The Common Sense of Political Economy

We will now turn to another question, without any attempt to establish a link between it and the one we have just examined; for the scheme of this chapter does not imply that any special connection between its successive sections exists.

Many people live under housing conditions which rightly shock every feeling of humanity; and the fact raises a growing sense of social compunction. How it is to be met constitutes the housing problem. But it is clear, on examination and analysis, that it is only in a very limited sense that we can speak specifically of a housing problem at all. In what sense is the question why people live in improper houses, and how we are to stop it, different from the problem why they eat improper and insufficient food, or why they are inadequately clothed, or amused? The problem how to house people is obviously only a branch of the problem how to provide for them generally, both in body and mind. Certain persons are ill-provided with everything. In their own eyes they are not ill-provided with houseroom relatively to other things, for if they were they would redistribute their expenditure so as to get more houseroom and less of everything else. But you will answer they cannot afford to give up anything else. Exactly. That is to say, they are as keenly in want of more of everything else as they are of more house accommodation. Their conditions of accommodation possibly strike us as even more terrible than their conditions of feeding and clothing, but they do not strike them so. The housing problem, then, is in the first place the general problem of poverty. In the next place it is the problem of education. We think, perhaps, that people ought to value decent accommodation more highly than they do. And lastly, we think (and here it seems for a moment that we come upon a specific housing problem) that rents ought not to be so high. But why is the house rent of the poor so high? Primarily because they have to live near their work and land is of great value there because it is a highly efficient industrial instrument there. The rich man either does not live where his work lies, or lives there in a good house. If the poor man lives in foul quarters, then, it is either because he is poor or because he does not appreciate the value of better housing conditions as highly as we think he ought to do. Broadly speaking, it would seem that the only ways of dealing with the housing problem are to combat the poverty of the ill-housed, to quicken their sense of the evil of bad housing, to make good houses cheaper, or to give houses to people for less than they are worth. All these plans have been attempted. Miss Octavia Hill and her disciples have done much in educating individual slum-dwellers into desiring better conditions, but the process is too slow and laborious to satisfy the impatience of the demand for improved conditions. Attempts, whether by public authorities or private companies, to build better houses at a cheaper rate, on commercial principles, come under an important class of experiments of which we have already spoken.
*63 If, on the other hand, houses are provided by philanthropic companies or individuals, who are content with 3 per cent on their capital (or otherwise on less than commercially remunerative terms), a privileged class of occupants is at once created; and the difficulty may be found insuperable of securing the privilege, even as far as it goes, to the class of persons most in need of it. Possibilities of cheap and easy transport are constantly opening, and perhaps the best hope of depleting our overcrowded centres lies in a development of tram services which would relieve the competition for central business sites. Thus, the housing problem turns out to be a poverty problem, a land problem, an education problem, a problem of locomotion, and a problem of town-planning. Attempts to deal with it merely by saying that bad houses shall be destroyed and none but good ones built in their stead do not in themselves touch the difficulty. They are open to the same danger which we encounter in connection with proposals for a minimum or standard wage.
*64 As a minimum wage may mean the multiplication of the unemployed, so minimum requirements of decency and convenience in houses may mean the multiplication of the unhoused; or if the standard only applies to new houses it may mean the crowding into existing tenements of those who cannot afford to come up to the new requirements. At best, if it stood alone, it would mean attempting to force people to pay for what we think they ought to want instead of for what they want themselves. There is no doubt a wide range for insisting on sanitary conditions which do not notably add to the expense of building, but it can hardly be doubted that in some country districts the by-laws enforced by the local authority prevent cottages being built, and therefore aggravate overcrowding.

It should hardly be necessary to add that overcrowding may be brought about by any cause that makes building land difficult to obtain; and if the owners of land object to having cottages on their estates for æsthetic, social, or sporting reasons, the result is just the same as if the competition for the land were purely industrial.

We will now turn to the connected problems of unemployment, depression, and commercial crises, which are admittedly amongst the most baffling on the whole field of applied economic science. I am far, indeed, from claiming that the principles laid down in this work present an obvious and convincing solution of them. But the following points may be considered. Every one knows that persons, not without some dexterity both of mind and hand, may be absolutely unemployable in a given post. Every busy man has had embarrassing offers of “help” from zealous friends who are willing to do anything,—but who can do nothing that does not require more superintendence and correction than the result is worth. In an industrial society of increasing complexity it may reasonably be expected that the conditions which enable the individual to pass from a negative to a positive efficiency will become more and more exacting. An advancing education may be supposed to meet these more exacting conditions, but, so far as it depends on the specialising of capacities, the man who has been made eminently employable in one line of activity may thereby be made all the more unemployable in another. Again, unemployment may be absolute or relative; that is to say, a man may be unable to find any employment at all because he can do nothing that is worth anything to any one else that he can find, or he may be unable to find employment at a living wage or at the wage which he demands. Now the specialising, alike of instruments and of faculties, and the minute division of labour, which are characteristic of the organisation of industry on the great international scale, are accompanied by liability to variations in the stress of demand, and such variations mean accompanying variations in the relative worth, economically considered, of this or that particular skill. Industries in which sliding scales prevail recognise this fact. When, for any reason, the product becomes worth less, there may still be employment for the same number of labourers if they are willing to recognise that their work also is worth less. The sliding scale cannot obviate disputes, for it is based on an evaluation of the significance of labour relatively to the significance of all the other factors of production, which can hardly, in the nature of things, be above dispute; but it does at least recognise the fact that with the changing stress of demand the significance of any kind of labour changes also. If this fact could be universally recognised, one cause at least of unemployment would be removed or qualified; for it is obvious that the attempt to maintain a standard wage, or to fix a minimum wage, independently of fluctuations in the market of the product, must, so far as it succeeds, throw men out of work when the demand falls, until the marginal value of the reduced product and the marginal significance of the reduced number of workers bring about equilibrium. The larger product might have been sold at the lower price, and all the workers might have been kept in employment at the lower wage. And the supplies of the rest of the community would have been maintained at a higher level.

There is, however, no limit to the possible fluctuations of demand, and however much the principle of the sliding scale were elaborated and extended, and even if it were applied to all interests, rents, and salaries, fluctuations in demand might reduce all concerned in a given industry to a starvation wage, if not to absolute “unemployment.”

Obviously, the only real issue from such a state of things will be found in the draining off of labour from the depressed industry to others. This is a process beset with inherent difficulties in the want of mobility and versatility on the part of the workers,
*65 but the difficulties are indefinitely aggravated by the jealousy with which any invasion of other industries (all of which normally regard themselves as overstocked
*66) is sure to be regarded.

Note, further, that every business must be carried on to a great extent on a speculative basis. Promises of all kinds are made
*67 in anticipation of the results of an industrial undertaking. Thus, before a great ship is launched or a great building completed, not only an immense number of promises, but an immense number of payments have been made in anticipation of the value that the completed work will have. All kinds of estimates of the marginal significance of land, tools, technical skill in directing and executing work, and every variety of factor of production, have thus been formed and acted on. These estimates are not necessarily correct. When the whole commercial community is in high spirits and feels successful, vast numbers of over-estimates of the worth of things may be indulged in. Payments out of current stock may be made on the assumption that the stock is being more than replaced
pari passu; and while the country thinks itself growing in wealth, it may in fact be living on its means. At last the time for keeping promises and replacing expenditure comes, and the resources from which this was to be done are found not to exist. In detail this is a chronic phenomenon in all periods, whether of prosperity or of depression. Individual firms are perpetually becoming bankrupt because they find themselves unable to keep their promises; and others who have promised or performed on the strength of these promises are involved in the ruin in their turn. But if business in general is sound, these events do not shake the general confidence, however much they discourage or hamper individuals. If, on the other hand, the general estimate has been at fault and the commercial world collectively, or in a particular country, has consumed more rapidly than it is creating, and has promised what it cannot perform, a general shudder of nervous apprehension will run through it when the discovery is made. People become afraid of promising anything at all, and still more afraid of paying in advance, or of trusting other people’s promises, and the whole complex system of mutual supply becomes more or less paralysed. Mechanics and others have been receiving and have consumed more than the equivalent of their marginal significance, and now that this is known they cannot get the same wages any more. Meanwhile, the people who gave them more than they get from them are impoverished or ruined. And not only do many people realise that they have spent more than they had or more than they could afford, and are actually in poverty, but the means of communication and combination by which alone we can prosper have been disorganised and the mutual confidence without which the industrial machine will not work has been shaken. A starves for want of the things that B can make; B starves for want of the things that C can make; and C for want of the things that A can make; because A, B, and C can only be brought into relation with each other by a system of speculative promises which no one dares to make or which no one cares to trust. Now, as soon as a man finds that he cannot sell his goods at the accustomed price, he complains of over-production and says that the markets are glutted. Thus we have the paradoxical situation of general “over-production” and “glutted markets,” accompanied by general want. That is to say, apparently, there is so much of everything that no one can get anything. But it is not really the abundance of the things produced, or the abundant power of producing them, that causes the mischief, but the timidity or forlornness of those who weave the vast and intricate maze of promises, through confidence in which alone things can be moved from those who make to those who use them.

For recurrent general depressions the only radical cure seems to be a raising of the intelligence and conscientiousness both of the directors of industry and of the public. It is possible that this may ultimately be furthered by making them state officials, but at present the socialistic Utopias are generally characterised by totally ignoring the necessity of any connection and proportion at all between promises and the means of fulfilling them.
*68 It is said, however, that private persons are already beginning to take advantage of slack times for outlay on permanent plant and improvements; and it seems ideally conceivable that the State should pursue a similar course, and should undertake public works, that must be executed some time, in the slack periods when they can be executed at least expense, and will, at the same time, have a tendency to counteract a serious evil.
*69

Note, finally, that it is easy to exaggerate the magnitude of the material difference between prosperous and depressed times. The bulk of the business of the country goes on successfully all the time. It is only over a comparatively narrow margin that inflation and contraction succeed each other.

The question may often have presented itself to reflective minds whether it would be possible, by limiting the area of commercial intercourse, to prevent the inhabitants of a given country from being swept into the storms of the whole industrial world. Just as it is argued that a yeomanry, living largely on the direct products of its own industry, would be less liable to desolating economic disturbances than a manufacturing population, which is helpless to supply its own wants if the world markets cease to demand its product, so it may be argued in the abstract that the fluctuation within a limited area will be less violent and disastrous if it is approximately self-supplying than if a considerable portion of its population are liable to bear the brunt of changes in the currents of the whole commerce of the world. But though the question whether such relative isolation and self-sufficiency are possible, and whether they might be expected to yield a balance of advantage, is perhaps arguable in the abstract, as a matter of fact no scheme of fiscal union is ever based on any such idea of shielding a suitably constituted area from the commercial storms of the world. The fact becomes obvious when we note that actual or proposed areas of fiscal union are always determined by other than commercial or economic considerations. The United States of America are often cited as furnishing a typical case of protection, but we should never lose sight of the fact that there is free trade within the United States themselves, so that it seems safe to assert that there is no other free trade area of so great an extent and embracing so wide a variety of natural and social conditions in the whole world. Moreover, it is generally supposed that the United States would welcome the accession of Canada, and in case of a union would at once throw down the fiscal barriers that now separate the two countries. If this is so, one is led to the conclusion that the tariff is not maintained on economic grounds, and that no economic loss would be anticipated from its removal. In the same way the desire to federate the British Empire fiscally is clearly determined by other considerations than those of an economically convenient and suitable area, containing a due balance of productive resources; and the desire of all advanced industrial communities to find external markets for their “surplus products” shews that they have no idea of cutting themselves off from the great world-streams of commerce and constituting themselves into self-supplying groups of a size and character determined by the prospect of economic stability.
*70

It will be a good exercise to see how far we can trace the meaning of such an act as subscribing a guinea to a famine fund in India. The root fact is that there is a shortage of food, and the inevitable deduction seems to be that man or beast must somewhere go so much short.
*71 If the otherwise starving Hindus are fed, they must eat food that some one else would eat if they were left to starve. Now, if I subscribe a guinea, it is exceedingly improbable that I save that guinea out of food. Even if I did we should have to inquire in what way the food that I should have eaten gets, directly or indirectly, to the Hindu; but if I eat just as much as I should have done, the more perplexing question remains: Who abstains from food because I subscribe a guinea? How does my subscribing make him abstain, and how does the food from which he abstains reach India directly or indirectly? Let us consider the special circumstances, which would of course vary if the famine were not in India, but in China or Sicily. To begin with, we may assume that there is no actual lack of food-stuffs in British India as a whole, even in time of the severest famine. Probably there will be plenty of food near the famine-stricken districts, easily accessible. The trouble is not that there is no food, but that the ryot has no money or general command of wealth by which to get it. Nay, it is very possible that the starving ryot has himself managed to grow rice enough for sustenance and next year’s seed, but has to sell to enable him to pay taxes.
*72 Now a certain not inconsiderable part of the taxation of India is devoted to the payment of pensions and annuities in England. This, then, is the situation. India exports rice in order (amongst other things) to pay pensions in England. Suppose, in the first instance, that English pensioners or annuitants, who would actually have consumed a guinea’s worth of Indian rice, determine to subscribe a guinea to the famine fund, and to go short of the food themselves. That is to say, they give up eating the rice and eat nothing else instead. The case would then be perfectly simple. The distressed ryots would either keep their own rice or buy rice from a neighbouring district, and India would export less rice by that amount. Money can in this case be eliminated from the question, and we can regard the English pensioner as simply giving the ryot a bill on himself for the price of the rice which he has never received. The ryot can then either keep his own rice and pay his taxes by his bill on the Englishman, or can buy rice from his neighbour with the bill and pay his taxes out of other resources. It would be exactly the same if you or I abstained from the rice, and subscribed the guinea. In that case the essential facts might be represented thus. I allow India to draw a bill on me for a guinea, and at the same time I abstain from eating rice. India, instead of selling rice to raise a guinea for the pensioner in England, sends him the bill upon me for that amount, and keeps and eats the rice; leaving me to pay the pension. But now, suppose that the subscribers, instead of abstaining from rice, abstain from stalls at the opera, or dishes of early asparagus or strawberries, or that they travel third class instead of first, or go without books they would otherwise have bought, or trench upon their other charities. How does this relieve the famine? The immediate answer is obvious and is the same as before. India has leave to draw a bill upon the subscriber, and, therefore, is not compelled to sell the rice. There is, therefore, so much more rice in India, and so much less in the general market, and it follows that somebody must go short. But the accounts are not “cleared” as they were in the former case, and we must pursue our inquiries further. Two apparently independent centres of disturbance have been established. On the one hand, the rice market in England is to a certain extent depleted. Our previous studies enable us to form a perfectly clear conception of what that would mean if it stood alone. What would have been the marginal demands had the supply been as great as usual would remain unsatisfied. The price of rice would rise, and certain people would either go without rice altogether, or would take less than usual. As we need not suppose that any of the phenomena we are examining affect the incomes of the majority of these abstainers, they would presumably increase their purchases of the most obvious substitutes for rice, let us say sago, tapioca, or Indian corn. And since at present we have seen no reason to suppose that the available supply of these substitutes would be in any way increased, these markets also would feel the reaction, and there would be a tendency to a rise. And so, in widening circles, the effect of a shortage in rice would diffuse itself, and minute abstinences would be the result, until the whole effect of the shortage was exhausted in the diminished satisfactions of a great number of individuals who had unconsciously and unintentionally made minute marginal concessions to fill up the hideous void in India, where for once we watch a margin actually running back, unless arrested, to the origin itself.

So far, then, the effect of my donation to India has been to diffuse the suffering caused by the shortage of the rice crop, and this is entirely satisfactory. But, so far as we have yet gone, though the diffusion is in itself a subject of congratulation, it is a little surprising to discover that the persons amongst whom the actual loss is diffused appear to be entirely involuntary agents in the transaction.

But we have only traced the movement from one of the centres of disturbance. Let us now return to the other. If I economise in my railway travelling or in my payments at the box-office of a theatre, I do not save any expenditure except to myself. The first-class carriage in which I should have travelled is run just the same, and the performance I should have witnessed takes place; but the shareholders of the company or the proprietors of the theatre are a guinea to the bad. So far as I am concerned, the balance-sheet is made up. I have given a guinea to the ryots, and I have gone without a guinea’s worth of comfort or enjoyment. But the enjoyment or comfort that I have forfeited is not transferred to some one else. It has perished, or rather it has never come into existence, but has remained a dormant opportunity. I am the loser to the full extent; but nothing whatever has yet been done towards economising rice. And again, though I bear the loss of the pleasure or comfort that has not emerged into actuality, yet the management of the theatre or the shareholders of the company have their resources curtailed by the full extent of the guinea of my subscription, and they must bear the loss too. I, therefore, compel them practically to pay the subscription over again in some shape or another; and they again have the alternative of standing out of some open opportunity already provided for them, or of going without some material transferable thing which is there not potentially but actually. We may carry on this process as far as we like in the imagination, though it is clearly impossible to trace it in the concrete, as the pressures becomes more and more diffused. It is impossible to say how many potential enjoyments, or exchanges of service, are sterilised without in any way affecting the consumption of rice. But, ultimately, the pressure must come home somewhere to persons who economise by going without material things. We need hardly repeat the stock warning that no sharp line can here be drawn. Gathered fruits or cut flowers stand more nearly on the footing of a stall at the opera-house or a journey in a first-class railway carriage than on that of a bag of rice or corn. The opportunity they offer is open, indeed, for a longer time than the opportunity of witnessing the performance or taking the journey, but they are indefinitely more perishable than a bag of grain, and it may well be that if I do not buy them, they cannot be kept and supplied to some one else. In that case the vendors will be the losers, wholly if they cannot sell at all, partly if they are obliged to make a reduction at the close of the market. In the latter case the loss is not complete, but a product which would have satisfied a want higher on the collective scale goes to satisfy one lower on that scale. There is an objective loss, amounting to something short of the whole objective value that would have been realised; but whether there is psychic gain or loss no man can say. In any case nothing has yet been done towards bearing the ultimate privation caused by the shortage of rice except just so far as the enjoyment I have abstained from is directly or indirectly a substitute for the consumption of rice.

But the widening effects of my abstinence are reaching the same diffused markets which the widening effects of the relief of the Hindu’s starvation have reached, and they are acting in opposite directions. While the retention of rice in India is raising demands, the enforced abstentions in England are lowering them, and so theoretically we have found the meeting-place, and have seen not only that the relief of the famine in India is directly caused by my abstaining from a certain enjoyment, but also that the effects of these two primary phenomena theoretically meet and counteract each other through a vast network of minute capillary channels. It still remains true, however, that my voluntary subscription causes an undefined series of involuntary contributions on the part of those whom my contracted expenditure affects, and that these are passed on from hand to hand, repeating and multiplying themselves in diffusing circles, and all of them without effect in relieving the markets upon which extra pressure has been put, so long as they affect forms of consumption which are not effective substitutes for the consumption of rice. Further, it remains true that the ultimate abstinences are borne by involuntary, not voluntary, agents, except in so far as the original subscriber actually abstains from such food-stuffs or other commodities as are direct or indirect substitutes for the rice.

Now, note that the unforeseen and sudden nature of the demand is the real cause of the disturbance. If an enlightened administration came to the conclusion that the regular levying of taxes, together with irregular appeals to charity for their practical remission, was a wasteful method; and if the English public were to make up its mind, once for all, to give peace and justice to India on easier terms
*73 than are now nominally exacted, and were to regularise and rationalise the methods on which these lower terms were enforced; we might then have a continuous instead of an intermittent abstinence on the part of the British public from certain satisfactions in order to relieve the pressure upon India. The energies which are now devoted to the construction of first-class carriages, the production of operas, and so forth, would be turned into other channels, and might, directly or indirectly, produce food to make good the diminished tribute in rice from India. And even if no direct provision could in all cases be made, so that an ultimate shortage of food was somewhere felt, at any rate there need be none of that incidental and gratuitous waste that our analysis has traced as due to the intermittent character of the claim upon England’s charity and the inability of the machinery of the economic world to adapt itself to it.

Now let us eliminate the fact that the suffering to be relieved is in one country, and the abstinence that relieves it in another. We may suppose that a disaster has occurred in our own country and that subscriptions are made to relieve it. Here the conditions are essentially the same as before. There will be two centres of disturbance, caused respectively by the destruction, say, of crops and herds, due to a flood, and by the contraction of my own expenditure, when I have by my subscription transferred a part of my purchasing power to the sufferers; and unless the things I abstain from are precisely the things which the relieved sufferers consume, my abstinence does not cover their consumption, and the same succession of incidental and, so to speak, gratuitous losses that we have already traced will accompany the process of my compelling some less well-to-do person than myself involuntarily to incur the really effective abstinence that balances my beneficiary’s consumption.

Now let us take another step and eliminate the element of suffering or loss altogether, simply supposing that one person in England makes a gift to another. The difference here is that there is no primary loss to be made good. We are not supposing that there is a shortage anywhere. But, if the presentation is not one of a group of actions that has been contemplated and provided for in advance by the enterprise of the industrial world, that is to say, if it constitutes a disturbance in the regular and anticipated course of events, it may be accompanied by all the incidental disturbances that we traced in the other case. If I buy for my friend something different from what I should have bought for myself, or if I make him a present in money and what he buys with it is not the same thing that I abstained from, then two markets are affected. Prices tend to rise in the one and to fall in the other, and there is a suction in the one case and an obstruction in the other, which, if continued, would tend to draw productive resources down one set of channels to the relief of the other.
*74 Meanwhile, there is a certain amount of waste of services and of swiftly perishable commodities, and as the relative places on the communal scale of a variety of things are directly and indirectly shifted up or down by the tightening and relaxing demands, certain people are made richer or poorer.

And now, finally, we may eliminate the hypothesis of a gift altogether, and may see exactly how any sudden change of expenditure tends to produce loss and disturbance. The provision already made for the expenditure which ceases will run more or less to waste, and the increased demand on another market will squeeze out certain marginal claimants upon it, driving them to alternative forms of expenditure. But, as the increased expenditure in the favoured market improves the position of those who command its wares, it is probable that some of them may secure, in the falling market, some of the satisfactions from which I have turned aside, and caused others to turn aside, and so far the wastage of accumulated resources and talents which my contracted expenditure has caused will be checked. Some waste, however, there will always be, as well as the disturbance of the raised and lowered values of existing goods. If the new order of things becomes established, the distribution of the factors of production adapts itself to it, and the things more in demand are produced instead of those less in demand, and there is no continuous loss.

The incidental disturbance due to any change, as such, may be ignored when there is a great and obvious purpose to be served, such as in our instance of the relief of famine. Nor need it trouble the most scrupulous conscience when it is of a casual and personal nature, for such irregularities are always taking place, and in the broad cancel each other. But capricious changes in fashion have, doubtless, a depressing effect upon the material and moral condition of the industrial populations they affect; and even where a new invention or reformed administration increases the resources and the well-being of the community, the incidental disturbance may be disastrous in its local effect, and, unless some provision be made to meet it, may be a heavy social offset against the total gain.
*75

In leaving this subject we may note that we have throughout been assuming a “rigidity” in the industrial organisation that allows no room for “play.” As a matter of fact it would require very extensive movements to complete the circles in the way we have supposed. Any small changes of pressure would probably exhaust themselves long before their effects met and counteracted each other in diffused markets, and at every point spare energies might be released and directed into compensating channels. To take a single instance; a rise in the price of any food might make it just worth while to harvest some small and distant crop in some part of the world that would otherwise not have paid for the picking or saving and transporting.

We are now in a position to enter upon the last inquiry to be undertaken in this chapter, namely, the meaning of estimating the national income at so much, and the value of the speculations as to the average income which it would secure if wealth were more evenly distributed. I may warn the reader in advance that we shall reach no particularly definite or novel results; but the inquiry will itself, I think, constitute a particularly valuable exercise.

What would be meant by saying, for example, that the total income of England is about seventeen hundred million a year, and that this gives an average of £40 a head, or of £200 for a family of five? The total income is arrived at by adding up the estimated incomes of individuals. Both the national and the individual incomes are expressed in terms of gold. But how are these incomes reckoned, and in what do they consist? If a man earns his living by growing vegetables and selling them in the market, he acquires a certain command of commodities and services that other people control and which they consider marginally equivalent—each to each—to the lots of vegetables they receive from him in exchange. The vegetables he produces, therefore, are the communal asset that is represented in his income. They are what he contributes. What he consumes is contributed by others. If he pays rent, then part of this asset of vegetables is represented not in his income, but in that of the landlord. But what if the man earns his living by teaching Greek, or by book-keeping, or by preaching, or by dancing, or by company-promoting? He renders services, in return for which he receives certain things he desires. The communal asset is his services. They are what he contributes. What he enjoys is contributed by others. The communal income, then, though measured by marginal significances in gold, is constituted by the marginal significance of everything made, produced, or done, that enters into the circle of exchange. The revenue of a community for a year is all the desired things, whether material commodities or services, which come into existence that year. Hence, if my income is £500, and out of it I pay a servant the equivalent of £30 in board and lodging and wages, her income will be estimated at £30 and mine at £500. And this will not be counting her £30 twice. I have rendered services that count for £500, and she has rendered services that count for £30, and both are reckoned in the national income, just as much as the wheat grown by the farmer. Many reflections are at once provoked. Naturally, the total income of a nation tells us nothing unless we know how it is distributed. Wealth and starvation side by side may shew as large a total as evenly distributed comfort would. Again, the income of the nation consists only in exchangeable things; but we have seen
*76 that the true revenue of satisfaction, enjoyment, or vital realisation and experience (whether of the individual or of the community), though supported by things in the circle of exchange, is neither secured nor measured by them. Probably, if any community realised this, its income would decline and its well-being would increase, for it would create less and enjoy what it created more.

Again, as all wealth is estimated by its marginal significance in gold, it would be possible for an increased supply of any commodity or service, except gold, to appear on the estimate of the national income as a loss. For, if the fall in marginal significance relative to gold should more than compensate the increased supply, the total area of enjoyment would increase while the total exchange value of the commodity declined; and a gain in the means of satisfaction would be registered as a loss of wealth. If gold increased in greater proportion than other things, prices would rise and all supplies would be registered at a higher figure and so the income of the country would rise all round, whereas only gold would really be more abundant. In all careful statistics this is allowed for, and an “Index Number” is used which measures values not in gold but in a complex unit that may be supposed to give a much nearer approach to psychic or vital stability.

Innumerable sources of error and illusion, however, remain. Since all services and commodities are impartially estimated at their market value, the tools that the burglar buys and uses are just as much a part of the year’s income as those that the farmer uses. The services of two rival “travellers” who are endeavouring to capture the same market count as much in the national income as if they had been bringing conveniences and utilities within the reach of persons who would otherwise have gone without them. Mutually destructive or inherently vicious activities and services count for as much as constructive and wholesome ones. The “services” for which the wages of shame are paid constitute a part of the national revenue as much as any other;
*77 but if Portia is Brutus’s wife and not his harlot her companionship ceases to count in the national revenue. And, moreover, any changes in the tastes, habits, or morals of the community which enabled them to derive increased enjoyment from their own personal activities or their mutual intercourse would tell for nothing in the estimates of national wealth.

All this, however, and much more of the same sort, is admitted. It must not be lost sight of, but it need hardly be pressed, for it is all generally allowed, and some of it is habitually realised. Any one who says that the national income amounts to £40 a head means no more, at most, than that the resources of the country are such that there is enough for every one to have forty pounds-worth, at the rates now current, of the things and services in the circle of exchange that, wisely or foolishly, virtuously or viciously, he desires. But it is just this proposition that we must now proceed to examine, for it is by no means obviously true.

If, indeed, we could be sure that, however the wealth of the country were redistributed, the same things would be wanted in the same quantities and with the same relative intensities by the people then in a position to realise their desires as they are now by the present commanders of wealth, then, truly, all the activities of the country might go on just the same and the revenue might remain the same, only the things and services now made and rendered would be given to other people. Indeed, less than this would satisfy us, and would justify us in speaking of the “average income” of the country in the usual way. We have learnt to distinguish between the immediate disturbance and the ultimate effect of any change, and the former of these considerations may be ignored. It will be enough for us if the resources now devoted to the production of services and commodities desired by those who are at present in a position to command them, are capable of being so diverted as to produce commodities and services demanded in the new order of things, in such quantity and quality that, estimated at their marginal significance, they would total to the same amount as at present. Have we any right to assume that this will be so? Let us try to see.

The mere fact of a thing being desired by a number of wealthy men gives it a high marginal value objectively. It is possible to conceive, for example, that a man of very great wealth might be willing to offer a larger sum for a great area of land for purposes of sport than a number of poorer men might be willing to give for the same land for purposes of subsistence. Strange and paradoxical as it may seem, the land would in this case occupy a higher place on the scale of preferences of the man to whose pleasures it made a slight addition than on the scales of the men to whom it made the difference between a hard life of unrelieved toil and a fair degree of comfort;
*78 because the wealthy man has so great a command of generalised resources and commodities that the whole amount which would make the vital difference between poverty and comfort to a hundred families signifies very little indeed to him, and opens to him no alternative more eligible than that of adding to his game preserves. The price of the land, therefore, is higher because of the existence of a few very rich men than it might be if there were the same general command of resources and services in the community, more evenly distributed. Thus land might stand lower on the communal scale, if wealth were more evenly distributed.

One may see the same fact illustrated in the case of the fees that an eminent surgeon or counsel can command. If there are a number of exceedingly wealthy men in the community, there may be many persons to whom the difference between the services of the acknowledged possessors of the very highest skill in their respective branches, and those whom skilled opinion places just one distinguishable degree below them, might weigh in the scale as heavily as anything else that could be got for, say, £200; and if there were enough of these persons to employ the energies of some two or three surgeons, they might command fees of five hundred guineas; whereas, if there were no very wealthy men, no considerable body of persons would care to spend more than, say, £20, or £10, or 10s., as the case might be, on the mental satisfaction of thinking they had got the services of those whose public reputation was supreme, in preference to the services of others, possibly quite as good, and certainly barely distinguishable from them in excellence. If I suppose that by going to one dentist I can have one per cent greater security against present or future suffering than if I go to another, the extent of my general resources will determine the amount at which I am willing to purchase this extra security. If I am a millionaire and am unfortunate enough to require the amputation of a limb, the difference between three hundred and five hundred guineas sinks, in the presence of such a crisis, below the range of perceptible distinctions. If my whole income is not above a few hundreds, I shall be well content with the services of a man of good local reputation in whose hands I shall feel reasonably safe; and if he will perform the operation for £20 I might not be willing to give £30 (much less £500) for the services of the top man in the profession. Thus the difference between a certain exercise of A’s skill and of B’s may be valued at £480, or at something under £10, in the estimate of the national income, according to the degree to which the inequalities in the distribution of wealth have been carried.

It is unnecessary to multiply examples. It is sufficiently clear that if the command of the collective resources of the community were more evenly distributed, they would all be there just the same. The surgeon’s skill and every other faculty would be there, available for the relief of suffering, and the sustaining and adorning of life, but minute differences would not count for so much, relatively to staple articles, as they do now. Whereas fine distinctions of talent in music-hall “stars” and others, who render services to masses of persons at once, might possibly command greater not less differentiated remuneration. But these latter cases would be exceptional. When we think of the scheme of values in the minds of the rich and poor respectively, we must surely feel that these considerations entirely vitiate the calculations made from the total income of the nation to the ideal “average” which each might enjoy; for if we divide the national income by the population and say that the quotient is £40, what that suggests is that there is now enough to give every one the things that he individually would buy if under present circumstances, and with present prices ruling, he had £40. But this is not so. He would have a share in the national revenue of things and services, the items in which share, taken severally, can each find somebody now who attaches such a value to it that all the values added together make up £40. But to some of them no one not immensely rich could attach the high values they now bear, so that if wealth were evenly distributed they would be there, but would not be valued by any one at such a figure as to make up the average of £40.

This does not mean that there would be a material loss to set against the psychic gain of a more even distribution. It merely means that the averaging of the national income, objectively measured, gives an unreliable estimate of the actual command of the things he desires which his share of that revenue would secure to each individual.

But, it may be urged, although it is obvious that a family with an income of £200 a year would not value jewellery or game preserves, choice bindings or
editions de luxe, thoroughbred horses or skilled professional services, at the figures they now command, yet this would merely create a disturbance for a time, if the change were sudden; and ultimately the talents and resources that are devoted to the production of these things would flow down other channels and would produce equal values in the things that are now most in demand. But can we really place any reliance upon this? The talents and resources that are now devoted to the breeding of a bull-dog worth £1000 might conceivably, if diverted, produce the year’s food, clothes, shelter, amusement, and so forth, which five families of five each would demand, if each family had an income of £200 a year; and our general assumption that all free resources can be turned into various channels at approximately equivalent commercial significances seems to imply something like this; but the assumption is far from safe even as a
prima facie probability if we are supposing the change in the direction of resources to be not a mere shifting of margins but a substitution in bulk of one set of industries for another. It does indeed seem at least possible that the kind of talent that produces prize bull-dogs might succeed in producing particularly fertile varieties of plants and animals that would be valued under the new conditions. But no one can say how these things would work out in terms of marginal value in gold; or whether, for instance, the general distribution of the population of the earth over her surface could remain substantially the same as it now is if the processes of industry were so completely revolutionised as they would be under the conditions we are supposing.

Forecasts on such subjects must be based on general considerations, and their speculative character should be recognised. An extensive redistribution of wealth would certainly change its psychic significance, but its actual effect cannot be arrived at by any such simple process as doing a division sum. And statements based on such a procedure have a delusive air of solidity and precession against which we should be on our guard. If we are confident that the world, or any particular community, is rich enough to enable every member of it to live in human comfort, our confidence must be based on our general belief in the versatility and resourcefulness of human intelligence, and our anticipation that the reaction of a more even distribution upon the energies, tastes, and morals of the community would be such as to heighten rather than to lower the effectiveness of human effort.

This confidence is not shared by every one, and, therefore, the desire for a more even distribution of wealth, which animates most social reformers, is looked upon with open suspicion or with secret misgiving by many men who would be slow to admit that they were willing to purchase the luxury of the few at the cost of the penury of the many. They believe that all devices for relieving poverty at the expense of wealth will result in impoverishing the rich without enriching the poor in the first instance, and in still further impoverishing the poor ultimately. The only basal answer that can be given to such forecasts is that we must at least try to devise such methods as may make the experiment worth trying; but it is well, meanwhile, that we should try to face the implications of our Utopia itself, suppose we could get to it. And to this we are led by some aspects of the inquiry we have just concluded.

We have asked whether the talents that are now devoted to choice bookbinding, for instance, could under changed conditions produce improvements in the potato crop that would stand on the relative scale of the new community as high as the object of artistic beauty stood on that of the old one. Well, if they could, and if they did, there would doubtless be a psychic gain, but would there not also be a psychic loss? Few of us would dare to say that we prefer a society in which there are both slums and culture to one in which there is no want and no refined artistic taste. But, nevertheless, if the disappearance of poverty meant the disappearance of a wealthy and leisured class, and if the disappearance of such a class meant the disappearance of what we now think of as refined tastes, refined manners, and all the finer artistic enjoyments, we should feel that a heavy price had been paid. A comparison, however, of such social and economic conditions as those of Denmark with those of countries of greater wealth and greater poverty does not support the belief that the higher qualities and finer tones of the intellectual and æsthetic life need fear anything from more even distribution of wealth.

One thing, however, is very clear; namely, that there actually are some satisfactions or indulgences which in the nature of things could not become universal, even if our general command of material resources were indefinitely increased, and which must tend to disappear if wealth is more evenly distributed. And the examination of a case in point may serve to remind us of the necessity of constant vigilance against the tacit assumption that what is possible to any one is possible to every one.

Napoleon may have wished to encourage the belief that every soldier carried in his knapsack a marshal’s baton. But he must have known that, however true it might be that
any soldier might rise to the position of a marshal, that “fool of a word” impossible was the only one to apply to the supposition that
every soldier could do so. For the existence of one marshal implies the existence of a number of soldiers who are not marshals. In like manner it is possible in any advanced industrial community for any man to become wealthy; but it is not possible for every man to become wealthy, with the implications we now attach to the term; for, included in our conception of wealth (even in the modest degree to which every middle-class establishment aspires to its possession) is the keeping of servants. The personal ideal then, at which middle-class people aim, appears to be one which cannot in its very nature be universally realised; for, if we cannot all be marshals, neither can we all belong to the servant-keeping class. This is the most obvious and stubborn of a great number of facts indicating that most of us wish to command the services of others on terms on which we should not wish to render them ourselves.

People who for any reason have done all their own housework know how much of it there is which is not worth doing for the sake of enjoying the results. Amazing simplifications of life take place, for good or ill, when the alternative is to work the apparatus of a complicated life one’s self.

Let us suppose that one family enjoys an income of £500 a year and another an income of £100. One member of the poorer family goes into service with the richer family and receives in food, wages, and accommodation, the equivalent of £30 a year. The income of the poorer family is now scheduled as £130, and the joint incomes of the two families are £630. Had the girl stopped at home and done the same things for her own family that she does for the other family the joint incomes would only be £600.
Prima facie both families would be the losers, not only nominally but really, for the poorer family prefers £30 a year in other things to the services of the girl, and the richer family prefers the services of the girl to £30 worth of other things. But now, suppose that the income of the poorer family rose, from independent causes, to the level of the other. The family, now in command of £500 a year, might not only prefer to keep their daughter at home rather than that she should earn the equivalent of £30 elsewhere, but might further desire to command the services of another girl at £30 a year, and might soon come to consider themselves the victims of extreme social hardship if they could not get her. But “where everybody’s somebody, there no one’s anybody”; and if the rendering of personal services stands no lower down upon any one’s scale of preferences than it is upon yours, you must either (1) render personal services yourself, or (2) get them from other people at terms which you or your compeers would accept, or (3) go without them.

Thus we see that not only an equalised distribution of existing wealth, but changes which should raise the resources of the poorer to a level of those of the richer without any corresponding loss anywhere, would in themselves render the realisation of the usual middle-class ideal impossible.

Such reflections may cause many searchings of heart, and may bring home to us the danger of allowing a not inconsiderable gap to arise, unobserved, between our social sympathies and the goal to which our practical endeavours are directed. On the other hand, it may strengthen our sense of the true nature of independence, and may direct our thoughts to many possibilities of simplification of the apparatus of life by extension of our communal as distinct from our private opportunities, and dissociation of the idea of enjoyment from the idea of exclusive possession and command. The flower-beds in a public park may be enjoyed by hundreds of thousands, and half a dozen gardeners may give as much pleasure as hundreds could have done if each of them had worked at that which only a few could enjoy. In the National Gallery or the Louvre the poorest citizen who has the rudiments of artistic taste and culture may secure opportunities of enjoyment and education which no private collection could secure to even a handful of the community. The extent to which this economy can be carried depends very largely upon the development of two qualities in the general mind: the capacity for dissociating the idea of enjoyment from the idea of possession, and the sense of respect and responsibility in handling or enjoying public property.