第9章

Somesuchbusinessesorgroupsofbusinessespossessavirtualmonopolyofthemarket，andcancontroloutputandprices，soastosecureabnormaldividends。Suchcontrolis，tobesure，neverabsolute，itscontrolofpricesbeingsubjecttotwochecks，therestrictionofdemandwhichattendseveryriseofprices，andtheincreasingprobabilityofcompetitionspringingupifprofitsaretoohigh。Butqualifiedmonopolies，earningdividendsfarlargerthanareeconomicallynecessarytosupporttherequiredcapital，areeverywhereinevidence。Trusts，cartels，pools，combines，conferences，andtradeagreementsofvariouspotencyandstringency，pervadethemorehighlyorganisedindustries，substitutingtheprincipleofcombinationforthatofcompetition。Inallmajorbranchesofthetransporttradebylandandsea，inlargesectionsoftheminingindustry，intheironandsteelindustryandinmanybranchesofmachine-making，inmanyofthespecialisedtextiletrades，inthechemicalandothermanufactureswherespecialscientificknowledgecounts，inmanydepartmentsofwholesaleandretaildistribution，and，lastnotleast，inbanking，financeandinsurance，freedomofinvestmentandofcompetitionhavevirtuallydisappeared。Toassumethatfreshstreamsofcapital，labourandbusinessability，

havelibertytoenterthesefieldsofenterprise，andbytheirequalcompetitionwiththebusinessesalreadyinpossessionsotoincreasetheoutput，lowersellingpricesandkeepinterestandprofitsatabare"costs"level，isachildishtravestyoftheknownconditionofthesetrades。Toaffirmthatsuchmobilityandlibertyofcompetitionisthesolenormal"tendency"，andthatthemonopolisticandcombinativeforcesmerelyrepresentfriction，issograveafalsificationofthefactsastoputoutofcourtthewholemethodofeconomicinterpretationwhichisbasedthereon。Concretecapitalhasnoneofthequalitiesassignedtotheabstractcapitaloftheseeconomists。Itisneitherinfinitelydivisible，norabsolutelymobile，noraccuratelydirected，norlegallyandeconomically"free"todisposeitselfinanypartoftheindustrialsystemwherethecurrentinterestorprofitexceedstheaverage。Overlargetractsofindustrycombinationismorenormalandmorepotentthancompetition，andwherethisisnotthecase，themostcompetitivetradeswillbefoundhoneycombedwithobstructiveclots，businessesenjoyingspecialadvantagesandearningcorrespondinglyhighprofits。

§；13。Becausecertainqualitiesofbusinessabilityarerequisite，towitastuteness，keennessofjudgment，calculatingpower，determination，capacityfororganisationandexecutiveability，itissometimesclaimedthatthehighratesofprofitwhichaccruefromsuchbusinessesaswehaveindicatedarereallythecreation，notofmonopolyorcombination，butofthetalentsoftheseentrepreneurs。Buteventhoughitbeadmittedthatsomesuchabilityisessentialtoproduceortomaintainasuccessfulcombination，cantheentireprofitsofsuchacombinationbeimputedtothisabilityorregardedasitsnaturalandproperreward？Takethecommoninstanceofthe"forestaller"，whostopsthesupplyofsomecommodityonitswaytoamarket，securesthewholesupplyatcompetitivepricesfromthevariouscontributors，andthensellsitatamonopolypricefixedbyhimself。Aretheprofitsofthiscorneraproductofabilityandarewardofability，andnota"surplus"representinganartificiallycontrivedscarcityvalue？

Ortakethecaseofacontractingfirm，whichpersuadesalltheotherfirmsinapositiontocompetetocomeintoanarrangementastoaminimumtender。

Aretheextraprofitsduetosuchanarrangementtoberegardedaswagesofability，becausesometactwasneededtoworkthething？Butsupposewegrantedthewholecontention，andagreedthattheextradividendspaidtoshareholdersinfavouredorprotectedbusinesseswerereallyproducedbytheabilityoftheentrepreneurormanager，whatthen？Itisnotprovedthattheseextraprofitsare"costs"，not"surplus"。Onthecontrary，thefactthattheycanbetakenasextradividendsorbonusesbytheownersofthecapital，insteadofpassingin"wagesofability"totheentrepreneur，isproofpositivethattheyaresurplus。Foriftheywereasubsistencewageofability，orevena"prize"，essentialtoevokesomespecialoutputofskillorenergy，theycouldnotbethusdivertedfromtheentrepreneurtotheshareholders。Infact，thereisnoreasontosupposethatanyveryrareorconspicuousabilityisevincedinworkingasuccessfulpoolorcombine，oreveninorganisingasuccessfulbusiness。Stilllessistherereasontosupposethattheprofitsattendingsuchanenterpriseareinanywayproportionatetotheskillorenergyoftheentrepreneur。Everyoneisawarethatthecontraryisthecase。Indeed，sofarasscientific，professional，andbusinessabilityisindustriallyusefulandhasaclaimtoincome，enquiryshowsthatthereisnobettersecurityformobility，freedomofcompetitionandequalityofpayment，thaninthecaseofcapital。Inequalitiesofeconomicconditionsbetweenvariousclassesofourpopulation，involvinginequalitiesofnurtureandofeducation，andofeveryothersortof"opportunity"

relevanttothediscovery，training，equipmentandsuccessof"naturalability"，setupaseriesofalmostimpenetrablebarrierstothefreeflowofnaturalabilitythroughouttheindustrialsystem，andgiverisetoanelaboratehierarchyofrestrictedemploymentswheretheratesofremunerationrepresent，notanyinherentservicesofability，butthedegreeoftherestrictioninrelationtotheimportanceofthework。Allsuchadvantagesofopportunityarereflectedinratesofpaymentfor"ability"whichcarryelementsof"surplus。"Thoughsomeportionofthehigherremunerationpaidtosuccessfulprofessionalworkersmayberegardedasinterestuponthecapital-outlayoftheireducationandtraining，thereisnoreasontoholdthattheextrapaymentisadjustedtothecostsofthisoutlay。Stilllesscananysuchargumentavailinthecaseofhighbusinessprofits。Thoughabilityandexpensivetrainingmaybefavouringconditionstosuchfinancialsuccess，restrictedcompetitionmustbeaccountedtheprincipaldirectdeterminantofallsuchextrapayments。

§；14。Thereremainsonefinaldemurrertoourdoctrineoftheunproductive"surplus"。Ifyoutakeintoconsideration，itisurged，alltheunsuccessfulaswellasthesuccessfulbusinesses，youwillfindthattheaveragereturnforcapitalandforbusinessabilityislowenough，notinfactmorethanrepresentsabare"costs"economy。Similarlywiththehighincomesearnedbythefewsuccessfulmenintheprofessionsandinotherwalksoflife。

Setthefailuresfairlyagainstthesuccessesandthereisnonet"surplus"

totakeaccountof。

Butthiscontentionisonemoreabuseofthemethodofaverages。Tothechargethatonemanisoverpaid，itisnoanswerthatanotherisunderpaid。

Tothestatementthatsurplusemergesinthepaymentforsomeordersofcapitalorabilityitisnoanswertosaythatothercapitalandabilitydoesnotevengetitstrue"costs"orsubsistencewages。Theforceofthisrebuttalisstillfurtherstrengthenedwhenitisrealisedtowhatextentthesuccessofthosewhosucceedisdirectlyresponsibleforthefailureofthosewhofail。Fortheeconomicstrengthofthosewhosesuperioradvantageshavesecuredforthemapositionofcontrolwillnecessarilyoperatetomakethecompetitionofoutsidersdifficultandtheirfailureprobable。

Indeed，aportionofthegainswhichcombinationyieldswilloftenbeconsciouslyappliedtokillthecompetitionofoutsiders，ortorestricttheirtradetothelessprofitableorthemoreprecariousformsofenterprise。Butevenwherethisbusinesspolicyisnotadopted，theveryfactthatstrongfirmsand"combines"controlmanymarkets，must，bylimitingtheareaoffreecompetition，intensifythecompetitionwithinthatareaandsocausethefailurestobenumerous。

Thecontention，thattheexcessiveprofitsofsuccessfulfirmsarebalancedandinsomewaycancelledbythelossesofthosethatfail，isalsocontradictedbythepsychologyofthecase。Ifitcouldbeshownthatthechanceofwinningthesehighgainswasinfactanecessaryinducementtothewinnerstostaketheircapitalandbusinesscapacityinaninherentlyriskylineofenterprise，theremightbesomeforceinthisplea。Buttothemenwhoachievethesesuccessesbusinessisnotasimplegameofhazardinwhichtheyhavemerelythesamechanceastheothers。Successiscommonlyachievedbyforce，strategyandthepossessionofknownadvantages，andisusedtostrengthentheseadvantagesandsotoincreasecontinuouslythe"pull"bywhichtheyaccumulatetheirgainsandruintheirwould-becompetitors。Althoughtightformsofmonopolyareveryrare，looseorpartialrestrictionsuponcompetitionareverynumerousandoftenveryprofitable。

Alltheseextragains，issuingfromvariousformsofnaturalorcontrivedscarcityinallsortsofindustries，arerightlyclassedasunproductivesurplus。Manyofthemareasconstantandascertainastheeconomicrentsofland，ariseinthesamewayfromalimitationofsomeproductivefactor，andare"unearned"incomeinthesamesenseofthatterm。Otherofthesegainsaremorefluctuating，proceedingfromlessstableformsofprivilegeorcombination，butwhiletheyexisttheyequallybelongtounproductive"surplus。"8

§；15。Thedistinctionbetweenthatportionofthesocialincomewhichgoesasnecessarypaymentstosupportandevoketheenergiesofbodyandmindofwealth-producers，i。e。，costsofproduction，andthatwhichgoesasunproductive"surplus"tothosewho，possessingsomenecessaryinstrumentofproductionthatisrelativelyscarce，canexactascarcityprice，isfundamentalinavaluationofindustry。Forthissurplusnotonlyrepresentssheereconomicwaste，regardedfromthesocialstandpoint，butitcanbeshowntobedirectlyresponsible，asanefficientcause，formostofthoseparticularmaladiesinourcurrentprocessesofproductionandconsumptionwhichimpedetheeconomicandthehumanprogressofthenation。

Forifouranalysisofthissurplusiscorrect，itconsistsintheseizureofalargeportionofthefruitsofindividualandsocialproductiveenergies，requiredforthefullsupportandfurtherstimulationoftheseenergiesandforthewiderhumanlifewhichtheyaredesignedtoserve，andtheirassignmenttopersonswhohavenothelpedtomakethem，donotneedthem，andcannotusethem。Thepaymentofsurplustakeslargesectionsoftheincome，neededtoraisetheeconomicandhumanefficiencyoftheworking-classes，ortoenablesocietytoenlargethescopeandtoimprovethequalityofthepublicservices，anddisposestheminwaysthatarenotmerelywastefulbutinjurious。Ineffect，alltheexcessivehumancostsofproductionandallthedefectivehumanutilitiesofconsumption，whichourseparateanalysisofthetwoprocessesdisclosed，findtheirconcreteandcondensedexpressioninthis"surplus"。Thechiefinjuriesitcausesmaybesummarisedasfollows:

(1)。Flowingabundantlyas"unearned"incomeintothepossessionof"wealthy"individualsandclasses，ittherebycauseslargequantitiesofthenationalincometobeconsumedwithlittleornobenefit。Formuch，ifnotmost，ofthissurplus，beingdevotedtoluxury，waste，extravaganceand"illth"，furnishesbyitsexpenditurenothumanutilitybuthuman"cost"，notanenhancementbutadiminutionofthesumofhumanwelfare。

(2)Byenablingitsrecipientstodisobeythesoundbiologicalandmoralprecept，"inthesweatofthyfacethoushalteatbread，"itcallsintobeingandsustainsaleisuredorunemployedclasswhoseexistencerepresentsalossofproductiveenergyandofwealth-productiontothenation。

(3)Theevilprestigeandattractionofthelifeofsensationalfrivolitythisidleclassisdisposedtoleadtendsbysuggestiontosapthewholesomerespectforworkinthestandardsoftherestofthecommunity，andtoencouragebyservileimitationinjuriousorwastefulmethodsofexpenditure。

(4)Theeconomicnecessityofproducingthissurplusimposesexcessivetoilupontheproductiveclasses，beingdirectlyresponsibleforthelonghoursandspeeding-upwhichconstitutetheheaviestburdenofhumancosts。

Thedirectionwhichtheexpenditureofthesurplusgivestocapitalandlabourdegradesthecharacteroflargebodiesofworkersbysettingthemtofutile，frivolous，viciousorserviletasks。

(5)Thedisturbingirregularityofthetradeswhichsupplythecapriciousandever-shiftingconsumption，uponwhichthe"surplus"issolargelyspent，imposesupontheworkersagreatcostintheshapeofirregularityofemployment，andaconsiderableburdenofcostlysavingbywayofinsuranceagainstthisirregularity。

(6)Bystampingwiththebadgeofirrationalityandinequitythegeneralprocessofapportionmentofincome，thesurplusimpairsthatspiritofhumanconfidenceandthatconsciousnessofhumansolidarityofinterestswhicharethebeststimuliofindividualandsocialprogress。

Thesurpluselementinprivateincomethusrepresentsthehumanlossfromdefectsinthecurrentdistributionofwealth，notonlythelossfromwastefulandinjuriousconsumptionbutfromwastefulandinjuriousproduction，anexaggerationofhumancostsandadiminutionofhumanutilities。Theprimaryobjectofallsocial-economicreformsshouldbetodissipatethissurplusandtosecureitsapportionmentpartlyasusefulincomeforindividualproducers，partlyasusefulincomeforsociety，sothat，insteadofpoisoningthesocialorganismasitdoesnow，itmaysupplyfullernourishmentandstimulustothelifeofthatorganismanditscells。

Thusdirected，partlyintohigherwagesofefficiencyforworkers，partlyintofurtherincomefortheenrichmentofthecommonlife，the"surplus"

willineffectceasetobesurplus，beingcompletelyabsorbedinsatisfyingthehumanrequirementsofindividualsandsociety。Fornotonlywillitfurnishtheexpenditurerequiredtobringthestandardofconsumptionofallgradesofworkersuptothelevelofafullsatisfactionofhumanneeds，butitwillestablishanentirelynewconceptionofpublicincome。Foritwillberecognisedthatthepublicrevenue，takeneitherbytaxationorasprofitsofpublicindustry，isearnedbypublicworkpreciselyastherevenueofindividualsisearnedbyprivatework，andisrequiredforpublicconsumptionjustasprivateincomeisrequiredforprivateconsumption。

Thusthewholeofwhatnowfiguresasawasteful"surplus"wouldbeappliedinproductiveconsumption。

Thescopeoftheoperationofthisorganiclaw，ofcourse，widelytranscendsthisspecialapplicationtothedistributionofeconomicincome。Itisthegenerallawoforderandofprogressinalldepartmentsoforganicactivity。Butforourtask，thatofahumanvaluationofindustry，itsworthissupreme。ForintheapplicationoftheorganiclawofdistributionallthegreatantagonismswhichloomsobigassocialProblems，LuxuryandPoverty，Toilandidleness，TheindividualandSociety，AuthorityandLiberty，findtheirsolution。9

NOTES:

1。Eventhereheisnotseparatedinphysicalfunctions。Thesexual，philoprogenitive，andthegregariousinstincts，whicharerootedinphysicalstructure，negatephysicalindividualism。Sodoesthestructureofhisbrain，whichinsolitudedecaysorbecomesdiseased。

2。TheCommon-senseofPoliticalEconomy，p。698。

3。p。345。

4。WorkandWages，Vol。I，p。14。

5。ProfessorPigou(WealthandWelfare，p。176)，thoughadoptingthegeneralpositionofmarginalism，makesaconcession，astoitsapplicability，whichisavirtualadmissionofitsfutility。Forbyshowingthatonlyin"industriesofconstantreturns"are"supplyprice"and"marginalsupplyprice"equal，andthatinindustriesof"decreasing"orof"increasing"

returnsthereexistsatendencytoexceedortofallshortof"themarginalnetproductyieldedinindustriesingeneral，"hevirtuallyendorsesthecriticismthat"marginalism"assumesastaticalconditionofindustry。

Foronlyinastaticalconditionwouldallindustriesbefoundconformingtoconstantreturns:theoperationofincreasingordiminishingreturnsmeansnothingelsethanthatchangesinvolumeormethodsofproductionareraisingorloweringproductivityandremunerationaboveorbelowtheequallevelwhich"marginalism"desiderates。

6。Fromthestandpointoftheindividualbusinessfirm"costsofproduction"

mayincludemanyhigherratesofpayments，necessaryundertheactualconditionsofcompetitiveindustrytosecuretheuseoftherequiredagents。

7。Foritmustbekeptinmindthatthe"productiveexpenditure"towhichreferenceisheremadereferultimatelytoastandardnotofmarketbutofhumanvalues。

8。Economists，followingtheclassicaldistinctionmadebyAdamSmithinthecaseoflandvalues，maybreakupthesurplusintovariousspeciesofscarcityrentsontheonehandanddifferentialrentsontheother。

Ascarcityor"specific"rentwilloccurwhenthewholesupplyofsomefactorofproduction，e。g。，allthelandavailableforsomeparticularuse，orallthecapitalemployedinsometrade，isinapositiontotakeapaymenthigherthanisobtainablewheremorelandorcapitalisavailableforthisparticularusethanisrequiredtoturnoutthesupplyofgoodsthatisactuallysold。TheworsthoplandinuseinEnglandobtainsapositiverent，theworstequippedshipsintheAtlanticcombineobtainasurplus-profit:

betteracresofhopland，better-equippedshipsobtainadifferentialrentorprofitinaddition。Bothspecificgainanddifferentialgainaresurplus，andthebasisofeachisascarcityofsupplyandarestraintofcompetition。

9。Foradetailedandmoretechnicaldefenceofthefundamentallyimportantdistinctionbetween"costs"and"surplus"andforacloseranalysisofthesourcesof"unproductivesurplus，"readersmaybereferredtotheauthor"searlierwork，TheIndustrialSystem:anenquiryintoearnedandunearnedincome。(Longman"s2ndandrevisededition，1909)。CHAPTERXIII:THEHUMANCLAIMSOF

LABOUR

§；1。ThevalidityofthehumanlawofdistributioniswelltestedbyconsideringthelightitshedsuponthemodernclaimsofLabourandtheMovementwhichisendeavouringtorealisetheseclaims。ForthesignificanceoftheLabourMovementwillcontinuetobemisunderstoodsolongasitisregardedasameredemandforalargerquantityofwagesandofleisure，importantastheseobjectsare。TherealdemandofLabourisatoncemoreradicalandmorehuman。ItisademandthatLabourshallnolongerbeboughtandsoldasadeadcommoditysubjecttothefluctuationsofDemandandSupplyinthemarket，butthatitsremunerationshallberegulatedonthebasisofthehumanneedsofafamilylivinginacivilisedcountry。

Atpresentmostsortsoflabourersarepaidaccordingtothequantityoflabour-powertheygiveout，andaccordingtothemarket-pricesetuponaunitofeachseveralsortoflabour-power。Thismeansthattheactual

weeklyearningsofsomegradesoflaboureraremuchhigherthanthoseofothergrades，notbecausetheworktakesmoreoutofthem，orbecauseitinvolvesahigherstandardofliving，butbecausesomenatural，somefortuitous，orsomeorganisedscarcityofsupplyexistsintheformergrades，whilethereisabundanceofsupplyinthelatter。1Moreover，theweeklyearningsforanyofthesesortsoflabourwillvaryfromweektoweek，frommonthtomonth，oryeartoyear，withthevariationsofSupplyandDemandintheLabourMarket。Theincomeoftheworkingfamilywillthusvaryforreasonsutterlybeyonditscontrol，thoughitsrequirementsforeconomicandhumanefficiencyshownosuchvariation。Thusthereisnosecurityforanyclassstandardofliving。

Withineachclassorgradeoflabourtherewillbevariationsoftheindividualfamilywage，basedontheamountoflabour-poweractuallygivenoutintheweek。Alesseffectiveworker，eventhoughheputsoutasmucheffort，willearnlessmoneythanamoreeffective。Thisseemsnecessary，reasonableandevenjust，solongasweaccepttheordinaryviewthatlabourshouldbeboughtandsoldlikeanyothercommodity。

Butonceaccepttheviewthattobuylabour-power，likeothercommodities，atapricedeterminedpurelybyrelationsofSupplyandDemand，isapolicydangeroustothelifeandwell-beingoftheindividualwhoselabour-poweristhusboughtandsold，tothoseofhisfamilyandofsociety，yourattitudetowardsthelabour-movementingeneral，andeventocertaindemandswhichatfirstsightseemunreasonable，willundergoagreatchange。

ThefundamentalassumptionoftheLabourMovement，initsdemandsforreformedremuneration，isthattheprivatehumanneedsofaworkingfamilyshouldberegularlyandsecurelymetoutofweeklypay。Thelifeandhealthofthefamily，andthatsenseofsecuritywhichisessentialtosoundcharacterandregularhabits，totheexerciseofreasonableforesight，andtheformationandexecutionofreasonableplans，allhingeuponthiscentraldemandforasufficiencyandregularityofweeklyincomebaseduponthehumanneedsofafamily。

§；2。Thisexplainsaliketheworking-classobjectionstopiecework，thedemandforaminimumwage，andthepolicyoflimitationofindividualoutput。Forpiece-work，evenmorethantime-work，isbaseduponatotalignoringofthehumanconditionswhichaffectthegivingoutoflabour-power。

Itistheplainestandmostlogicalassertionofthecommodityviewoflabour，themostcompletedenialthatthehumanneedsoftheworkerhaveanyclaimtodeterminewhatheshouldbepaid。

Sofirmly-rootedinthebreastoftheordinarynon-workingman，andofmanyworking-men，isthenotionthataman，whohasproducedtwiceaslargeanoutputasanotherman，ought，asasimplematterofrightorjustice，toreceiveapaymenttwiceaslarge，thatitisverydifficulttodislodgeit。Itrepresentsthegreatesttriumphofthebusinesspointofviewoverhumanity。Ifamanhasdonetwiceasmuch，ofcoursebeoughttoreceivetwiceasmuch!Itseemsanethicaltruism。AndyetIventuretoaffirmthatithasnothingethicalinit。Ithasassumedthismoralguisebecauseofadeepdistrustofhumannaturewhichitexpresses。Howwillyougetamantodohisbestunlessyoupayhimaccordingtotheamounthedoes？

Itisthispurelypracticalconsiderationthathasimposeduponthepiece-worksystemtheappearanceofaxiomaticjustice。

Itisnotdifficulttostripoffthespuriousethicsoftheprinciple。

Yousaythatpiece-wagesorpaymentbyresultisrightbecauseitinducesmentodotheirbest。Butwhatdowemeanby"doingtheirbest。"？Aweakmanmayhewonetonofcoalswhileastrongmanmayhewtwo。Hasnottheformer"donehisbest"equallywiththelatter？Thestrengthofastrongman，thenaturaloreventheacquiredskillofaskilfulman，cannotbeassumedasapersonalmeritwhichdeservesrewardinthetermsofpayment。

Ifthereismeritanywhere，itisintheeffort，notintheachievementorproduct，andpiece-wagesmeasureonlythelatter。

No!thereisnothinginherentlyjustinthepiece-wagesystem。Itsrealdefenceisthatitisthemostpracticalwayofgettingmentoworkashardastheycan:itisacheckonskulkingandsugaring。Itassumesthatnoothereffectivemotivecanbemadeoperativeinbusinessexceptquantityofpayment。

§；3。AsRuskinandmanyothershaveremarked，thelieisgiventothisassumptioninanincreasingnumberofkindsofworkwherethehighestqualitiesofhumanpower，thefinestsortsofmentalskillandresponsibility，areinvolved。Publicservantsofallgrades，fromCabinetMastersandJudgesdowntomunicipaldustmen，arepaidbysalaries，notbypiece-wages。Thesameistrueofthemoreremunerativeandmoreresponsibleworkinprivatebusinesses。NoGovernment，noprivatefirm，buystheservicesofitsmostvaluableemployeesatthelowestmarket-price，orattemptstoapplytothemapiece-workscale。Itwouldnotpaythemtodoso，andtheyknowit。Noristhismerelybecausesomesortsofworkdonoteasilyadmitofbeingmeasuredbythepiece。ItwouldbepossibletopayJudges，ascounselarepaid，bythecase。CabinetMinistersmightbepaidonpiece-wagesforLawsmeasuredbythenumberorlengthoftheirclauses。Thechiefreasonforadoptingpaymentbyfixedsalaryisthatitisreckonedawisemodeofsecuringgoodindividualservices。Itisrecognisedthat

eachpieceofworkwillbebetterdone，iftheworkerssetaboutitinathoroughlydisinterestedmanner，concentratedintheirthoughtsandfeelingsentirelyontheworkitself，andnotentangledintheconsiderationofwhattheyaretogetoutofit。Thisissupposedtobethedifferencebetweentheprofessionalmanandthetradesman，thattheformerperformsafunctionandincidentallyreceivesafee，whilethelatter，bytheveryactsofbuyingandsellingthatconstitutehisbusiness，keepshismindsetupontheprofitfromeachseveraltransaction。

Butthefixedandguaranteedsalaryforpublicservantshasanotherground。Itmayprofitabusinessfirmtopractiseaneconomyofsweating，todriveitsemployeesandconsumetheirhealthandstrengthbyafewyears"

excessivetoil，totakeonnewcasualworkersforbriefspurtsoftrade，tosackemployeesruthlessly，assoonastradebeginstoflag，ortheirindividualpowersofworkareimpairedbyage。Apiece-worksystem，withnoguaranteeofemploymentorofweeklywage，maybeasoundbusinesseconomyforaprivatefirm。ItcannotbeasoundeconomyforaStateoraMunicipality。

ForalargeandincreasingshareoftheworkandtheexpenditureofmostStatesandMunicipalitiesisappliedintryingtomendoralleviatedamagesordangerstothehealth，security，intelligence，andcharacteroftheworkersandtheirfamilies，arisingfrominsufficiencyofworkandwagesorotherdefectsofprivateindustrialism。Itwouldobviouslybebadpubliceconomytobreakdownthelivesandhomesofpublicemployeesbyunderpayingoroverworkingthem，orbydismissingandleavingthemtostarvewhenworkwasslack。Forwhatwassavedinthewage-billoftheparticulardepartment，wouldbesquanderedinpoor-law，police，hospitals，old-agepensions，invalidityandemploymentrelief。Noristhatall。A

massofill-paid，ill-housedworkers，alternatelyoverworkedandoutofwork，standsasachiefbarrierineveryoneofthosepathsofsocialprogressandnationaldevelopmentwhichmodernstatecraftsetsitselftofollow。

Thelowwageofunskilledlabouristo-dayasourceofinfinitewasteoftheforcesofnationaleducation。Stillkeepingourargumentuponthenarrowestlinesofeconomy，weplainlyrealisethatthefinancialresources，uponwhichtheStatecandrawforallherservices，dependinthelastresortuponthegeneraleconomicefficiencyoftheworkingpopulation，andthatasystemofpublicemploymentwhichwas，howeverindirectly，detrimentaltothishealth，longevityandintelligence，wouldrankasbadbusinessfromthepublicstandpoint。

Itispossiblethatinthiscountrythesalarymodeofpaymentisgainingground。Apartfromthepublicservices，nationalandmunicipal，whichnowemploysome7percentofthetotalemployedpopulation，thegreattransportandthedistributiveindustriesarealmostentirelyrunuponthesalarybasis。Thesedepartmentsofindustryareconstantlyincreasing，notonlyinabsolutesize，butintheproportionofthetotalemploymenttheyafford。

Tothemmustbeaddedthelargeclassofdomesticservice。Suchgreatsalariedservicescannot，indeed，beclaimedastriumphsfortheorganicprincipleofdistribution，orpaymentaccordingtoneeds。Forthemostparttheyareveryunsatisfactorymodificationsofthepiece-wageorcommodityviewoflabour。For，exceptforthesmallhighergradesofofficials，theymostlyretainthetwochiefdefectsoftheordinarywage-system，apaymentofweeklyincomenotbasedonapropercomputationofhumanneeds，andalackofadequatesecurityoftenure。Overalargepartofthefieldofindustryandcommercewhereweeklyfixedsalariesarepaid，thereexistsaflagrantdisregardforallconsiderationsofhumansubsistence。Someoftheworse，thoughnottheworst，formsof"sweating"arefoundinshops，workshopsandfactorieswherewomenareemployedonweeklysalaries。

Nonetheless，itremainstruethatthesalaryisamorerationalformofpaymentforlabourthanthetimeorpiecewage，andthat，asthehumanisationofindustryproceeds，itwillmoreandmoredisplacethewage-system。Forwheresalariesarepaid，theconsiderationofneedsorsubsistencedoestendalwaystoqualifythemerecommodityviewoflabour。

Piece-wageortime-wageignorestheworkerasahumanbeingandthesupporterofafamily:itignoreshimasapersonalityandregardshimmerelyasaninstrumentforgivingoutunitsofproductivepowertobepaidforonthesametermsastheunitsofmechanicalpowerusedinworkingmachinery。

§；4。TheLabourMovementinsiststhatthepersonalandhumanfactorisfundamentalasaconditioninthelabourbargain。Iflabouristreatedasamerecommodity，itspriceaffordsnosecurityoflifetothelabourer。

Itmaynotfindacustomeratall，andsohestarvesandwithhimhisfamily，thefuturesupplyoflabour。Or，lefttothefluctuationsofthemarket，itmaysellatapricewhichisinsufficientforhismaintenance。Thefluctuationsofpriceinallothermarketsinvolveonlythepecuniaryprofitorlossofthosewhosell，fluctuationsofthepriceoflabourinvolvetheexistenceandwell-beingofhumanfamiliesandofthenation。Hencetheattackoforganisedlabouronthiswholeconceptionofthelabour-market，andthedemandthattheremunerationoflabourshallnotbelefttothehigglingofamarket。

Thechieffightisforasecureweeklyincome，orforconditionsofemploymentwhichleaduptothis。Aminimumoralivingwageistheusualnamegiventothisdemand。Complaintismadeofthevaguenessofthedemand。

Butthisvaguenessdoesnotmakethedemandunreasonable。Alivingwageindeediselasticaslifeitself:itexpandsandwillcontinuetoexpand，withthedevelopmentoflifefortheworkers。Butwhatineffectismeantatthepresentbyalivingorsubsistencewageissucharegularweeklysumassufficestomaintaintheordinaryworkingfamilyinhealthandeconomicefficiency。

Itiscontendedthatnopurchaseoflabourshouldbepermittedwhichentailsthedegradationofthatstandard。Whenaminimumrateofpiece-wagesisdemanded，theimplicitunderstandingisthatitissuchaswillyieldundernormalconditionstheordinaryweeklysubsistenceorstandardwage。

Sincepiece-wagesaresofirmlyestablishedinmanytradesthatitisimpracticabletodemandtheirimmediateabolition，theactualstrugglebetweenemployeesandemployersisastowhetherthesepiece-wagesshallbeallowedtofluctuateindefinitely，beingdraggedattheheelsofthepricesofcommodities，orwhetheranabsolutelimitshallbesetupontheirfall。Theemployersays，"Whentradeisgoodandpricesandprofitshigh，labourwillsharetheprosperityinhighratesofwageandlargeweeklyearnings:so，whentradeisbadandpricesandprofitslow，labourmustsharethisadversityandtakelow。pay，Organisedlabourreplies，"No，thereisnoparitybetweenthepowerofcapitalandoflabourtobeardepressions:capitalisstrongandcanbearupagainstlowprofitswithoutperishing，labourisweakandcannotbearupagainstlowwages。Wewillonlysellourlabour-poweronconditionthatalowerlimitissetuponitsprice，suchalimitaswillenablethelabourertokeepbodyandsoultogether，andtomaintainthatefficiencywhichconstituteshisworkingcapital。Thisminimumwageshouldberegardedasafixedcostinyourproduction。Atpresentthepricesofyourgoodsoscillatewithoutanyassignedlimit。Youacceptlowcontractsforwork，andthenadducethislowpriceasareasonforreducingwages。

Letaminimumwageoncebeadoptedinthetrade，andcontractpricescannotbeacceptedonsolowalevel。Theminimumwagewillthushelptosteadysellingpricesandtoregulateemploymentandoutput。"

Boththeeconomicsandthesocialethicsofthislabourcontentionareinsubstancesound。Solongasthepriceoflabourislefttohigglinginacompetitivemarket，thereisnothingtopreventthewagesfallingtothelowestlevelatwhichasufficientnumberofworkerscanbeinducedtoconsenttowork，andthatlevelmayinvolveareductionofthestandardoflivingintheirfamiliesbelowthetruesubsistencepoint。Thefixingofwagesbyso-calledfreecompetitionaffordsnosecurityforafamilywageofefficiencyorevenofsubsistence。Thereshouldbenomistakeuponthisessentialmatter。Thedoctrineof"economyofhighwages"hasnosuchgeneralefficacyasissometimessuggested。Thoughinmanycaseshighwagesareessentialtomaintainandevoketheenergyandefficiencyrequired，inothercasestheyarenot。Fromthestandpointoftheimmediateprofitsofemployers"sweating"oftenpays。Butfromthestandpointofsocietyitneverpays。

Therefore，thepolicyoftheorganisedworkers，inseekingtoenforcethedoctrineofaminimumwage，isnotonlyapolicyofself-preservationfortheworking-classesbutasalutarysocialpolicy。ItisforthisreasonthattheStateintervenesinfavourofthepractice，establishingTradeBoardstoenforceitsapplicationinso-called"sweatedtrades"，andacknowledges，intheoryatanyrate，itsvalidityinallpublicemploymentsandpubliccontracts。

§；5。Althoughthisminimumwageistolerablyremotefromtheidealofafixedweeklysalaryinmosttrades，itisatruestepinthisdirection。

Themostcontroverteditemintrade-unionpolicy，thelimitationofindividualoutput，isalsopartlyactuatedbythesamemotive。Fewthingsmaketheordinarybusinessmanmoreindignantthanthetrade-unionregulationsincertaintradeswhichrestrainstrongerorquickerworkersfromputtingforththeirfullproductiveenergy。Theydenouncealikeitsdishonestyanditsbadeconomy。Itisbased，theysay，uponthe"lumpoflabour"fallacy，thefalsenotionthatthereexistsanabsolutelylimitedamountofemployment，orworktobedone，andthatifthestrongerorquickermendomorethantheirshare，theotherswillgoshort。Thisrefusaltoalloweachmantodohisbest，liketherelatedrefusalto

getthefullworkoutofnewlabour-savingmachinery，appearsmonstrouslyperverseandwicked。But，thoughpartlyanimatedbyshort-sightedeconomicviews，thispolicyisnotentirelytobethusexplained。Thelevellingdownoftheoutputofallworkerstoastandardhaspartlyforitsobjecttheestablishmentofgreaterevennessofincomeamongtheworkersinatrade。Atanygiventimeinagivenmill，orfactorytown，theactualamountofavailableemploymentislimited，andforthetimeitistruethatbylimitationofindividualoutputalargernumberofworkersareemployed，andalargernumberofworkingfamiliesareprovidedwithanormalwage，thanwouldhavebeenthecaseifacertainnumberofmenwereencouragedtoanunrestrictedenergyandunlimitedovertime。

Inthelongrun，itmaybebettertoencouragefullindividuallibertyofoutput，evenintheinterestoftheaggregateofemployment，buttherestraintstowhichiherealludebecomemoreintelligiblewhentheyareregardedasattemptstoenforceacommonclassweeklywagebymeansofanevendistributionofemployment。

Aminimumpiece-wage，basedonamoderatecomputationoftheweeklyoutputperworker，andaccompaniedbyasubstantialsecurityoffullregularemployment，wouldineffectplacethepiece-workerinthepositionofasalariedemployee。But，ofcourse，aminimumpiece-wage，howeverhigh，doesnotgofartothisend，unlesssecurityoftenureatfairlyfullemploymentisobtained。Theproblemofun-andunder-employmentandofirregularemploymentisnowbeginningtoberecognisedinitsfullsocialgravity。Aweeklywageofbareefficiencywithregularemploymentissociallyfarsuperiortoahigheraveragewageaccompaniedbygreatirregularityofwork。Theformeradmitsstabilityofmodesoflivingandreadymoneypayments:itconducestosteadinessofcharacterandprovisionforthefuturewithoutanxiety。Rapidandconsiderablefluctuationsofwages，evenwithfullemployment，aredamagingtocharacterandstabilityofstandards:butirregularityofemploymentisthemostdestructiveagencytothecharacter，thestandardofcomfort，thehealthandsanityofwage-earners。Theknowledgethatheisliableatanytime，fromcommercialornaturalcausesthatlieentirelyoutsidehiscontrol，tolosetheopportunitytoworkandearnhislivelihood，takesoutofamanthatconfidenceinthefundamentalrationalityoflifewhichisessentialtosoundnessofcharacter。Religion，ethics，education，canhavelittleholduponworkersexposedtosuchpowerfulillustrationsoftheunreasonandinjusticeofindustryandofsociety。

Theregularisationofindustry，soastoaffordsubstantialguaranteesoffullregularemployment，thusrankswiththeminimumwageasthemostsubstantialcontributiontowardsthesubstitutionofsalaryforwages，whichtheorganiclawofDistributionrequires。TheStateisbeginningtocooperatewiththeLabourMovementfortheattainmentofthissocialobject，stimulatingemployerstoorganisetheirindustriessoastofurnishamoreevenvolumeofemployment。

§；6。ThisinterpretationoftheLabourMovementasahalf-consciousmanifoldendeavourtorescuetheremunerationofLabourfromtherisksanddefectsofthecompetitivelabourmarket，andtoestablishitonaneconomyofhumanneeds，isnotfullyunderstoodwithoutsomefurtherreferencetotheactionoforganisedsociety。TheLabourMovement，initsendeavourtogetabetterdistributionoftheincome，isnotconfinedtotryingtosecureasatisfactoryminimumorstandardwage，fortifiedbygreatersecurityofworkandpersonalinsuranceagainstunemployment。Itseeksalsotosupplementitswagesbycooperativeandpublicprovisions。

Thecooperativemovementisanattempttoconvertintorealwagessomeoftheprofitsofemployersandshareholdersinmanufacturingandcommercialbusinesses，soenlargingtheproportionoftherealincomeofthenationwhichgoestotheremunerationoflabour。ButthegrowingattachmentoftheLabourOrganisationstopoliticsisequallymotivedbytheendeavourtosecurefromtheState，notmerelylegalsupportsforhigherwagesandimprovedconditionsofemployment，butactualsupplementstowagesintheshapeofcontributionsfromthepublicservicestotheirstandardofliving。

Freeeducation，old-agepensions，andpublicsubsidiestowardsinsuranceareadirectcontributionfromtheStatetothehigherstandardoflifewhichmoderncivilisedsocietydemands。Health，education，recreation，andprovisionagainstemergencies，arecomingmoreandmoretoberecognisedasproperobjectsofgovernmentalaction，andotherimportantservices，suchastransport，credit，art，musicandliterature，arefaronthewaytobecomingcommunal

supplies。Althoughthesemodesofsocialprovisionmaybechieflymotivedbyconsiderationsofpublichealthandothercommongoods，theyneverthelessmustrankascontributionstothestandardofcomfortandwell-beingoftheworking-classfamilieswhoarethespecialbeneficiaries。Relieving，astheydoinmanyinstances，theprivateincomesoftheworkersfromexpenditurewhichotherwisethefamilywouldfindittoitsprivateinteresttoincur，thesegrowingpublicservicesformagenuineandaconsiderablecontributiontotheavailablerealincomeoftheworking-classes。Sofarasbytaxationdirectorindirectthecostofsuchpublicservicescanbeconsideredaburdenupon，oradeductionfromthewage-incomeoftheworkers，itforms，ofcourse，nonetadditiontotheirshare，butisonlyapubliccontrolovermethodsofexpenditure。

Butinasmuchasthedistincttendencyofmoderntaxationistowardsanincreasingtaxationoftheincomesandpropertyofthenon-workingclasses，thesepublicservicesrankassupplementaryincome，paidinkind，andtendingtoequalisethestandardoflivingofindividualworkersandgradesofworkers。ThecriticismsometimesdirectedagainstthisStatesocialism，uponthegroundthatittendstoweakentheforceofwage-bargainingandtransferstotheshouldersof"society"costswhichemployerswouldotherwisehavetobearintheshapeofhighermoneywages，wouldhaveconsiderableforce，iftheoldlaissez-faireprincipleof"freecontract"wereallowedotherwisetoworkunimpeded。Butthis，aswesee，isnotthecase。Thegrowingpolicyofminimumandstandardrates，supportedbypublicopinionand，wherenecessary，bypubliclaw，andhardeningintoapolicyoffixedsalaries，isnowiseinconsistentwithasimultaneousdevelopmentofcommunalsuppliesofgoodsandserviceswhichusuallyliealittleabovethenormalstandardofcomfortofthosewhoarethechiefbeneficiaries。

ThegrowingpoliticalactivitiesofalabourmovementwhichonceeschewedStateaidsnotmerelyattestthegeneralgrowthofconsciousdemocracybutimplyarecognitionofthedirectcontributionwhichtheStateismakingtowardsageneraldistributionofthenationalincomeinaccordancewithaneconomyofhumanneeds。

NOTES:

1。Thewidthofvariationsintheweeklyearnings，involvinginmostinstancesanearlycorrespondingvarietyoffamilyincome，maybeillustratedbythefollowingestimatecompiledbyMr。Webb，fromacarefulanalysisofofficialwagereturns。NewStatesman，May10，1913。

CHAPTERXIV:SCIENTIFICMANAGEMENT

§；1。Nohumanisttreatmentofmodernindustrycanignoretherecentadvancesofscientificmethodsintotheregulationbothofstandardsofproductionandstandardsofconsumption。Inbothartsalikethecrudeempiricismofthepastisgivingplacetoamoreordered，consciousrationalism。Asisonlynatural，theadvanceofscienceismorerapidintheproductivearts。

Inrecentyearsmanyscatteredattemptshavebeenmadetoapplyphysiologyandpsychologytoeconomicprocesses。Businessmenbyscientificobservationandexperimenthavebroughtcriticismtobearuponthetraditionalandempiricalmodesoforganisingandconductingbusinesses。Themoreorlesshand-to-mouthmethodswhichwerepossibleinsmallbusinesseswherethemanagerwasowner，andcouldkeepaclosepersonalsupervisionofhisemployeesandalltheirwork，werefoundincreasinglyunsuitabletomoderntypesoflargecapitalistbusiness。Itwasnecessarytodeviseregularmethodsforcorrelatingtheworkofthedifferentdepartments，andforenablingasinglecentralpurposetooperatebycomplexdelegationthroughseveralgradesofsubordinateofficialswithautomaticchecksandregisters。Moreaccuratemethodsofbook-keeping，especiallyofcost-taking，weredevised；

experimentsweremadeinbonuses，profit-sharing，fines，pace-makingandvariousmodificationsofthewage-systemsappliedtoevokemoreenergy，skill，orcarefromtheworkersandofficials；hoursoflabourandshift-systemsweresubjectedtomeasuredtests。Stillmorerecentlythedetailedtechnologyofmanualandmentallabourhasbeenmadematerialofphysiologicalandpsychologicalinvestigation。ScientificManagementhasbecomeaconsciousart。BusinesscollegesinAmericaandgermanygivecoursesofinstructioninthisart，andanewprofessionhasarisenofexpertadviserswhoarecalledinasspecialiststodiagnosethedeficienciesorwastesofindustrialorfinancialpowerinparticularbusinessesandtoprescriberemedies。

Economicprogress，regardedfromthestandpointofthebusinessman，consistsingettingagivenquantityofsaleablegoodsturnedoutatalowercostofproduction。Thatcostofproductionconsistsofthesalariesandwagespaidtovariousgradesofemployeesformentalandmanuallabour，costofmaterialsandpower，standingexpensesformaintenanceofplantandpremises，includingreplacementandinsurance，andinterestuponcapital。

Anythingthatreducesanyoneofthesecosts，withoutacorrespondingincreaseofanother，isprofitablefromthestandpointoftheindividualemployer，orofallemployersinthetrade，ifitbegenerallyadopted，oroftheconsumingpublic，ifitwhollyorpartlygoestotheminlowersellingprices。Wherethereductionofcostssimplytakestheshapeofreducedwagesforthesamework，however，itcausesnonetincreaseofconcretewealth，butmerelydistributesthesameamount(orlessbyreasonofreducedefficiencyoflabour)inadifferentmanner。Suchareductioncannotthenberegardedaseconomicprogress，fromthenationalstandpoint。

Buteveryotherreductionofcostcarrieswithitprimafacieevidenceofanetincreaseofconcretewealth。Inventionsofmachinery，improvedchemicalorothertreatmentofmaterials，betterbusinessorganisationandsubdivisionoflabour，improvedskillandenergyinemployees，betterbook-keeping，credit，marketingarrangements，——allsuchtechnicalimprovementspromotetheincreaseofconcretewealth。Inallthesewaysmanygreatadvanceshavebeenmadeinvariousindustries。But，alikeininventionandinorganisation，toomuchhasbeenlefttochance，ortothepressureofsomeemergency，toolittleistheresultoforderedthought。Businesshasbeenconductedtoomuchinthespiritofanart，toolittleinthatofappliedscience。

Themoderntendencyistointroducetheexactermethodsofscience。Themodernlargemanufacturingorminingenterpriseemploysexpertengineersandchemists，notonlytotestandcontroltheoperationofexistingprocesses，buttoinventnewandcheaperwaysofcarryingoutaprocess，todiscovernewproductsandnewusesforby-products。Itemploysexpertaccountantstooverhaulitsbook-keepingandfinanceandtosuggestimprovements。Initiativeandeconomyaretobestudied，evokedandappliedalongeverypath。

§；2。Butuntillatelythedetailedorganisationoflabouranditsutilisationforparticulartechnicalprocesseshadreceivedlittleattentioninthegreatroutineindustries。Evensuchtechnicalinstructionashasbeengiventobeginnersinsuchtradesasbuilding，engineering，weaving，shoemaking，etc。，hasusuallytakenforgrantedtheexistingtools，theacceptedmethodsofusingthemandthematerialtowhichtheyareapplied。

Tomakeeachsortofjobthesubject-matterofacloseanalysisandofelaborateexperiment，soastoascertainhowitcouldbedonemostquicklyandaccuratelyandwiththeleastexpenditureofneedlessenergy，comesasanovelcontributionofbusinessenterprise。TogettherightmantousetherighttoolsintherightwayisafairaccountoftheobjectofScientificManagement。Atpresentamanentersaparticulartradepartlybyuninstructedchoice，partlybychance，seldombecauseheisknownbyhimselfandhisemployertohaveanaturaloracquiredaptitudeforit。

Hehandlesthetoolsthataretraditionalandareingeneraluse，copyingthewaysinwhichothersusethem，receivingchancetipsorsuggestionsfromacomradeoraforeman，andlearningfrompersonalexperiencehowtodotheparticularworkinawaywhichappearstobeleasttroublesome，dangerous，orexhausting。Bothmodeofworkandpacearethoseofprevailingusage，moreorlessaffectedbymachineryorothertechnicalconditions。

Thescientificmanagerdiscoversenormouswastesinthiswayofworking。

Partofthewastehefindsduetoimpropertoolsandimpropermodesofworking，arisingfrommereignorance；partheattributestosystematicorhabitualslacking，moreorlessconsciousandintentionalonthepartoftheworkers。Thenaturaldispositionoftheworkerto"takeiteasy"