Take the Sting Out of Socialism With Individualism

10. The War between Capital and Labour.--As has been pointed out, the variation of labour payment with profits will, to a very great extent, take the sting out of trades-​unionism; but the gradually growing perception of the workman that he is himself a capitalist will fairly give the death-​blow to the suicidal policy of injuring the capitalist by limiting production, keeping down stock, or shortening the hours of labour or the quantity of work to be done per hour. Finding by experience that they are actually capitalists, that their own and their employers’ interests are identical; that masters and workmen are all in the same boat, they will all pull together and do their best for the common weal. And so will be brought to an end the great fifty years’ war between capital and labour.

The historian of the future will treat of Wagedom as a transitional phase in the evolution of industrialism. In passing from slavery to freedom it will be regarded as a necessary stage of development, but by no means as a permanent or in itself a desirable regime.

Ethical View of the Question.--Certain sociological laws relate to the gradual neutralization and elimination of forms of individual force. As aggregates of men advance from anarchy to society, these several forms of individual superiority are eliminated in the inverse order of their complexity-​-​that is to say, the simplest first, and the most complex last. First of all, individual liberty is curtailed in respect of brute force-​-​that is to say, a strong man is precluded by society from obtaining advantage over a weak man by means of superior muscular power. This is the elimination of brute force. Presently certain lower forms of intellectual force are neutralized. Stealth ceases to be recognized as a legitimate means of obtaining advantage over others. And still later, fraud is excluded from the category of legitimate weapons.

These, then, are the three first inroads or encroachments upon the liberty of the individual. He is prohibited from prevailing by means of muscular strength, by means of stealth, and by means of fraud.

First, you may not take your neighbour’s cloak from him, he being unwilling and resisting.

Second, you may not take his cloak, he being unwilling and unaware, not resisting because not knowing.

Third, you must not take his cloak, he being neither unwilling or unaware, but deceived.

There is nothing mystic in the number three, in spite of all that may be said to the contrary. What guarantee, therefore, have we that some new curtailment of our individual liberty is not forthcoming. At present, that is to say in the nineteenth century, we in Western Europe have arrived at the third stage; the question is whether another step is in course of being taken, and if so, what it consists.

Before discussing this next step, it will be well to consider the opinions of the wise concerning the present state of affairs. We are told that we have no at last (since the practical overthrow of slavery all over the world) reached the stage of voluntary contract. What is this vaunted contract? In the usual acceptation of the term it is a bargain to which both contracting parties consent of their own free will. Now a fraudulent bargain is in this sense undoubtedly a voluntary contract.

Knowledge may be wanting, but the will is there. If, on the other hand, we say that an accurate knowledge of the nature and consequence of a bargain is essential to the constitution of a voluntary contract in the sense in which it is rightly understood, the reply is that in ninety-​nine cases out of a hundred commercial transactions this element is altogether wanting. If a speculator purchase shares in an undertaking which in the opinion of the vendor will shortly sink in value, and which actually do so sink, the purchaser has no redress in any court on the grounds that his knowledge of the value of the shares was deficient. So that in this modified sense in which to interpret voluntary contract we cannot yet be said to have reached that stage.

Let us therefore retain the natural and original meaning of the term voluntary, and regard a fraudulent bargain as a voluntary one. Let us consider the elimination of fraud and overreaching as subsequent steps in the development of society. The institution of voluntary contract coincided in this sense with the elimination of stealth.

As lawyers are well aware, the term fraud is extremely difficult to define. For our present purpose it may serve to distinguish between two classes of bargain, in both of which the knowledge of the facts possessed by one of the contracting parties is deficient, but in the one case, owing to false representations made by the second party, and in the other case owing to any other cause. The first may be called a fraudulent bargain, but not the second.

It is this second class of bargains in which knowledge is wanting, but into which fraud does not enter, which now remains to be inquired into.

Let us consider the following case: You make the acquaintance of your groom’s nephew, a poor lad living in an obscure part of the town. You having a good knowledge of drawing and painting, find his chalk sketches on the stable walls full of merit and genius, while they are unappreciated by the grooms and stableboys. Estimating their marketable value, you engage to buy all the lad’s productions on paper at a price which, though remunerative to him, is altogether disproportionate to their true worth, and you pocket the difference.

Your advantage is gained without the use of brute force, without the use of stealth, and without the use of fraud. Thus, in every sense of the phrase it is a voluntary contract. Yet from a moral point of view higher than that from which modern society expects us to regard these matters, is there not an element of unfairness in the arrangement? Do we not feel that the lad ought to have all the proceeds of the sale of his drawings? Surely this sentiment may be examined as a sign of a future restriction (no matter how sanctioned) upon the use of superior knowledge. Why should not this higher form of intellectual superiority follow the lower forms which have already been tabooed? Why should it not follow fraud as fraud followed stealth, and as stealth followed brute force? When this shall happen, if ever, the profits of an undertaking will be distributed exactly according to the value of the original contribution of each contributor, whether it consist of inorganic or organic material, of hand-​labour, of superintendence, of foresight or of any other ingredient. That is to say, that profits will be divided in proportion to the new increment of value imparted by each contributor. At present there are two sources of gain in business. The one consists in increasing the value of purchased commodities while in possession of them, and afterwards selling them at that increased value. The other consists in buying an article at less than its real value, or in selling them at that increased value. The other consists in buying an article at less than its real value, or in selling it at more than its real value, or in both, without in any way adding to its value. Why should not the manufacturers and traders of the future discard the second mode of gain?

This mode of obtaining advantage over those ignorant of the facts, is most clearly exemplified in the case of bargains made between the employer and employed, that is to say between the wage-​paying and the wage-​receiving classes. In the absence of open book sit is clearly impossible for the workpeople to ascertain how much of the profit obtained in the business is due to their exertions and how much to the capital in conjunction with which they labour. Taking advantage of their ignorance, the master is in a position to contract with them so as to compound for their services at a valuation which is necessarily below their true value.

When the manual labourer is deprived by force of the fair portion of profit due to his labour, it is said that slavery is the order of things. Compulsion is necessary in order to make the workman toil. When he is deprived of his fair rights by concealment of facts, whether by fraud or by mere suppression of the truth, or in any way by which he is kept in ignorance of his real worth, his labour may be said to be compounded for, and wagedom is the order of things.

When, again, the ascertained value of his contribution in the form of work is the measure of his remuneration, he may be said to labour fully and openly in the full light of knowledge, and freedom prevails.

Serfdom, Wagedom, Freedom, these are the three stages in the development of Industrialism. To-​day we are still in the second stage. Slavery is dead, but the working-​classes are still in receipt of wages which are kept down by ignorance and competition at a level which, as has been said, is fairly defined as the cost of keeping body and soul together.

There may be nothing illegal in bargaining with an individual or with whole classes of the population, to pay any sum which he or they will accept for their work; but illegal or not, it is surely immoral. It would be immoral to demand a large sum of money from a drowning man as a condition of helping him into your boat. It would be a voluntary bargain. He would gain by promising any sum whatever, but surely it would be an unfair bargain. So it is with a hungry population a most unfair and immoral practice to pay them one penny less than the true value of their labour.

There is no intention in this place of confounding morals with law. How far a man may be legally justified in palming off upon another an article for more than it is actually worth: how far, that is to say, the law should deal with such transactions at all is a juridical question which in no way affects the ethical one. “Caveat emptor” may be an excellent legal maxim without in any way conferring a moral justification on such dealings. It is all very well to say that every man must look after himself, that superior knowledge ought to have its reward and so forth; but notwithstanding, there remains the feeling (it may be mere sentiment) that there is something mean, something morally wrong in such transactions, that a stigma attaches to them. Nor does it follow that because we are unable to foresee what the penalty may eventually be-​-​whether the sanction shall be moral or legal-​-​that it is therefore impossible for such sanction to arise without interfering with the freedom of the individual, and so bringing about a retrogression in the social economy. Indeed, the same arguments apply equally to proposed elimination of fraud. The prohibition of fraud is as much a curtailment of individual liberty as would be the restriction in question on the employment of superior knowledge for the purpose of obtaining advantage over less experienced persons. Whether in other departments of contract any such future step is likely to be taken it is difficult to predict, but in this one class of cases, namely, contracts between employers and employed, the signs of the times certainly seem to point in this direction.

Legal Aspects of the Question.--It may have occurred to the reader that all the advantages of the new system would be more than neutralized by the great and manifold inconveniences arising out of the partnership questions which would be eternally springing up between masters and their partners, the men. Many forms of robbery would cease to be felonious in the eyes of the law, and moreover, men and masters would be mutually liable for one another’s debts in connection with the business. Besides, it may be said that a partnership of more than some twenty persons must by law be registered as a joint stock company, which would necessitate the application of the Joint Stock Companies Acts to every large manufactory.

It is not proposed in this place to enter into a criticism of the existing law of partnership in this or other countries. In another place this will be done. Suffice it to observe, that the law is not slow to adapt itself to new institutions and customs, though it is not likely to take the initiative. Moreover, a careful analysis of the juridical idea of partnership reveals a definition of the term which is not the definition received in authorized legal treatises, or even in the law courts. To state the matter briefly and dogmatically, the essence of partnership is not the sharing of profit and loss, or either or both, whether alone or in conjunction with other conditions: it is simply guaranty. That persons who trade in common, sharing profits and losses, do as a rule guarantee each other so far as the debts of the firm are concerned, even though that rule may have no exception, is no reason for confounding essentials and accidentals, but it is a very simple explanation of the existing confusion. As it is, the tendency in the courts is in the direction of recognizing only those partnerships which have been admitted by the parties, instead of arguing from community of profit and loss. And no doubt when working men have established their undoubted claim to such community of profit and loss, some way will be discovered of escaping from all the difficulties and inconveniences inseparable from the present muddled notions of mutual liabilities. The only question is whether the present disgraceful state of the law with respect to joint stock companies will not bring the ancient definition into contempt, before the correct interpretation has been forced upon the legislature by the independent action of the laboring classes. Meantime there is no cause for misgiving on account of the effect of the law of partnership on the new system.

Juridical Aspects.--At one end of the labour-​ladder we have the agricultural labourer, striving to throw off the last vestiges of serfdom, demanding higher fixed wages in lieu of a low wage, increased by gratuities and perquisites. At the other end, we have workers in the coal and iron trades demanding wages varying with employers’ profits. The first represents the transition from serfdom to wagedom; the second the transition from wagedom to freedom. So we find that the same progress is not made all along the line, for we have one wing advancing into the third stage of development before the other wing is well out of the first. However, it is for us to keep our eye on the advanced guard if we would learn the direction the campaign is likely to take.

But do the history of labour and the history of contract point to the same future? Would not the overthrow of the wage-​system be a backward move, being, as it were, a blow at the doctrine of voluntary contract? Let us see. Contracts tend to be modified in three ways in course of time: first, they tend to become more and more free; second, they tend to become more and more definite; third, they tend to become more and more separate or simplex. Now, how will this nascent change in the labour system affect contracts with respect to their freedom? The labourer who agrees to work for a fixed percentage on profits (gross profits) instead of for a fixed wage, is, of course, entering into a voluntary contract; but it is a freer contract, inasmuch as he knows better what he is selling-​-​the value of what he is giving in exchange for his income. The man who sells himself out and out as a slave, enters into a contract which is quite voluntary; but like the man who ignorantly but willingly accepts sham coins for his goods, his will can hardly be called free when it is thus shackled with ignorance.

Next, how does the new system tally with the increasing definiteness of contracts? Here, again, the change will be slight, but in so far as there is any, it will be in the direction of more definite contracts.

But in this respect also the change is more marked as we advance from the first to the second phase in the industrial evolution. At the same time, the man who is paid for the work he actually does, instead of for the number of hours he stands over his work, on the tacit understanding that he applies himself with reasonable diligence, must be admitted to have made a more definite bargain, because he knows precisely what will be expected of him. But it is in respect of the third tendency of contracts to become more simple or separate that the new labour system will show itself especially conformable. Instead of containing a number of distinguishable engagements, a contract tends to contain fewer and fewer, and, eventually, the fewest possible-​-​indeed only one. Even mutual pacts will no longer be required. Each side of a bargain will be independent of the other: and one-​sided pacts will be recognized. The old maxim ‘Ex nudo pacto non oritur action,’ will be sent to limbo, and a contract will be merely a promise with the legal sanction appended. Now, this tendency towards simplicity of contract is well marked in the change which takes place in the functions of capitalists as soon as they cease to guarantee fixed wages. This has been already explained, and need nor further be dwelt on.

Thus in every respect the change in the labour system conforms with the change which is taking place in the nature of contracts.

On the Practicability of the Change.--It has been assumed all along, for the sake of argument, that there would be no difficulty in introducing the proposed change, provided it could be shown to be sound in principle. If this has not now been done, it is useless to proceed further with the inquiry. If on the other hand this has been done, it remains only to hedge the proposal in with certain reasonable qualifications, before thrusting it forward as a sure specific for all the ills that the commercial world is now suffering from.

To begin with, it cannot be introduced all along the line. Only certain departments of labour are as yet sufficiently advanced for the reform. It would at present be absurd to attempt to apply it to agricultural labourers, who are only now casting off the few remaining fetters of serfdom. Nor would it succeed in small concerns which are conducted on hand-​to-​mouth principles. It must begin in the large coal and iron and textile fabric industries. There it is already known, or easily ascertainable, exactly what proportion of the gross receipts of the business has been paid away in wages every year these ten years. An average can be struck, or a bargain made once for all with the work-​people on any basis agreeable to both parties, and any generosity on the part of the masters in deciding on the percentage to be paid to the hands would be repaid a hundred fold. Once established, the system would be successful, and would spread in all directions, perhaps gradually, perhaps rapidly; but the time is not far distant when the old wage system will be regarded as an interesting survival in holes and corners of a practice once nearly universal.

Many more advantages of the proposed reform might be pointed out, but there is plenty of ground for satisfaction and encouragement if it only succeeds in enhancing the providence and prosperity of the working classes, in conducing to thrift, in economizing cost of production, in superseding trades-​unionism and eradicating strikes, in improving the quality of British workmanship and increasing the absolute quantity, in enlarging the liberty and raising the status of the labourer, in raising the tone of industrial art, in smoothing away differences between employer and employed, in elevating the morality of industrialism, and in paving the way for a reform in the civil law.

It may be supposed that the system would require the keeping of open books and very frequent stock-​taking, but besides that, even so, it is an open question whether much harm would accrue from the arrangement, it moreover by no means follows that either condition is necessary. The elected president of the hands would of course have access to the books, and if need be the balance payable to the labour-​account could be handed over weekly, even though the books were made up at the usual intervals. No doubt the shorter the intervals the better for all parties.

In conclusion, it is hardly necessary to add that social changes of so vast a nature always take time. Any attempt on the part of the legislature to force the system upon the country would be worse than useless. A beginning is easily made. The working-​men themselves must take the lead. The masters ought not to be slow to follow, though we must not be too sanguine on that point. The legislature must pave the way by amending the law of partnership, including the law relating to joint stock companies.

The completion of the task may be left to time, without much anxiety as to its eventual success, for apart from the favour or disfavor with which this proposal may be met in commercial circles, it certainly seems to be based on principles from which there is no appeal. Approved or disapproved by masters, or men, or both, the new system of remunerating labour by a percentage on gross profits will most assuredly come into force some day: and then, and not till then, shall we be in a position to say that the Labour Question has been practically solved.