amounts to the same thing as receiving for services rendered in money or labour a draft or cheque, entitling to the reception of other services or commodities required. The capitalist in conducting the process stakes his own invested capital; and as a premium for his risk, prudent foresight, and management, receives profit. He is spurred on by the hope of accumulating an independent fortune as the due reward of his labours. Money and price play an important part, therefore, in this mercantile process; conflicts ensue between capital and labour, profit and wages, and other antagonistic interests, which form the gordian knot of the modern social question. The final result of these struggles between conflicting interests makes itself felt in the distribution and redistribution of wealth, the amount of income of individuals, and consequently their social and moral condition. It thus brings about those class antagonisms which have become the burning question of the day; this forms the link of connection between capitalism and socialism.

Externally the capitalistic process is a purely voluntary series of commercial exchanges between individuals; and legally it is a mere matter of contract between man and man, a mercantile transaction between the labourer and the employer, or between the invester of money and his client. Hence our capitalistic era is of necessity the era of liberalism, or free trade. Socialism, which tends rather to interference with individual liberty, has therefore many sympathisers among the higher classes, and is watched with suspicion by the "liberal" moneyed classes.*

*The reader must draw a distinction between liberalism as understood here, and liberalism as generally understood in a political sense by English readers. By liberalism in this treatise we mean the principles of free trade carried out in capitalistic enter

CAPITALISM IN RELATION TO THE STATE. 61

The question, however, is whether this vaunted liberty in capitalism, as distinguished from the more ancient and less free organizations under despotic, feudal, or clerical influence, be liberty in deed as well as in name, and also whether, even if this were the case, it would entirely exclude all further demands for social reforms. Suppose this liberty practically serves only capital, in extorting cheap labour from the classes depending on the employer for their daily bread; suppose all small trade of the lower middle classes to be swallowed up by the gigantic enterprises of the wealthy capitalist: then indeed this liberty amounts to a liberty of the rich to fleece the poor, and a subjection of proletarians by means of the all powerful money-bag.

The liberal tendencies of capitalism are therefore by no means its strongest point, and to defend it on such grounds solely is by no means a prudent course. Besides, as we have shown already, competition itself serves as a very salutary pressure in the social organism, binding upon the capitalist and the labourer alike; and thus capitalism itself does not exclude interference with individual liberty or compulsion in practice. Moreover, it is impossible for liberal capitalism to become the only organization in the social system to the exclusion of all the rest, without destroying itself.

The help of the state organization too is required in public institutions; the state not as policeman only to protect the sacred" person and still more sacred money-bag of the capitalist," to use the words of Lassalle, but the state as a positive organization for economic purposes,

prise. It so happens that on account of more marked class differences in Germany the plutocracy, as a rule, is liberal also in politics, and opposed to the strictly feudal landed aristocracy.

e.g. in establishing means of communication, docks, the post, etc., etc. Many institutions which could neither be founded nor superintended satisfactorily by private speculation require the state and the corporation for that purpose. The financial functions of the state too, for the performance of public services by means of the public revenue, the funds raised by authority, point out to capitalism that it only has a relative importance. State interference in favour of the labouring classes may be sometimes necessary. It provides an elementary education, and extends its protection over those who cannot help themselves. The alternative is not between state help or no help; but the question is rather where and when is such help feasible? where and when may the action of the state serve as a supplement of the capitalistic organization? And in answer to this it may be said, the function of the state is one of the component elements of the mechanism of society; they represent the organic force of law. The state secures suum cuique; it helps the various parts viribus unitis to support each other; fulfils thus the "architectonic" mission of society.*

We shall presently show what is the special mission of the state, and how far its interference with capitalism is practical. The time has not yet arrived for a categorical answer to the question whether its organization is to supersede that of capitalism; but this much we may state in advance, the proof whereof will follow in the sequel. (1) The conversion of all existing private capital, and the

*In the words of the German poet :

"Gerechtigkeit, Gerechtigkeit,

Ist der kunstvolle Bau der Welt;
Wo Eines Alles, Alles Eines hält,

Wo mit dem Einen Alles stürzt, und fällt.

CAPITALISM SUPERIOR TO ITS PREDECESSORS.

63

property of private companies, into a general state bank fund for the benefit of societies founded for co-operative production, according to Lassalle's plan, is a political and economic error. Capitalism, duly reformed and swept of abuses, must ever remain as a grand system of gravitation for independent individual enterprising bodies in the universal movement of society, just as much as the astronomical mechanism is required for keeping bodies in their spheres and in the universal system of the heavens. From times immemorial capitalism has maintained its place among other systems in the world's economy. It was the ruling principle in the commerce of the Phoenicians, the Italians, the German towns, long before slavery and feudalism ceased to dispute its pretensions as the exclusive economic motor of society. It has grown into importance in the course of centuries, and in proportion to the wider extension of national intercourse; and its superior value as a system cannot be doubted from a simply economic point of view. It is a superior organization for production chiefly because it is perfectly independent, resting upon a purely economic basis, requiring no extra economic motives. Former systems, e.g. where the patriarchal, priestly, or feudal forms prevailed, have not for their chief object economy or the creation of wealth. On the contrary, there the will of the head in the family, ecclesiastical power, or the furtherance of the interests of the feudal lord, were the first consideration. But the primary object in the capitalistic organization is the most effective production and consumption of useful commodities and the accumulation of wealth. The centre of gravity of the whole system is purely economic, it is profit.

And just as the theocratical, patriarchal, and feudal political systems have been superseded by the supremacy of law and constitutional forms of government, so too

the former social-economic organizations have been superseded by capitalism. It has attained its independence and proper position as an economic system, free from the fetters of personal rule and the influences of class interests. Both in the macrocosm of society and in the microcosm of the family its power makes itself now felt, in the wise husbanding of economic resources, and their application towards the highest development of the individual and the nation. Thus capitalism marks an advanced state of modern civilization. Feudalism and the guild system, its immediate predecessors, retarded both agricultural and industrial progress; the former by heavy duties and villainage attached to the soil, the latter by corporation privileges interfering with the free combination of labour. Competition was thus shut out, and with it freedom of movement in the economic world.

Socialists of a higher order and scientific attainments do not deny this economic progress in the form of capitalism, encouraging as it does individual liberty and personal responsibility. Nor is it necessary to demonstrate for the benefit of socialists the superior advantages of liberal capitalism in the distribution of labour and capital, their best mechanical application by the aid of machinery and wholesale manufacture, and the beneficial results of competition and exchange. They have long since learned this alphabet of political economy. "Buy a starling M. Bourgeois," says Lassalle ironically with regard to such arguments, "and teach him to pronounce the three words Exchange, Exchange, Exchange! and you will have a most perfect political economist."

He and others, however, lay special stress upon the one-sided complaint that this capitalistic era has many defects which neither feudalism nor despotism could produce. They say this system enables one man to