily end when the article is produced ; he cannot 
 altogether disregard the manner in which the article is con- 
 sumed, for it is by the consumption of his beer that his capital 
 is replaced, and that his profit accrues. In so far as he is 
 careless whether his beer is misused or not, and in so far as 
 he pushes his business and tries to enlarge the sale without 
 thought of the possibility of abuse, he is shirking a responsi- 
 biUty. In so far as he is aware that his beer is commonly 
 misused, and carries on a business so that he deliberately 
 derives gain from the misuse of beer, he is certainly to blame. 
 But it is very difficult to carry on this particular kind of 
 business in the present condition of this country without 
 falling into mischief of some kind. The attempt to push a 
 sale by taking up the retail trade is apt to tend to abuse, for 
 it is very difficult to exercise an effective supervision over 
 houses that are thus managed. It may therefore be said of 
 brewing that it is a kind of business which is perfectly legiti- 
 mate but which it is particularly difficult to conduct without 
 incurring the guilt of gaining through the vices of others. 
 
 Where a man brews in connexion with his own hotel, and 
 exercises a personal supervision over the consumption as well 
 
Possibility of Effective Control 179 
 
 as the sale, he is in the best possible position for preventing 
 abuses ; the risk of evil is much greater in the case of 
 large firms, which not only brew for wholesale customers, 
 but own a large number of public-houses for the sale of their 
 beer ; in such cases the possibility of effective management, 
 and therefore of avoiding abuses, is reduced. It is still 
 further reduced in the case of breweries which are not man- 
 aged by private firms, but by companies ; the power of each 
 partner in controlling the business is practically nil, while the 
 directors are more tempted than the managers of other firms 
 to push the business with mere regard to possible profit. In 
 the case of brewing the effort of the virtuous man will be to 
 guard against the dangers of misuse, and to avoid as far as 
 may be the deliberate effort to gain because of misuse ; and 
 consequently the matter turns very much on the carefulness 
 of the management, and its effectiveness. When the control 
 is personal and effective, the risk of abuse is at a minimum ; 
 where responsibility is divided there is great difficulty in 
 exercising a complete control. Thus the question wears a 
 very different aspect in the case of the man who brews for 
 consumption on his own premises, and in that of the man 
 who holds brewery shares, and draws a gain without any 
 consideration for, or any effective power of, preventing pos- 
 sible misuse. 
 
 It is of course true that the prevention of abuse in this 
 matter is an affair of social importance, and that no single 
 individual can do much to abate it. He may do his best to 
 guard against mischief in connexion with his own business, 
 but that will do little to alter the habits of society. So far 
 as abuse can be limited by municipal regulation or by legis- 
 lation, it is incumbent on the good citizen to endeavour to 
 frame measures that will abate the evils of intemperance. 
 It is of course the part of the brewer, as of every other 
 citizen, to promote any measure that would really have this 
 result ; but it may be that in aiming at this result some 
 legislative enactment would impose serious restrictions on 
 the brewer's business, and his interest as a trader would con- 
 flict with the duty of promoting a measure of general benefit 
 
i8o Duty 171 regard to efnploying Capital [Ch. Xll. 
 
 to the community. In such cases it would call for much 
 public spirit to join in the attempt to limit the abuse by 
 legislative means ; and there might be at least a temptation 
 to postpone public duty to private advantage, and to refuse 
 to take active part in putting down abuses which prove pro- 
 fitable to himself personally. This is a position which the 
 scrupulous man will wish to avoid ; he would be anxious not 
 to slip into a position where his personal and pecuniary 
 interest might tempt him to be lukewarm, or even to oppose 
 a well-considered measure for checking the evil of intem- 
 perance. 
 
 The business of brewing may be taken as typical of othef 
 cases, and the discussion may be summed up in a general 
 form. Any business which is in itself useful and honourable 
 offers a legitimate employment for capital; but when the 
 products of the business are frequently misused, and when 
 the profits of the business arise, in part at least, from the 
 misuse of the article manufactured, it is incumbent on the 
 manufacturer not to ignore the misuse and deny his responsi- 
 bility, but to endeavour to take precautions against misuse. 
 It is very difficult to take precautions if a business is being 
 developed rapidly, and very difficult to carry them out where 
 the organisation is large and complicated. There may also 
 be a conflict between private interest and public duty as a 
 citizen, and the scrupulous man will wish to avoid placing 
 himself in a position where it is so difficult to act with recti- 
 tude. Rather than be liable to slip into the position of 
 abetting intemperance, and gaining through the vices of others, 
 he will prefer to eschew that calling altogether. 
 
 4. One solution of the difficulty for which there is a good 
 deal to be said is that a trade of this kind should be a Govern- 
 ment monopoly. This may appear paradoxical, as it has 
 just been remarked that effective control will give the best 
 safeguard against abuses ; and it is notorious, as has been 
 pointed out above, that Government administration is apt to 
 be lax. This is true ; but it is also true that the Government 
 need not push the business for the sake of profit, or in order 
 to compete with other traders, and that by possessing the 
 
State-7nanageineiit of the Liquor Trade i8i 
 
 complete control it may be able to limit the supply. This was 
 attempted in England under James I, and it is the practical 
 effect of the high license policy which is in vogue in many 
 of the American States. The State could thus carry on the 
 legitimate business at a large profit, and at the same time 
 devise any possible measures for preventing abuse. 
 
 There is, of course, the real difficulty that any arbitrary 
 restrictive measure is likely to oifer great temptations to 
 illicit manufacture and secret drinking, and that such practices 
 are exceedingly demoralising ; and this is true. Some people 
 urge that it is wrong for the Government to reap a gain from 
 the self-indulgence of the subjects, but this contention seems 
 to involve some misapprehension of the particular case. The 
 point of the whole proposal rests on the belief that the 
 Government can so manipulate their monopoly as to reduce 
 the evil to a minimum ; that it can get its profits from the 
 production of a much used national beverage, but that the 
 possession of a monopoly would put the Government in the 
 best possible position for checking incidental abuses. While 
 such a solution might seem to be the best possible, there is 
 no prospect whatever of any attempt to carry it out in this 
 country ; and we are therefore left in this position, that while 
 it is a useful and honourable thing to produce good beer, 
 there is yet so much danger of being insensibly led to become 
 a conscious accessory to intemperance and evil, that the 
 scrupulous man will prefer to avoid such an investment 
 unless he is able to exercise a complete control, and believes 
 that he is able to guard effectively against the dangers of 
 misuse. 
 
 III. Helinquishing Business in consequence of 
 Conscientious Scruples. 
 
 1. But there may be a further difficulty. If a man comes 
 to have scruples about a business in which he is engaged, 
 how is he to get rid of it? There are two possible courses; 
 he may {a) shut the whole thing down and sell the plant for 
 its worth as material, — a transaction which must involve 
 serious loss, and may mean absolute ruin. Or (<5) he may 
 sell the business as a oroino; concern, or his share in the 
 
1 82 Duty in regard to einploying Capital [Ch. XII. 
 
 business to another man who feels no scruple about it, 
 though by so doing he involves another man in the very 
 career which he has himself discarded on conscientious 
 grounds. To incur ruin would be the more heroic course; it 
 might conceivably be the right course if the business were in 
 itself immoral, like keeping a gambling saloon ; such a 
 sacrifice would certainly place a man in an effective position 
 for leading a crusade against abuses connected with a trade 
 in itself useful. 
 
 2. But though it might be a heroic proceeding it does not 
 appear to be incumbent on the man who has begun to feel 
 conscientious scruples about gaining from a business which 
 is generally recognised as allowable and honourable. It is 
 wrong for him, with his conviction as to its bearing, and his 
 felt difficulty to prevent abuses ; but it may not be wrong for 
 another. He has a perfect right to realise his capital and 
 sell a business which he does not desire to manage and does 
 not wish to push. His withdrawing from the trade would in 
 any case make room for others to enter, or to enlarge their 
 business. If he shuts down, the neighbouring brewers will 
 be the gainers, and he will lose heavily, but there will be no 
 diminution of the supply to the public. If he sells, he carries 
 his money out of the trade, and a new man enters on the 
 field. The practical bearing of his deciding to take the 
 heroic course is that in one case he loses and his competitors 
 gain; in the other case he severs his connexion with the 
 trade, and competition continues as before. In such a case 
 it seems that a man who scrupled to hold a property need 
 have no scruple about selling it ; his personal feeHng makes 
 it wrong for him to continue to profit by it ; but his personal 
 feeling gives him no right to condemn all those who are 
 carrying on a business which society regards as allowable and 
 useful. 
 
 3. There is another matter about which difficulty is felt. 
 Supposing a man comes to have scruples about the way in 
 which his money has been acquired, how far is he justified 
 in continuing to enjoy it? For example, a fortune may have 
 been made originally by dealing in slaves ; that is an im- 
 
Possibility of Restitution 183 
 
 moral business ; and we can easily suppose a case where the 
 grandson of a Liverpoo or Bristol merchant enjoys an 
 estate or a fortune which was notoriously acquired by a 
 mode of business which is now illegal. 
 
 (a) So far as the man who has inherited such a fortune is 
 concerned, it may be said that he has himself come honestly 
 by it ; that it has descended to him, and that he has had no 
 part in the doubtful transactions by which it was acquired at 
 first. Since the property has come into his hands, his main 
 duty would appear to be the conscientious discharge of his 
 obligations as a proprietor ; he ought to be careful, as all 
 other proprietors should, about the manner in which he uses 
 his property. If there is a possibility of restitution and 
 reparation to any who have been wronged it is an undoubted 
 duty to make it ; but when reparation is no longer possible, 
 there does not seem to be any obligation for me to pay Paul 
 because Peter has been robbed by my grandfather. But the 
 whole matter wears a different aspect with regard to the 
 personal enjoyment of gains which a man has himself 
 acquired by unscrupulous conduct. There is a far clearer 
 call and probably a far greater opportunity for restitution 
 and for attempts at reparation, and no man can have a 
 moral right to enjoy what he was not justified in acquiring. 
 
 (b) Even so, however, there is a very great distinction 
 between gain which was acquired by dishonesty and chi- 
 canery, that was known to be dishonourable at the time, 
 and gain which accrued through a business which was 
 pursued in all good faith and with a clear conscience, but 
 which has come to be differently regarded through the 
 gradual elevation of public sentiment, as slave-dealing has. 
 In the latter case the attempt at reparation would be a 
 voluntary act, which the scrupulous man might feel it right 
 to do ; in the former there would be an equitable claim 
 which might possibly be enforced in law even after the lapse 
 of many years. But the most important questions in regard 
 to money are not as to the means by wdiich it has been 
 originally acquired, but as to the manner in which it should 
 be used ; and to this we must return later. 
 
CHAPTER XIII. 
 
 Duty in regard to the Return on Capital. 
 
 It is usual to distinguish the return which the capitaHst 
 receives into three parts: Interest, Insurance against Risk, 
 and Wages of Management. This analysis is very unsatis- 
 factory in each of its parts, but nothing better can be expected 
 so long as only one form of capital is taken into account, 
 and the subject is treated as if all capital were employed in 
 industry, and administered by the man who owns it. If we 
 wish to discuss what is right and wrong in regard to the re- 
 turn on capital we must include all capital, whether engaged 
 in industry or not ; and we must analyse the return which 
 accrues, not on one form only, but on all forms of capital. 
 
 I. "Wages of Management. 
 
 1. There is indeed one part of the employers' receipts 
 which cannot be properly included as part of his profit, and 
 which recent economists have rightly considered under an 
 entirely different head. This is the element termed Wages 
 of Management. It is plainly distinct even in connexion 
 with capital employed in industry, for in a Joint Stock Com- 
 pany the owners of the capital will for the most part take no 
 effective part in the management, and the wages of manage- 
 ment will be paid to men who do not own any part of the 
 capital. Thus in a Railway Company, the shareholders and 
 debenture-holders own the capital, but they take no real part 
 in the management ; some of them do not even familiarise 
 
Wages and Salaries 185 
 
 themselves with the half-yearly reports, and few of them ever 
 attend the meetings or send proxies, unless on some very un- 
 usual occasion, and after an active whip for their suffrages. 
 Wages of superintendence and management are paid to 
 numerous officials, from the general manager with some 
 thousands a year, down to the foreman porter at thirty 
 shillings a week : and of those who draw wages of manage- 
 ment as responsible servants, none need be shareholders, 
 and probably very few, if any, are shareholders, or have any 
 part of the profits. The only persons who draw both are the 
 chairman and directors; they are, on one hand, partners, 
 and partners with considerable shares ; and, on the other 
 hand, they draw fees for attendance at meetings, and thus 
 obtain wages for their services. But on the whole it is true 
 to say that the shareholders get profits, but no wages of 
 management ; and on the other that the responsible servants 
 get wages for managing the concern, but draw no profits. 
 Such a case brings out the impossibility of drawing a line 
 between wages of superintendence and wages for labour. 
 The foreman porter when he is directing other men is super- 
 intending and managing ; but when he is himself handUng 
 luggage or screwing up a coupling, he is labouring. The in- 
 terconnexion is still closer in office work ; at one time a clerk 
 is writing invoices which are necessary for the safe and regular 
 conveyance of goods, at another he is checking returns ; in the 
 one case he may be said to be working at the business of the 
 company, in the other to be superintending and checking the 
 work of others. We cannot distinguish them as manual labour 
 and head work, nor as responsible and mechanical employ- 
 ment, for the driver of an engine is in a very responsible 
 position, and yet he is doing work, not superintending the 
 work of others. We cannot distinguish the one kind of 
 service from the other ; though it may serve to classify 
 them by the manner in which they are commonly paid, and 
 to say that those who labour are paid weekly wages and 
 those who superintend are paid quarterly salaries. This is 
 a very crude way of dividing the groups of workers and 
 superintendents ; but the different modes of remuneration 
 
1 86 Duty in regard to the Return on Capital [Ch. Xlll. 
 
 roughly correspond to different kinds of service, and may- 
 be taken as representing the two classes of servants. 
 
 2. For though there is such difficulty in classifying the 
 different grades of service, the fact that there are such dif- 
 ferent grades is of the highest importance. Superintendence 
 and management, what may be called responsible service, is 
 sometimes remunerated on a very liberal scale, and there are 
 not wanting signs that the labourer is inclined to view these 
 large payments with some little jealousy. Thus, when some 
 years ago the Midland Railway reduced the payments to 
 a very large number of their servants, there was much 
 dissatisfaction expressed because the 'gold-lace officials' 
 suffered little if any diminution. It is also said that in 
 working men's co-operative societies, the salaries of the high 
 officials are by no means so large as in similar businesses 
 conducted as private firms. In distributive societies they 
 possibly do not need so much business capacity as firms that 
 rely on competition, and the comparative failure in pro- 
 ductive enterprise may possibly be partly due to neglect of 
 this factor in success. It is quite possible that enterprise, 
 shrewdness, and complete trustworthiness are qualities which 
 the employer finds it well worth while to pay for ; that the 
 example of heads of departments influences all their sub- 
 ordinates, and that it is prudent for capitalists to pay almost 
 any sum to secure or to retain the services of a thoroughly 
 good man as a superintendent. In fact, it appears that if it 
 were not worth while it would not be done. But the im- 
 portant point remains that these large salaries are paid as 
 wages and for services, and that they are in no sense paid to 
 a man as a return on his capital. 
 
 3. It has been necessary to go into this at some length in 
 order to enforce the proposition that, when we are considering 
 the return on capital, the wages of management must be 
 rigorously excluded; and that in the case of those who 
 themselves manage the business in which capital is invested 
 a very large allowance must be made for the amount they are 
 entitled to as wages for their successful management. It is 
 easy to contrast the style in which the owner of a cotton mill 
 
Two Sources of Gain 187 
 
 lives with that of his hands ; he has a handsome house, and 
 sends his boys to a public school, while the hands live in a 
 tenement, and may often have difficulty about threepenny 
 fees. But a very similar contrast might be drawn between 
 the manager of a bank or an insurance company and one of 
 the copying clerks. The company pays the man of business- 
 capacity handsomely, while the man who does mere drudgery 
 has to manage on a mere pittance. It may be true that there 
 is unfairness in the apportionment of wages for different 
 classes of service, but this is an entirely distinct question 
 from that of fairness in the apportionment between capital 
 and labour. We want to discriminate the employer as 
 capitalist from the employer as the energetic man of business ; 
 and we are only called upon at present to consider the gain 
 which accrues to him in the former capacity. 
 
 n. How the Return on Capital is obtained. 
 
 If, then, we exclude the wages of management, and take 
 account of capital in all its various forms, we shall find that 
 there are two sources from which the gain is ultimately 
 derived — (a) on the one hand, it is obtained by securing a 
 right to levy taxes, and {p) on the other hand, it is derived 
 from success in catering for the wants of the public. It is 
 here that the distinction to which allusion has been so 
 frequently made between capital that is lent and capital 
 that is employed in business comes into clear light. The man 
 who lends money at interest bargains for the right to draw 
 on the resources of the borrower ; if he lends to a nation he 
 expects to be paid annually out of the proceeds of the taxes ; 
 if he lends to a municipality he expects to be paid annually 
 by means of the rates ; if he lends on mortgage to a land- 
 owner, he expects to be able to obtain payment regularly 
 out of the rental. It does not matter to him whether the 
 nation or the city or the landlord use his money in a re- 
 munerative manner or not. They may employ it profitably, 
 or they may expend it in display ; it is all the same to him, 
 so long as they are able respectively to fulfil their obligations. 
 
1 88 Duty in regard to the Return on Capital [Ch. xiii. 
 
 They may use his money unproductively — whether usefully 
 or not — or they may use it in a productive enterprise which 
 proves a complete failure ; but so long as it does not involve 
 the borrower in ruin, the lender's claim holds good, and is 
 unaffected by the misjudgment of the borrower. For in such 
 cases the lender counts to gain by his right to tax the 
 resojirces of the borrower, and this definite right remains. 
 
 On the other hand, he may gain by success in catering for 
 a public want ; he enters into business, and supplies goods 
 which the public buy, so that he replaces his capital at a 
 profit. If business is good, his profit maybe very large; if 
 it falls off he may merely replace his capital, or he may be 
 forced to work for a time at an absolute loss. But whether 
 profit is high or not it is always varying — as business itself 
 fluctuates, — sometimes high, sometimes low, and sometimes 
 disappearing altogether ; it can never be definitely calculated 
 upon, and sometimes it does not accrue at all. This is the 
 marked difference between the return which is paid on loans, 
 and the return which is obtained by capital employed in 
 business. The lender bargains for a definite rate of return, 
 and bargains to receive it for certain ; the borrower's bank- 
 ruptcy may deprive him both of principal and interest, and 
 he is forced to take that risk; but by the terms of his bargain, 
 and so long as the borrower can pay his way at all, the lender 
 insists on a definite rate of return, and on having it paid 
 without fail. The man in business is in a very different 
 position; his gain is contingent, for he may not get any, 
 and he cannot generally expect that any two years will be 
 exactly ahke ; the second may be better or it may be worse, 
 but it will not probably be precisely the same as the first. 
 The one man counts to gain by taxation, and he can bargain 
 for a definite rate of return at stated times ; but the gain of 
 the other is necessarily contingent, as it accrues in the course 
 of trade, and is affected by fluctuations of every kind. 
 
 (A) 1. The man who lends his money to a Government ren- 
 ders a very real service. This has never been denied. What 
 has been maintained was that this was a service for which it was 
 impossible to assess the fair remuneration, and that therefore 
 
A right to Tax the Borrower 189 
 
 it should be done out of charity, if at all, as any demand for 
 remuneration tended dangerously towards extortion. Public 
 opinion and the law of the land alike agree at present in 
 regarding bargains of this sort as allowable. The mere fact 
 that borrowing offers the easiest means to any Government for 
 procuring the use of capital— that it is in its superior facilities 
 for borrowing that Government has an advantage over private 
 capitalists or associations— makes it clear that the wise states- 
 man may wish to borrow. He may intend to start public 
 works which will prove remunerative, either directly or indi- 
 rectly ; or he may have some scheme of educational improve- 
 ment which involves a large outlay, and this can be most 
 easily met by borrowing. The public works, like a railway, 
 may prove remunerative directly; public works, like a har- 
 bour, may facilitate commerce, and be remunerative indi- 
 rectly; public expenditure on education may be beneficial 
 to the inhabitants, and thus bring about in the more or less 
 distant future an improvement in that most important element 
 of national resources — the population. By aiding in any of 
 these the lender does a service, and it is a service for which he 
 may fairly claim compensation in money. The question of 
 personal duty then will arise in this shape. Whether it is 
 possible to discriminate between a fair and unfair rate of 
 return for a loan? and Whether it is possible to guard against 
 the danger of falling insensibly into extortion in connexion 
 with such gains ? 
 
 2. At the same time the fact that there is a need which the 
 lender supplies can at least only give a justification for paying 
 something ; it does not at all help us to understand how much 
 it is fair to pay. The lender is put to some trouble, or risk, or 
 privation, in making the loan ; but how much compensation 
 is adequate? He may fairly claim to receive enough to com- 
 pensate him, and the difficulty is to estimate the fair compen- 
 sation. But there is always the danger of looking at it from 
 the other side, of estimating the service rendered by the need 
 of the borrower, and being satisfied to take whatever he is 
 willing to pay. Now it is obvious that the greater the man's 
 need is, the more he will pay rather than fail to get the 
 
190 Djity 171 regard to the Return on Capital [Ch. xill. 
 
 accommodation ; and that the more necessitous a man's cir- 
 cumstances, the greater is the rate which he will offer. This 
 is equally true whether it is the temporary embarrassment of a 
 rich man, or the last chance of an insolvent. In this latter 
 case the risk would be great, and the lender might fairly ask 
 for the promise of large compensation if he consented to 
 undertake the risk. But the temporary embarrassment of a 
 rich man may not mean that there is real risk in lending him 
 money ; and it is tempting to measure the charge by what 
 he can afford, or what he is ready to give, and not by what it 
 costs the lender in privation and anxiety to meet this need. 
 Wherever the rate of return is based on the necessities of the 
 borrower, and not on the cost to the lender, there is real 
 extortion ; for the lender gains by trading on the necessities 
 of another. 
 
 3. If it is not easy to discriminate in any single case, and 
 to make sure that in the rate agreed on the lender has not 
 taken advantage of the needs of the borrower, it is obviously 
 impossible to get any help from examining a number of such 
 cases and considering the market for loans. For there may 
 be a number of eager and necessitous borrowers ; colonial 
 governments anxious to attract emigrants, and indulging in 
 costly harbour works and railways ; municipalities laying out 
 parks or building libraries ; any of them may be terribly 
 reckless in burdening posterity so as to defray present ex- 
 penditure. If the rate of interest obtainable rises, it may 
 only show that there are more people anxious to borrow, or 
 that the borrowers are more anxious for accommodation. 
 And by floating such schemes the responsible authorities 
 may be burdening a community with a heavy debt, which 
 requires very heavy taxation in order to defray the interest. 
 The market for capital only shows what the borrower on 
 good security is, as a matter of fact, ready to give ; it does not 
 show for certain what is adequate compensation to the lender. 
 
 4. There may, as a matter of fact, be extortion in exacting 
 the interest agreed on in connexion with Government loans. 
 There is such a thing as a limit of profitable taxation, and if 
 the burden imposed by borrowing were such that the limit of 
 
Extortion in cotmexion with Government Loa?is 191 
 
 profitable taxation had been passed, and the country was 
 becoming more and more exhausted annually in order to 
 meet the demands of foreign creditors, there would be real 
 extortion ; and there might be serious distress before the 
 pressure became so serious. The precise object for which 
 the money was borrowed is not of importance ; it may have 
 been for public works which did not prove remunerative, or 
 for great institutions which the country could not afford. 
 Where the fault lay, or whether the loss was due to unfore- 
 seen circumstances, does not matter ; if a burden of interest 
 is pressing so heavily on a country as to exhaust it, there is 
 extortion in continuing to collect the taxation which is needed 
 in order to meet the demands of the lenders ; and it is most 
 desirable on every account that relief should be given in 
 some form or other. 
 
 There are two countries at present where the pressure of 
 public indebtedness is very severely felt ; different in the 
 forms of government, in the climate and productions and 
 everything else, but alike in suffering from a burden of debt 
 which retards progress, even if it does not positively exhaust. 
 In New Zealand and in Egypt alike there was a period of 
 rapid borrowing on account of schemes which have not met 
 the expectations of those who brought them forward. Such 
 a state of affairs is recognised by law and public opinion, and 
 to repudiate the debt would be dishonest ; if a nation has 
 made a bad bargain it is a crime to attempt to evade it, or to 
 confiscate the property of men whose only crime is that they 
 have placed confidence in a national promise. At the same 
 time the scrupulous man might prefer not to be placed in 
 such a position ; he might dislike to feel that his income was 
 wrung from starving felaheen. If so, his remedy is an easy 
 one — he will avoid subscribing to Government loans unless 
 the country is so rich, or the rate of interest is so low, that 
 there is no appreciable risk that the pressure of taxation to 
 meet the interest due to him will be a serious burden. 
 
 5. There is, however, another way in which the remunera- 
 tion received by the lender may become excessive, as he or 
 his descendants may profit through a national necessity. In 
 
192 Duty in regard to the Return on Capital [Ch. xill. 
 
 the time of the French wars, Pitt was obliged to borrow on 
 terms which were high even then, and were ludicrously out 
 of proportion to the rate which is current at the present 
 time. The greater part of the national debt has been so 
 financed that these anomalies are done away with ; but there 
 were many years when the nation continued to pay terminable 
 annuities or tontines at a most extravagant rate. Here it 
 may be felt that the nation made the bargain with its eyes 
 open, that as it was able to meet it there was an obligation 
 to abide by it, and that there was no call on the part of the 
 fortunate creditors to offer to be satisfied with less. There 
 certainly was not ; but at the same time it may be felt that 
 they were lucky dogs who were able to make an exceedingly 
 good thing out of their bargain. Attention is called to it 
 here, because it reveals a criterion which we do occasionally 
 apply and which does give a good test of the cost to the 
 lender in making an advance. We feel that these men who 
 drew their 7 or 10 per cent, were excessively fortunate, 
 because the average rate of return which might be reaped by 
 contingent profits had come to be so much lower. If the 
 capitalist who carried on a trade could only average, apart 
 from wages of management, 5 per cent., and the Government 
 creditor was drawing 6 per cent, or 7 per cent., then he was 
 getting a return which was felt to be excessive. And this is 
 a sound criterion ; the ordinary rate of profit in any country 
 serves to give an indication as to a fair rate of interest, 
 for it gives a measure that is simply based on the cost to the 
 lender and has no reference to the need of the borrower. 
 The lender can obtain the ordinary rate of business profit, if 
 he invests in railway stock ; he has at least a right to be com- 
 pensated for the gain he sacrifices by not investing in an enter- 
 prise of the sort, and he may certainly claim lucru7n cessans. 
 But as the payment of any profit from a business — and at all 
 events the rates of profit — are contingent, he may well be 
 satisfied with less than the average rate of profit when he is 
 going to get a regular return at a definite rate. On the 
 other hand, if there is a more serious risk in lending on 
 inferior security, he may demand more than the average 
 
Success in Catering for the Public 193 
 
 rate of profit, so as to include insurance ; because he is 
 really risking his principal — periaihim sortis. The average 
 rate of business profit, that is of contingent return, gives 
 a criterion as to the cost and privation for which the lender 
 can fairly claim compensation ; though the element of less 
 or greater risk must also be taken into account before it can 
 be satisfactorily applied. 
 
 6. The best criterion we can get for fair interest on a loan 
 is found by comparing it with the average rate of profit from 
 ordinary enterprise. It is likely to be free from extortion, 
 for if the loan is sensibly applied to remunerative public 
 works or to developing the resources of the country and the 
 nation, it ought to be possible to earn this rate of return at 
 least, so that the Government need not be out of pocket 
 in paying the interest on its debt. Even if it borrows for 
 unproductive expenditure like a war, the lender can satisfy 
 himself or anyone else that his demand was not excessive. 
 The profit obtained in business is entirely different in 
 character from the gain that accrues by lending ; the lender's 
 gain arises from the fact that he has acquired a right to tax, 
 and the man who carries on a business in the face of com- 
 petition has neither the power nor the right to tax. But 
 although they are so different, they are not entirely uncon- 
 nected, as the capitalist may choose to obtain gain either in 
 one fashion or the other, and the man who is only compen- 
 sated for gain he might have had by trading, with due 
 allowance for risk, has not asked an excessive rate. 
 
 (B) 1. The return which accrues to the man who is engaged 
 in business comes from separate and distinct transactions, 
 some of which may be more successful and others less. 
 Some branch of the business may hardly pay, but it may be 
 worth while to keep it going in order to avoid waste, or 
 because it leads to remunerative business. Thus it is com- 
 monly said that the grocer makes little or no profit on sugar, 
 but finds it worth while to deal in it, so that customers may 
 not go elsewhere for their tea. And so in manufacturing; 
 one order may be turned out at a handsome profit, another 
 at little better than a loss, or the works may be almost idle 
 
194 DtUy in regard to the Return on Capital [Ch, xiii. 
 
 for weeks, and the profit on months of hard work may be 
 absorbed in keeping things together. In building operations 
 undertaken on a contract whicli runs on for several months 
 or years, there may be changes in the rates for material 
 or wages which will render the whole work highly profitable 
 or very much the reverse. There is no regular rate of return 
 and therefore there can hardly be a question as to a fair rate 
 of return. We may strike an average of the transactions in 
 a given period as they have occurred in all sorts of different 
 businesses, and thus get an average rate of profit for that 
 time ; we may expect that the average rate for some months 
 in the future will be higher or lower than in the past, but 
 there is no regular rate ; there is sometimes a big haul and 
 sometimes a little one, as in the herring fishery ; but there 
 is no regular and constant rate at all, because the whole gain 
 is contingent. The ethical question must present itself in a 
 different shape from that we have considered, and we must 
 not ask, What is a fair rate? but, What is a fair division of 
 the produce ? 
 
 2. Labour and Capital are the two factors interested in 
 the division, and the employer who manages the business 
 is the agent in the division. In putting the matter in this 
 way we need not forget that there are many persons who 
 hold that there should be no such division, but that the whole 
 produce should go to labour. No industry can be carried on 
 without labour; that is true, labour is a necessary element 
 in all production. But labour is not the sole agent in pro- 
 duction ; the strength of purpose which hoards and the 
 enterprise which uses a hoard are elements which bring the 
 great forces of nature into play, so that human strength and 
 
 , skill may be to some extent assisted, and to some extent 
 superseded. From all that has been said on the formation of 
 capital, and on its effectiveness when formed, it seems to 
 follow that the capitalist has a claim to some share in the 
 product. 
 
 3. We may first look at the division of the gross produce, 
 that is of the total amount which is realised by the sale of 
 the product. It is obvious that this amount will vary accord- 
 
The Fair Division of the Produce 195 
 
 ing as trade is good or bad ; it is also certain that for many 
 purposes these fluctuations are an evil, though owing to the 
 superior fluidity of capital, the capitalist can adapt himself 
 to them and take advantage of them more easily than the 
 labourer. But so long as these fluctuations continue there 
 must be variations in the amount of the gross produce and 
 in the sum which can be divided. On the whole, too, it 
 seems that the only fair principle is, that the division of the 
 produce should be according to the relative importance of 
 each factor in production. That is to say, if any business 
 requires ;^5ooo to buy the materials and to keep up the 
 buildings and plant, and ^5000 to feed and maintain the 
 men in good condition, the labourers might claim half the 
 produce ; while if it required ^9000 to buy materials and 
 maintain the building and plant, and ^1000 for wages, the 
 labourers would only be justified, on the same principle, in 
 claiming one-tenth of the product. Now, in by far the 
 greater number of industrial employments during the last 
 hundred years there has been an immense increase of 
 machinery, and the relative importance of labour as a factor 
 in production has been greatly reduced ; this has been 
 pointed out above in a different connexion. It therefore 
 follows that there must be a general depression of labour 
 relatively to capital in the division of the gross produce; 
 and that of the total wealth produced a relatively larger share 
 will go to capital, and a relatively smaller share will go to 
 labour. That this has been the case is patent to all, and is 
 matter of common remark ; the division between the rich 
 and the poor is far more marked than it was ; the long 
 streets of immense mansions in London, of villas in the 
 suburbs, or the great residential towns at the seaside, tell of 
 a very numerous reiitier class, and it is a matter of common 
 belief that most of the middle classes, including retail shop- 
 keepers, live in greater comfort than the corresponding 
 classes in the last generation. About this there is no 
 dispute ; on the other hand, the question as to whether the 
 wage-earners, skilled and unskilled alike, organised and un- 
 organised, have gained or not by the changes of the last fifty 
 
196 Duty in regard to the Return on Capital [Ch. xiii. 
 
 years, is hotly debated. There certainly is a good deal of 
 evidence which goes to show that there has been a relative 
 depression of the labourer as compared with the capitalist, 
 and that the labourer has not enjoyed such a large pro- 
 portional share in the increased wealth of England in 1890, 
 as he enjoyed of the comparatively small amount of wealth 
 produced in 1800. Considered as a question of honest 
 bargaining we might ask, How could he ? He does relatively 
 less. Considered as a question, not of generosity, but of 
 justice, we might ask, Why should he, since he does relatively 
 less as a factor in production? Why should he continue to 
 share in the same proportion as before ? From all which it 
 appears that it is not easy to get to close quarters with the 
 right and wrong in regard to this division unless we look at 
 the matter in some detail, and do not content ourselves with 
 stating a broad principle of justice. 
 
 4. We may therefore consider the division which the 
 capitalist makes as a matter of practice. There is constant 
 outlay required to continue his business as a going concern ; 
 there is (a) an outlay on machinery and materials, and also 
 (<^) an outlay on wages, including salaries ; with the former he 
 maintains his plant, with the latter his labourers ; {c) the differ- 
 ence between his outlay and his receipts by the sale of the 
 produce is profit, and this he retains as remuneration for the 
 capital employed. There is, taking the average of any period 
 of years, a minimum rate which is necessary to induce him to 
 continue in that business ; if he conducts his business well, 
 or is specially fortunate, he may get much more, but he will 
 be unwilling to take less. He may submit for a long time to 
 a very low return rather than attempt to realise and remove 
 his capital; it is impossible#to state in general terms the 
 amount of success which he must have in order to be tempted 
 to continue, but unless he thinks he can work at some sort of 
 a profit, and be remunerated for incurring the risks and 
 anxiety of the business, he will not engage in it, or will not 
 voluntarily remain in it. This may be called the necessary 
 remuneratioti of enterprise, as unless there is reason to expect 
 such a return the enterprise will not be forthcoming ; but it 
 
Necessary Remuneration of Enter p7'ise 197 
 
 may vary immensely in different places, or in the same place 
 at different times. But we are able to find a rough indica- 
 tion of this necessary remuneration by looking at one kind of 
 enterprise ; there are particular advantages in rural employ- 
 ments which render them attractive to many men, and there 
 are not such sudden fluctuations as in many other employ- 
 ments, even if we do not allow anything for superintendence. 
 The rate of return which a man expects to get when he uses 
 his capital as a farmer, or the rate of return which a moneyed 
 man expects to get when he sinks his capital in land and 
 buys an estate, may be taken as helping to indicate the 
 remuneration which is necessary in order to induce a man to 
 go on with any kind of business. 
 
 (i) This necessary amount will, of course, vary according to 
 different social conditions — political security and the like. 
 In countries where there is a great deal of available capital 
 people will be forced by competition to be content with a 
 smaller inducement than in new lands where capital is much 
 wanted for many purposes. But on the whole the return 
 that is obtained by working land, or by the man who sinks 
 his capital in purchasing an estate, may be taken as an index 
 to the remuneration of capital that is necessary, there and 
 then, if the owner is to enter or to continue to follow any 
 form of enterprise. It is, of course, only an index, as there 
 must be an allowance for greater risk, either physical or 
 commercial, and less attractiveness, perhaps, in various 
 other employments ; and the necessary remuneration for 
 capital in manufacturing gunpowder, or in weaving cloth, at 
 any place and time, may probably be explained by some such 
 allowances on the basis of the rate indicated by the return 
 from land, but will not be identical with it. 
 
 If the capitalist does not, on an average, earn this neces- 
 sary rate of remuneration over any period, he will withdraw 
 from the business, and in so far as the same thing occurs in 
 the trade generally, that industry will decline, and perhaps 
 decay altogether in that district. This entails a great waste 
 of capital, but, as has been noted above, it involves far more 
 serious and irreparable loss to the labourers. They cannot 
 
198 Duty in regard to the Return on Capital [Ch. XIII. 
 
 find employment at once, they may not be able to find it at 
 all without emigrating, and a period of idleness, even if it 
 does not necessitate a change of abode, must be a serious 
 drain on the savings of years, if it does not plunge the man 
 hopelessly in debt. There can be no more serious evil to 
 the labourers in any employment than that the master's 
 capital should fail to receive the necessary remuneration, 
 and that the works should be closed in consequence. 
 
 (ii) This necessary rate, then, gives the minimum which the 
 owner must receive, on an average, of his transactions over 
 any period, to induce him to continue in his enterprise ; and, 
 of course, the profits on particular transactions will often be 
 very much larger than the ' necessary rate.' In times of 
 good trade they will exceed the necessary rate on every 
 transaction for a longer or shorter period, and in cases where 
 a man has a trade secret, whether protected by patent or 
 not, or has any other means of defying competition — as by 
 agreeing with all possible competitors — the profits may be 
 very large indeed. But wherever competition is in effective 
 operation no manufacturer can hope to enjoy exceptional 
 profits for long, as the action of other competitors, and their 
 efforts to undersell him and get a footing in the trade, will 
 force him to diminish his prices, and thus to leave a smaller 
 margin between his outlay and the value of the product. 
 
 Exceptional profit, secured by agreement, is a phenomenon 
 that is attracting much attention in the United States, where 
 rings and trusts have been formed in a fashion that is un- 
 known in this country ; in it we notice the reappearance, 
 under new conditions, of the evils which mediaeval legisla- 
 tors attempted to prevent when they legislated against 
 engrossers and forestallers. When such schemes are worked 
 successfully manufacturers are able to gain at the expense 
 of the public, instead of merely gaining because they have 
 succeeded in serving the public ; there is no justification for 
 such gains, though in some cases the public are quite as well 
 and cheaply served by the monopolists as they could hope to 
 be by competing traders. But an exceptional profit which 
 arises temporarily or incidentally in a trade which is subject 
 
I7idustrial Partnerships 199 
 
 to competition is not likely to do much more than reimburse 
 the capitalist for periods when he did not even receive the 
 necessary amount of remuneration, but continued to work at a 
 positive loss in the hope that trade would mend. 
 
 5. There are many schemes in the present day for effect- 
 ing a more equal division of profits, or for enabling the 
 labourer to participate in profits. 
 
 {a) In so far as the necessary remuneration of the capitalist 
 goes, it is not possible to reduce it and pay any portion 
 away ; the labourer can only share in this if he is an owner 
 of some part of the capital, and there is a scheme for indus- 
 trial partnership. There are, however, some grave practical 
 objections to industrial partnership in any of the forms in 
 which it has been tried in this country. It implies that the 
 labourer shall invest all his savings in a given enterprise, 
 and in the enterprise to which he looks for the payment of 
 his wages. If, owing to any new invention or other change, 
 the business should cease to pay and should ultimately fail, 
 the labourer will be cast on the world, and the very same 
 disaster which throws him out of employment will swallow 
 up all his savings. A prudent man may well desire some 
 other form of investment. But apart from this there may be 
 considerable difficulty in framing a working constitution so 
 that the labourers with small shares and the large share- 
 holders shall be duly represented and have complete con- 
 fidence in the management. If industrial partnership can be 
 worked out in a satisfactory form it would enable the 
 labourers to share in the necessary remuneration, and give 
 them a portion of the exceptional profit as well. 
 
 (p) There is less difficulty in framing a scheme which shall 
 first secure to the capitalist the necessary remuneration, and 
 shall afterwards pay a portion of any exceptional profits to 
 the labourers as a bonus. This may often serve as a means 
 of obtaining exceptional profits, as the stimulus it gives may 
 enable the partners to dispense with the payment of heavy 
 salaries for superintendence ; and by rendering the men 
 more eager to work and more careful at their work it may 
 prove very remunerative. But such schemes have occasion- 
 
200 Duty in regard to the Return on Capital [Ch. xill. 
 
 ally broken down through a want of confidence between the 
 receivers of bonus and their employers. This may obviously 
 break out when the employers assert that there is no excep- 
 tional profit, and when the labourers believe that there ought 
 to be a bonus, and that they have worked so hard as to 
 deserve one ; and though it is good that there should be 
 more diligent labour, it is not good that the strain of labour 
 should be greatly increased without a constant, not a spas- 
 modic, increase of wages. 
 
 {c) On the whole the most practicable scheme for enabling 
 the labourers to share in exceptional profits is one which is 
 as nearly as possible self-acting, and therefore gives the least 
 possible opportunity for dispute. This is attained in those 
 trades where wages are paid according to a sliding scale ; 
 this does not merely give a bonus to the labourer, and does 
 not therefore stimulate to special work ; but it provides a 
 means by which the ordinary wages of the labourer shall be 
 raised at times A^hen trade is good, and thus enables him to 
 get the benefit of those conditions which give rise to excep- 
 tional profits. There may be great difficulties in framing a 
 sliding scale, and it will need to be revised from time to time ; 
 but these difficulties have been faced in many trades with 
 great success. This scheme certainly affords the simplest 
 means for the labourer to benefit by improved trade ; it does 
 not offer him any share in the profits, but it forces the 
 capitalist to increase his outlay in wages at the times when 
 his profit is becoming exceptional. It gives the same sort of 
 benefit, but without implying any unusual confidence between 
 the two parties ; and it gives it in a form in which it is most 
 likely to promote the labourer's comfort, and without 
 imposing any new obligation or special strain upon him. 
 
 (). If there are periods of exceptional profit, or transactions 
 of exceptional profit, there are also periods when the employer 
 has to exercise the greatest care in order to make any profit 
 and to reap the necessary remuneration which will induce 
 him to continue in the business. Competition is so keen, 
 we may suppose, that he cannot get larger receipts by the 
 sale of the product, and the only saving he can effect is by 
 
Relative and Absolute Depression of Labourer 201 
 
 looking carefully at his outlay and seeing if he can cut it 
 down. 
 
 (^) The cost of materials does not lie in his own control, and 
 he cannot alter it ; he may have more choice about repairs 
 to his buildings and the keeping up of his plant; but a 
 niggardly expenditure in these directions may prove very 
 false economy. If he saves in petty repairs he may soon 
 find it necessary to spend a large sum in substantial repairs ; 
 if he does not introduce new improvements, but is contented 
 to work with old-fashioned machines, he condemns himself 
 to carry on the competition with his rivals on most unequal 
 terms, and he cannot hope to prosper. The one element of 
 outlay which he can reduce without serious damage to his 
 own property is the labour bill ; and therefore he is apt to 
 look out for every means of reducing this item of expenditure, 
 either by paying a lower rate of wages, by employing fewer or 
 less skilled hands, or by getting more work out of those whom 
 he does employ. These are the various expedients by which 
 the employer is tempted to grind down the labourer — 
 whether he yields to the temptation or not. The history of 
 the latter part of the last century and the beginning of this 
 seems to show that employers did yield to the temptation in 
 some cases ; in fact, it may be doubted, as was stated above, 
 whether they had power to resist it, until they were assisted 
 by legislative interference. In so far as the labourer was 
 ground down, and forced to submit to a lower standard of 
 comfort, there was not merely a relative depression, but an 
 absolute depression of the labourer. Not only was it true 
 that he was a less important factor in production relatively 
 to capital, and that he received a relatively smaller share 
 than capital in the division of the produce, but that he 
 received an absolutely smaller portion of the necessaries and 
 comforts of life, and that he was positively worse off than 
 before. 
 
 {F) It is necessary to insist on this distinction so as, if 
 possible, to avoid the possibility of confusion. The relative 
 depression of the labourer appears to be inevitable, as 
 human skill adapts physical forces to carry on industrial 
 
202 Duty in regard to the Rettirn on Capital [Ch. xiii. 
 
 processes ; but since these physical forces are so powerful, 
 and supply the necessaries and comforts of life in such 
 abundance, the labourer may, when the readjustment has 
 taken place and the time of transition is past, find that he 
 enjoys a larger amount of the comforts of life than he did 
 before. He may find that though he gets relatively less, a 
 smaller proportion of the increased total, he gets also 
 absolutely more. The additional production may be so 
 great that a smaller share of the larger sum amounts to 
 more than the larger share of the smaller sum which he 
 formerly enjoyed. It therefore seems possible that, while 
 in the progress of society there has been a gradual depres- 
 sion of the labourer (as a factor in production and as sharing 
 in the produce) relatively to capital, there has still been no 
 depression, but an improvement, in the condition of the 
 labourer absolutely. On the other hand it is contended by 
 socialists, that though this is theoretically possible, it has not 
 occurred in practical life. It is urged that there has been 
 not only relative but absolute depression in the past, and that 
 we may expect not merely continued relative depression, as 
 we certainly may, but continued absolute depression, so long 
 as the present social regime, and capitalistic era, are permitted 
 to continue. 
 
 ic) While, on the one hand, it is perfectly clear that there 
 have been times, like those of the industrial revolution, when 
 the labourer was forced to submit to absolute depression, it 
 is also clear that there have been cases where the application 
 of machinery to some department of industry is effected 
 without detriment to the labouring classes. For example, 
 the invention of the locomotive has revolutionised the internal 
 carrying trade; it was feared that inns would be ruined, 
 coachmen and guards done away with, and that horse- 
 breeders would be ruined. But the enormous increase of 
 travelling which has arisen in consequence of the facilities 
 which railways offer has called for a far larger amount of 
 labour than was employed before, in the capacity of .engine- 
 drivers, guards, and porters. It may even be doubted whether 
 the very occupations which have suffered most have suffered 
 
The XV and the XIX Centuries 203 
 
 at all ; there are certainly far more inns and hotels than ever 
 before ; the employment of horses in local traffic and as 
 subsidiary to the railways must be very large. The North 
 Western Railway requires an enormous number of horses, and 
 the excellence of the English cart-horse has not declined since 
 railways came in. There is as much hunting or more than 
 before, and coaching is not extinct. The outlay for labour 
 all round must be immensely greater than it used to be, and 
 the labourer has been greatly benefited by the facilities for 
 cheap travelling. In such a case there has been relative 
 depression, but absolute improvement so far as labour is 
 concerned. 
 
 It would be interesting to endeavour to investigate the 
 results accurately in some of the minor employments in 
 which machinery has been recently introduced. How is 
 the condition of seamstresses affected by the sewing-machine ? 
 How is the condition of copyists affected by the typewriter? 
 Not of course those who try to compete against it, but those 
 who use it? Far more sewing and far more copying is done. 
 Labour is a smaller factor than before, but is it worse off or 
 not in consequence of the change? We need not pause to 
 consider each particular case, but we may endeavour to 
 examine the course which affairs have taken over a con- 
 siderable period, and to see how far they tell in favour of 
 either view. 
 
 (r) Here, then, we are brought to consider a simple matter 
 of fact; has there, on the whole, been an absolute depression 
 of the labourer under the influence of capital? Those who 
 insist that there has, point triumphantly to the fifteenth cen- 
 tury and challenge a comparison of the labourer's position 
 then and now. To the fifteenth century, then, let us go ; it 
 was a time when capital had been but little formed in Eng- 
 land, and when it was chiefly employed in commerce ; there 
 was little scope for investing either in agricultural or indus- 
 trial pursuits — though the weaving trades were an exception. 
 On some points we have sufficient data for instituting a 
 definite comparison, in other cases the data are wanting. 
 The hours of labour of the fifteenth century peasant were 
 
204 Duty in regard to the Return on Capital [Ch. xiii. 
 
 very long, as they lasted from five in the morning till half- 
 past seven at night, with intervals which came to about two 
 hours and a half. There is reason to believe that employ- 
 ment was very irregular, and that the day labourer was idle 
 for half his time, so that even though the rate of day wages 
 was high, when the difference of the value of money is taken 
 into account, the labourer's income was not large. As to 
 his command over the comforts of life we know that there 
 are many simple luxuries which he could not procure, — tea, 
 coffee, tobacco, oranges ; and that he had no access to news- 
 papers or other literature, and no opportunity for travelling. 
 As to the things he could procure we cannot judge correctly 
 of their quality; but from the frequency of the epidemics 
 that visited the country, it is impossible to believe that the 
 labourer was well housed or had wholesome food. The 
 furniture in the mansion of a city magnate like WilHam 
 Canynge was so simple that it is most unlikely that the 
 peasant had even a bed in his cabin. When we do not con- 
 tent ourselves with quoting the rates of wages, but try to 
 picture the conditions of life, it appears that rude and laborious 
 as is the agricultural labourer's life to-day, he is not so 
 utterly sunk in sordid drudgery as was his prototype in the 
 fifteenth century. If we look at the matter since the begin- 
 ning of the capitalist era we may say that while there can 
 be no doubt that labour has lost its preeminence in produc- 
 tion and has been relatively depressed, there is no proof 
 whatever that it has absolutely suffered, and has been per- 
 manently ground down by the influence of capital. 
 
 While this is true if we look at the conditions of employment, 
 it is equally true if we consider the numbers of the unemployed. 
 There are terrible accounts of the scarcity of work in London 
 in the fifteenth century, and of the violent outbreaks against 
 foreign competition to which it led under Henry VIII. The 
 evil did not abate, and was greatly increased in the rural dis- 
 tricts by the number of enclosures in the sixteenth century. 
 Some idea of the desperate condition of affairs may be gathered 
 from an estimate of the pauperism at a later date, when in- 
 dustry and commerce were reviving, and in a town which 
 
XVI I Ceiitiny Pajiperisvi 205 
 
 was awakening to a career of great prosperity. In Sheffield 
 in the year 1615, out of a population of 2207, there were 
 no fewer than 725 persons who were begging poor ; of the 
 remainder, 160 families were so hard pressed that they could 
 not afford to contribute towards the maintenance of the 
 others, but the whole expense had to be defrayed by the 
 contributions of a small body of 100 householders, and these 
 were only artisans, not one of whom could keep a team on 
 his land, while only two had ground enough for a cow. We 
 must remember, too, that in these days there was little or no 
 provision made for the shelter of the poor ; that there were 
 no workhouses, that relief was administered with a most 
 grudging hand, and that the able-bodied beggar was treated 
 as a criminal. There can be little doubt that at the opening 
 of the capitalist period, in a rising town, the paupers were 
 infinitely worse treated and were in a far larger proportion 
 to the population than they are at present. Sad as it is that 
 there should be so many paupers and so many unemployed 
 in the present day, there is every reason to believe that the 
 unemployed and the pauper of Tudor times, as well as the 
 employed, were worse off than the corresponding classes 
 to-day. 
 
 {d) This conclusion, while it may lead us to reject exag- 
 gerated statements about the increasing degradation of the 
 labourers, cannot be regarded as at all satisfactory; for it 
 seems that while the wealth of the country has so largely 
 increased the labourer has not shared greatly, if at all, in the 
 gain. But can this sad result be ascribed to the action of 
 capital? Is it clear that capitalists could have prevented it? 
 In comparing the two periods we must remember that there 
 has been an enormous increase in population ; that the 
 present population of England is six or seven times what it 
 was in the fifteenth century. The labourer's standard of 
 comfort has not been raised, and the population has increased 
 to almost the full extent which our increased power over the 
 means of production allows. The labouring classes in their 
 millions receive far more than the thousands of labourers did 
 before the era of capital commenced ; but they accept the 
 
2o6 Duty in regard to the Return on Capital [Ch. XIII. 
 
 traditional standard of comfort, and by rapid multiplication 
 the successive opportunities for raising the standard have 
 been lost. It thus appears that we can completely account 
 for the sad fact that the labourer has so little additional com- 
 fort, without for a moment supposing that he has been 
 steadily ground down. If the standard of comfort had 
 obviously declined we could not attribute the change to the 
 force of population, but should have to look for the explana- 
 tion in the oppressive action of capitalists ; but where the 
 complaint is that the standard of comfort is so little raised 
 we do not need to seek any more remote cause, but can explain 
 it by saying that the increase of population has gone on so 
 fast as to absorb the opportunities of improved comfort which 
 the labourer might have enjoyed. When this is taken into 
 account we may say with some confidence that there is no 
 proof whatever that capital has exercised a steady influence 
 in grinding down the labourer ; he has been but little raised, 
 but he has not been steadily degraded. There is therefore 
 no reason to anticipate that the grinding down will continue, 
 especially when we remember that the cases which appear 
 to give most justification for this fear occurred under social 
 conditions of a very unusual character, and which have long 
 since passed away. 
 
 (^) At the same time it must not be forgotten that there is 
 real danger of grinding down the labourer, and that there is 
 constant need to be on the guard against it. Organisations 
 of labourers to maintain their own interest in this matter are 
 the most effective weapons, but it does not merely concern 
 the operative classes. It concerns the nation as a whole ; 
 just as it is short-sighted of a capitalist to allow his buildings 
 and plant to fall into bad repair, so it is short-sighted of a 
 nation to allow the labouring class to be reduced to a worse 
 condition of mind. Any pressure which threatens to weaken 
 or degrade them is to be resisted by the legislature, and pos- 
 sibly can be resisted in no other way. Such interference is 
 not really pauperising if it improves the conditions of work, 
 and so benefits the worker without affecting the idler. There 
 is more ground for anxiety lest the diminution of hours or 
 
shorter Hours and Better Workers ib^j 
 
 increased rates of pay should have a disastrous effect on the 
 position of this country as a competitor with other countries 
 in foreign markets. But if the interference is really called 
 for to prevent the weakening and degrading of the labourer 
 there need be no cause for alarm ; the danger really lies the 
 other way, lest our population should be so weakened and 
 enervated that it could not continue to compete successfully. 
 So far as shorter hours or higher pay are really used to make 
 the artisan a better man, there is little fear but that they 
 will also make him a better worker, and that the resources of 
 this country will be increased rather than diminished by the 
 change. There is, indeed, no royal road for attaining a 
 better standard of comfort among the labourers ; legislation 
 can often prevent them from being ground down, and can 
 perhaps insist on their having opportunities for rising ; but it 
 is only as they are inspired with better ideals, and with 
 strength of purpose to realise them, that these opportunities 
 will be turned to good account, and that the increasing 
 wealth of the country will tell very decidedly on the condition 
 not only of those who succeed in saving capital and rising in 
 the world, but on those who continue to live by wages as well. 
 
 III. Public Debts and Danger of Accidental Extortion. 
 
 1. There are two points which may be taken into account 
 before this long discussion is summed up. It has been 
 pointed out above that in countries where there is much 
 capital the owners are forced to be content with a low rate 
 of necessary remuneration ; and that the indication of this is 
 found in their willingness to have recourse to worse soils and 
 to increase the extent or the intensity of their cultivation, 
 despite the fact that they are likely to get a return at a 
 diminished rate. When there is an increase of population 
 and more food is needed, an increase of capital and more 
 means available for producing it — in fact, when there is 
 material progress as it is understood in modern times — there 
 is likely to be a diminished rate of necessary remuneration to 
 the capitalist. 
 
2o8 Duty in regard to the Return on Capital [Ch. XIII. 
 
 2. In some of the countries of the world material progress 
 of this modern type has been going on for centuries ; in 
 some it is a thing of decades ; in others the history can only 
 be counted in years, and as a consequence the necessary 
 remuneration for capital in one country, say in New Zealand, 
 differs very much from the necessary remuneration in 
 another, say Holland or England ; and this difference has 
 some very important consequences when we consider its 
 influence on the distribution of capital throughout the world. 
 Hitherto we have only had to consider the necessary re- 
 muneration and exceptional profit in one particular place ; 
 but it remains to consider what influence is exerted by 
 varieties of necessary remuneration in different places. The 
 necessary remuneration in New Zealand is probably nearly 
 double what it is here ; and it appears almost as easy to get 
 5 or 6 per cent, there as to get 3 per cent. here. The 
 consequence is that there has been a steady drain of capital 
 from the old countries to the new ; and that men prefer^ to 
 live on the proceeds of capital lent to the New Zealand 
 Government or municipalities rather than to engage in 
 business enterprise in this country. There is danger of 
 capital going abroad, not because it is driven out by any 
 occurrences here, but because it is drawn out by the large 
 return which is offered elsewhere. This cannot be corrected 
 by cutting down the outlay in business, but it will correct 
 itself gradually as capital is formed in the new lands and the 
 owners are forced to be content with a lower necessary 
 remuneration. 
 
 3. The subject has now been dealt with in such a way 
 that we can return to consider the danger of extortion. For 
 purposes of illustration let us suppose that the necessary rate 
 of remuneration in this country, in most kinds of trade, 
 is 3 per cent, and that in New Zealand it is 5 per cent. 
 We may then say that the man who lends money at 3 per 
 cent, in this country or at 5 per cent, in New Zealand is 
 only taking what he could have obtained by enterprise in 
 either land, and that he is fully justified in asking for such a 
 rate of return. But even so he is liable at any time to drift 
 
Accide7ital Extortion 209 
 
 into the position of an extortioner and draw a gain at the 
 expense of others. He may have lent on mortgage in 
 England, and owing to the agricultural depression and the 
 fall of rents the interest on his mortgage may absorb the 
 entire return from the estate and more. In such a case, if he 
 is paid, he must be paid at the expense of the landlord; the 
 money may have been sunk in making real improvements in 
 the estate, but if there is a great fall in rent nothing may be 
 forthcoming in consequence of the improvement ; the entire 
 loss has fallen on the owner of the estate, and the mortgagee 
 has a legal right to exact his annual interest if he can get it 
 anyhow. Even though the interest is so low it may acci- 
 dentally become extortionate, because the lender is com- 
 pletely secured, and draws a moderate gain without taking 
 any share in the risks of bad times. 
 
 In the same sort of way there may be accidental extortion 
 in the case of loans to a foreign government. It is often the 
 case that State-trading is expensive and badly managed, and 
 the schemes for laying down railways and developing 
 harbours may cost vast sums and fail to secure the direct or 
 indirect remuneration that was hoped for. In such a case 
 the man who has lent money at 5 per cent, has not asked 
 an excessive rate ; but if 5 per cent, is not earned, directly 
 or indirectly, he can only obtain his interest at the expense 
 of the colonists and out of taxes they pay. The whole 
 burden of failure falls on them, and the lender continues to 
 draw his interest at their expense, and by means of an 
 increase of taxation. 
 
 4. This danger is not an imaginary one; for as capital 
 becomes more abundant in any new country the rate of 
 necessary remuneration is likely to decline, and there will be 
 greater and greater difficulty in paying the interest at which 
 capital was originally borrowed. Even if statesmen were 
 perfectly wise, and if all public borrowing were for the sake 
 of making remunerative works, there would be danger that 
 the burden of the original interest would be increasingly felt, 
 unless it could be readjusted by some financial operation 
 like Mr. Goschen's. But statesmen are not all perfectly 
 
210 Duty in 7'egard to the Return o?t Capital [Ch. XIII. 
 
 wise, and the public debts of the world are not all incurred 
 for remunerative purposes ; there is a constantly increasing 
 burden of interest which has to be defrayed by taxation, and 
 which must have most serious results on the industry and 
 commerce of the world. Of the total annual produce of the 
 world, in 1882, something like ;^200, 000,000 was not divided 
 between the labourer who works and the capitalist who 
 conducts the enterprise, but went as a fixed charge to those 
 who had lent capital in times gone by ; while much of the 
 principal has been wasted or extravagantly used, the burden 
 of interest has still to be defrayed. 
 
 5. The exhaustion of the provinces under the Roman Re- 
 public is so far analogous to the pressure which is exerted by 
 foreign bondholders in the present day, that it is at least 
 incumbent on us to look carefully at the state of the case, 
 and see if it is practicable to check the evils which sapped the 
 strength of the greatest power of ancient times. It is at all 
 events possible for the scrupulous man to avoid having any 
 personal part in this matter by abstaining from this mode of 
 employing capital altogether; or, if that seems impracticable, 
 the risk of accidental extortion will be reduced to the lowest 
 possible point, if he only lends to very wealthy countries and 
 for a low rate of return. 
 
 The pressure of extortion, whether through demands 
 for interest out of taxation, or through saving outlay by 
 grinding down the labourer, will show itself in injury to 
 national resources. It may be the exhaustion of the soil or 
 the mines, as under the Roman rule; it may be in the 
 degradation and weakening of the population. It is a real 
 danger which only ceases to be serious when it is faced and 
 kept in view. There may be legislative interference to check 
 the grinding down of the labouring population, and there has 
 been ; but it may be doubted if legislation can check the evil 
 which may occur through reckless borrowing by a Govern- 
 ment and subsequent exhaustion to meet the demands for 
 interest. A bargain is a bargain, and no man and no 
 Government is justified in repudiating an agreement because 
 the bargain has turned out badly, especially if the mischief 
 
Accidental Extortion 211 
 
 has lain in their own folly. But the man of probity and 
 good sense may well scruple to lend his capital to a Govern- 
 ment in terms which may lead to his drawing interest in a 
 fashion which exhausts and impoverishes the country where 
 his money is placed. 
 
CHAPTER XIV. 
 
 The Enjoyment of Wealth. 
 I. Right and "Wrong in Enjoyment. 
 
 Here it seems that the task we had set ourselves might be 
 brought to a close. We have examined the part which 
 capital plays in modern society, the dangers which arise in 
 connexion with it, and the manner in which it is being 
 administered, and is likely to be, so far as we can look 
 forward. We have tried to look at capital in itself, to see 
 how it is formed, and how replaced, to note the nature of the 
 service it renders to the public, and the character of its 
 relation with the labourer. We have touched, too, on the 
 considerations which should guide a man as to the direction 
 in which he uses his capital, and the manner in which he 
 bargains for a return ; and thus have examined personal duty 
 in regard to social life. It is by the manner he uses his 
 wealth, and the manner he gets his income, that the capitalist 
 is brought into contact and exercises a direct influence on 
 society at large; but it is not unnecessary to add a few 
 remarks on the duties of private life as well — on the manner 
 in which a man enjoys his wealth. For no man lives to 
 himself alone, and there is a very real, if not very easily 
 measurable, influence which the personal and private life of 
 each exercises on the well-being of others. 
 
 1. After all, the prospective enjoyment of wealth is never 
 left out of sight altogether; even the miser looks forward 
 to a continued enjoyment of the sight of his accumulations. 
 It is for the sake of enjoying freedom from anxiety that some 
 
Recreation as Fitting for Work i\'i, 
 
 men form a hoard and save capital ; it is for the sake of 
 enjoying wealth that others enter into business and try to 
 increase their income. The special ideas of enjoyment which 
 any man cherishes, and for which he provides, are constantly 
 before him ; the aims he has in view may affect his conduct 
 in regard to the means he uses for attaining them, and they 
 will at any rate affect the feelings with which other people 
 regard his success. If he is merely vicious in his ideas of 
 enjoyment they will grudge him his gain, while the man who 
 has been generous and wise in the use of his wealth will find 
 ready and hearty sympathy on all sides if he loses it. When 
 we look at the character of personal life, and the manner of 
 enjoying wealth, we may see that they are not merely 
 matters of private duty, but that they have a real bearing 
 on the condition of society at large. 
 
 2. Stress has been laid above on the importance of work; 
 and it has been asserted that according to Christian con- 
 ceptions of duty the ideal for man is not a life of idleness 
 but a life of work. It is this that will call forth the best of 
 his powers, and that will enable him to benefit his fellow- 
 men ; and it is when we keep this conception of life clearly 
 before us that we advance one step towards discriminating 
 in regard to what is right and wrong in the enjoyment of 
 wealth. If man is primarily a worker, he is the better of all 
 such enjoyment^as keeps him up to his best as a worker ; he 
 is the better for such rest as recuperates him after work, and 
 for such recreation as refreshes him and fits him for doing 
 his work better. These are elements both of rest and 
 recreation which it is positively right for him to enjoy ; such 
 rest and such recreation, according to his powers and tem- 
 perament, as keep him at his best, and enable him over a 
 period of years to do the most he is capable of, are times of 
 idleness and amusement which no one need grudge him. 
 
 3. On the other hand, there can be no doubt that any 
 enjoyment of wealth which unfits a man for work is wrong. 
 If he takes a long holiday and gets into easy-going and 
 irregular habits, so as to be unable to settle down again to 
 the routine of ordinary duty and the monotonous round of 
 
214 The Enjoyment of Wealth [Ch. xiv. 
 
 daily tasks, his idleness has been wrong. If his recreation 
 takes the form of a ' wet night,' so that he finds himself a 
 ' bit chippy ' in the morning and unfit for work, his recrea- 
 tion has been wrong. Any form of enjoyment which fits 
 a man for his work is right, and any form of enjoyment 
 which unfits a man for his work is wrong. The one is 
 recreation since it recreates his energies, the other is dissi- 
 pation since it dissipates them. 
 
 These distinctions may be found to include a larger 
 number of cases than might at first sight appear, but they 
 can of course only be applied personally. What is necessary 
 rest for one would be gross idleness for another ; what 
 would amuse one and prove suitable recreation would bore 
 another man to death. Still, the man of forty, who is not 
 a fool, will have a very good idea as to what is rest and 
 recreation for him, and what is idleness and dissipation ; he 
 will be able to judge how things affect his powers of working. 
 There may be a large number of enjoyments, however, to 
 which it is difficult to apply this test; they seem to be 
 things indifferent, as we cannot see that they have much 
 bearing one way or another on powers of work. But after 
 all, the duty of work is only one side of human life, and 
 diligence only one part of human duty, and we may be 
 able to test other enjoyments by their bearing upon other 
 sides of human character. 
 
 4. Any use of wealth that facihtates the development of 
 any kind of skill or the refinement of taste has much to be 
 said for it ; at all events wealth is not wasted if it promotes 
 the cultivation of human faculties, intellectual or artistic. 
 Enjoyment in connexion with the pursuit of knowledge or 
 the practice of any branch of art is in itself wholesome and 
 good ; and this is true of athletic games which improve the 
 human body, as well as of any intellectual exercise which 
 disciplines and improves the mind. On the other hand, 
 there may be over-indulgence which mars rather than 
 develops the mental and bodily powers,— a strain which 
 exhausts the physique and plants the seeds of disease ; and 
 while enjoyments which develop faculty and power are good 
 
 ^ 
 
Social Enjoyment 215 
 
 so far as they go, enjoyments which exhaust the body or 
 deteriorate the mind are obviously wrong. 
 
 5. Man, however, is a social being, and it is a poor thing 
 for him to aim only at his personal self-development; he 
 may indeed have his reward and become the complete prig. 
 It is far better if he can aim at mixing happily with other 
 men, can learn to appreciate their excellence, to sympathise 
 with their interests, and to make allowance for their faults ; 
 because as part of a social circle his life is more complete 
 than when he has no thought for anything but himself, and 
 neglects all opportunity of correcting his one-sidedness, and of 
 learning from the experience of others. And thus to mix and 
 learn from others involves the expenditure of time and 
 money in social enjoyments ; in fact, it is in connexion with 
 entertainment that there is the most frequent temptation to 
 extravagance. It might at least be kept within bounds if the 
 host would always recollect that anything that is bad for him 
 is probably bad for his guests, and that mere display for the 
 sake of showing off is at best a vulgar pleasure. To cut 
 down eating and drinking to the limits required by modera- 
 tion, and which really conduce to pleasant social intercourse, 
 would be no small gain, and would mean a considerable 
 retrenchment of wasteful and injurious enjoyment of wealth. 
 
 II. The Neglect of Opportunities and "Waste of "Wealth. 
 
 1. In thus trying to mark out the modes of enjoyment 
 which are wrong from those that are not, one may add that 
 in so far as the owners use wealth so as to injure themselves 
 and others in person and character, or so as merely to gratify 
 a petty vanity by idly displaying it, there is ample reason 
 for the indignation which is felt in regard to the luxurious 
 expenditure of the rich. When ball decorations involve an 
 expenditure of ^1000 on flowers there is an outlay which is 
 wrong; not because it is unproductive consumption, but 
 because it is a wrong kind of unproductive consumption, and 
 is an idle display. It is extravagance like this that is to 
 blame for setting class against class ; jealousy itself finds 
 
 \ 
 
2i6 The Enjoyment of Wealth [Ch. xiv. 
 
 little to fasten on in the case of a wealthy man who uses his 
 wealth wisely and well, but it is aroused by evidences of 
 extravagance and dissipation ; and when aroused it is ready 
 to condemn everything that it cannot appreciate. 
 
 2. There are some in the present day whose sense of justice 
 is violated by the inequalities of life, and who cannot recon- 
 cile themselves to that state of affairs where some enjoy so 
 very much and others have so very little. But those who 
 feel that communism is impracticable, and who, while they 
 welcome every sort of effort at levelling up, fear that any 
 attempt at levelling down would be a hindrance to future 
 progress, must force themselves to accept inequalities in 
 human life, as there are inequalities in other spheres. Those 
 who take this standpoint will not be unduly severe in their 
 criticisms of any man's expenditure so long as it is clear that 
 he is not injuring himself and his property, and is getting his 
 money's worth in something that is relatively permanent. If 
 he is not unfitting himself for the duties of life, if he is culti- 
 vating his bodily and mental powers, if he is enjoying genial 
 intercourse with men of kindred tastes and forming ties of 
 friendship with his neighbours, there will be but few to 
 grudge him his wealth. It is the man who might have 
 done all these things and does none of them, who has all the 
 opportunities which wealth affords and throws them away, 
 who is a mere idler, careless of anything but his own pleasure, 
 and whose pleasures render him feebler in body and emptier 
 in mind, it is such misuse of wealth that rightly rouses scorn 
 and indignation. For all misuse of opportunities is bad, and 
 the greater the opportunities are, the more shameful is the 
 conduct of those who waste them. 
 
 III. The Sacrifice of Enjoyment in its bearing on Material 
 Progress. 
 
 But even those who have not misused their wealth at all, 
 who have had their money's worth in the best that a high 
 civilisation can afford, who have been diligent in the duties 
 that came to hand, and have made the most of every op- 
 portunity by developing their own powers and tastes and 
 
Misdirected Charity 217 
 
 cultivating the friendship of others, have not attained to the 
 best standard in the use of wealth. There is higher virtue, 
 a virtue that is found not in enjoyment but in sacrifice. 
 
 1. There is the sacrifice that is involved in using wealth 
 for others, that is the outward embodiment of care and con- 
 sideration for the failures of life. Indiscriminate charity is 
 good so far as it goes ; it shows a real if a somewhat spas- 
 modic sympathy with suffering. Discriminating relief is 
 better still, for it shows a more thoughtful care for the needs 
 of others, and marks the man who is at pains that his help 
 shall be given where it helps most. Preventive charity is 
 best of all since it sets itself to diagnose the conditions which 
 lead to poverty and attacks them in their beginning; it shows 
 the greatest readiness to give time and thought to the suffer- 
 ings of others. But in whatever way there is an effort to 
 reduce the inequalities and mitigate the sufferings of human 
 life, there is an effort which may be welcomed even if it be 
 misdirected. Misdirected charity may do harm ; it may 
 encourage dishonesty and hypocrisy and idleness, and all 
 sorts of evils. But the man who stays his hand until he is 
 absolutely certain his charity is well directed and cannot do 
 any possible harm, will not find that he responds to many 
 calls. Charity hopeth all things, and there are many cases 
 when the sufferer may well have the benefit of the doubt. 
 The poor are improvident and drink ; the rich indulge their 
 vanity by silly ostentation. So long as so much money is 
 wasted, and wasted in so many ways, why should the petty 
 extravagances of the poor be so loudly blamed? To put it 
 on the lowest grounds, if somebody is going to make ducks 
 and drakes of the money, why should the poor never have 
 the fun of trying their hand at the game? For after all, no 
 human being can do much more for another than to give him 
 opportunities ; no human being can compel another to use 
 them aright. And those who have, may well sacrifice a por- 
 tion of their possessions by using it, not for enjoyment of any 
 kind, but to give better opportunities of education and work 
 and comfort to others. 
 
 In the progress of society there are many who are left be- 
 
2i8 The Enjoyment of Wealth [Ch. XIV. 
 
 hind in the race through no fault of their own, whose power 
 of work is superseded by machinery, or whose health breaks 
 down under the strain of the struggle. And while we cannot 
 wish to raise artificial barriers or stay the pace at which ma- 
 terial progress advances, we ought to feel that it is incumbent 
 on those who are succeeding, or have succeeded, to be mindful 
 of others who have been less fortunate. To be mindful, too, 
 of those who are starting in the race of life, and to see that 
 they are as well equipped as may be for the course they have 
 to run. To insist on equal opportunities for all to start alike 
 seems vain, and to attempt to carry this out compulsorily would 
 be disastrous. But to reduce the existing inequalities and to 
 afford improved opportunities to all is worth aiming at, and 
 this can be accomplished by the sacrifice of enjoyment and 
 the generous use of wealth. 
 
 2. Such sacrifice may tend to remove the inequalities of 
 society, but it will not tend to raise society itself. For that 
 we must have an aim which rises above the present possi- 
 bilities of enjoyment altogether; we must cherish a better 
 ideal than they can aiford. There is an absolute limit to the 
 increase and enrichment of man upon the globe, but there 
 are definite possibilities of advance in capacity and self- 
 command and all that makes man noble. And those who 
 cherish an ideal for themselves and for the race (formed in 
 terms not of what man has but of what he may himself be), 
 and who are trying to realise it in their own persons, are 
 giving the best guidance to their generation for possible steps 
 in progress. They are setting before us, not the means by 
 which material wealth may be increased, but a clearer view 
 of the objects for which it may be most worthily used, be- 
 cause a better view of what man himself may be. As the 
 heroes of every cause are ready to sacrifice life for the aim 
 they set before them, so have they shown themselves ready 
 to sacrifice every present enjoyment and to keep themselves 
 free from every material interest in order to maintain their 
 ideal of a better, less selfish, and purer human life. They 
 have cultivated their powers, not by enjoying all the oppor- 
 tunities that came to hand, but by trying to live without such 
 
Ascetics and Saints 219 
 
 things and learning to live above them. And they have not 
 lived in vain; the world owes much to the inventors and 
 discoverers, it owes more to ascetics and saints. There have 
 been men in all ages who have taught their fellow-men how 
 to overcome nature and to acquire wealth ; there have been 
 others who have showed them how to overcome themselves, 
 to rise to a better conception of man's life, and thus to use 
 their wealth so that it might tend to human welfare. 
 
 Typography by J. S. Gushing & Co., Boston. 
 Presswork by Berwick & Smith, Boston. 
 
UNIVERSITY 
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 ELEMENTS OF EFFECT IN THE ARTS OF FORM — THE WORK OF 
 
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 RELATION TO CONSTRUCTION — THE CONVENTIONS OF SCULPTURE 
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 his synopsis of speculative thought on the subject of Beauty and 
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UNIVERSITY EXTENSION MANUALS 
 
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 FRENCH LITERATURE. By H. G. Keene. 
 
 THE REALM OF NATURE. With Maps and Illustrations. By 
 Hugh R. Mill, University of Edinburgh. 
 
 THE. STUDY OF ANIMAL LIFE. By T. Arthur Thomson, 
 University of Edinburgh. 
 
 THE DAILY LIFE OF THE GREEKS AND THE 
 ROMANS. By W. Anderson, Oriel College, Oxford. 
 
 THE ELEMENTS OF ETHICS. By John H. Muirhead, 
 Balliol College, Oxford. 
 
 OUTLINES OF ENGLISH LITERATURE. By William 
 Renton, University of St. Andrews. 
 
 SHAKESPEARE AND HIS PREDECESSORS IN THE 
 ENGLISH DRAMA. By F. S. Boas, Balliol College, Oxford. 
 
 THE FRENCH REVOLUTION. By C. E. Malley, Balliol 
 College, Oxford. 
 
 LOGIC, INDUCTIVE AND DEDUCTIVE. By William 
 MiNTO, University of Aberdeen. 
 
 THE HISTORY OF ASTRONOMY. By Arthur Berry, 
 King's College, Cambridge. 
 
 THE ENGLISH POETS, FROM BLAKE TO TENNY- 
 SON. By the Rev. Stopford A. Brooke, Trinity College, Dublin. 
 
 ENERGY IN NATURE. An Introduction to Physical Science. By 
 John Cox, Trinity College, Cambridge. 
 
 OUTLINES OF MODERN BOTANY. By Prof. Patrick 
 Geddes, University College, Dundee. 
 
 THE JACOBEAN POETS. By Edmund Gosse, Trinity College, 
 Cambridge. 
 
 TEXT BOOK OF THE HISTORY OF EDUCATION. 
 
 By Prof. Simon S. Laurie, University of Edinburgh. 
 
 BRITISH DOMINION IN INDIA. By Sir Alfred Lyall, 
 K. C. B.. K. C. S. I. 
 
 THE PHYSIOLOGY OF THE SENSES. By Prof. Mc- 
 
 Kendrick, University of Glasgow, and Dr. Snodgrass, Physiological 
 Laboratory, Glasgow. 
 
 COMPARATIVE RELIGION. By Prof. Menzies, University of 
 St. Andrews. 
 
 THE ENGLISH NOVEL FROM ITS ORIGIN TO SIR 
 WALTER SCOTT. By Prof. Raleigh, University College, 
 Liverpool. 
 
 STUDIES IN MODERN GEOLOGY. By Dr. R. D. Roberts, 
 Clare College, Cambridge. 
 
 PROBLEMS OF POLITICAL ECONOMY. By M. E. 
 
 Sadler, Senior Student of Christ Church, Oxford. 
 
 PSYCHOLOGY: A HISTORICAL SKETCH. By Prof. 
 
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