Chapter XI. Capitalism and Freedom

CHAPTER XI CAPITALISM AND FREEDOM IN putting the case for Capitalism in the foregoing chapters, I have by no means meant to argue that it is the, best possible economic system, only that it has'worked ,wonders, and can work still better wonders' in the future and that we cannot be sure that any ,other system that has yet been suggested will do as well. I have tried to show that under it the capitalist-the man who' owns the plant and material 'and takes the risk of enterpris'e-' does not rob the wage-earner of "surplus value "cr.eated 'by the latter, because the surplus value is due to the existence of the plant, and is shared by the wage-earner through the far better standard of 'life that the equip mentof industry, has' enabled him to secure. Without the plant, the labourer' could only supply himself with a bare subsistence, if that. It is true that most of the plant has been made or put where it is wanted by the manual 236 CAPITALISM AND FREEDOM 237 effort of wage-earners, but. this was only pos siblebecause·vvage-earners were paid to do so, under direction supplied by capitalists, by capitalists who thereby, instead of spending theirin.come's on immediate enjoyment, invested part of it, always with,more or less risk, in furnishing industry with equipment for an ever expanding output, so creating surplus value not only for. themselves, but for the whole nation, and for the whole economically civilized world.

By .making this. investment and taking this risk, and applying labour under expert direction to. the task ofprovi4ingindustrywith plant in the widest sense .of the word, Capitalism has made an', enormous increase in population possible, and has put '.' control over the forces ofN ature into the hands of' active enterprising venturers who certainly, rnighthave made better use of it, but have this excuse, that they. were bound, in their search for profit, to work to meet.· the d,emand 'of the average consumer, whose' quaint foibles in the ulatter of demand have resulted in the production' of a, great deal of ugliness and rubbish. But in spite of all that' the fastidious·mayurge~ on artistic, moral and common-sense grounds, against the use that .has been made under 238 THE CASE FOR CAPITALISM Capitalism of the. new powers which the Industrial Revolution has given toman, there is plenty.· to be said on the other· side of the account. We have done things ,vorth doing under Capitalism. Sir LeoChiozza Money in an article in the· Observer of Novemher 23, 1919, told us that:· U With coai we create an export surplus of manufactures ; with that export surplus.· we purchase food and materials to ·feed ·our population· and our factories, and thus obtain the means to create a further export surplus to import more food and materials. This process, continued . during a period of five generations, changed the poor and backward agricultural Britain of 17So into the conlparatively wealthy State which found, at the opening of the nineteenth century, the means to fight Napoleon, and, a century later, the, means to ,destroy German milita,rism~"

It is only fair to Sir Leo to observe that ,he, being a convinced. and ·earnest Socialist, doubtless.believes that economic progress would havebeen 'much '. greater and better under· some form of Collectivist management than 'it has been under Capitalism. And he may ,be right. ' But, as Aristotle says, "the fact is· the starting line," and the fact is that these things were done under ~apitalisnll and that under it, as CAPITALISM AND FREEDOM 239 shown on a previous page, l many millions of people were born and lived a' .life that had a good deal of comf~rt· and jollity, and a certain amount of real nobility mixed up in its queer salad-bowl, who never would ,have seen the light without the industrial development that was in fciet worked out under Capitalism. Far from robbing anybody of surplus value,Capi talism is like .a benevolent ancestor who, instead ·of consuming all the· port that.he could get-as som.e anee'stors did-·laid down an enormous cellar of it for the use of future generations. And every Qne who is now alive in this country, and millions abroad likewise, are no,v able to help thelnselves to bottles of the grand old vintage then laid down and now ready for us, crusted, fruity, full of ripe flavour and rich bouquet. For none of us could have been sowell off, and many of us could not ,have been born at all, if Capitalism had not done this deed, and done it judiciously and weB. We all thus drink of the bottles laid down by those 'who went before us, those of us who work, because our work could not have been so well rewarded if we had not been members of a productively efficient conlmunity, those who cannot, will not, or do not \vork, 1 Page 1'14.

240 THE CASE FOR CAPI"fALISM because it would not have been .possibie for our needs to be provided as well as they are now. That some people have access to some of the bottles asa matter of legal right, is only because'this privilege has been handed on to them by those who laid down the cellar. If we took their right away, there would be a few nlorebottles for the rest of us while the cellar lasted, but would the process of laying down for those who come after us' be likely to continue on this voluntary basis? I t would most probably have to be done by officials or Committees. Their .efforts ,might appear at first sight· to be cheaper than those of the private benefactor, who took a consideration for his forethought when he could earn it, but might cost the conlmunity dear in the long run if they laid down the wrong vintage or were too ·timid to try new brands. Such is the" debt· that all of us owe to the capitalists of the past. But when we have taken off our,hats' to them and acknowledged it, we have to give our minds to reforming and improving the Capitalism of the present.

In our studies of the schenles that have been put forward for improving the economic system, we have found many aspirations that were highly desirable if they could be made irito CAPITALISM AND FREEDOM 241 practical facts, but .did not seem likely to be carried out by the proposed reforms, or only at the cost or loss of efficiency in output. First among these comes the desire. for economic freedom. Most of us will admit that freedom is the most precious j'ewel that we can gain, and that without a certain amount of it, no one's mind and character can achieve real growth, any.more than his legs can grow if they are encased in plaster of Paris. Economic freedom means· to most of us freedom to work or not to work, or if we do work, freedom to work to please ourselves and not at the hidding . of anybody else. In this sense it is notpos sible to the great nlajority of mankind because we all have to work unless we can induce sonlebodyelse to keep us alive, and the wdrk that we do has to be pleasing to somebody in , orMer.to make him give uS in return for it the money· with which, by our choice of the goods that ,we buy, we exercise control over the work of others and make them turn out things that we want. In other words, we sacrifice freedom as producers in order to increase our freedom as consumers.

A few can induce others to .keep them alive, and in some cases exceedingly conlfortable, by the claims that they exercise as hereditary Q 242 THE CASE FOR CAPITALISM owne'rs of the equipment of industry in the widest sense of the phrase, including land. A few others can do it by appealing to the.com munity'ssympathy owing to physical and other inability to work. Most of us have to work, and to please others by so doing. If we lived in a wilderness and worked only for ourselves, we should still have to work, but only to please ourselves. Our control of goods would thereby be very greatly lessened, ,and would economic freedom, so gained, be really good for us? Is it not better that we should be forced to co-operate in order to enjoy, and to secure a good life for ourselves by helping to provide what others want ?Those of us who take this democratic view must be ready to be blud geoned with examples of the great artist pros tituting h,is .brush to boil his pot, and of the poet who starves because an ignorant public does not ·want the sonnets that the Muses bid him sing. These are special cases of special gifts, and one cannot feel sure that the artist or the poet would fare better at the hands of a Socialist Treasury. Committee or· of an Academy appointed by the Guildsmen. But for the ordinary workaday goods of life, there seems to be something pleasant and really " social U and sociable in this dependence on CAPITALISM AN.DFREEDOM 243 the judgment of others on our work ;~nd a restriction of' economic freedom that makes everybody work' to, please others, is very similar to the restriction on social freedom, which only allows people to do as they please as long as they obey the laws of the com munity, 'and do not allow their liberty to be' a nuisance to others and a restriction 'on theirs.

If the decision, about what is to be produced, and whether it is well produced, is left to the producers, it seems unlikely that ,the goods turned out win ,maintain so, high a standard as when they have to pass muster before the consulnerbefore they can earn any reward. And yet such seems to be t1)eideal of economic freedom aioled at, by some at least of the Guildsmen, for we saw that Mr~~Cole ,main tained that the workers must be free" to choose whether they will 'make well or ill." To this extent, then, it seems that economic freedom must be limited, if we a're to secure .efficiency in production and freedolu for the consumer to choose what goods he will enjoy. And since, as has already been pointed out, we most of us produce .. only one, or only a . fraction of only one, thing, and consume thou sands of things, our freedom' as consumers seems to be 111uch more precious than our 244 THE CASE FOR CAPI~ALISM freedom as makers, doers and growers of goods and services.

But when the need for this limitation is .grant~d, there is a great range of .ecpnomic freedom left, in respect of which Capitalism can contend that it confers at least as much as any other possible system that has yet been suggested. With regard to the consumer's freedom, it beats State· Socialism· and Guild .Socialism. so hollow that they are hardly to be seen on the course. Under State Socialism, carried to its logical conclusion, the consumer's freedom, and the producer's likewise, does not even" Also Run." Bureaucrats will decide who is to pro duce what,; and the consumer will take what is produced,. on a rationing. system with all its exasperating apparatus, or leave it. Mr.· Cole paints tOQ flattering a .picture with his·.. naughty but amusing jeer, when he says (Sel.fGovern men! in Industry~ page 122), "the greatest of all dangers is the 'Selfridge' State, so loudly heralded these twenty years by Mr. 'Callis thenes· Webb." Mr. Selfridge. gives his customers plenty of choice, and with the help of the adroit Callisthenesinvites them to <;ome and choose. .Mr. Sidney Webb, with scientific and kindly ben~volence,would order our lives CAPITALISM AND FREEDOM 245 for us much better than we could, but they would lose all their zest because they would no longer be ours. ., Under Guild Socialism eithet, according to Mr. Cole, the producers are to have the choice whether they will" make well or ill," or accord ing to others the· interests of the consumers are .tobe represented by apparently elected bodies which will leave little chance to those with eccentric tastes, or according to Mr.

Stirling Taylor there is to be inter-Guild competition, which will give the consumer a chance, ·but seems to wreck the whole Guild fabric, which appears to be frankly based on monopoly. Under Capitalism,. as long as there is free competition, °theaverageconsumer decides what is to be'produced, and the wishes of mino rities are readily met as long as their demand is great enou;gh to stimulate production ~omeet them. But is not the. consumer's freedom to some extent threatened under Capitalism by monopoly, or at least by attempts in its direction on the part of trusts, "combines," amalgam ations, rings,an'd "gentlemen's agreements"? If Capitalism plays this game, it will simply weave for· itself a rope with which it will be hanged, and rightly, as high as Haman.

246 THE CA.SE FOR CAPITALISM lVIonopolyhasstunk in ..• English nostrils· since the days of Elizabeth, and if Capitalism tries to impose it now, it is con·.;mitting suicide and asking for State Socialism. It is true that under State Socialism monopoly would be more tyrannous than under private enterprise, because since' the Government would itself be the monopolist, the, helpless consumer would have no official stick to lay across the back· of it. But if there is to be monopoly, it will be easy for Socialists to persuade the public that in the hands of .the State the monopoly would create profits, not for a profiteering octopus, but for the general· good. Already Mr. Sidney Webb has made the recent bankamalga.mations. though they are far from having set up any real·approach to monopoly, a text for an~droit and ingenious sern10n on the need for State banking, in .anarticle on "How to Prevent Banking Monopoly," in the Contemporary Review of July 1918.

In fact, if the movementin favour of national.ization triumphS and proceeds ·toits Jogical conclusion,. the .end·of the· system· of private Capitalism, it will be an interesting inquiry for the economist of the· f~ture to consider, how much.was done by private· capitalists 'and the property owning classes to kina system CAPITALISM AND FREEDOM 247 which might, if more sensibly develop~d, have enjoyed a Inuch longer life. The stupid financial policy of belligerent governments during the late war has given a great opportunity to the enemiesof Capitalism by debauching the currency, pouring fortunes into the pockets of shareholders and adventurers through the consequent rise in prices, and so stirring up unrest and suspicions of "profiteering." Mr. Keynes, who develops this theme with brilliant lucidity in his book The Economz'c Consequences of the Peace, observes (page 222}that "perhaps it is historically true that no order of society ever perishes save by its own hand." But for this breach in the walls of .CapitaIism, private capita lists, as such, are not alone responsible; it was made rather by the politicians of their class whom the wealth that they created enabled to serve their. country according to their lights, with results that .are now plainly to be seen.

In other corners of the economic field,. how ever, capitalists, have themselves 'worked hard to weaken their own position. Bycontinually resisting the claims of the wage-earners for higher wages on the ground that industry could. not stand ·them, when subsequent ex perience proved that it could, they have 248 T·HE CASE FOR'C4PITALISM done much to embitter the mind of the workers, and to'teach them to believe 'that they could only get what was their due from the State. By their action in the matter of piece-rates they have helped to increase the prejudice among the workers against being paid on this system, and so have done much to produce that deadly view, so· fatal to efficient production, .that the best workers should limit their pace to that of the average or of the worst. It was no inherent wickedness that'led them to make these mistakes. They were quite ordinary human. beings doing their best· accord ing to their· lights. But they looked to the interest of the moment, .and their luental horizon was. bounded' by the date of their next balance sheet. If they had looked further ahead they would have seen that it would, pay them well.

in the long run to pay, not the lowest wage at which they could get their work done, but the. highest that their business could stand; and that if a man earned'much at piece-work that .was not a reason for cutting down, the piece-rate,' but for encouraging him'to make more. They have been very conscious of the' fact that they risk their money. Have they always remembered that some of the worst..paid \vage-earners risk their lives?

CAPITALIS},f AND FREEDOM 249 Again, there has been unnecessary reluctance on the part of the capitalist in publi5h~ng full and candiq statements of the' financial position of his business. The accounts issued by public companies often seem to be' arranged to give ,as little information as possible. There is much excuse for this attitude owing to the desire to litnit the power of possible competitors to pry into, matters that it is more pleasant to conceal. On the other hand, it would be an immeasurable advantage if the workers in an industry could be shown more clearly how it is faring on the financial side, and if, the problems that its managers have to deal with were put before them in a way that they can understand. By this system it is possible that very practical suggestions of great value might be made 'by the wage-earners. With regard to the control of the conditions under which they work, reform is now generally admitted. to be due, but here ,again capitalist employers have been, in the past, much too ready. to resent what they have regartled as interference with matters that concern thenl only.

'fobring about improvement on these lines, no revolutionary change in human nature is required such as would be necessary for the smooth running of indus.try by S~~te or Guild 250 TJ.IE CASE FOR CAPITALISM Socialism. We should not all have to be suddenly fired by zeal to work for others with no consideration for ourselves. Capitalists would.still be working, as they have to now, to earn profit for themselves by providing the needs of the community. They ,would only have to recognize, as the best of them do already, that to earn larger profits for the moment by paying their workers less than they can afford to pay is bad policy in the long run; bad for themselves, and bad for the community on whose prosperity and stability they depend. If they would only reflect that if they earn the hostility of conSUlners by , attempts at monopoly,_and of the wage-earners by an abuse of the strength that their wealth gives them, they are weaving a rope for their own economic necks, they would be learning a lesson that would be ofgreat benefit to them selves and to everybody else.

Besides their shortsighted' attitude to those who work for theqt, capitalists have done much to undermine their own position in the eyes of detached observers by the use that they have made of the wealth that they have gained. Much of the academic Socialism that is rife among what are called the educated classes is due to the spectacle presented by the rich CAPITALISM AND FREEDOM 251 bounder spending money, in' vulgar ostentation. All who earn or own wealth have to remember how much of it they owe to the ,exIstence of a busy and prosperous community as part of their raw material, and how little they could' have done -apart from that environment, and consequently how uluch of it has been earned for them by the' community which has given them ,,'the'irchance. By bad spending they ask industry to produce bad stuff. By good spend .. , ing on worthy public objects they might transform the appearance of most of the ugly and depressing towns in England, and give us an educational system that could really afford to grant' every citizen that is born to us a chance of growing upinta a good and healthy man or woman, fully developed in mind and body. Here perhaps we are delnanding too great and rapid a change of outlook. But it is surely not too much to hope that the capitalist may learn that, when he wastes money on luxury, he not only exasperates, public opinion, but raises; the price of necessaries, and, so emphasizes the inequalities which are so danger ous to the social stability on which his existence depends. 1 1 This platitude I have worked .out in detail in a book called Povertyand Waste.-H. W.

252 THE CASE FOR CAPITALISM These inequalities would be lessened rapidly if the attitude of capitalist employers towards those who worked for theln were modified as suggested above. But we want to see them attacked at the other end at the same time, by the wage-earners recognizing that. Capitalisnl is not an evil monster that robs them, but a system that has inlproved their lot and given life to millions who could not have been born without the industrial development that has taken place under it. Owing to the short sightedness of the capitalist· employer, they have had to fight hard for the improvement gained, but if they want to emancipate them selves from dependence on him, is it not easier and safer to do so by becoming .capitalists themselves, and providing for themselves the management, organization and plant without which labour is powerless to produce ? To this end again no great ·revolution in human hatureis needed, but only a develop ment ofa process which has already in the Co-ope~ative Movement produced astonishing results. The War Savings. Campaign has taught·millions who never.saved money before ,to save it in order to save their country when threatened by ·a· .foreign enemy. All that is CAPI'l'ALISM AND FREEDOM needed is that this process should be continued to save the country from the internal enemy that sets class against class. W ewant a financial organization by which wage-earners' savings, that now go into Governmentsecuritiest can go into industry without having to face the risk .that is attached to investments in any particular industry .or company. This is a problem that financial ingenuity should surely be _able to solve. The workers have already shown that they can become capitalists, but what is wanted is that more of them, and ultimately all of them, should be capitalists.

Then, if the wealthy continue to perceive in a widening circle that it is not good for their youQglings· to bring them up to idleness, -we shall begin to be within sight of a state of things in which .. every worker is a capitalist and every capitalist a worker. In the meantime improvements in education should give to all a better chance of material success in life, and open the chance of. a career to all who have the ne~essary gifts of courage, honesty, initiative and readiness to take respon sibility. Though, owing to the weaknesses of Capitalism, baser qualities too often earn big rewards, these are the .gifts that most surely 254 THE CASE FOR CAPITALISM bring success under it, and they are also the qualities that make a great nation. With these qualities fully developed and given free play, we might produce a country in which all would be competing vigorously in order to supply the needs of the consumer, and, wealth being well distributed, great profits would only be earned by those who. served the whole com ..

munity best. Great profits when earned would be spent sparingly on personal enjoyment, lavishly on worthy public objects, or put back into industry, thereby quickening production and increasing the demand for labQur, and material success would be the prize of energy, initiative and courage, wherever found, and so would stimulate the best powers of active, bold and ~nterprising men and women. Such a system is surely more attractive to those who love freedom than that of State Socialism under bureaucratic control, or Guild Socialism based .onmonopolyand a society grouped according to function. I t would stimulate out put to a degree thatwe can hardly now conceive, and having solved the problem· of the supply and distribution of material goods would enable those who lived under it to address themselves to the task of building up a real civilization, CAPITALISM AND FREEDOM 255 and producing a \vorld that should be not only rich, but also beautiful v and noble, full of wise . and beautiful and noble men and ,vomen, competing and co-operating for the common good.

THE END