Part 15 (1/2)

CHAPTER XIX

Eden Vale: Aug. 11, ----

What we learnt from the director of the Freeland Central Bank occupied the thoughts of my father and myself for a long time. As this high functionary, who was a frequent visitor at the house of the Neys, dined with our hosts the next day, the table-talk ran mainly upon the Freeland inst.i.tutions. My father began by asking whether the circ.u.mstance that the rest of the world, from which Freeland did not--and, in fact, in this matter could not--isolate itself, paid interest for loans, did not induce Freeland savers to seek foreign investments for their money; or whether at least some artificial means had not to be adopted to prevent this.

'There is nothing, absolutely nothing,' answered Mr. Clark, 'to prevent Freeland savers from investing their capital abroad; in fact, at present--I have quite recently been referring to the statistics upon this point regularly published by our central bank--some two and a-half milliards (2,500,000,000) are invested partly in the large foreign banks, partly in European and American bonds. For example, a good half of your Italian national debt is in the hands of Freelanders. But what are such figures in comparison with the gigantic amounts of our savings and capital? We cannot prevent, and have no reason whatever to prevent, many Freelanders from being induced by foreign interest to acc.u.mulate more capital than is needed here at home on the one hand, and more than they consider necessary to insure themselves against old age on the other. For what is required for these two purposes cannot go abroad.'

'And is not this last-mentioned fact a disadvantage to the Freeland saver?'

I asked.

'A Freelander who thought so,' said Mr. Ney, 'must have a very imperfect knowledge of what is to his own advantage. The interest paid by foreign debtors can in no respect compare with the advantages offered by employment of the money in Freeland, those advantages being, as you know, equably distributed among all the members of our commonwealth. At the end of last year we had altogether thirty-four milliards sterling invested. The calculated profit of these investments amounted to seven milliards; therefore, more than twenty per cent. Moreover, thanks to these same investments, every Freelander enjoys gratuitously the electric light, warming, the use of railways and steams.h.i.+ps, &c., advantages the total value of which would very nearly equal the remunerative production effected by our investments. Anyone can now calculate how much more profitable Freeland investments of capital are than foreign ones. Moreover, the two and a-half milliards, of which friend Clark spoke, is a large sum in European and American financial operations, and it has actually contributed towards very considerably lowering from time to time the rate of interest in all the foreign money-markets; but when this amount is compared with Freeland finances, the investment of it abroad is seen to be simply an insignificant and harmless whim. This large sum brings in, at the present rate of interest--you will understand that Freeland savers invest merely in the very best European or American bonds--about thirty-four millions sterling; that is, not quite the two-hundredth part of the national revenue of Freeland. And there can be no doubt that this whim will--for us--lose much of even its present importance as Freeland continues to grow; for the compet.i.tion of our capital has already reduced the rate of discount of the Bank of England to one and a-quarter per cent., and raised the price of the One and a-Half per cent. Consols to 118; hence there can be no doubt that a large flow of Freeland savings to Europe and America must, in a near future, reduce the rate of interest to a merely nominal figure. That this whim of investing capital abroad will altogether vanish as soon as foreign countries adopt our inst.i.tutions is self-evident.'

I now addressed to Mr. Clark the question in what way the Freeland commonwealth guarded against the danger of _crises_, which, in my opinion, must here be much more disastrous than in any other country.

'Crises of any kind,' was the answer, 'would certainly dissolve the whole complex of the Freeland inst.i.tutions; but here they are impossible, for lack of the source from which they elsewhere spring. The cause of all crises, whether called production-crises or capital-crises, lies simply in over-production--that is, in the disproportion between production and consumption; and this disproportion does not exist among us. In fact, the starting-point of the Freeland social reform is the correct perception of the essential character of over-production arrived at twenty-six years ago by the International Free Society. Until then--and in the rest of the world it is still the case--the science of political economy found in this phenomenon an embarra.s.sing enigma, with which it did not know how better to deal than to deny its existence. There was no real over-production--that is, no general non-consumption of products--so taught the orthodox political economists; for, they contended, men labour only when induced to do so to supply a need, and it is therefore impossible in the nature of things that more goods should be produced than can be consumed. And, on our supposition, to which I will refer presently, this is perfectly correct.

Everyone will use what he produces to meet a certain need; he will either use his product himself or will exchange it for what another has produced.

It matters not what that other product is, it is at any rate something that has been produced; the question never need be what kind of product, but only whether some product is asked for. Let us a.s.sume that an improvement has taken place in the production of wheat: it is possible that the demand for wheat will not increase in proportion to the possibility of increasing its production, for it is not necessary that the producers of wheat should use their increased earnings in a larger consumption of wheat. But then the demand for something else would correspondingly increase--for example, for clothing, or for tools; and if this were only known in time, and production were turned in that direction, there would never be a disturbance in the exchange-relations of the several kinds of goods. Thus the orthodox doctrine explains crises as due not to a surplus of products in general, not to a mere disproportion between production and consumption, but to a transient disturbance of the right relation between the several kinds of production; and it adds that it is simply paradoxical to talk of a deficient demand in view of the misery prevailing all over the world.

'In this, in other respects perfectly una.s.sailable reasoning, only _one_ thing is forgotten--the fundamental const.i.tution of the exploiting system of society. Certainly it is a cruel paradox to speak of a general lack of demand in view of boundless misery; but where an immense majority of men have no claim upon the fruits of their labour, this paradox becomes a horrible reality. What avails it to the suffering worker that he knows how to make right, good, and needful use of what he produces, if that which he produces does not belong to him? Let us confine ourselves to the example of the increased production of wheat by improved methods of cultivation. If the right of disposal of the increased quant.i.ty of grain belonged to the agricultural producers, they would certainly eat more or finer bread, and thus themselves consume a part of the increased production; with another part they would raise the demand for clothing, and with another the demand for implements, which would necessarily be required in order that more grain and clothing might be produced. In such a case it would really be merely a question of restoring the right relation between the production of wheat, of clothing, of implements, which had been disturbed by the increased production of one of these--wheat; and increased production, a condition of greater prosperity for all, would, after some transient disturbances, be the inevitable consequence. But since the increased proceeds of wheat-cultivation do not belong to the workers, since those workers receive in any case only a bare subsistence, the progress which has been made in their branch of production does not enable them to consume either more grain or more clothing, and therefore there can exist no increased demand for implements for the production of wheat and textile fabrics.'

'But,' I objected, 'though this increased product is withheld from the workers, it is not ownerless--it belongs to the undertakers; and these too are men who wish to use their gains to satisfy some want or other. The undertakers will now increase their consumption; and after all one might suppose it would be impossible that a general disproportion should exist between supply and demand. Certainly it would now be commodities of another kind, the production of which would be stimulated in order to restore an equilibrium between the several branches of labour. If the increase belonged to the workers, then would more grain, more ordinary clothing, and more implements be required; but since it belongs to a few undertakers there will be an increased demand only for luxuries--dainties, laces, equipages--and for the implements requisite to produce these luxuries.'

'Exactly!' said David, who here joined in the conversation. 'Only the undertakers are by no means inclined to apply, in any considerable degree, the surplus derived from increased production to an additional consumption of luxuries; but they capitalise most of it--that is, invest it in implements of production. Nay, in some circ.u.mstances--as we heard yesterday--the ”undertaker” is no man at all possessing human wants, but a mere dummy that consumes nothing and capitalises everything.'

'So much the better,' I said, 'wealth will increase all the more rapidly; for rapidly growing capital means rapidly increasing production, and that is in itself identical with rapidly increasing wealth.'

'Splendid!' cried David. 'So, because the working ma.s.ses cannot increase their consumption, and the undertakers will not correspondingly increase theirs, and consequently there can be no increased consumption of any commodity whatever, therefore the surplus power of production is utilised in multiplying the means of production. That is, in other words, no one needs more grain--so let us construct more ploughs; no one needs more textile material--so let us set up more spinning-mills and looms! Are you not yet able to measure the height of absurdity to which your doctrine leads?'

I think, Louis, you, like myself, will admit that there is simply no reply to reasoning so plain and convincing. An economic system which bars the products of human industry and invention from the only use to which they should finally be applied--namely, that of satisfying some human requirement--and which is then astonished that they cannot be consumed, narrowly escapes idiocy. But that such is the character of the system which prevails in Europe and America must in the end become clear to everyone.

'But, in heaven's name, what becomes of the productive power among us which thus remains unemployed?' I asked. 'We are, on the whole, as advanced in art, science, and technical skill as you are in Freeland; I must therefore suppose that we could become as rich, or nearly so, as you, if we could only find a use for all our production. But we do not actually possess a tenth of your wealth, and yet there is twice as much hard work done among us as there is here. For though among you everyone works, and among us there are several millions of persons of leisure who live simply upon the toil of others, yet this is counterbalanced by the circ.u.mstance that our working ma.s.ses are kept at their toil ten hours or more daily, whilst here an average working day is only five hours. Certainly among us there are millions of unemployed workers; but that also is more than compensated for by the labour of women and children, which is unknown among you. Where then, I repeat, lies the immense difference between the utilisation of our powers of production and of yours?'

'In the equipment of labour,' was the answer. 'We Freelanders do not work so hard as you do, but we make full use of all the aids of science and technics, whilst you are able to do this only exceptionally, and in no case so completely as we do. All the inventions and discoveries of the greatest minds are as well known to you as to us; but as a rule they are taken advantage of only by us. Since your aristocratic inst.i.tutions prevent you from enjoying the things the production of which is facilitated by those inventions, you are not able to take advantage of the inventions except in such small measure as your inst.i.tutions permit.'

Even my father was profoundly moved by this crus.h.i.+ng exposition of a system which he had always been accustomed to honour as the highest emanation of eternal wisdom. 'Incredible! shocking!' he murmured in a tone audible only to myself.

But Mr. Clark proceeded: 'Among us, on the contrary, the theorem of the so-called cla.s.sical economics, that a general excess of production is impossible, has become a truth, for in Freeland consumption and production exactly tally. Here there can be over-production only temporarily and in _isolated_ kinds of goods--that is, the equilibrium between different kinds of production may be temporarily disturbed. But we have no need to be afraid of even this trifling danger. The intimate connection of all productive interests springing from the nature of our inst.i.tutions is an antecedent guarantee of equilibrium between all branches of production. A careful examination will show that the whole of Freeland is one great productive society, whose individual members are independent of one another, and yet are connected in one respect--namely, in respect of the proceeds of their labour. Just because everyone can labour where and how he pleases, but everyone's labour is alike in aiming at the highest possible utility, so--apart from any incidental errors--it is impossible but that an equal amount of labour should result in an equal amount of utility. All our inst.i.tutions tend towards this one point. At first, as long as our commonwealth was in its initial stages, it sometimes happened that considerable inequalities had to be subsequently balanced; the producers did not always know until the year's accounts were closed what one and the other had earned. But that was a period of childhood long since outlived.

At present, every Freelander knows, to within such trifling variations as may be due to little unforeseen accidents, exactly what he and others have earned, and also what they have every prospect of earning in the near future. He does not wait for inequalities to arise and then set about rectifying them; but he takes care that inequalities shall not arise. Since our statistics always show with unerring accuracy what at the time is being produced in every branch of industry, and since the demand as well as its influence upon prices can be exactly estimated from a careful observation of past years, therefore the revenue not only of every branch of industry, but of every separate establishment, can be beforehand so reliably calculated that nothing short of natural catastrophes can cause errors worth notice. If such occur, then comes in the a.s.sistance of the reciprocal insurance. In fact, in this country, not only are there no crises, but not even any considerable variations in the different productions. Our Statistical Department publishes an unbroken series of exact comparative statistics, from which can at any time be seen where either fresh demand or excess of labour is likely to arise; our supply of labour is controlled by these returns, and that is sufficient--with rare exceptions--to preserve a perfect equilibrium in production. It frequently occurs that here or there a newly started establishment comes to grief, particularly in the mining industry. Such a failure must not, however, be regarded as a bankruptcy--how can undertakers become bankrupt when they have neither ground-rent, nor interest, nor wages to pay, and who in any case still possess their highly priced labour-power?--but at the worst as a case of disappointed expectations. And should the very rare circ.u.mstance occur, that the community or an a.s.sociation loses the loaned capital through the premature death of the borrower, of what importance is that in the face of the gigantic sums safely employed in our business? And if a guaranty (_del credere_) were insisted upon to cover such a loss, it would amount to scarcely a thousandth part of one per cent., and would not be worth the ink used in writing it.'

'And do not foreign crises sometimes disturb the calm course of your Freeland production? Are not your markets flooded, through foreign over-production, with goods for which there is no corresponding demand?' I asked.

'It certainly cannot be denied that we are considerably inconvenienced by the frequent and sudden changes of price in the markets of the world caused by the anarchic character of the exploiting system of production. We are thereby often compelled to diminish our production in certain directions, and divert the labour thus set free to other branches of industry, though there is no actual change in the cost of production or in the relative demand. These foreign, sudden, and incalculable influences sometimes make a diversion of labour from one production to another necessary in order to preserve an equilibrium in the profits, though the regular and automatic migration of labour from one industry to another is sufficient to correct the disturbance in the relations between supply and demand due to natural causes. But these spasmodic foreign occurrences cannot produce a serious convulsion in our industrial relations. Just as it is impossible to throw out of equilibrium a liquid which yields to every pressure or blow, so our industry is able to preserve its equilibrium by means of its absolutely free mobility. It may be thrown into fruitless agitation, but its natural gravity at once restores the harmony of its relations. But, as I have said, such a disturbance is produced only by a partial over-production abroad.

That this brings about a superabundance of all commodities, we care but little. Since foreign countries do not send us their goods for nothing, but demand other goods in return, what those other goods shall be is their business, not ours. We have no interest-bearing bonds or saleable property in land; hence our export goods must be the produce of our labour. The fact that in Freeland every product must find a purchaser is therefore by no means affected by external trade.'

'That is very clear,' I admitted.

'But,' interposed my father,' why do you not protect yourselves against disturbance due to foreign fluctuations in production, by a total exclusion of foreign imports?'