Without Reform, the Communists Will Win

…The present pamphlet [is] an attempt to apply plutological theory to the solution of the labour question…The doctrine [is this:] that labourers are themselves a species of capital. To many this will appear to be a matter of no practical import-​-​a mere form of words for political economists to wrangle over; but it will presently be seen that much depends on the truth of the proposition.

It is not intended to repeat here at length the arguments in support of the doctrine. They may be found in the essay on capital at the end of [a previous] work; and at present we shall be fully occupied in following up the practical consequences of accepting the theory.

The following quotation from the work referred to will throw enough light on the theoretical side of the question for the present purpose:

“At present we are concerned to note that man is a tool, entering as an element into the cost of production of other commodities just as an engine does.

“Man, then, it appears, is regarded by the plutologist in two quite distinct aspects: firstly, in his capacity of demander; and secondly, in his capacity of labourer. In the former, he is the cause of values; in the latter, he is the part-​cause of most valuables. This double role of man is of the utmost consequence, and, above all things, we must beware of confounding the two, or of failing to keep them apart. Disastrous indeed have been the consequences of disregarding this fact, more especially because the two capacities very frequently inhere in the same individual, when it is more than ever of importance to avoid entangling their respective effects.

“Or either of them may inhere separately. For instance, a slave having no property whatever, not even in his own body, cannot be a demander; but he is a labourer, and, as such, an element of the product he helps to create.

“A gentleman, in the legal sense of one who lives on his means, without working at anything, is a demander, but not a labourer; while a free workingman, whether he be a tinker or a poet, combines the two, and thereby is a cause of values and a part-​cause of valuables. But in the exercise of these two functions the plutologist is bound to regard him as two distinct persons, in every respect as fully as though he actually were resolved into a slave, on the one hand, and an idle gentleman on the other. This position must be firmly held before further progress is possible. The free labourer without other visible means of subsistence-​-​that is, without other property-​-​differs from a slave in this respect, that he is the proprietor of his own body-​-​the proprietor of a slave who happens to be himself. This body, endowed as it is with the most extraordinary powers, is indeed a valuable possession: but, of course, of every degree of value in different individuals according to their abilities. In estimating a man’s real worth, we ought never to overlook (and, practically, we never do) that most important item, himself: and just as out of several horses this one, the winner of the Derby, is worth so many thousands of guineas, while that one, dragging a four-​wheeler, will barely fetch a five-​pound note in the open market, so amongst men, of three, otherwise penniless, one is appointed to the governorship of Madras, with a salary of some thousands a year; a second obtains employment in a mechanics’ shop at thirty shillings a week; while the third goes to the workhouse, or dies of starvation.

“Without encroaching on the province of the sociologist, I may here remark that experience has proved the economy of vesting the property of every man’s person in himself: and, rightly or wrongly, the law of most civilized countries refuses to recognize the transfer of such property in the form of a sale out and out. Men do, however, let themselves out for hire at a fixed charge per hour, day, week, month, or year, and even for periods of seven years, just as they might let out their horses or engines. And just as a proprietor stipulates that his corn-​crusher shall be used only for crushing corn, and not for crushing any other substance, so a labourer, before agreeing to accept wages for his services, hedges himself round with certain conditions. The man who lets himself out by the month as butler, undertakes to perform only certain services to the exclusion of all others; and although within those limits he transfers his property in his own body to another for the time, it must not be supposed that this gives the transferee the right to do what he likes with him, or to exact more than certain specified services, any more than a similar bargain confers unlimited rights over a hired horse or corn-​crusher.”--Principles of Plutology, p. 83, et seq.

It has long been an established doctrine of political economy, and one well warranted by sad experience, that under the competitive system of trade, wages have a tendency to gravitate down to a limit which has been defined as the cost of keeping body and soul together. To the working man it is no consolation to be told that this is a law of nature against which it is of no avail to struggle. If he does not understand the expression, he is apt to think that the sooner such a law of nature if repealed, the better. If he does understand it, he refuses to believe it. Stubborn, uncompromising resistance to the doctrine, alike in theory and in practice, is invariably to be met with among the industrial classes. And what is equally significant, is the fact that employers as well as employed seem to admit to a certain extent the justice of an opposite contention, that wages should vary somehow with the rate of profits. This admission, at variance though it is with the economical dogma just stated, seem to be made almost universally. Arbitrations between masters and [workers] are invariably conducted on the assumption that [if] profits are higher, wages should be higher also.

Indeed, it has recently been arranged, under the [influence] of Mr. Chamberlain, that the miners in certain districts are to be paid according to a sliding scale, in proportion to the gross profits of their employers.

Now, clearly either this principle is utterly vicious and arbitrary, or the time-​honoured economical dogma must be exposed as a dangerous fallacy. Stupendous consequences hang upon the answer eventually given [to] this question. It is no mere question of speculative interest-​-​it is a question of life and death to millions of hard-​working men and women, not only now living, but for untold generations to come.

The rise of the great middle class under the industrial regime about the end of the fifteenth century; its conflicts with the ancient landed aristocracy and eventual triumph (in this country) consummated in the Reform Act of 1832; its subdivision into two distinct parties, employers and employed, masters and men, or superintending labourers and manual labourers, are grand historical facts, and they bring us down to the present day. The battle is now between the employer and the employed; year by year the strife waxes hotter. We are in the midst of it. Louder and louder roar the discontented hosts of wage-​receivers; inch by inch the baffled capitalists retire before the onward pressure of numbers. The masters (derisive appellation!) tremble; they negotiate; they offer terms; they buy off the enemy-​-​for a while; and then again the billows swell and roll forward as before. Whither does all this tend? To Communism, destruction of property-​-​whither? See, the millions have organized themselves; no longer a mob, they are an enemy. One side must win: the battle cannot rage for ever with equal fortune. And which side? This is the question which some answer with despair, others with enthusiasm; whilst others again evade it, persuading themselves that it has no existence. Let us, however, consider it in the spirit of lookers-​on in no way affected by the answer.

It would be waste time to enumerate even the principal attempts that have been made to bring about a practical solution of the labour question: on the part of the men, the strikes that have gone far to paralyse industry during the last fifty years; on the part of the masters, the lockings-​out and the importations of foreign hands; on the part of the public, all kinds of pieces of legislation regulating the hours of labour, the ages of labourers, the mode of wage payments, the relation of master and servant, etc.; on the part of economists or statists or writers on social subjects, a vast variety of schemes, plans, and systems. Of the last class, few are worthy even of mention, where all have failed in practice. Many of them are well known, and no better known than despised. But, as has already been said, there seems to be floating in the air, as it were, a notion (it can hardly be called a theory) that wages should vary with profits. The notion is vague, it owns no parentage, it is associated with no great name; it is perhaps the spontaneous outgrowth of an intuitively far-​seeing public opinion, which is so often the precursor of the eventually accepted philosophical theory.

None of those who may by implication be deemed to hold this view, or who to a certain extent adopt it in practice, has yet ventured to embody it in words of to advocate it openly and in an intelligible form. Even in its present unassuming garb, the system has already been met on the threshold by sundry serious and weighty objections. In a memorable speech delivered by Lord Derby some years ago at Liverpool, after reviewing or paying for labour, the following argument was brought to bear with characteristic logical consistency against the system of defraying the cost of labour out of a percentage on profits. Said he in words to this effects: “Capital and labour being two distinct and in a sense opposed agents of production, there must be something wrong about a practical plan which confounds them together in respect of their remuneration.”

Now, if we admit the truth of the assumption, we cannot well refuse to accept the inference. If capital and labour actually are distinct agents of production as political economists assure us, then there is something unphilosophical in classing them together for the purpose of apportioning their respective shares in the new product.

The present writer has elsewhere endeavoured to demonstrate the untruth of the assumption in question, and to show that unless engines, horses, and workmen are included in the same category, the term capital can have no distinct and definite connotation. It is therefore unnecessary to do more here than take it as proved that labourers are a species of capital, from which it follows that whatever objections may be raised to the practice, there is nothing unphilosophical in paying for labour-​-​the labourer’s contribution to the resulting new compound-​-​in proportion to the increased value of the product over and above the value of its proximate elements; that is to say, by a previously fixed share or percentage of the profits of the undertaking. Both Adam Smith and McCulloch were of opinion that there is no good reason for excluding man himself from the category of capital, and we are indebted for the fallacy of so doing to Ricardo. McCulloch writes: “However extended the sense previously attached to the term capital may at first sight appear, we are inclined to think that it should be interpreted still more comprehensively. Instead of understanding by capital all that portion of the produce of industry extrinsic to man, which may be made applicable to his support and to the facilitating of production, there does not seem to be any good reason why man himself should not, and very many why he should, be considered as forming a part of the national capital. Adam Smith has fully admitted the justice of this principle, though he has not reasoned consistently from it.”

The primary and fundamental obstacle in the way of accepting the new system having been overcome, it remains first of all to consider from a practical point of view the economical results to be expected from its adoption. After which, it will be necessary to examine the ethical and juridical aspects of the question, both of which are of the utmost importance; for, unless the adopted practice conform to plutological, ethical, and nomological laws alike, it cannot properly harmoise with its surroundings, and will sooner or later be found to be out of gear.

It is now proposed to inquire into the economical effects of paying the labourer a fixed percentage of the gross profits of production. How this is to be done will be considered later on. And in advance it must be observed that if anyone supposes that the system of paying for labour by a share of profits has ever been actually tried, he is grossly deceived. Of this a careful examination of the facts he relies on will easily convince him.

The economical results of making the employees as it were partners in the undertaking, may be examined under the following heads: the effect upon strikes; the effect on the improvidence of the working man; the effect on the national demand for capital; the effect on overlooking and the cost of regulative labour; the effect on the quality of work; the effect on the quantity of work; the effect on economy of time; the effect on the liberty of the individual workman; the effect on the government of factories; the effect on the equilibrium of labour demand and supply; the effect on the functions of employers; the effect on the status of the workman; the effect on industrial art; and the effect on relations between the laboring classes and other classes of the community, or, in vulgar parlance, between capital and labour.

1. On Strikes.--The cause of strikes is not far to seek. The rate of profits in all trades varies from age to age, from year to year, and from day to day. The diurnal variations are commonly minute, and so far unimportant; and the variations during long periods corresponding with the rise of some trades and the decline of others in the country or district, have their effects obscured by lapse of time; labour is diverted into new channels before low profits have time to pinch the labourer. But what may be called the annual variations are neither too small nor too gradual to be felt, and it is with these that labourers are concerned. The sea has its tides, its waves, and its ripples, but it is the waves, and the waves only, that make us so sea-​sick.

When employers are making their twenty per cent is it reasonable to expect the workman, whose toil has mainly contributed to the high profit, to sit down content with his twenty-​four or five shillings a week, as he did when profits were at five or six per cent? Clearly wages must be raised, or the men strike; and what is more, are frequently backed up by public opinion, and favoured by opportunity: masters do not care to be idle in prosperous times, and the men know it, and sooner or later their demand is granted or a favourable compromise effected. Then follows a period of good fortune and tranquility of some duration.

Meanwhile, with little or no experience of vicissitudes, our working man has married on the strength of the rise, or perhaps his children have increased in number, or he pays a higher rent for a better cottage, or his family has accustomed itself to certain additional comforts. And now comes the decline. The prosperity of the trade has attracted new capital, or the demand has contracted to its old limits, and profits sink again to the original level or below it. It is now the master’s turn to grumble and ask for change; he very naturally determines to reduce wages. The workman as naturally resists. His scale of living has been modified to suit improved circumstances; he has become accustomed to the new rate of wages, and now he cannot well go back or retrench. Another conflict ensues, and one or other of the combatants goes to the wall. No one believes that this state of strain, this incessant struggle, is desirable; every strike entails untold misery and waste, no matter what the result may be; and yet under the present system of wagedom there does not appear to be any loophole out of the difficulty. An eternal see-​saw! Pull baker, pull devil! Such is the cheerless prospect.

But now let us suppose that instead of the present system of wage payment an estimate is made of the actual amount of money paid during, say, the last ten years in a given business to the workpeople-​-​paid away, that is to say, in wages; suppose the proportion which this bears to the gross returns is twenty-​five to seventy-​five; suppose that an agreement is entered into between masters and men that in future the latter shall receive, instead of a fixed wage, twenty-​five per cent of the gross returns, what would be the consequence? To begin with, it is obvious that on an average the masters would not be keeping less for themselves than hitherto, nor would the men be receiving more unless the gross returns of the business increased, in which case the masters would be only too glad. If now the following year or two should be unusually good, the men would be receiving considerably more than usual, and no strike would be necessary in order to give them a fair share of the general prosperity. If then the next few years should be bad years, then twenty-​five per cent would represent a smaller sum, maybe, even than their ancient wage (let this be assumed for argument’s sake, although other considerations show it to be impossible); so that the masters would have no cause to demand a reduction of wages. As to the behavior of the men under these depressing circumstances, we shall come to that presently under the head of “Providence.” Now it has almost invariably been observed as a matter of history, the successful strikes have been those which were based on justice or common-​sense fairness, or at least attended with public sympathy; and those strikes which have been made in response to a fair claim on the part of the masters to a reasonable reduction of wages, have been unsuccessful. If, therefore, the workpeople under the supposed conditions should clamour to extort alms (for it would be nothing less) from their employers, in flagrant violation of their contract and in the face of every reason to the contrary, a few inevitable failures would soon teach them wisdom. Public opinion could never side against employers who in a period of depressed trade and low profits were being called upon to raise their work-people’s receipts, and that in spite of contract.

Thus it appears, whatever the advantages or disadvantages of the proposed system, one thing is certain, and that is, that strikes would be completely eradicated.

Is not this of itself a sufficient plea for the establishment of the system, even apart from the recognition of the principle upon which it is based? And yet, enormous as is this gain to society, there are others far greater, to which attention must now be drawn.

Stephen Herbert & Mo Heard. Industry, Liberty, and a Vision: Wordsworth Donisthorpe’s Kinesigraph. London: The Projection Box. 1998.