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I.—Population (p. 162)
In the writings of no contemporary economist, in Great Britain or abroad, does the idea that population is constantly tending to press upon the means of subsistence occupy the same conspicuous and primary place as it does with Mill. The treatment of the subject by Marshall, Principles, bk. iv. chs. 4, 13, and bk. vi. ch. 13, is characteristic of the general present attitude. Attention is coming to be directed more and more to those defects in the present industrial organisation which create a body of permanently underemployed as well as temporarily unemployed, even where the growth of population is evidently not outstripping the means of employment: hereon see Beveridge, Unemployment (1909), p. 6 and passim. The understanding of the exact teaching of Malthus, and of the differences between the first edition of the Essay (1798) and the second (1803), has been facilitated by the publication of Parallel Chapters from the First and Second Editions of an Essay on the, Principle of Population (1895).
J.—The Law Of Diminishing Return (p. 188)
Careful restatements in general accord with Mill's teaching are to be found in Marshall, Principles, i. bk. iv. ch. 3; and Nicholson, Principles, bk. i. ch. 10. For the results of the Rothamsted experiments, showing that "beyond a certain point the increase of crop is not in proportion to the increase in the amount of manure applied," see Lawes, Is Higher Farming a Remedy for Lower Prices? Lecture (1879); and Hall, The Book of the Rothamsted Experiments (1905). The extent to which the formula of diminishing returns covers the facts of agricultural development is discussed by Schmoller, Grundriss, ii. § 233 (Principes, iv. pp. 427 seq.). But while Mill and the older theoretic writers distinguished between the law of diminishing return in agriculture and the fact (by some called the law) of increasing return.in manufacture (ef. Marshall, Principles, bk. iv. ch. 13, § 2), and writers of the historical school tend to minimise the effect of the law of diminishing return even in agriculture, some more recent theoretic writers go in the other direction and declare that the law of diminishing return is universal and applies to production of all kinds. For the sense in which they use such language, see Clark, Distribution of Wealth, p. 208, and Seligman, Principles, § 88.
K.—Mill's Earlier And Later Writings On Socialism (p. 204)
Mill's account in the Preface to the 3rd edition of the nature of the alterations there made, scarcely give an adequate impression of the change of tone on his part between 1848 and 1852. The total impression produced by the argument of 1848 is that "Socialism" was probably undesirable and impracticable. Thus the difficulty of apportioning labour among the members of the community, which was met in 1852 by an expression of the hope that " human intelligence would not be inadequate " to deal with it, had called forth in 1848 the following remarks:
"In the existing system of industry these things do adjust themselves with some, though but a distant, approach to fairness. If one kind of work is harder or more disagreeable than another, or requires a longer practice, it is better paid, simply because there are fewer competitors for it; and an individual generally finds that he can earn most by doing the thing which he is fittest for. I admit that this self-adjusting machinery
does not touch some of the grossest of the existing inequalities of remuneration, and in particular the unjust advantage possessed by almost the commonest mental over almost the hardest and most disagreeable bodily labour. Employments which require any kind of technical education, however simple, have hitherto been the subject of a real monopoly as against the mass. But as popular instruction advances, this monopoly is already becoming less complete, and every increase of prudence and foresight among the people encroaches upon it more and more." And the argument concluded thus:
"I believe that the condition of the operatives in a well-regulated manufactory, with a great reduction of the hours of labour and a considerable variety of the kind of it, is very like what the condition of all would be in a Socialist community. I believe that the majority would not exert themselves for any thing beyond this, and that unless they did, nobody else would; and that on this basis human life would settle itself into one invariable round. But to maintain even this state, the limitation of the propagative powers of the community must be as much a matter of public regulation as everything else; since under the supposed arrangements prudential restraint would no longer exist. Now, if we suppose an equal degree of regulation to take place under the present system, either compulsoiily, or, what would be so much preferable, voluntarily; a condition at least equal to what the Socialist system offers to all would fall to the lot of the least fortunate, by the mere action of the competitive principle. Whatever of pecuniary means or freedom of action any one obtained beyond this, would be so much to be counted in favour of the competitive system." It is true that, in the next section, he went on to say:
"These arguments, to my mind conclusive against Communism, are not applicable to St. Simonism ... St. Simonism does not contemplate an equal, but an unequal, division of the produce." But he judged the assumption on which it rested "almost too chimerical to be reasoned against " ; and began the next section thus:
"There has never been imagined any mode of distributing the produce of industry, so well adapted to the requirements of human nature on the whole, as that of letting the share of each individual (not in a state of bodily or mental incapacity) depend in the main on that individual's own energies and exertions, and on such furtherance as may be obtained from the voluntary good offices of others. It is not the subversion of the system of individual property that should be aimed at, but the improvement of it." In the 3rd edition, it should be noted, the treatment of the subject is affected not only by a modification of personal opinion, but also by the insertion, which had taken place in the 2nd edition, of the account of Fourierism.
In 1869 Mill formed the design of writing a book on Socialism; and after his death the first rough drafts of the work were published by his step-daughter. Miss Helen Taylor, in the Fortnightly Review for February, March, and April 1879. These articles indicate a reversion on Mill's part to an attitude resembling more closely perhaps his state of mind in 1848 than that in 1852. It must be remembered that his criticisms bore primarily upon the Socialist literature of his own time (1869). His treatment of the subject was so carefully balanced that there is a certain risk of giving an unfair impression of the general effect of the argument by the selection of a few passages. The following passages, taken in conjunction with the chapters in the Principles, will, however, indicate with sufficient clearness his general point of view.
After an Introduction on the importance of the subject. Mill begins by setting forth at length the Socialist objections to the present order of society, and by recognising the large element of truth in them.
"But the strongest case is susceptible of exaggeration; and it will have
been evident to many readers, even from the passages I have quoted, that such exaggeration is not wanting in the representations of the ablest and most candid Socialists. Though much of their allegations is unanswerable, not a little is the result of errors in political economy; by which, let me say once for all, I do not mean the rejection of any practical rules of policy which have been laid down by political economists: I mean ignorance of economic facts, and of the causes by which the economic phenomena of society, as it is, are actually determined.
"In the first place, it is unhappily true that the wages of ordinary labour in all the countries of Europe are wretchedly insufficient to supply the physical and moral necessities of the population in any tolerable measure. But when it is further alleged that even this insufficient remuneration has a tendency to diminish; that there is, in the words of M. Louis Blanc, une baisse continue des salaires; the assertion is in opposition to all accurate information, and to many notorious facts. It has yet to be proved that there is any country in the civilised world where the ordinary wages of labour, estimated either in money or in articles of consumption, are declining; while in many they are, on the whole, on the increase; and an increase which is becoming not slower, but more rapid." The following passage supplements the chapter in the Principles on the theory of Profit:
"Another point on which there is much misapprehension on the part of Socialists, as well as of Trades Unionists and other partisans of Labour against Capital, relates to the proportions in which the produce of the country is really shared, and the amount of what is actually diverted from those who produce it, to enrich other persons. . . . With respect to capital employed in business, there is in the popular notions a great deal of illusion. When, for instance, a capitalist invests £20,000 in his business and draws from it an income of suppose £2000 a year, the common impression is as if he was the beneficial owner both of the £20,000 and the £2000, while the labourers own nothing but their wages. The truth, however, is that he only obtains the two thousand pounds on condition of applying no part of the £20,000 to his own use. He has the legal control over it, and might squander it if he chose, but if he did he would not have the £2000 a year also. As long as he derives an income from his capital he has not the option of withholding it from the use of others. As much of his invested capital as consists of buildings, machinery and other instruments of production, is applied to production and is not applicable to the support or enjoyment of any one. What is so applicable (including what is laid out in keeping up or renewing the buildings and instruments) is paid away to labourers, forming their remuneration and their share in the division of the produce. For all personal purposes they have the capital and he has but the profits, which it only yields to him on condition that the capital itself is employed in satisfying, not his own wants, but those of labourers. The proportion which the profits of capital usually bear to the capital itself (or rather to the circulating portion of it) is the ratio which the capitalist's share of the produce bears to the aggregate share of the labourers. Even as his own share a small part only belongs to him as the owner of capital. The portion of the produce which falls to capital merely as capital is measured by the interest of money, since that is all that the owner of capital obtains when he contributes nothing to production except the capital itself. Now the interest of capital in the public funds, which are considered to be the best security, is at the present prices (which have not varied much for many years) about three and one-third per cent. Even in this investment there is some little risk—risk of repudiation, risk of being obliged to sell out at a low price in some commercial crisis.
"Estimating these risks at one-third per cent., the remaining three per cent, may be considered as the remuneration of capital, apart from insurance against loss. On the security of a mortgage four per cent, is generally obtained, but in this transaction there are considerably greater risks—the uncertainty of titles to land under our bad system of law; the chance of having to realise the security at a great cost in law charges; and liability to delay in the receipt of the interest, even when the principal is safe. When mere money independently of exertion yields a larger income, as it sometimes does, for example, by shares in railway or other companies, the surplus is hardly ever an equivalent for the risk of losing the whole, or part, of the capital by mismanagement, as in the case of the Brighton Railway, the dividend of which, after having been six per cent, per annum, sunk to from nothing to one and one-half per cent., and shares which had been bought at 120 could not be sold for more than 43. ... Of the profits, therefore, which a manufacturer or other person in business obtains from his capital no more than about three per cent, can be set down to the capital itself. If he were able and willing to give up the whole of this to his labourers, who already share among them the whole of his capital as it is annually reproduced from year to year, the addition to their weekly wages would be inconsiderable. Of what he obtains beyond three per cent. a great part is insurance against the manifold losses he is exposed to, and cannot safely be applied to his own use, but requires to be kept in reserve to cover those losses when they occur. The remainder is properly the remuneration of his skill and industry—the wages of his labour of superintendence. No doubt if he is very successful in business these wages of his are extremely liberal, and quite out of proportion to what the same skill and industry would command if offered for hire. But on the other hand he runs a worse risk than that of being out of employment: that of doing the work without earning anything by it, of having the labour and anxiety without the wages. I do not say that the drawbacks balance the privileges, or that he derives no advantage from the position that makes him a capitalist and employer of labour, instead of a skilled superintendent letting out his service to others; but the amount of his advantage must not be estimated by the great prizes alone. If we subtract from the gains of some the losses of others and deduct from the balance a fair compensation for the anxiety, skill and labour of both, grounded on the market price of skilled superintendence, what remains will be, no doubt, considerable, but yet, when compared to the entire capital of the country, annually reproduced and dispensed in wages, it is very much smaller than it appears to the popular imagination; and were the whole of it added to the share of the labourers it would make a less addition to their share than would be made by any important invention in machinery, or by the suppression of unnecessary distributers and other ' parasites of industry.' . . .
"It seemed desirable to begin the discussion of the Socialist question by these remarks in abatement of Socialist exaggerations, in order that the true issues between Socialism and the existing state of society might be correctly conceived. The present system is not, as many Socialists believe, hurrying us into a state of general indigence and slavery from which only Socialism can save us. The evils and injustices suffered under the present system are great, but they are not increasing; on the contrary, the general tendency is toward their slow diminution." Mill then opens his statement of the objections to Socialism with the following classification, which illustrates the extent to which Socialist propaganda has changed its character since 1869:
"Among those who call themselves Socialists, two kinds of persons may be distinguished. There are, in the first place, those whose plans for a new order of society—in which private property and individual competition are to be superseded and other motives to action substituted—are on the
scale of a village community or township, and would be applied to an entire country by the multiplication of such self-acting units; of this character are the systems of Owen and Fourier, and the more thoughtful and philosophic Socialists generally. The other class, who are more a product of the continent than of Great Britain and may be called the revolutionary Socialists, propose to themselves a much bolder stroke. Their scheme is the management of the whole productive resources of the country by one central authority, the general government." Remarking that:
"the peculiarities, however, of the revolutionary form of Socialism will be most conveniently examined after the considerations common to both the forms have been duly weighed," he begins by pointing out that:
"the distinctive feature of Socialism is not that all things are in common, but that production is only carried on upon the common account, and that the instruments of production are held as common property/. Accordingly:
"The question to be considered is, whether this joint management is likely to be as efficient and successful as the managements of private industry by private capital. And this question has to be considered in a double aspect: the efficiency of the directing mind, or minds, and that of the simple workpeople.'' He discusses this, first in relation to the form of Socialism which he calls"simple communism, i.e. equal division of the produce among all the sharers, or, according to M. Louis Blanc's still higher standard of justice, apportionment of it according to difference of need, but without making any difference of reward according to the nature of the duty nor according to the supposed merits or services of the individual,"
with the conclusion that its success would depend upon a moral education for which mankind could only be effectually trained by communistic association: "It is for Communism, then, to prove, by practical experiment, its power of giving this training. Experiments alone can show whether there is as yet in any portion of the population a sufficiently high level of moral cultivation to make Communism succeed, and to give the next generation among themselves the education necessary to keep up that high level permanently. If Communist associations show that they can be durable and prosperous, they will multiply, and will probably be adopted by successive portions of the population of the more advanced countries as they become morally fitted for that mode of life." And, going on then to " those other forms of Socialism which recognise the difficulties of Communism and contrive means to surmount them," of which the principal was Fourierism, he gives reasons for the opinion that, for them, " practical trial" is no less necessary. He then goes on to the other main division: "The various schemes for managing the productive resources of the country by public instead of private agency . . . are at present workable only by the elite of mankind, and have yet to prove their power of training mankind at large to the state of improvement which they presuppose. Far more, of course, may this be said of the more ambitious plan which aims at taking possession of the whole land and capital of the country, and beginning at once to administer it on the public account. Apart from all consideration of injustice to the present possessors, the very idea of conducting the whole industry of a country by direction from a single centre is so obviously chimerical that nobody ventures to propose any mode in which it should be done." Mill's argument with regard to the second or "revolutionary" type of Socialism is accordingly based upon the difficulty of " the problem of management." And his final conclusion is thus expressed: