Chapter II. The Weakness and Strength of Capitalism

CHAPTER II THE WEAKNESS AND STRENGTH OF CAPITALISM AMONG the many drawbacks that mar the systeln .of privat~ ownership of capital, as -it has been hitherto developed, an obvious blot has already been noted, when it was .observed, some pages ago, that if only everyone had a fair start it would be difficult to devise a more stimulating arrangement for human nature as it is with its instinct for acquisition and rivalry. Under private ownership of capital this fair .start ha~ not been given. Capitalism, as now understood, is usually regarded as dating fronl about the middle of the eighte,enth century, when what is called the Industrial Revolution began. Before then, the tools of industry were primitive Clnd cheap, and it was compara tively easy for the worker to own his own capital, in. the shape of tools and raw material. When m~chinery came and brought with it production on a great scale in large factories, a great capital was necessary to success, and so the worker and his capital were divorced from 24 WEAKNESS AND STRENG'fH 25 one another. Son1e individual or body had to be found, prepared to provide the necessary equipment, and to hire those who had strength and skill to work it.

In the past the position of the owner of capital has been strong, because capital has been generally, if not always, scarce as com pared with labour, and, until labour organized itself, the bargaining power of the owner of capital was greater than that of. those who had little or no resources behind them. This advantage in the hands of the capitalist, how ever, is not a necessary part of a capitalistic system. Capital without labour and labour without capital are under modern conditions equally powerless, and in these days labour, with its growing political influence and the sympathy of public opinion whenever it c~n show a real grievance, is fully able to take care of itself. Moreover there is no reason why the sharp division between the owners of capital and those who work its machinery should be maintained. Under an ideal capitalistic system every worker would be a capitalist and every capitalist would be a worker. And this is an ideal that is quite within· the bounds of possibility.

But this is not the only inequa)ity th~tmacle 26 THE CASE FOR CAPITAl~ISM the race for' materi~l success. an unfair contest. The C!wning cla,.ss not only controls the equip ment of industry, but also, by its greater individual wealth, can. give its sons, daughters and dependents a better and· longer education and bring them up under conditions-in the matter of food, clothing and access to good air-' that give them a long start. in. life's race. Convention and custom increase, theinequaIity. Certain jobs and positions are actually reserved for those who have had an education that can usually be .afforded only by the chUdren.of the well-to-do.' For instance, only ,a boy of ex ceptional cleverness can rise from a primary school to the university degree that is necessary for entry into the learned professions. And many other positions, 'though there ,is no such definite bar, are practically reserved by custom and prejudice. to those who·speak a certain kind of English, wear a certain kind of clothes, and behave with a certain kind of assurance and confidence; all which gifts are only. to be acquired at a certain kind of school, or in a certain kind of home surroundings. Luck or ability sometimes enables' exceptional persons to overcome. these bars. . Fleet Street. tradition whispers of an unsuccessful plumber who made a great mark 'as a journalist and a great fortune, WEAKNESS AND STRENGTH 27 as a newspaper proprietor; but the story of his failure as a plumber was probably a slander prompted by envy. There is, however, no need to be libellous in order to find scores of men who have risen from the bottom to the top of the ladder of wealth, beginning life with nothing behind them but their wits and their . good luck and ending it great owners of capital.

Nevertheless there the handicap is. The well-to-do, under the private ownership of capital, can live, if they have enough of it, on the toll that it takes from production without doing any work at all, and if they want to work have everything made easy for them iIi the shape of specially reserved posts, and the connections and .influence that are so great a help in making a start. It must be a very great tenlptation·to those who are rich enough to be able to idle through life, to do so; and the fact that .very few succumb to it shows that some sort of activity is a natural want of a healthy and normal human being. There has been a noticeable change in this. respect even within the memory of the middle-aged. The graceful idleness which used to be thought so gentlemanly is now much less popular than it was, and young Olen of the class that used to 28 THE Ci\SE FOR CAPITALISM go to the university as to a social, sporting and athletic club were approaching life from a much more serious point of view even before the war. It is curious to note that in America the tendency· seemed to be in the other direction.

There opinion was apparently growing in" favour of the creation of a leisured class "which would do something in life besides pursuing dollars. A leisured class that uses its leisure to do public work that is otherwise done ill or left undone is certainly a national asset, but it cannot' be denied that under the capitalistic system there has existed a class of most un amiable folk who lived narrow, selfish lives on wealth that they had inherited, grumbled at paying taxes, forgetting that if the Government did not protect them and their property they would be quite unable to earn a living, and seemed to expect the whole world to be managed for their convenience and comfort. Most of us have suffered from such people, who are apt to gather at such resorts as residential hotels. They were generally quite unable to amuse themselves, and lived lives of unprofit able boredom, a nuisance to themselves and to most people whom they met.

This handicap of ineqqality was thus in many cases bCl:d for those who enjoyed"it. For WEAKNESS AND STRENGTH 29 those who started with it against them it must have often been a daunting influence if it affected them seriously. But how far did it do so ? The average man surely aims at being moderately successful in the conditions under which he starts. One can, in these matters, only judge from one's own experien~e. To myself, born into the circumstances of an ordinary middle-class family, it never occurred that I was handicapped by the fact that many people were born witl,1 much easier chances of much greater· success. There was a road clearly marked out for me. Somehow I had to make a living, and the fact that some people were not under that necessity was not a thing that influenced me one way or the other in approaching the problem. But this may only have been because I was thoughtless or un imaginative, and I remember when I was at Oxford hearing, a very brilliant man of my year remark that it made him " feel Socialistic"

when he was starting off ·to an early morning lecture and saw other men setting out for a day's hunting. I n this case at any rate the early recognition of what seemed to be economic injustice had no practical effect in checking effort. MyoId friend may have felt Socialistic, but he went off to his lecture and did his day's 30 THE CASE FOR CAPITALISM work, and is now a shining ornament of the Indian Civil Service. But we of the middle class, of course, have no right to talk as if we had any real grievance under the capitalist systeln. Wehad quiteas nluch as was good for us, and got an education and tradition that generally stimulated us·· to make fairly good use of the powers with which \ve \vere born. The question must look very different to those who view it when born under conditions of destitution, and have imagination enough to see how great are the disadvantages which this accident brings with it. In this case it nlust often happen that despairing apath y is a very. real clog to effort, and· there is small reason to wonder if many of those so· born not only feel Socialistic, but put n1uch energy and bitterness into working for schemes to reconstruct society on a ne\v .basis. If anew basis qf society were really going to produce a better life for the community as a .whole, most of us would sympathize strongly with this .anlqition; but doubt on this point is the reason why this book is being written.

It seems, ho\vever, that the inequality only has to be lessened in order to modify very greatly its adverse effect on those who suffer from it most. In AnlericaCapitalismhas grown WEAKNESS AND STRENGTH 31 with a vigorous and perhaps ruthless 's~rength, unchecked by the many feudal and social re strictions which have in this country ··turned the edge. of its power. But owing to the circum~tances there ruling-the wealth of the country and the. unlimited power of expansion that its undeveloped resources haye placed in. the hands of. its .·citizens-. the way from the bottom to the top has been more open. The traveller there seenled to find himself in a country in which" there' were no bars between class and class. Those at' the bottom looked on those farther up as people who had 'gone ahead but might be. caught up and would be. There was no sense of a heavy handicap. \ I carne in contact in .a curious way with this cheerful sentiment when in a hotel in Denver in 1911. A Swedish chambermaid when I 'Yas leaving was good enough to say that she was sorry I· was going because I was "nice and clean in my room." I asked her if she would like to come and be a maid in my home in England. She declined. on inquiring into the poss~bilities of the position, but added: "I tell you what; I won't come and be a maid in your home, but I'll marry some fellow who'll make a pile. and then I'll come and stay with you."

I gave her my card, and I hope and fully 32 THE CASE FOR CAPITALISM expect that sonle day she w'ill arrive, with the husband and the pile in her train. I t thus. seems that the drawbacks of inequality are bad for a limited number, both of those who are apparently benefited by them, and of those to whom they are a handicap, but that their adverse effect on the latter can be greatly reduced,. if the inequalities of birth and fortune are not allowed to be a serious bar to success in life. When we have granted all this, we have next to consider what are the. advantages that the capitalistic system carries with it. In the first place, there is the moral advantage involved by individual choice and responsibility which make men and Women of us, while grandmotherly regulations under State or Guild tnonopolywould make us into machines. In the second, it is clear that the ordinary man ",·iII work harder and better jf he knows that the result of hiswotk is going to bean im proveOlent in his' econonlic position and in that of his dependents. For every man to work for all the rest just as hard as he will now work for his own hand is an ideal to which human nature may some day attain; but we have not yet arrived there, and if we try to make things better by assulning that we have, we may put back the clock of progress bY' a century or two.

WEAKNESS AND STRENGTH 33 The incentive to effort that is given by the power of acquisition is at present the great driving-force that constantly improves man's control over nature. If we took it away we might find not only that the improvement /ceased, but that there was a very serious decline in the output of any country that tried the experiment; and we always have to re member that a country's output is all that it has to live on, apart from the accumulations out of past output, which would very soon be exhausted. From a purely economic point of view the advantage of a reward for effort in proportion to its success seems to be overwhelming. It is true that, as things are, success in prod uction or organization often comes from forcing very questionable goods or services-on a stupid and ignorant public. But that is the public's fault for being stupid and Ignorant, and what is the alternative? Either an equal reward for every body whatever the effort n1ade and whatever the work produced-a system that would, as things are, simply mean that an ever-increasing body of sluggards would live on an ever dwindling and more disgusted body of workers; or else some new device. for a reward in pro portion to what is called the "social value" of c 34 THE CASE FOR CAPITALISM the work done. What this social value really means it is ~ard to say. What is the social value of Mr. Charlie Chaplin as compared with a coal-hewer? And who is to decide the ques tion? I f, as seems most likely, it is to be a popularly elected body, their election would be a pretty picture of glib promise-makers com peting for the suffrages of those whose power to help themselves out of the general store of wealth they were going to decide. If the de ciding. body is to be composed of Government officials the results, though less obviously disgusting, would probably be still more un satisfactory in the en4 ..

This question of the reward of effort is the most difficult problem .. that one hits one's head against when· one tries to grope a practicaL path through economic theory. If the reward. is to be in proportion to the market value of the work done, inequalities that will have bad effects will certainly arise. These bad effects seem on the whole to be preferable to the worse effects on the general output, out of which we all have to live, that are likely to follow from rewarding everybody not for the work that they· do but for merely having taken the trouble to be born, like the Marquis in the French farce. The present system can at WEAKNESS AND STRENGTH 35 least claim the merit of having worked in different well.and of being obviously capable of "improvement, if the community will only apply a little more sense to the objects on which it spends its money. Under it the value of our work, like that of everything else, is what it will fetch-that is, what we can get for it out of our fellows. If they are vulgar, taste less and stupid we can sell them rubbish· and grow fat on them, if we happen to be. greedy rogues. The fact that many of them are vulgar, tasteless and stupid thus gives greedy rogues a chance of which they nlake ready use; and so the unpleasant sight is daily' seen of greedy rogues battening on vulgar stupidity, and so getting for themselves all· the pow~r and influence that wealth brings with it. And then moralists naturally exclaim that. there is dreadful villainy abroad, and that the laws ought to be ··made .much stricter for catching and punishing it; and short-cutting reformers cry .out that there is no remedy for such a .

system except its abolition and the substitution of a· new· way of rewarding people which shall not in any way depend on the price at which theycau sell their work. But surely. the true remedy, though a terribly slow one, is for the community to contain a smaller and smaller 36 THE CASE FOR CAPITALISM number of vulgar, tasteless and stupid people so that it shall grow continually more difficult for bad work to get a good price. After all, however we may beat about the bush, the value of anything that has to be exchanged or sold is, and nlust be, nothing but what we can get for it, whether the thing be our own work or saIne article that we have otherwise acquired. Economists have ob scured ,the question of value by distinguishing between Value in Use and Value in Exchange,' and otherwise surrounding it with subtleties that the ordinary man cannot, and does not want to, understand. The value of anything that I have to sell is what I can get for it, and the value of anything that I want is the amount of my work, or of goods that I possess, or of money that I \vill give and the owner of it will accept. When expressed in money,value becomes price.

Many things, such as friendship, are most precious possessions but have no value in an economic sense because they cannot be bought and sold, and would lose their real worth if they could. From the confusion that this fact produces the notion arises that there can be such a thing as "in4erent" value in an article apart from anybody's desire for it, and thence WEAKNESS AND STRENGTH 37 we easily fall into the fallacy which tells us that a thing must be valuable because a certain amount of work and energy have been put into it. Work and energy may be lavished on the production of something that nobody wants, but if there is no demand for it it will have no economic value. Economic text-books tell us that there are goods, such as air, which are essential to life and so have incalculable "value in use" but are· provided by nature to an unlimited extent and so haveno cc value in exchange." There by they merely confuse themselves and their readers. Obviously nohody will pay for any thing that is given to him free, except perhaps the American millionaire who left his hotel because ,he was not charged enough to enable him to feel that he was really" having a good time. J) Air, when it is supplied by Nature, has no value in an economic sense because no one will give anything for it, and to say that it has a "value in use" because we should pay all .. that we have for it if it was not there, is only to introduce a quite irrelevant confusion into economics, w'hich is ultimately an inquiry into the ternlS on which men produce and ex change goods. When and where air is scarce it is paid for. The Central London Railway 38 THE CASE FOR CAPITALISM has, to the great benefit· of its passengers, paid for a system by which its tunnels are supplied with air ; and seaside lodging-house keepers make a handsome harvest out of Londoners, who come to stay in otherwise most unattrac tive spots in> order to breathe . sea-air and· get the London soot out of their Iu·ngs.

Value is merely a question of the extent to which somebody wants·a thing .in .relation to the extent to which its present owner wants to keep it. It thus depends to a great extent on place, since an article' that is· a drug in the market here may be scarce to the point of ~'preciousness somewhere else. As· was well shown by th'e answer of the Scotch drover when a Londoner remonstrated with him for the prices at which he was sellinghi"s beasts at a Highland fair, and told him tbatifhe.took them to Smithfield he ·would get· twice the money for them. , h Vera true," said-the Scot; "and if I could take Loch Lomond to Hell I should sell·itfor haIfa croon a glass." Value, then, is what we can. get for a thing. or what we have to give for it, when we wor15, ~s_prac-' ticallyall of us do now, in co-operatic)J1.with our fellows, making something or doing some thing that they will pay for and using their payments to us in paying for work· that ·they WEAKNESS AND STRENGTH 39 do. If we were self-sufficing and made every thing that we wanted for ourselves, value would still be determined by the same principle, be cause we should still have to decide how much of our work· and exertion was worth putting into the production of any article that we desired. It would still be a question of the degree of desirability and the amount of effort that we were prepared to give in exchange for an object that we wanted.

If then the value of everything that has· to be exchanged is the 'sum of things that we can get for it, how is the basis of exchange to be arrived at? Capitalism leaves the question to be deciqed by competition, so putting the ultin1ate decision concerning the price of any article of common use into the hands of the average consurner. The consumer cannot, of course, say that he will have an article at a price at which it is impossible to produce it.. But he can, under Capitalism, say that if he cannot have it at a price he will take something else instead. "Whoever ultimately fixes Prices;' said the New Age of August 14, 1919, "con trols thereby the distribution of the wealth of the world." Under Capitalism this power is given to the average consumer, and this is an enormous advantage on the side of Capitalism 40 THE CASE FOR CAPITALISM as compared with any other system that has yet been devised. For it means that we have to work to satisfy the wishes of our fellows, as expressed in their demand for goods and services. Their demand may be ill-judged and faulty, but it is real and human, and it is the expression of individual choice freely exercised.

Under State Socialism the value of our work what we could. get for it-would apparently be the reward which Government. officials thought fit to award to us. We should be working not to·please the ordinary human being with all his faults and foibles, but to earn the approval of an inspector, whose decision would be based on red-tape rules and formulas drawn. up and enun ciated and annotated in offices tenanted by beings who, from the nature of their duties, would be more or less out of sympathy with common humanity. Under Guild Socialism, as will .be seen .later, every guild would apparently' work largely according to the fancy of its mem bers; and how they would arrive at a decision. of the value of the work so done-that is at a basis on which their products should be ex changed-is one of the many problems that th~ advocates of the system do not seem yet to have fairly faced. .Capitalism leaves the question of the value of WEAKNESS AND STRENGTH 41 work done to the buyer, that is to the average consumer.. It is thus much more truly demo cratic and in' favour of freedom than either of the rival systems. Under it nobody can earn a penny unless somebody else wants his work.

It n1ay be thought that the capitalist, or the manager who organizes production on the capitalist's behalf, has the final say as to what goods shall be produced, and this delusion is at the bottom of much of the talk that is heard nowadays about the tyranny of capital and of its ruthless decisions about the objects to which the labour that it hires is to be devoted. But the capitalist and the manager, unless they are continually successful in meeting a public de lnand for the goods that they produce or distribute, will very soon be in Queer Street. .If the capitalist puts his money and the manager his organizing power into turning out or turning over goods that nobody wants, there will be no interest or profit for the former and no salary for the latter. Value under the capitalist system thus depends directly on the popular voice, and will do so more and more as wealth is better distributed, as we hope and are determined to see it. At ,the same time, the tastes of the minority are not neglected, because under competition a minority that is large enough to 42 THE CASE FOR CAPITALISM express an effective demand will get it satisfied~ To make the system work really well and only give good rewards to good work, it is thus only necessary to train the great mass of individuals who make up the popular voice to judge better concerning the things that they want· to buy.

This is a long and difficult process, but it.works sicle by side and· hand in hand with real pro gress, which can only be got by creating a· community composed ~f individuals who are good and sound in every sense. No rearrange men t or rebuilding of systems and institutions will do any good that fails to produce good and sound men and women, any more than the most cunning cooking-stove ,villmakea good omelette out of bad eggs. Capitalism then is essentially democratic. State Socialism would hand us over to the regulation of the impervious and elusive bureau crat. Guild Socialism would leave the consumer to the tender mercies of producing Guilds. Capitalism puts the real power in the hands of the average. consumer, and so suffers from and rejoices in all the weakness and. force, all the hopefulness ·and· despair,. that are associated with democracy. If democracy wins its 'battle by producing a race of men fit to work it, then its victory will cure the worst evils of WEAKNESS AND STRENGTH 43 Capitalism. It will no tonger be possible for providers of rubbish to make fortunes by' selling it· to fools, or for company promoters and swindlers and "sharepushers" to found county families out of the gains of fraud at the expense of silliness, or for unnecessary middlemen. to take toll on what we consume because shop keepers do not know. their business, or for advertisers to wax fat because buyers do not know their wants. But Capitalism as it might be, is a subject for a later chapter. At this stage of our inquiry it is enough to have shown that by giving the word of command to the average consumer it is based on democratic principle, and will ,stand. or fall with the success or failure of that principle in justifying itself: If democracy fails and we go'back to Divine Right, not of kings but of bureaucrats orguilds men, then to those of us who. believe in freedom it will not be a matter of great mOnleI1t under what economic system we have to live.