Jack Fitzgerald
Source: Socialist Standard, June/July 1915
Transcription: Socialist Party of Great Britain.
HTML Markup: Adam Buick
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"ELEMENTARY PRINCIPLES OF ECONOMICS" by Richard T. Ely and George Ray Wicker (America). Revised and adapted for English Students by L. L. Price, M.A. London ; Macmillan & Co. 45. 6d.
To the working-class student who has begun to free himself from the mental bondage of capitalist teaching, the admissions of some of the agents of the master class often come as a surprise. This surprise sometimes has the effect of obscuring his view of the relative value of the other statements, made by these agents, and so leading to unsound or even false conclusions. This is seen in the attitude adopted by the rank and file of the Labour Party, Clarion organisations, the so-called independent labour party, etc., when some capitalist supporter happens to admit the existence of evils that stand out clear enough for any child to see. These supporters are at once hailed as "advanced," or even as "Socialists," when not the faintest real ground can be found for such a claim. The worker who has a firm grip of the essentials of Socialism, however, sees the matter from another standpoint. He knows that the development of capitalism forces forward certain changes (accompanied by new evils) that call for some regulation on the part of the masters. These admissions are, to him, evidences, of the changes, signs of the development; but in no way do they mislead him into fancying the makers of these admissions are Socialists. He always applies the touchstone of Socialism to their views and actions on fundamental matters, and usually finds that these persons are the more acute and up-to-date of the capitalists' agents, and that their work is the more misleading on that account.
In the volume before us the authors merely claim that it is an "elementary" text book, and that it therefore does not attempt to go into the difficult and deeper problems on which "there is more or less disagreement among economists." The authors "have presented the outlines of theory in the form in which they are to-day most generally accepted by economists." This, in the preface, gives a warning as to the lines to be followed, for the student can be at once assured that what is "to-day most generally accepted by economists " will be nothing against the interests of the paymasters of those economists—the capitalist class.
Thus among the preliminary remarks a criticism is given on the idea of "natural" rights, and we are told:
The right of private property, for instance, is so fundamental in our modern civilisation that we hardly think of it as the creation of society, maintained only by constant vigilance on the part of the State, and subject even now to slow and gradual modification. Still less, perhaps, has it ever occurred to most of us that the right is open to question. (Page 9.)
The historical sketch in the early pages of the work is, despite some glossing over of important facts, surprisingly good both for the amount of information contained in a small space, and for the recognition by the authors of the formation of the capitalist and working classes as a result of the establishment of capitalism, though there is—in contradiction to so much that is accurate—the childish remark on page 28 that Fishing Tribes in the primitive days "naturally form larger accumulations of capital" !
The origin of chattel slavery, as a substitute for cannibalism, when the prisoners of war were put to till the soil instead of being eaten is well dealt with.
When we reach the section dealing with the Industrial Stage several important admissions are made. Thus we are told that "Now we have two distinct industrial classes with interests that seem irreconcilable, and between them is fixed a gulf which in an old Society comparatively few can hope to cross." (P. 44.)
Note the guilelessness of the "seem" in above. We are only too well aware how utterly irreconcilable they are and must be because of their fundamental opposition.
Still more guileless is their further remark that under the present system "the employer has furnished materials and machinery and has assumed the risk of loss. He must be paid." (Page 45.)
Where did the employer obtain these "matetrials and machinery"? He did not construct the latter or wrest the former from Nature's grip. These things were done by members of the working class. Yet the capitalist owns them and "must be paid" for allowing other workers to use them. How these things exist and persist we are not told. Perhaps it is one of the points of ''more or less disagreement" left for the advanced student. But we are also told that while the modern employer takes all the product he gives the workmen "not the actual product of their labour, but a stipulated wage which is represented to be an equivalent." (Ibid.) If the wage is the equivalent of the product whence the amount by which the employer is "paid" for allowing the workers to work? Perhaps it is explained by the fact that the wages are only "represented" to be equal to the product.
A Protestant beginner in this subject may be somewhat shocked to find—what the more advanced student has discovered—that the continuance of fast days in the Elizabethan period and after on the old Roman Catholic basis had nothing to do with religion, even though enforced by Acts of Parliament, but was carried on for the purpose of encouraging the fishing industry that formed—and still forms—so important a recruiting area for the Navy. While agriculture was supported because it produced a healthy population which supplied the Army. (Page 68-9.) We are also told that trade "was the motive of Colonial enterprise," while the wars with Spain, Portugal, Holland and France during the 17th and 18th centuries "were largely economic." Traffic with the New World across the Atlantic Ocean, and business in India, inspired a policy which furnishes a connecting link between the overthrow of the Spanish Armada and the battle of Waterloo." (Page 70.) How like to-day !
How necessary is the warning of the Socialist is shown a few pages further on where the enclosure of common land is defended on the ground that it "was imperatively demanded, if sufficient food was henceforth to be raised for the increased population busy about machinery during long hours of work in urban factories." (Page 75.)
Even an elementary student would ask why were "common" lands only enclosed if the need for food was so great. Why not the deer parks and pleasure gardens of the rich, who could better afford to spare land ? Again, in dealing with the notorious conditions based on the employers' greed for gain that led to the passing of the Factories Acts, it is calmly stated that "They did not consciously, we must hope, appreciate the clash of interests, while the children, the 'young persons,' and the women, successively protected by Factory Laws, were powerless to defend themselves." (Page 85.) Such an enormous demand for hope will drive the price above the war limit. In the case of the pauper children employed In the factory hells we have the significant admission that the "regulation by the State of the distressing conditions of their employment was prompted not so much because it was the fulfilment of an obvious duty as on account of the serious danger to the health of the neighbourhood caused by the life they were obliged to lead." (Page 86.)
Of course, it is absurd on the part of the Socialist to say that the remark that the children were "forced to lead" such lives is a complete admission of the slavery of these children. Bat the authors are clearly entering on dangerous ground when dealing with the cause of the "popularity" of the economists of that time, as Smith, Malthus, and Ricardo. The New Economics "was at once suggested by, and offered a rational explanation of, the new order of affairs introduced by the Industrial Revolution," and this Economics "was in this way as much a product of the age as were the factories, the machinery, the canals and railways and the banks." (Page 96.) If this was true then, why is it not true now ? Does any so-called orthodox economist dare to deny that the capitalist system is the best the world has ever seen, even though a few reforms here and there, cautiously and slowly introduced, might bring about improvement ?
None that I know of dare deny that, and for the simple reason that he would lose his situation directly he uttered such a denial.
This is clearly shown when we leave the history of the past and enter the theoretical section—supposed to analyse present-day conditions. All the old confusion and errors on Value, on Price, and on Use-Value and Exchange-Value (wierdly jumbled up) are trotted out and re-sifted with an occasional verbal alteration but no real change. Thus in the discussion of Production a definition is given as follows :
Production, then, we may define as the creation of utilities by the application of man's mental and physical powers to the physical universe, which furnishes materials and forces. This application of man's powers we call labour. (Page 135)
This seems quite clear and simple—as simple, in fact, as the truth that as the working class are the only class applying their powers to production they obviously provide the wealth the masters enjoy. But our authors soon smother this simple fact under a cloud of words, though they reassert their definition on p. 143, when they admit that capital is derived from the "action of labour upon nature."
While giving a chapter on the "Law of Diminishing Returns" in quite the orthodox style, the writers of the book admit that "The art of agriculture is constantly improving as a result of invention and the discovery of better methods and processes, and every improvement makes it possible to secure a greater crop without greater expenditure ; in other words, every such improvement pushes forward the point of diminishing returns." (Page 148.) What value there is in this precious "law" in face of such an admission is quite beyond the power of any orthodox economist to explain.
Another hoary "chestnut" is trotted out when our authors are dealing with the factor of labour in production. We are told : "labour-saving devices, while they may injure individual labourers, are beneficial to society as a whole, because they enable it to secure greater satisfaction by the same exertion." (Page 150.) See how true all this is. The workers have the satisfaction of securing shoddy more rotten than before, or foodstuffs more heavily adulterated, while the capitalists have larger profits for their "satisfaction." Hence the benefit to "society as a whole."
In defining "capital" our authors give us another instance of the old errors restated, for it is said that capital consists of "those intermediate products which are used for the purpose of further production." (Page 155.) As Marx pointed out long ago in his "Wage Labour and Capital," this definition is as good as the one describing a Negro slave as "a man of the black race." For if the definition is correct, then capital has existed ever since man used any implement to aid him in obtaining a living. Then capital existed in the days of primitive savagery ! But how comes it, if this is so, that "Now we have two distinct industrial classes" ? The two statements cannot both be correct, for the one clearly contradicts the other. Not until, and only when, the means of production are owned by one class and used to extract surplus-value from the labour-power of the other class do these means of production become capital, and no other definition will stand analysis on anything approaching scientific lines.
Another childish fallacy is the one borrowed from Bohm-Bawerk that the function of capital is "the substitution of roundabout methods of production for direct ones" and that "Roundabout methods are almost without exception more efficient than direct ones, but these methods require tools and machinery and a lengthened period of production." Here we have not only a fallacy, but a contradiction, for if the method means a "lengthened period of production" how can it be "more efficient" ? Its glaring stupidity is shown by the fact that goods of all sorts are turned out to-day in enormous quantities, at amazing speed, in all directions. The "period of production" for each article or unit of quantity has been not lengthened, but tremendously shortened, but it takes a "professor" of economics to beat the bat in blindness.
A great display is made of the valuable qualities (!) of the "Entrepreneur" or "Captain of Industry," whose function we are told on page 164 "has become of the utmost importance in modern society, and seems to be growing with every increase in the complexity of industrial organisation" ; while on page 165 we read: "On account of the magnitude of business transacted under this form [of business companies] it often happens that the functions of entrepreneurship are divided, the shareholders owning, controlling, and bearing the risk, but committing the active management to elected directors, and, through the directors, to hired superintendants and managers." (Italics mine.) Apparently the "utmost importance" of the "entrepreneur" (these French, words sound so superior, you know) consists in his ability to be "hired," like any other wage-slave.
Another useful admission is made by our authors when dealing with the advantages of the division of labour. They say : "It has therefore happened that a large proportion of modern inventions have come from the brains of workmen." (Page 171.)
But it is on the subject of Value that the greatest confusion prevails, and necessarily so, as a clear understanding of this factor demolishes all the claims of the capitalist to his "interest" and "profit."
Firstly we are told that two distinct but closely related ideas of Value are named "subjective value" and "objective value" ; then that "utility is the power to satisfy wants," while "subjective value is the power to excite desire" and is determined by being "utility under a condition of scarcity." (Page 100.) Also we are told that "objective value, or exchange value, is simple . . . it is the quantitative ratio in which goods or services are exchanged " (ibid). Quite simple. But how is it determined ? Here we are at once in a fog. We are asked to look at a market where eight buyers meet eight sellers and where the buyers have one range of prices and the sellers another. After juggling the sixteen persons and their prices round once or twice we reach the conclusion that "the market price is an equilibrium between the existing state of the supply and the existing state of demand." (Page 190.) Charmingly simple ! The market price is the price prevailing in the market. It would take a bold person to deny the profound truth of this, though an ignorant man may ask what decides the point of equilibrium when supply and demand are equal.
Some attempt is made to skim over this awkward point in dealing with "cost of production," when the question is put: "Why cannot bakers, for example, sell bread for much less than six pence a loaf ? . . . There are two possible answers : They might in some cases prefer to be idle rather than work for less, or they might feel that they were sacrificing the opportunity of making something else for which there are wants equally urgent." (Pages 191-2.)
This is vague enough, and the further analysis as to the costs forming the margin of production is no clearer. We are told that the "greatest" or "marginal cost of producing that supply which will be in equilibrium with the existing demand" (p. 194) is the determining factor in freely-produced goods, and finally we reach the definition that "value is determined on the side of demand by the marginal utility, and on the side of supply by the marginal cost, of production." (Page 199.) This is the last word on Value in general. How "marginal utility" can be compared with "marginal costs of production" we are not told — for the simple reason that it is impossible to compare such things in a measurable manner.
The old confusion between use-value (or utility) and value (or exchange value) is still as glaring as ever, though further confused by the jargon of "marginal" this and "marginal" that so beloved of Marshall and the Fabians. Nor are we given any analysis, however elementary, of the "costs of production," though some "frictional elements" are briefly considered. And wisely do our authors avoid analysis. A correct analysis, even if very brief—such as Marx's "Value, Price, and Profit"—would be too enlightening to the wage slaves, and so must be avoided or befogged.
Monopolies are handled rather carefully which is not at all surprising in a book which was originally written for America, where the latest thing in monopoly, the Trust, flourishes and controls—though the statement that "all intellectual achievements are in part a social product" (p. 101) may be used either to defend capitalist society against the monopolist, or, on the other hand, to defend the Trust or monopolist against the inventor.
The question of Money is fairly well dealt with from the Gold Standard point of view, though the usual chaos as to the "value" of money is maintaiued.
A sufficient sketch of the matters of Credit and Banking is given, but in the chapter on "International Trade and Exchanges" technical terms are introduced too soon in the discussion for the elementary students, who would find some difficulty, from this cause, in following the arguments.
In the chapter on Distribution the old nonsense of sharing the product among the three factors, "land, labour, and capital." is repeated, though a few lines further on it is admitted that "when we are discussing the share of the annual produce that falls to the land (sic) we are at the same time explaining the principles which determine the size of the rent income of the landlord." (Page 275, italics mine.) Obviously the land and the landlord are not one and the same thing—except in orthodox economics.
On the share of the product called wages we are met with a curious fact. The old factors supply and demand are still used, but we are now told they are too general to be of much use. A description of the conditions forming the "standard of life" or "standard of comfort" is given as being a "very real and powerful force in the determination of wages," and it is further stated that :
Even from the standpoint of employers as a class the policy of depressing the labourer's standard of life stands condemned. Labour, to attain its highest efficiency, must have character and intelligence, as well as mere animal strength.(Page 296, italics mine.)
And, I may say, let them only add correct knowledge, and the day of the employers will be over.
The purpose of our authors' last-quoted statement is shown a few lines further on, where we read :
If the labourers in seeking higher wages enforce demands which would rob the capitalist of the interest that is his due . . . then in a short time the capital will cease to be saved (!) and the unprofitable business will be discontinued. (Page 297, italics mine.)
How are the mighty fallen ! The great god Supply and Demand, and even "marginal" supply and "marginal" demand, must descend from its throne when the labour market is under consideration. Here stern necessity, tempered a little, perhaps, by a "standard of comfort" which makes for the cheapness called "efficiency," is to be the ruling deity, and before it we of the "lower orders" must humbly bow.
For are we not told on the same page that "it is not easily conceivable that under present conditions of industry the labour can for long get more than it actually produces" ? That particular conceivability is entirely reserved for the capitalist, who not only produces nothing, but enjoys the best of that produced.
Bohm-Bawerk's much-boomed "theory of interest" is trotted out to explain why interest is paid, but as no attempt is made to discover whence this interest comes, the theory does not take us far. The writers say (p. 321):
Interest is, in fact, a payment for postponement of enjoyment, and such 'postponement' furnishes an expression less open to abuse or misunderstanding than the expression 'abstinence.'
Think of the enjoyment a Rockefeller or Rothschild "postpones" when investing his capital in a fresh line of industry. With what joy can he look forward to the repayment that will enable him to have an extra kipper for tea or—hush—another "arf-a-pint" to go to bed !
That a whole chapter in an elementary textbook should be devoted to Socialism is certainly encouraging to ourselves. The general description of Socialism is marred by the absurdity (apparently borrowed from the capitalist notions of the I.L.P.) that we "desire to socialise capital," though we are correctly described as wishing "to abolish capitalists as a distinct class." It will doubtless astonish the I.L.P.er and Clarionette to read that municipal ownership of gas-works, electric lighting works or other "natural" monopolies are not Socialistic. Moreover, by separating "frankly and rationally the private from the public industrial sphere we lay firmly the strongest possible foundation for the existing order, instead of allowing men. to drift haphazard into Socialism or chaos," (Page 343.)
When we come to the ''arguments" against Socialism we are led once more into the region of hope. "We may derive hope from the fact that men everywhere are coming now to recognise the social obligations resting on the individual" we are told, while Dr. Frazer, late Bishop of Manchester, is quoted as saying :
Some of us, however, have inherited or received money in some way without a return on our part. We are placed by God on our honour. (Page 345, italics mine.)
Note how they receive money "in some way," and how strong their "honour," as religious associations and as individuals, must be when it allows them to draw rents and profits from brothels, slums, and breweries.
In referring to the so-called "Weakness of Socialism" we are asked how we are to deal with agriculture, "which has hitherto resisted all efforts at centralisation." And this from people in the land of the Bonanza Farm, the Grain Elevator Trust, and hugh cattle ranches ! The differences here are no greater than in many another industry, of which a good example is the "chain-store" system, where the units are comparatively small but the ownership and control are centralised.
And the hoary "herculean task" of apportioning work "without engendering a universal discontent that would be fatal to the plan" is once more brought from its retreat. Blissfully ignorant, of course, are our authors that these tasks are done to-day with misery as a reward and a gulf before them that "few men can hope to cross." Note that few men can even "hope" to leave the ranks of the working class.
Yet without even the "hope" the authors are so fond of referring to no difficulty is experienced in obtaining the labour-power to carry out this work. How much more readily will it be done when a full share of the good things and enjoyments of life are taken as a result of doing a share of the work of society !
Another "objection" to Socialism is that the "danger to personal freedom . . . seems very real." Fancy ! We poor wage-slaves might lose our "freedom" to starve in the midst of plenty that we enjoy to day ; we might have to forego the liberty of remaining cold while plenty of fuel was at hand ; we might find ourselves faced with the "very real danger" of no longer requiring to tramp the streets for weary weeks vainly seeking the job that seems farther off each day ; we might have to give up the "freedom" of keeping to the road when on tramp and take to the woods and parks and beauty spots now so seldom open to us. It looks as though it would be almost worth risking.
"Finally," we are told, "we may lay down the general rule that the domination of a single industrial principle is dangerous to civilisation." As this is exactly what is happening to-day where Science, Art, Literature, Poetry, and Music, as well as production of wealth, are all under the domination of capitalism, our authors appear to have made a mistake in their reference. Under Socialism, where the maximum of diversity consistent with the general well-being would be the rule, this "objection" obviously does not apply.
The suggestion that "What is needed is a coordination of the two principles—the principle of private and of public business," is rather late, as most of the "public" business to day is conceived and carried on in the interests of the master class, who have arranged the "co-ordination" to a fair degree of efficiency.
When such acute agents of the masters can find no better objections to Socialism than these we can realise how strong our case really is. Not a single essential point of that case is refuted, nor is any real error shown ; and the so-called points are in each instance far more strongly applicable to the present system than to any other.
As stated in the reviewer's opening remarks, the admissions of our opponents show how far our ideas and education are spreading in all lands. When a sufficient number of the workers grasp the truth of the Socialist case and decide to take control of the means of life for themselves, they will look back with amusement upon the laboured and befogging efforts of the capitalist economists to explain the system of wealth production and distribution, and with still more amusement to the feeble objections and difficulties now urged against Socialism.