Monday, January 19, 2015

#25.2 A SCIENTIFIC SOLUTION OF THE MONEY QUESTION – Arthur Kitson - Part 2

CHAPTER I (Part 1)
ECONOMICS AND ETHICS

It is surely a sad symptom for a science, when, in developing itself according to its own principles, it reaches its object just in time to be contradicted by another; as for example: when the postulates of political economy are found to be opposed to those of morality, for I suppose morality is a science as well as political economy. What, then, is human knowledge, if all its affirmations destroy each other, and on what shall we rely?” — System of Economical Contradictions: Proudhon.

That which is altogether just shalt thou follow, that thou mayest live and inherit the land.” — Deuteronomy XVI : 20.

In proceeding towards any given point, there is always one line which is the shortest — the straight; so in the conduct of human affairs there is always one course which is best — the just.” - Macaulay's Essay on Lord Bacon.

Modern civilization, which, as we are taught to believe, transcends that of any period in the world's history, may be said to be entirely the result of modern scientific thought. Nothing serves to illustrate so well the difference between the civilization of ancient Greece, for instance, and our own, as to compare the mental attitude of the Platonists toward the sciences, with that of the nineteenth century philosophers. By the former science was studied not for the purpose of adding to the material comforts of life, nor to satisfy the vulgar appetites or wants of man, but to exalt the mind to the contemplation of " pure truth " and of things " which are to be perceived by the intellect alone." To bring science to the aid of manufacture was supposed to degrade what was regarded as a purely intellectual pursuit. Inventions were despised as being beneath the dignity of philosophy and fit only for craftsmen. Hence we learn that Archytas, who " had framed machines of extraordinary power on mathematical principles," was persuaded by his friend Plato to abandon mechanics as unworthy the attention of a philosopher. So we read that Archimedes considered geometry degraded by being employed in the production of anything useful, and "was half ashamed of those inventions that were the wonder of hostile nations."

The high esteem in which science to-day is held is wholly on account of what the ancients termed its "vulgar utility." We prize mathematics, not because it leads to the contemplation of "the immutable essence of things," but because It enables us to solve problems connected with the industrial arts and the ordinary affairs of life; so, too, with all other sciences. The age of speculation has given place to the age of practice. What to the ancients was the end of learning, viz : cultivation of the intellect and strengthening of the memory, is to us but a means to an end, and that end is human happiness.

In judging the merits of any science, we are accustomed to inquire "What is its use." "To what purpose is it applicable?" And our respect for it depends upon its demonstrated utility. Take for instance the science of ethics. In furnishing a basis for conduct, principles for right guidance and an ideal standard toward which humanity should ever aspire, the utility of this system of knowledge becomes apparent.

Of modern sciences none stands generally more discredited, nor have the claims of any system of knowledge to rank as science been more persistently opposed than political economy. Transcendently important to human life as are the phenomena with which it deals, it is questionable whether any branch of knowledge is less understood, or commands so little respect as this one.

(After enumerating certain reforms that political economy has effected, Walter Bagehot, the author of several well-known economical works, says: "Notwithstanding these triumphs, the position of our political economy is not altogether satisfactory. It lies rather dead in the public mind. Not only it does not excite the same interest, but there is not exactly the same confidence in it. Younger men either do not study it, or do not feel that it comes home to them, and that it matches with their living ideas. They ask often, hardly knowing it, will this 'science,' as it claims to be, harmonize with what we now know to be science, or bear to be tried as we now try science? And they are not sure of the answer.")

Nor shall we be greatly surprised at this if we examine its doctrines in the light of existing science.

For many years past the civilized world has been confronted with problems which it is the professed aim of political economy to solve. But what do we find? Nothing but discord, disagreement and uncertainty among its doctors.

('Every country," says S. Laing, “'has a political economy of its own.")

The diagnoses of its various schools are contradictory. One school tells us the cause of industrial crises is " over-production;" another "under-consumption;" another says it is due to the credit system, whilst another holds the tariff responsible. Their prescriptions are found to be similarly antagonistic. One class prescribes greater freedom of trade, another greater restriction. This professor suggests the free coinage of silver, and that one denounces it. With such diversity of opinion we can hardly wonder that the science stands in such bad repute.

Notwithstanding the diversity of schools and opinions, not one has yet provided a scientific solution of the economic troubles now afflicting the industrial and financial world. To thoroughly appreciate the condition of economics, we have only to imagine a similar condition existing in those sciences which command our implicit faith and reliance. Suppose every bridge constructed according to recognized mechanical principles collapsed after a few years of ordinary traffic, or every boiler built upon so-called scientific rules should explode as soon as it was subjected to the required steam pressure, or every patient treated according to the Homoeopathic School of Medicine should die, in what light should we regard these sciences?

Political economy deals with the production and distribution of wealth, and its main object is to discover those laws and principles, guidance by which will tend to the material well-being and prosperity of the human race. "Considered as a branch of the science of a statesman or legislator, political economy," says Adam Smith (1723-1790, author of Wealth of Nations (1776)), "proposes two distinct objects: First, to supply a plentiful subsistence for the people, or more properly to enable them to provide such a revenue or subsistence for themselves; secondly to supply the State or Commonwealth with a revenue sufficient for the public services. It proposes to enrich, both the people and the sovereign." We may dispute this, at least the last part, but for the time being will let it stand.

"How happens it then," asks Proudhon, "that in spite of so many miracles of industry, science and art, comfort and culture have not become the inheritance of all? How happens it that in Paris and London, centres of social wealth, poverty is as hideous as in the days of Caesar and Agricola?"

Look, for instance, at the condition of the wealthiest nation on earth, — England. Here — the birthplace of political economy — statesmen and legislators have been largely guided by its teachings. It is said that the "Wealth of Nations" (Adam Smith's book) revolutionized the opinions of England's ministers and caused them to enter upon a new policy in accordance with the doctrines propounded by the great English economist. Clubs were formed for the study of economic questions, and statesmen vied with each other in seeking to bring the commercial laws of England in conformity with those of the new science. After fifty years of this experience what do we find? According to the judgement of one England's foremost statesmen and economists, the great work of political economy has been achieved.

"The controversies which we now have in political economy," said the Rt. Hon. Robert Lowe, "although they offer a capital exercise for the logical faculties, are not of the same thrilling importance as those of earlier days. The great work has been done."

Let us now look at the results. Bearing in mind that the object of the science is " to provide a plentiful revenue or subsistence for the people, and supply the State with a revenue sufficient for the public service,*' let us take a brief survey of "the great work" that Robert Lowe said "has been done."

"In the wealthiest nation in the world," says John Rae, "every twentieth inhabitant is a pauper; one-fifth of the community is insufficiently clad; the agricultural labourers and large classes of working people in towns are too poorly fed to save them from what are known as starvation diseases; the great proportion of our population lead a life of monotonous, incessant toil, with no prospect in old age but penury and parochial support; and one-third, if not indeed one-half of the families of the country are huddled six in a room, in a way quite incompatible with the elementary claims of decency, health or morality."

"Our exports during the past quarter of a century," writes Professor Fawcett, "have advanced from £60 million to more than £2SO million, and our imports have increased to a still greater amount; yet, incredible as it may on first consideration appear, it can, I believe, be proved that whilst there has been this unprecedented increase of wealth, the remuneration of labour has in many instances scarcely advanced at all."

Speaking of the industrial condition of Scotland's greatest city, Matthew Arnold says: "Who that has seen it can ever forget the hardly human horror, the abjection and uncivilisedness of Glasgow?” "Nothing is more certain," writes Professor (John Elliott) Cairnes (1823-1875), "than that, taking the whole field of labour, real wages in Great Britain will never rise to the standard of remuneration now prevailing in new countries, a standard which, after all, would form but a sorry consummation as a final goal of improvement for the masses of mankind. . . . The exertion of labour and capital produce is, lo, 20 or 100 times more than it did 100 years ago. Yet wages have not increased in any such ratio, and it is even questionable whether profits have risen. . . . The large addition to the wealth of the country has gone neither to profit nor to wages, nor yet to the public at large, but to swell a fund ever growing, even while its proprietors sleep — the rent-roll of the owners of the soil."

Here it is apparent that political economy has failed to achieve what its chief apostle designated to be its special mission, nor do we find in turning to other nations with their several schools a much better state of things. “Any one," writes Prof. (Thomas Henry) Huxley (1825-1895), in his "Social Diseases and Worse Remedies," "who is acquainted with the state of the population of all great industrial centres, whether in this or other countries, is aware that amidst a large and increasing body of that population, la misere reigns supreme. I have no pretensions to the character of a philanthropist, and I have a special horror of all sorts of sentimental rhetoric; I am merely trying to deal with facts, to some extent within my own knowledge, and further evidenced by abundant testimony, as a naturalist; and I take it to be a mere plain truth that throughout industrial Europe there is not a single large manufacturing city which is free from a vast mass of people whose condition is exactly that described, and from a still greater mass who, living just on the edge of the social swamp, are liable to be precipitated into it by any lack of demand for their produce. And with every addition to the population, the multitude already sunk in the pit, and the number of the host sliding towards it, continually increase.”

"In the United States,” says a well-known author, (Henry George 1839-1897, in “Progress and Poverty.") "squalor and misery and the vices and crimes that spring from them, everywhere increase as the village grows to the city, and the march of development brings the advantages of the improved methods of production and exchange. It is in the older and richer sections of the Union that pauperism and distress among the working classes are becoming most painfully  apparent."

"I have been told," says a clergyman (Rev. Mr. Cawardine, Methodist minister at Pullman) who witnessed the recent great railroad strike, "that the average wages paid by the Pullman Company are $1.87 per day. I doubt it much. It is claimed that the men are not receiving 'starvation wages.' I know many of which this is true, but they are the exception and not the rule. I know a man who has had, after paying $14.50 rent for four small rooms and seventy-one cents for water rent, but seventy-six cents a day left to feed and clothe his wife and children. When we remember that this is an average case, that it is on the basis of full time, then in the name of all that is just and right, I say God help that man if his dependents be many or if sickness invade his home."

This is a description of what exists in America's so-called "model town." "It is," says the same gentleman, "a civilized relic of old-world serfdom. Today we behold the lamentable and logical outcome of the whole system."

During the recent great coal miners' strike throughout this country the following press despatch appeared in all the newspapers: "I have never seen such a discouraged set of men as the miners of this neighbourhood have been since the last reduction was made. They know it matters not how steady they work, they cannot make enough money to keep a small-sized family in the necessary food, and they have concluded that if they have to starve, they prefer doing it at once and not by degrees.”

Here in the two wealthiest and most civilized nations on earth, we find labour leading a miserable existence, in a chronic state of warfare against capital, and periodically striking for "living” wages. Under the regime of this so-called science, society presents us with the two extremes of vast wealth and wretched poverty side by side; of the wealth-producer doomed to a poor existence, and the non-producer born to a life of luxury. With such results drawn from experience, what other judgement can we pronounce upon a system which works out so differently from what is desired, than that of being false and unscientific? What faith can we place in a science the object of which is "to enrich both the people and the sovereign,” that fails so completely in its main object? Even to the statists who happen to be reading this, certainly the so called “science” of economics has failed to prevent even “sovereign” states from becoming perpetual debt burdens of their citizens. We're nearly 120 years after this was written, so not a thing has changed!

But the question arises, "Have the principles of political economy had free play in any industrial community where poverty still exists?" "Have those nations in which poverty progresses with wealth been governed by its principles?" The patient who neglects to follow his physician's advice cannot justly hold him responsible for failure to regain health. So far as England and the United States are concerned there can be little doubt but that in all essentials the laws of each nation have been, in the main, favourable to the workings of its respective school — schools which, while differing in matters pertaining to foreign trade, agree in almost every other branch. Indeed, orthodox political economy is founded upon certain legalized institutions, which have been handed down from medieval times. Its fundamental assumptions recognize so-called "private rights," which governments of all nations have built up and strengthened. It is founded in a large measure upon the principles recognized by juris-prudence — better named "juris-ignorance." There can be no question that the production of wealth during the past century has been enormously in excess of any, within a similar period, that the world has ever known. But with the production of wealth, economics has had comparatively little to do. This growth of production has been due to invention, discovery, and the physical sciences. It is with the distribution of wealth the science is chiefly employed, and it is in this particular where it has failed. In each country we find wealth distributed amongst the so-called three factors, in rent, interest and wages, according to the laws governing these respective institutions. We find supply and demand governing the prices of all commodities, even the factors themselves. Exchange is carried on by the methods and rules approved by leading economists. Money is regarded by merchants in the same light as the highest authority on finance regards it, and gold has become — thanks to economists and legislators — the universal basis for currency. The doctrines of Thomas Malthus (1766-1834) are found to work like a charm, and the man for whom capital has no employment, finds no plate set for him at nature's banquet. In our dealings with each other we have imbibed the supreme principle of political economy — selfishness please recall this blog's precise definition, and the three cardinal virtues and our precise definition for virtue as well, abstention, deception and avarice are universally practised.

So closely has the fundamental law of this science — to gratify one's desires with the least expenditure of energy — been followed, that a large percentage of the race have devised schemes for living without the expenditure of any energy at all — on their part. We have acquired not only the art of buying in the cheapest, and selling in the dearest markets, but modern ingenuity has discovered a plan for controlling the markets themselves, thus making goods cheap or dear at pleasure.

In conformity with economic teachings we have abolished the duty of alms giving — a system which served to mitigate to a considerable extent the miseries to which the labouring classes were exposed during medieval times — and have enacted tramp and vagrancy laws, thus making poverty a crime. We have learned to treat labour absolutely as a commodity and have made it entirely subservient to the laws of supply and demand, notwithstanding our high pretensions regarding the immorality of slavery. In short, our modern commercial and industrial system seems to conform entirely to the principles and teachings of orthodox economists. So far, then, it is fair to say that the principles of political economy have had reasonably free play in the countries we have been considering, and therefore we are warranted in passing judgement upon the system which bears such fruit. But it will be contended that though conditions are bad, they are better than they were and are continually improving; that although labour is admittedly in a "dim-eyed, narrow-chested condition," it is slowly but surely gaining in health and happiness.

For instance, we are told by an optimistic economist, Mr. W. H. Mallock, 1849-1923 that "the poorer classes as a body have advanced and are advancing enormously.” Another writer informs us that the pauper of today enjoys comforts and privileges unknown to even the nobility of a few centuries ago. As though the privilege of looking through a pane of glass, or walking an electric-lighted, well paved street, could assuage the pangs of hunger or protect one from the icy blasts of a winter's storm! Against the statements of Mr. Mallock, however, we have that of Prof. Thorold Rogers 1823-1890: “I have protested against that complaisant optimism which concludes because the health of the upper classes has been greatly improved, because that of the working classes has been bettered, and appliances unknown before have become familiar and cheap, that therefore the country in which these improvements have been effected must be considered to have made for all its people regular and continuous progress." And again, " relatively speaking, the working man of today is not so well off as he was in the 15th century." He adds, "the freedom of the few was bought by the servitude of the many."!

We have also the statements of both Professors Fawcett and Cairnes before quoted. We have likewise the evidence gained from experience in all new countries of the inevitable growth of poverty with the progress of wealth, as demonstrated by Mr. Henry George in his "Progress and Poverty." But outside of any opinion, the fact remains that after a century's unprecedented growth of wealth, the one human factor in production still remains as a class, within sight of starvation, and unable to face, unaided, what are known as "hard times.” In short, so far as enabling the majority of people to provide themselves with a plentiful subsistence is concerned, political economy has been an ignominious failure. Keynesians, socialists and other so called “liberals” after nearly 120 years cannot argue sufficiently otherwise, either.

Passing from the condition of society to the particular phenomena with which it should deal, we find the science confronted with problems which it has thus far been powerless to answer. For instance, those regularly recurring decennial crises with which we are so familiar, we find economists regarding "with the same passive emotions of wonder and submission, with which in the material world we survey the effects produced by the mysterious and uncontrollable operation of physical causes." (Dugald Stewart 1753-1828) Passing within the realm of the science itself, we find it affording far greater cause for wonder and amazement than food for instruction. Starting originally with the intention of discovering laws by which the greatest amount of wealth can be produced and enjoyed by society, it concludes by showing how wealth can best be conserved by controlling and limiting the production of human beings. The problems which it originally propounded have become inverted. Acquisition of the means of wealth-production is set forth as the end of social existence. Instead of wealth being produced for the benefit of mankind, the right to life, by the majority of beings, is regarded solely from the standpoint of their ability to create wealth, whilst often this right is denied. Listen to the following passage from Malthus:

A man who is born into a world already occupied, his family unable to support him, and society not requiring his labour, such a man, I say, has not the least right to claim any nourishment whatever; he is really one too many on the earth. At the great banquet of nature there is no plate laid for him. Nature commands him to take himself away, and she will not be slow to put her order into execution." (I have quoted this passage from Ben R. Tucker's translation of Proudhon's “Economical Contradictions," as I have not the original work itself. The words may not be identically those used by Malthus, but the sense is the same. — AK)

The least intelligent person can hardly fail to perceive that under those laws which economists declare essential to social progress, nine-tenths of the people are the servants or slaves of the other tenth, whilst the whole of society is dominated by and subordinated to the things it produces. Instead of labour employing capital (i. e. human beings employing their own productions) we find capital employing labour.

"Although labour is the starting point in production," writes Prof. Jevons (Theory of Political Economy), “and the interests of the labourer the very subject of the science, yet economists do not progress far before they suddenly turn around and treat labour as a commodity which is bought up by capitalists. Labour becomes itself the object of the laws of supply and demand, instead of those laws acting in the distribution of the products of labour. Economists have invented, too, a very simple theory to determine the rate at which capital can buy up labour. The average rate of wages, they say, is found by dividing the whole amount of capital appropriated to the payment of wages, by the number of the labourers paid; and they wish us to believe that this settles the question."

In the branch known as exchange we find the same remarkable inversion of the natural order of things. The mechanism for distributing wealth has become the highest form of wealth. Money, instead of remaining the medium or tool of exchange, has become its ultimate object, and commodities, although produced for consumption, are regarded mainly from the standpoint of their ability to produce that which should function solely as a means for exchanging them. In place of finance serving industry we find industry the slave of finance. The end sought by the wealth-producer has come to be recognized as work. Universally good harvests and general increase in production and manufactures are regarded with dismay by producers as leading to overproduction and consequent starvation, whilst a wholesale destruction of wealth by fire, flood or war is hailed as a boon to the masses. We continue to insist that anyone using the term “the masses” in any way whatsoever, is suggesting that he or she is standing at a higher perspective relative to all others from which they can look down upon and call down upon other people or otherwise use their, thought to be exalted, position as an “argument from authority” which must always be false, since it begs the question, from whence does one ultimately derive the right to such authority or would be oppression of others? No matter how humble the speaker might claim to be, the use of the term “the masses” for “the people” is usually a dead giveaway that someone thinks too highly of themselves.

(Since writing the above, I cut the following from the Philadelphia Inquirer, Aug. 6th, 1894: “The reports of serious damage to the corn crop have advanced the price of that grain five cents a bushel, making an advance of eight cents in two weeks. The grain is now seven cents a bushel higher than at this time last year; and yet it does not appear that the crop will be any less in 1894 than it was in 1893. The higher price at which the grain is now quoted thus means prosperity to a very large and important consuming element in the population.”)

In fact, regarded from a rational standpoint, the whole commercial and industrial world appears to be standing upon its head.

The present science of economics is made up of antinomies. Whilst recognizing wealth as essential to social life, it demonstrates that the conditions favourable to its growth do not conduce to social health. The laws that lead to wealth production lead to starvation. Overproduction and want go hand in hand. The self-same laws that govern distribution of the means of existence, are continually urging man towards destruction. Life and death are inextricably mixed up in all its prescriptions.

The original problem was " How can wealth be controlled to serve the best interests of society?” Today the problem is " How can nine-tenths of society be controlled to serve the interests of existing wealth?"

Viewing it from an ethical standpoint we shall find still further grounds for astonishment. "Political economy generally," says Prof. William Smart 1853-1915, "is based on the analysis of economic conduct." Yet we find economic conduct to be utterly irreconcilable with any standard of right conduct. Not only so, but economists have not hesitated to proclaim economics and ethics as irreconcilable. "Moral considerations have nothing to do with political economy.” says John Stuart Mill 1806-1873. "The economic 'want' is not necessarily a rational or a healthy want," says Prof. Smart.

Prof. Cairnes writes: "I am unaware of any rule of justice applicable to the problem of distributing the products of industry; and any attempt to give effect to what are considered the dictates of justice, which should involve as a means towards that end, a disturbance of the fundamental assumptions on which economic reasoning Is based, more especially those of the right of private property and the freedom of individual industry, would, in my opinion, putting all other than material considerations aside, be inevitably followed by the destruction or indefinite curtailment of the fund itself, from which the remuneration of all classes is derived." He adds, "As to the amount of truth or morality which these several maxims of political economy embody, I am not concerned here to inquire. My business with them has reference exclusively to their efficacy as rules for regulating the production and distribution of wealth."

As well might the navigator say, "As to the correctness or incorrectness of the ship's compass, I am not concerned to inquire. My business is simply to sail the ship."

So the metaphysician might say, "As to the truth or correctness of my premises, I am not concerned to inquire. My business with them is simply to arrive at logical conclusions."

I confess that there is, to my mind, something amazing in these frank statements of Mill and Cairnes. How they could presume to suppose they were building a science governing human actions — for the production and distribution of wealth is entirely regulated by human actions — without any regard to that science which governs right conduct, is to me inexplicable.

With Proudhon, we may remark that "It is surely a sad symptom for a science, when, in developing itself according to its own principles it reaches its object just in time to be contradicted by another." (System of Economical Contradictions)

We now pass to a consideration of the premises upon which the science is built. Economists assert that wealth is the resultant of three factors: land, labour and capital. Allowing, for a moment, the assertion, we must recognize that this classification places all human exertion under one heading, viz : labour. Hence there is but one human factor in production; and since, in order to maintain and properly develop them, the factors must be properly nourished and replenished from wealth produced, in the absence of anything to the contrary, reason would suggest that all wealth should be divided among them in proportion to their needs. That is, that the land should be properly fertilized and irrigated, capital replenished and the balance should go to labour. This would seem to harmonize with the principles of ethics. To parody a political adage we may justly say "to the factors belong the spoils."

But what do economists say? "The products of industry” say they, "are divided into three parts. One part goes for use of land and is termed rent; another to labour and is called wages; and another to capital and is known as interest." Instead of rent going to land, then, it goes to a landlord, and interest is similarly paid to a capitalist. But to what purpose are these portions of wealth, which are paid to landlords and capitalists, applied? To fertilizing land and repairing capital? Not necessarily. The main disposition of this wealth is used to support the landlords and capitalists themselves, rather than maintain the factors that they justly or unjustly represent. With this question, however, economists do not bother themselves. There is here, evidently, some gross error, something entirely misleading and wholly unscientific. Beginning with three factors in production, one of which is human, economists end by distributing wealth among three factors, all of which are human. As factors in production, landlords and capitalists do not appear. On what basis, then, do they appear as factors in distribution? “Rent," they say, "is for the use of land." Now the natural payment to land for its use is labour. There is no just reason to exact payment for use unless the thing is used. To use land is to work upon it — to labour. Without such labour there can be no return, for nature gives only to labour; hence, the payment nature demands is labour. To use is to employ, and to say that land is an agent in production, and the use of land an agent, is one and the same thing. In other words, land as a factor necessarily means its use, and the natural and only just payment for use is labour. Labour is, in fact, nature's rent, and this is the only form of rent that is just. To pay rent to a landlord, therefore, means a double tribute, a  natural and an unnatural one. But land is nature's product, and her rent there is not the slightest possibility of evading. What part then does the landlord furnish? Where is his quid pro quo? To these questions political economy gives but evasive answers; and yet, if it be a science it must answer them, and answer satisfactorily.

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