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Henry Sidgwick, Economic Socialism,
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Henry Sidgwick

[620] OBSERVERS of the current drift of political thought and practice, however widely they may diverge in their judgments of its tendencies, appear to be generally agreed upon one point - viz., that all Socialism is flowing in upon us with a full tide. Whether, like M. de Laveleye, they regard this phenomenon complacently as a "good time coming," or whether, with Mr. Spencer, they hold that what is coming is "slavery," they seem to have no doubt that the political signs are pointing to a great extension of governmental interference in the affairs of private members of the community. And a second point on which they appear to agree is that this socialistic movement - as it is often called - is altogether opposed to "orthodox political economy"; that the orthodox political economist teaches us to restrict the intervention of Government on all the lines on which the socialistic movement aims at extending it. The object of the present paper is not to argue directly for or against any proposed governmental interference, but to reduce to its proper limits the supposed opposition between orthodox political economy and what is vaguely called socialistic, or semi-socialistic, legislation. I admit that the opposition really exists to some extent; and, so far as it exists, I am - for the most part - on the side of orthodox political economy; but I think that the opposition has been dangerously and misleadingly exaggerated for want of a proper distinction of the different grounds on which different kinds of governmental interference are reasonably based.

          I will begin by stating briefly the general argument by which orthodox political economy seeks to show that wealth tends to be produced most amply and economically in a society where Government leaves industry alone; - that is, where Government confines [621] itself to the protection of person, property, and reputation, and the enforcement of contracts not obtained by force or fraud, leaving individuals free to produce and transfer to others whatever utilities they may choose, on any terms that may be freely arranged. The argument is briefly that - assuming that the conduct of individuals is generally characterized by a fairly intelligent and alert pursuit of their private interests - regard for self-interest on the part of consumers will lead to the effectual demand for the commodities that are most useful to society, and regard for self-interest on the part of producers will lead to the production of such commodities at the least cost. If any material part of the ordinary supply of any commodity A were generally estimated as less adapted for the satisfaction of social needs than the quantity of another commodity B that could be produced at the same cost, the demand of consumers would be diverted from A to B, so that A would fall in market value and B rise; and this change in values would cause a diversion of the efforts of producers from A to B to the extent required. On the other hand, the self-interest of producers will tend to the production of everything at the least possible cost; because the self-interest of employers will lead them to purchase services most cheaply, taking account of quality, and the self-interest of labourers will make them endeavour to supply the best paid - and therefore most useful - services for which they are adapted. Thus the only thing required of Government is to secure that every one shall be really free to buy the utility he most wants, and to sell what he can best furnish.

          If the actual results of the mainly spontaneous organization by which the vast fabric of modern industry has been constructed do not altogether realize the economic ideal above delineated, they at any rate exhibit, on the whole, a very impressive approximation to it. The motive of self-interest does, I hold, work powerfully and continually in the complex manner above described; and I am convinced that no adequate substitute for it, either as an impulsive or as a regulating force, has as yet been found by any socialistic reformer. Still, the universal practice of modern civilized societies has admitted numerous exceptions to the broad rule of laisser faire with which the argument above given concludes; and it seems worth while to classify these exceptions, distinguishing as clearly as possible the principles on which they are based, in order that, in any novel or doubtful case, we may at least apply the appropriate general considerations for determining the legitimacy of the exception, and not be misled by false analogies.

          Let us begin by marking off a class of exceptions with which political economy, as I conceive it, is only indirectly or partially concerned; - exceptions which are due to the manifest limitations under which abstract economic theory is necessarily applied in the art of [622] government. Thus, in the first place, the human beings with whom economic science is primarily concerned, - who, in the general argument for laisser faire, are assumed to be capable of a sufficiently alert and careful regard for their private interests, - are independent adults. The extremest advocate of laisser faire does not extend this assumption to children; hence the need of governmental interference to regulate the education and employment of children has to be discussed on principles essentially different from those on which we determine the propriety of interfering with the industry of adults. It is, no doubt, a very tenable proposition that parents are the best guardians of their children's interests, but it is quite a different proposition from that on which the general economic argument for industrial non-interference is based - viz., that every one is the best guardian of his own interests; and the limitations within which experience leads us to restrict the practical application of the two principles respectively differ to an important extent.

          But secondly, what the political economist is primarily concerned with is the effect on the wealth (1) of the community caused by interference or non-interference; but we all agree that from the statesman's point of view considerations of wealth are not decisive; they are to be subordinated to conditions of physical or moral well-being. If we regard a man merely as a means of producing wealth, it might pay to allow a needle-grinder to work himself to death in a dozen years, as it was said to pay some American sugar-planters to work their slaves to death in six or eight; but a civilized community cannot take this view of its members; and the fact that a man will deliberately choose to work himself to death in a dozen years, for an extra dozen shillings a week is not a decisive reason for allowing him to make the sacrifice unchecked. In this and similar cases we interfere on other than economic grounds: and it is by such extra-economic considerations that we justify the whole mass of sanitary regulations; restrictions on the sale of opium, brandy, and other intoxicants; prohibitions of lotteries, regulation of places of amusement; and similar measures. It is, no doubt, the business of the political economist to investigate the effects of such interference; and, if he finds it in any case excessively costly, or likely to be frustrated by a tenacious and evasive pursuit of private interest on the part of persons whose industry or trade is interfered with, he must direct attention to these drawbacks: but the principles on which the interference is based carry him beyond the scope of his special method of reasoning, which is concerned primarily with effects on wealth.

          This last phrase, however, suggests another fundamental distinc- [623]tion to which attention must be drawn. We have to distinguish effects in the production of wealth from effects on its distribution. The argument for laisser faire, as given above, dealt solely with its tendency to promote the most economical and effective production of wealth: it did not aim at showing that the wealth so produced tends to be distributed among the different classes that have cooperated in producing it in strict accordance with their respective deserts. On this latter point there has, I think, always been a marked difference between the general tone of English political economists and the general tone of leading continental advocates of laisser faire, of whom Bastiat may be taken as a type. Bastiat and his school do boldly attempt to show that the existing distribution of wealth - or rather that which would exist if Government would only keep its hands off - is "conformable to that which ought to be"; and that every worker tends to get what he deserves under the economic order of unmodified competition. But the English disciples of Adam Smith have rarely ventured on these daring flights of optimistic demonstration: when (e.g.) Ricardo talked of "natural wages," he had no intention of stamping the share of produce so designated as divinely ordered and therefore just; on the contrary, a market-price of labour above the natural price is characteristic, in Ricardo's view, of an "Improving society." And, generally speaking, English political economists, however "orthodox," have never thought of denying that the remuneration of workers tends to be very largely determined by causes independent of their deserts - e.g., by fluctuations in supply and demand, from the effects of which they are quite unable to protect themselves. If our economists have opposed - as they doubtless have always opposed - any suggestion that Government should interfere directly to redress such inequalities in distribution, their argument has not been that the inequalities were merited; they have rather urged that any good such interference might do in the way of more equitable distribution would be more than outweighed by the harm it would do to production, through impairing the motives to energetic self-help; since no Government could discriminate adequately between losses altogether inevitable and losses that might be at least largely reduced either by foresight or by promptitude and energy in meeting unforeseen changes. If, however, we can find a mode of intervention which will reduce inequalities of distribution without materially diminishing motives to self-help, this kind of intervention is not, I conceive, essentially opposed to the teaching even of orthodox political economy - according to the English standard of orthodoxy; for orthodox economy is quite ready to admit that the poverty and depression of any industrial class is liable to render its members less productive from want of physical vigour and restricted industrial opportunities. Now, an [624] important part of the recent, and the proposed, enlargement of governmental functions, which is vaguely attacked as socialistic, certainly aims at benefiting the poor in such a way as to make them more self-helpful instead of less so, and thus seeks to mitigate inequalities in distribution without giving offence to the orthodox economist. This is the case (e.g.) with the main part of governmental provision for education, and the provision of instruments of knowledge, by libraries, &c., for adults. I do not say that all the money spent in this way is well spent; but merely that the principle on which a great part of it is spent is one defensible even in the court of old-fashioned political economy; so far as it aims at equalizing, not the advantages that should be earned by labour, but the oppo

          At this point it will probably be objected that the means of equalizing opportunities in the way proposed can only be raised by taxation, and that it cannot be economically sound to tax one class for the benefit of another. If, however, the result sought is really beneficial to the production of the community as a whole, it may, I conceive, be argued - on the premises of the most orthodox political economy - that the expense of it may be legitimately thrown on the community as a whole - i.e., may be raised by taxation equitably distributed. In order to make this plain, it will be convenient to pass to the general consideration of a kind of exceptions to laisser faire differing fundamentally in principle from those which we have so far considered; cases in which it may be shown a priori that laisser faire would not tend to the most economic production of wealth or other utilities, even in a community whose members were as intelligent and alert in seeking and guarding their private interests as any human beings can reasonably be expected to be. I do not argue that in all such cases Government ought to interfere: in human affairs we have often only a choice of evils, and even where private industry fails to bring about a satisfactory result, it is possible that governmental interference might on the whole make matters worse. All I here maintain is that in such cases the general economic presumption in favour of leaving social needs to be supplied by private enterprise is absent, or is balanced by strictly economic considerations on the opposite side.

          To give a complete systematic account of these exceptional cases would carry me beyond the limits of an article: my present object is merely to illustrate the general conception of them by a few leading examples, in choosing which I shall try as far as possible to avoid matters of practical controversy.

          We may begin by noticing that there are certain kinds of utility - which are or may be economically very important to individuals - [625] which government, in a well-organized modern community, is peculiarly adapted to provide. Complete security for savings is one of these. I do not of course claim that it is an attribute of governments, always and everywhere, that they are less likely to go bankrupt, or defraud their creditors, than private individuals or companies. History would at once refute the daring pretension. I merely mean that this is likely to be an attribute of governments in the ideal society that orthodox political economy contemplates. Of this we may find evidence in the fact that even now, though loaded with war debts and in danger of increasing the load, the English Government can borrow more cheaply than the most prosperous private company. We may say, therefore, that government is theoretically fit to be the keeper of savings for which special security is required. So again without entering dangerously into the burning question of currency - we may at least say that if stability in the value of the medium of exchange can be attained at all, without sacrifices and risks outweighing its advantages, it must be by the intervention of government: a voluntary combination powerful enough to produce the result is practically out of the question.

          In other cases, again, where uniformity of action or abstinence on the part of a whole class of producers is required for the most economical production of a certain utility, the intervention of government is likely to be the most effective way of attaining the result. It should be observed that it is not the mere need of an extensive combination of producers which establishes an exception to the rule of laisser faire, for such need can often be adequately met by voluntary association: the case for governmental interference arises when the utility at which the combination aims will be lost or seriously impaired if even one or two of the persons concerned stand aloof from the combination. Certain cases of protection of land below the sea-level against floods, and the protection of useful animals and plants against infectious diseases, exemplify this condition. In a perfectly ideal community, indeed, we might perhaps assume that all the persons concerned would take the requisite precautions; but in any community of human beings that we can expect to see, the most that we can hope is that the great majority of any industrial class will be adequately enlightened, vigilant, and careful in protecting their own interest; and in the cases just mentioned, the efforts and sacrifices of a great majority might easily be rendered almost useless by the neglect of one or two individuals.

          But the case for governmental interference is still stronger where the very fact of a combination among the great majority of a certain industrial class to attain a certain result materially increases the inducement for individuals to stand aloof from the combination. [626] Take, for instance, the case of certain fisheries, where it is clearly for the general interest that the fish should not be caught at certain times, or in certain places, or with certain instruments; because the increase of actual supply obtained by such captures is much over-balanced by the detriment it causes to prospective supply. We may fairly assume that the great majority of possible fishermen would enter into a voluntary agreement to observe the required rules of abstinence; but it is obvious that the larger the number that thus voluntarily abstain, the stronger inducement is offered to the remaining few to pursue their fishing in the objectionable times, places, and ways, so long as they are under no legal coercion to abstain.

          So far I have spoken of cases where it is difficult to render a voluntary association as complete as the common interest requires. But we have also to consider cases where such a combination may be too complete for the public interest, since it may give the combiners a monopoly of the article in which they deal. This is, perhaps, the most important of all the theoretical exceptions to the general rule of laisser faire. It is sometimes overlooked in the general argument for leaving private enterprise unfettered, through a tacit assumption that enlightened self-interest will lead to open competition; but abstract reasoning and experience equally show that under certain circumstances enlightened self-interest may prompt to a close combination of the dealers in any commodity: and that the private interest of such a combination, so far as it is able to secure a monopoly of the commodity, may be opposed to the general interest. Observe that my objection to monopoly - whether resulting from combination or otherwise - is not that the monopolist may make too large a profit: that is a question of distribution with which I am not now concerned. My objection is that a monopolist may often increase his profit, or make an equal profit more easily, by giving a smaller supply at higher prices of the commodity in which he deals rather than a larger supply at lower prices, and so rendering less service to the community in return for his profit. Wherever, from technical or other reasons, the whole of any industry or trade in a certain district tends to fall under the condition of monopoly, I do not say that there ought to be governmental interference, but at any rate the chief economic objection to such interference is absent.

          A familiar instance of this is the provision of lighting and water in towns. Experience has amply shown - what might have been inferred a priori - that in cases such as these it is impossible to obtain the ordinary advantages from competition. Competition invariably involves an uneconomical outlay on works, for which the consumers have ultimately to pay when the competing companies - necessarily few - have seen their way to combination.

          [627] And it is to be observed that the same progress of civilization which tends to make competition more real and effective, when the circumstances of industry favour competition, also increase the facilities and tendencies to combination when the circumstances favour combination.

          But again, laisser faire may fail to furnish an adequate supply of some important utility for a reason opposite to that just considered, not because the possible producer has too much control over his product, but because he has too little. I mean that a particular employment of labour or capital may be most useful to the community, and yet the conditions of its employment may be such that the labourer or capitalist cannot remunerate himself in the ordinary way, by free exchange of his commodity, because he cannot appropriate his beneficial results sufficiently to sell them profitably. Contrast, for instance, the case of docks and lighthouses. In an enlightened community, the making of docks might be left to private industry, because the ships that use them could always be made to pay for them; but the remuneration for the service rendered by a lighthouse cannot be similarly secured. Or, to take a very different instance, contrast scientific discoveries and technical inventions. A technical invention may be patented; but, though a scientific discovery may be the source of many new inventions, you cannot remunerate that by a patent; it cannot be made a marketable article. In other cases, again, where it is quite possible to remunerate labour by selling its product, experience shows that the process of sale is uneconomical from the cost and waste of trouble involved. This, for instance, is why an advanced industrial community gets rid of tolls on roads and bridges.

          It is under this last head that a portion at least of the expenditure of government on education, and the provision of the means of knowledge for adults, may, I think, be defended in accordance with the general assumptions on which "orthodox political economy" proceeds; so far as this outlay tends to increase the productive efficiency of the persons who profit by it to an extent that more than repays the outlay. For it will not be denied (1) that the poverty of large classes of the community, if left without aid, would practically prevent them from obtaining this increment of productive efficiency; and (2) that even when it is clearly worth paying for, from the point of view of the community, the business of providing it could not be remuneratively undertaken by private enterprise. So far, therefore, there is a primâ facie case for governmental interference on strictly economic grounds.

          I do not, however, contend that this defence is applicable [628] to the whole of the expenditure of the funds actually raised, by compulsory taxation, for educational purposes; still less that it is applicable to the whole of the expense that eager educational reformers are urging upon us. Nor do I mean to suggest that the economic reason just given is that which actually weighs most with such reformers. I should rather suppose that their strongest motive usually is a desire to enable the mass of the community to partake effectively in that culture, which - though not perhaps the most generally valued advantage which the rich obtain from their wealth is at any rate the advantage to which the impartial philanthropist sincerely attaches most importance. Is this desire, then, one that may legitimately be gratified through the agency of government? "No," say Mr. Spencer and his disciples; "let the philanthropist diffuse knowledge at his own expense as much as he likes; to provide for its diffusion out of the taxes is a palpable infringement of the natural rights of the taxpayers." "Yes," say the semi-Socialists - if I may so call them - taking the same ground of natural right, "the equalization of opportunities by education, the free communication of culture, are simple acts of reparative justice which society owes to the classes that lie crushed at the base of our great industrial pyramid."

          Now this whole discussion of natural rights is one from which, as a mere empirical utilitarian, I should prefer to stand aloof. But when it is asserted that the prevalent semisocialistic movement implies at once a revolt from orthodox political economy, and a rejection of Kant's and Mr. Spencer's fundamental political principle, that the coercive action of government should simply aim at securing equal freedom to all, I feel impelled to suggest a very different interpretation of the movement. I think that it may be more truly conceived as an attempt to realize natural justice as taught by Mr. Spencer, under the established conditions of society, with as much conformity as possible to the teachings of orthodox English (2) political economy. For what, according to Mr. Spencer, is the foundation of the right of property? It rests on the natural right of a man to the free exercise of his faculties, and therefore to the results of his labour; but this can clearly give no right to exclude others from the use of the bounties of Nature: hence the obvious inference is that the price which - as Ricardo and his disciples teach - is increasingly paid, as society progresses, for the use of the "natural and original powers of the soil," must belong, by natural right, to the human community as a whole; it can only be through usurpation that it has fallen into the hands of private individuals. Mr. Spencer himself, in his "Social Statics," has drawn this conclusion in the most emphatic terms. That "equity does not admit property in land;" that "the right of mankind at large to the earth's surface is still valid, all [629] deeds, customs, and laws notwithstanding;" that "the right of private possession of the soil is no right at all;" that "no amount of labour bestowed by an individual upon a part of the earth's surface can nullify the title of society to that part;" that, finally, "to deprive others of their rights to the use of the earth is a crime inferior only in wickedness to the crime of taking away their lives or personal liberties;" - these conclusions are enforced by Mr. Spencer with an emphasis that makes Mr. Henry George appear a plagiarist. Perhaps it will be replied that this argument only affects land: that it doubtless leads us to confiscate land "with as little injury to the landed class as may be" giving them, I suppose, the same sort of compensation that was given to slave-owners when we abolished slavery - but that it cannot justify taxation of capitalists. But a little reflection will show that this distinction between owners of land and owners of other property cannot be maintained. In the first place, on Mr. Spencer's principles, the rights of both classes to the actual things they now legally own are equally invalid. For, obviously, the original and indefeasible right of all men to the free exercise of their faculties on their material environment must - if valid at all - extend to the whole of the environment; property in the raw material of moveables must be as much a usurpation as property in land. As Mr. Spencer says, "the reasoning used to prove that no amount of labour bestowed by an individual upon a part of the earth's surface can nullify the title of society to that part," might be similarly employed to show that no one can, "by the labour he expends in catching or gathering," supersede "the just claims of other men" to "the thing caught or gathered." if it be replied that technically this is true, but that substantially the value of what the capitalist owns is derived from labour, whereas the value of what the landlord owns is largely not so derived, the answer is that this can only affect the respective claims of the two classes to receive compensation when the rest of the community enforce their indefeasible rights to the free use of their material environment; a

          But is the expropriation of landlords a measure economically sound? We turn to the orthodox economists, who answer, almost [630] unanimously (3), that it is not: that, not to speak of the financial difficulty of arranging compensation, the business of owning and letting land is, on various grounds; not adapted for governmental management; and that a decidedly greater quantum of utility is likely to be obtained from the land, under the stimulus given by complete ownership, than could be obtained under a system of leasehold tenure. What then is to be done? The only way that is left of reconciling the Spencerian doctrine of natural right with the teachings of orthodox political economy, seems to be just that "doctrine of ransom" which the serni-socialists have more or less explicitly put forward. Let the rich, landowners and capitalists alike, keep their property, but let them ransom the flaw in their titles by compensating the other human beings residing in their country for that free use of their material environment which has been withdrawn from them; only let this compensation be given in such a way as not to impair the mainsprings of energetic and self-helpful industry. We cannot restore to the poor their original share in the spontaneous bounties of Nature; but we can give them instead a fuller share than they could acquire unaided of the more communicable advantages of social progress, and a fairer start in the inevitable race for the less communicable advantages; and "reparative justice" demands that we should give them this much.

          That it is not an easy matter to manage this compensation with due regard to the interests of all concerned, I readily grant; and also that the details of the legislation which this semi-socialistic movement has prompted, and is prompting, are often justly open to criticism, both from the point of view of Mr. Spencer and from that of orthodox economists; but, when these authorities combine to attack its general drift, it seems worth while to point out how deeply their combined doctrines are concerned in its parentage.

          At this point the reader may perhaps wonder where I find the real indisputable opposition, which I began by admitting, between orthodox political economy and the prevalent movement in our legislation. The most obvious example of it is to be found in the kind of governmental interference, against which, the request for laisser faire was originally directed, and which is perhaps more appropriately called "paternal" than "socialistic": legislation which aims at regulating the business arrangements of any industrial class, not on account of any apprehended conflict between the private interests, properly understood, of the persons concerned, and the public interest, but on account of their supposed incapacity to take due care of their own business interests. The most noteworthy recent instance of this in England is the interference in contracts [631] between (English) agricultural tenants and their landlords in respect of "compensation for improvements;" since no attempt, so far as I know, was made by those who urged this interference to show that the properly understood interests of landlords and tenants combined would not lead them to arrange for such treatment of the land as was under their existing circumstances economically best.

          A more important species of unorthodox legislation consists of measures that attempt to determine directly, by some method other than free competition, the share of the appropriated product of industry allotted to some particular industrial class. The old legal restrictions on interest, old and new popular demands for "fair" wages, recent Irish legislation to secure "fair" rents, all come under this head. Any such legislation is an attempt to introduce into a social order constructed on a competitive basis a fundamentally incompatible principle; the attempt in most cases falls from its inevitable incompleteness, and where it succeeds, its success inevitably removes or weakens the normal motives to industry and thrift. You can make it illegal for a man to pay more than a certain price for the use of money, but you cannot thus secure him the use of the money he wants at the legal rate; so that, if his wants are urgent, he will pay the usurer more than he would otherwise have done to compensate him for the risk of the unlawful loan. Similarly, you can make it illegal to employ a man under a certain rate of wages, but you cannot secure his employment at that rate, unless the community will undertake to provide for an indefinite number of claimants work remunerated at more than its market value; in which case its action will tend to remove, to a continually increasing extent, the ordinary motives to vigorous and efficient labour. So again, you can ensure that a tenant does not pay the full competition rent to his landlord, but - unless you prohibit the sale of the rights that you have thus given him in the produce of the land - you cannot ensure that his successor in title shall not pay the full competitive price for the use of the land in rent plus interest on the cost of the tenant-right; and, in any case, if you try by a "fair rent" to secure to the tenant a share of produce on which he can "live and thrive," you inevitably deprive him of the ordinary motives - both attractive and deterrent - prompting to energetic self-help and self-improvement. I do not say dogmatically that no measures of this kind ought ever, under any circumstances, to he adopted, but merely that a heavy burden of proof is thrown on any one who advocates them, by the valid objections of orthodox political economy; and that, in the arguments used in support of recent legislation of this kind, this burden does not appear to me to have been adequately taken up.