Poverty in Plenty (Routledge Revivals)

The Ethics of Income

J. A. Hobson

• Publisher: Routledge
• Year: 2013
• ISBN:
  9781136240379
• Edition: 1
• Topic: Economics
• Subtopic: Labour Economics
• Index: Economics

First published in 1931, this Routledge Revivals title reissues J.A Hobson's analysis of financial distribution in the early years of Twentieth Century Britain. The book focuses on the moral questions that he considered to be important in regard to the economic reforms that were necessary to secure the utilisation of modern productivity for the welfare of mankind. In this work, Hobson considers the wasteful working of the economic system, with its over-production, under-consumption and unemployment and states that these errors are due to the unfair way in which income is apportioned among the nations, classes and individuals that produce it. Poverty in Plenty argues for a conscious economic government inspired by a sense of justice and humanity. It makes suggestions towards the establishment of such a government and presents business prosperity as a problem of morals.

CHAPTER IV

CLAIMS UPON SURPLUS INCOME, PERSONAL AND COMMUNAL

If it were recognised by all thinking men and women that the incomes they received for their personal efforts in production were only to a slight extent determined by the quantity and quality of their efforts, and chiefly by the efforts of other producers contributing to the same supply of products and to the efforts of producers in all other industries whose incomes constituted the demand for their products, this understanding would revolutionise their attitude towards taxation and the ‘social services’ upon which public revenue is expended. For they would perceive that taxation was not an invasion of their property rights, a forcible seizure of wealth which they have made, but a claim exercised by the State as representing the contribution which economic society had made towards ‘their’ incomes. In other words, the justification for taxation would no longer rest upon needs of revenue for the maintenance of public order, but would extend to cover the whole of that part of income and wealth which could rightly be regarded as the product of social activities. Here two objections may be raised. It may be urged that the so-called ‘social’ determination through ‘markets’ is nothing other than the activities of individual producers and purchasers. I would reply that the impact of these particular activities upon prices and through prices on real incomes is incapable of separate assessment and cannot be resolved into a multitude of individual claims. Moreover, it is not true that a social force or effort is the mere aggregate of individual forces and efforts. Organised society as a unitary whole supports the economic system and helps every member in the performance of his function.

Taxation, thus viewed, is the resumption by society of an income due to it as a productive instrument, and needed by it, as the individual needs his share, for maintenance and vital progress. The share thus due to society need not, of course, be taken by taxation. In a wholly or partially ‘socialised’ community the distribution of the product, or its value, will be such as directly to assign to society the net profits of each enterprise after meeting the expenses of production upon a basis of the personal efficiency of all producers. Such profits, or surplus, would be available either for the reduction of prices to the consumer of the product, or for the improvement of this or some other economic public service, or for the extension of social services that are noneconomic in their direct intent, such as health, education, and recreation.

Almost all modern economic nations have been ‘socialising’ themselves along these two paths, running certain basic services by publicly owned or controlled instruments, and enlarging and improving ‘social’ services, partly by expending the gains from socialised industries, but mainly by taxing surplus elements of private incomes and inherited wealth.

Our analysis of markets, as social instruments for the determination of values and the distribution of industrial gains, showed how what we here term ‘the surplus’ was distributed not according to any canons of justice or utility, but according to the strength of ‘pull,’ the economic force of the buyers and sellers, collectively and individually regarded. It is this unfair and wasteful apportionment of industrial gains or real income by the ill-ordered social processes of bargaining in markets that constitutes the need for a genuinely conscious economic government. For while we have dwelt chiefly upon the unfairness and inhumanity of the conduct of industry and the distribution of incomes, these charges, always valid in every age and country, are now reinforced by a growing realisation that this unfair and inhumane system will no longer work satisfactorily even from the standpoint of the financially and industrially powerful classes. The system, indeed, works so wastefully, with so much friction and stoppage, that many of the owning classes find their surplus incomes shrinking. I need not here discuss the causes of this new trouble, for in its scale and its duration it is new. War and post-war dislocations, industrial and financial troubles, the growth of tariffs and other economic barriers, the failure of wage-rates to adjust themselves to falling prices, and of gold to respond in output to the requirements of industry and credit—to these and other factors in our present troubles economic doctors ascribe very diverse values.

But the nature of the economic disease itself is not a matter of dispute. With existing plant and power, natural resources, labour, and managerial knowledge, the world could produce at least twice as much wealth per capita as it is actually producing, without undue strain upon human energy. For the volume of unemployed labour, huge though it is, is no adequate measure of the wastage. The slowing down of many processes, the limitation of output by organised capital, the corresponding ca’ canny of labour, the continuous drift from the productive into the distributive trades, in excess of any real demand, add greatly to the waste. But perhaps an even greater source of waste is the failure of attempts on the part of the depressed trades to re-equip themselves with up-to-date technique and organisation. The reasons for this failure are two. First, the unwillingness of a large number of separate and hitherto competing firms to enter into common arrangements for buying and selling and so to organise their producing units as to avoid overlapping and other wastes. Suspicion, jealousy, and sheer inertia are chief retarding forces. Secondly, though investment capital and bank credit are available in abundance for any business proposition which can show a reasonable prospect of effecting sales at a profitable price, the downward trend of prices has made it exceedingly difficult for would-be producers to show that further use of capital upon technique could enable them to make a profit upon their enlarged output.

Everywhere we are brought up against the obstinate fact that the productive powers of capital and labour are excessive, in the sense that any attempt to operate them fully creates a glut and a stoppage because markets for goods do not expand to keep pace with productivity. The waste of cyclical fluctuations with their long spells of un- and underemployment is manifestly attributable to this maladjustment. But this is only a restatement of the problem, not an explanation, still less a solution. There are various explanations, the chief of which are, (1) a failure of the quantity of money, or purchasing power, to keep pace with the expanding needs of commerce by reason of a shortage of the gold supply; (2) the high wages and the shorter hours which, taken along with the burden of taxation on incomes and industry, make it unprofitable to operate a large proportion of existing plant and labour; (3) a distribution of the general income which in normal times causes an attempt to save and put into increased capital a larger proportion of the income than is required to turn out the quantity of final commodities that can be bought by the income that is spent.

I do not wish here to discuss the respective value of these explanations, but only to insist that all of them admit the magnitude of the maladjustment and the inability of the economic system to effect a cure without constructive planning on a national and a world scale. There are, of course, economists and statesmen who think nothing can usefully be done except to wait for the swing of the pendulum, the turn of the tide, or the clouds to roll by. These maladjustments, distressing as they are and wasteful as they seem, are for them the expressions of natural laws, and seen in this light belong to a true economy of industrial evolution. The clumsy attempts of governments or other social bodies to interfere with them will only make matters worse!

But this is a foolish surrender to the forces of unreason, a claim to withdraw from man's rational control the largest sphere of his collective conduct, to assign to industry a reign of law which nobody would think of assigning to religion, politics, art, science, sport, or any other activity of man. The old laissez-faire had a sort of reason in its policy. It believed that the reasonable judgment upon which each man based his economic conduct would better serve the common good than the obstructive interferences of governments. This may have been sound reasoning for the time. But this new laissez-faire, the denial of all utility to collective planning, is at bottom a cover for the fears and greeds of the classes whose property interests may be assailed by attempts to put industry upon a more reasonable and more equitable footing. They evoke the rigours of economic laws in defence of the existing disorder, because they are unwilling to submit the concepts and institutions of property to damaging scrutiny.

The acute French critic, M. André Siegfried, has lately dwelt upon the special faculty of the British for blinding their eyes, not consciously but instinctively, to any line of reasoning or any set of facts which seriously disturb their convenience or dignity. It cannot, therefore, be assumed with confidence that what are here deemed to be irrefutable criticisms upon the working of the economic system, will be absorbed by any considerable section of those who are interested in not understanding them or in not recognising their validity. Nor is this convenient blindness confined to the capitalist and wealthy classes. It is equally difficult to get workers in the sheltered high-wage occupations to recognise the possibility, or indeed certainty, that their higher earnings must to a considerable extent entail reductions in the real wages of the workers in the unsheltered trades.

But is it impossible to formulate principles for the conduct of industry which by their evident reasonability and equity will gradually, or even quickly, release increasing numbers of decent-minded men and women from the grip of prejudice and self-interest and lead them to the acceptance of a new economic order? An approach towards the discovery of such principles is to be found in the familiar communist maxim: "From each according to his capacity, to each according to his needs.” Each half of this maxim makes a separate appeal to reason. A well-ordered economy would get from each member the best and largest service he was fit by nature, training, and circumstances to render. This economy would yield the largest and best product at the lowest human cost. The distribution of this product “according to needs,” or capacity to use, would ensure the largest human utility or vital service from its consumption. But though each half makes a separate convincing appeal, the appeal of the whole is far less convincing. The principle may operate successfully in the close economy of a good family, or even within a small religious community. But it would not work, it is held, in Western civilisation, on the larger scale and with the lesser contacts, of a town, a nation, or the world economic system. Altruism, or communal feeling, is not strong enough in most men to evoke their best personal efforts of production unless they get for their separate use or enjoyment a share of the product measured not by their personal needs, but by what seems to them to be the amount and quality of their effort, or its result. There still persists a strong belief in the equity of payment by result, though, as we see, it is based upon a fallacious disregard of the social determination of value. This false sense of equity is, however, nothing else than a cover for the undeniable fact that men will not work their best unless they are paid for doing so, a doctrine in antagonism with ‘payment according to needs.’ Some compromises on both sides of this difficulty are possible. On the physical plane, at any rate, there is some correspondence between effort and need, between the output of productive energy and the intake of food. In some higher kinds of work a fairly large personal income and expenditure may be required to provide the seclusion, travel, and other experience enabling a man to put forth his best intellectual or creative productivity. But it cannot be held that these considerations justify the wide discrepancies between the incomes of the rich and the poor in any society, or meet the obvious objection that most poor people do far more disagreeable work than most rich people, and do it under circumstances detrimental to life itself, as is reflected in the vital statistics of occupations.

Another qualification is found in the fact that respectability or prestige, skill, the possession of a sense of power and some genuine regard for public or personal service, count to some extent in certain occupations as substitutes for higher pay. Indeed, in the higher public offices of a State or municipality, and sometimes in private corporate bodies, the ‘needs’ basis of payment obtains recognition in th...