1920s >> 1925 >> no-248-april-1925

The capitalist and his case

The Socialist argues that in the typical capitalist industry of the twentieth century, the proprietor or proprietors have degenerated into mere receivers of dividends, and are therefore no longer a necessary part of the organisation for producing and distributing wealth. This does not involve any condemnation on “moral” grounds either of the system or of the capitalist class, nor does it prevent us from recognising the great historical role played in the past by the revolutionary capitalists when they struggled to clear Europe of the encumbrance of decrepit Feudalism. But the capitalists, like their Feudal predecessors, have overstayed their welcome, and the duty falls upon the workers of preparing for further progress by removing the encumbrances of this age and generation.

There is no lack of capitalist apologists willing, and in their own opinion able, to justify the system and the privileged position of those who benefit by it. Let us then examine some of the more familiar arguments.

First of all, there are those who tell us that the capitalist works just like any member of the working class and that his income is as much “earned” as are the worker’s wages. If this were true, it would not justify the enormous inequality between the one income and the other, and would not explain how it is that the capitalist is frequently able to live in luxury and yet increase his wealth, while the worker has barely sufficient to live in modest comfort and can usually save nothing at all. In fact, it is not true, except in small concerns and in certain unimportant industries, where the small concern still holds its own. In large-scale industry the shareholder does mot work. The ordinary shareholder is not even permitted by law to interfere in the conduct of the limited company in which he invests his money. No one would be more surprised than the investor in railway stock if it were suggested to him that he take his turn along with porters or cleaners on the line. He probably knows and desires to know nothing about the unpleasant processes associated with the running of “his” business. It is absurd on the face of it to suppose that investments made thousands of miles away from the residence of the investor, yield an income because of the work done by the investor. When financial failures and frauds bring into court such men as Bevan, of the City Equitable, no surprise is felt when a managing director declares that he is ignorant of managerial duties and pays someone else—a member of the working class—to perform them in his name. This brings us to a special type of work concerned with organising production. Our apologist says that, while it may be true the capitalists do not nowadays actually work alongside their employees, they still provide the brains and directive ability.

This claim is, of course, as false as the other. Granted that some men have organising powers approaching genius, and that some of these men happen to belong to the employing class, it is a sheer physical impossibility for, say, the late Hugo Stinnes to organise and direct literally hundreds, of concerns of the most varied nature operating in all parts of Central Europe and with world interconnections employing a million and a half hands. To master all the technical processes of one of the industries would more than tax the powers of any man. Moreover, if so much depended on the brains of the proprietor, his removal by death would—but does not—bring chaos. It does not, because salaried officials (members of the working class) can and do master the specialised work of direction just as they do any other trade. So plain is this that one of the most noted defenders of capitalism, the Austrian economist, Bohm-Bawerk, readily admits it. In his “Capital and Interest” (Macmillan, 1890, page 1) he writes about interest on invested money in the following terms :—

“It owes its existence to no personal activity of the capitalist and flows in to him even where he has not moved a finger in its making.”

He further asked, but never answered, the question, “Whence and why does the capitalist without personally exerting himself obtain this endless flow of wealth?”

When it is argued that the capitalist owes his superior position to his superior brains, we would also like to ask one question : If it is his brains and not his property which make him privileged, and in view of the fact that his brains will remain at his service, why does the property owner so strenuously resist attempts to take his property from him? The apologist often assures us that even under Socialism we could not keep the brainy capitalist down in the ranks of the common herd, but his determination not to take the risk gives the lie to his words. A recent illustration will help to drive home the absurdity of this position. A New Yorker named Suydam was left 50,000 dollars by his father fifty years ago. Last year he died worth 1,000,000 dollars, and for the whole fifty years Mr. Suydam lived in a lunatic asylum, mentally unable to direct his own or anyone else’s affairs. Whence then this increase of 950,000 dollars? Labour, directive ability, of course. But whose labour and whose directive ability? Not Mr. Suydam’s, but those of the workers employed in concerns in which Suydam, Senior, had invested the money.

Then we are told that the capitalist “saves,” and thus makes future production possible. In answer, we cannot do better than quote Sir W. Ashley, a Conservative historian and economist of note :—

“Senior, in 1835, introduced the term “abstinence,” as more fitly expressing the source of capital. . . . He characterised abstinence as implying “self-denial,” and declared that “to abstain from the enjoyment which is in our power” is “among the most painful exertions of the human will.” Phrases like these have occasioned no little mirth; it is hard to discover self-denial or parsimony as the world understands those words, in the processes by which modern capital is most largely accumulated.”—(Economic Organisation of England, p. 157.)

Under Socialism provision would naturally be made by society as a whole for future developments of plant, etc., instead of, as now, handsomely rewarding a favoured few because they cannot consume or waste the whole of the proceeds of their robbery of the wealth producers.

The greatest and most impudent stand-by of the capitalist economist is the “risk,” which needs to be paid for. The very real risks from industrial accident run by miners, and railwaymen and others count for nothing in this argument. They were in the past permitted to occur without any penalty for negligence or liability for compensation resting on the employer, until it was found that this was really an expensive method, despite its appearance of cheapness. Throw-outs on the industrial scrap heap simply became burdens on the Poor Law, and in the long run prevention was cheaper than indifference. Thus do our masters make a virtue of their meanness and boast of their humanity when their pocket induces some capitalist reform. But the capitalist is supposed to run the risk of losing his capital, and this is said to justify his being paid his profits. Now what is the basis of this argument? The Socialist replies that it is merely a man-made law which protects capitalist private property, and we propose, of course, to terminate such laws when we control the machinery of government. The capitalist, on the other hand, says, or at least believes, that we are here concerned with some law or vital principle of nature in accordance with which risks are rewarded. This is nonsense. The man who jumps off Waterloo Bridge runs the risk of being drowned. Does he for that reason anticipate being rewarded by Nature? If he selected the Monument he would run the risk (so great as to be almost certainty) of breaking his neck. Would he expect some compensation commensurate with the risk? And to come nearer to the actual conditions of industry, compare two possessors of £10,000; one of whom invests his money in some safe stock, Government Loan, for instance, while the other keeps his at home. The latter would run great risk from burglary, while the former would run no appreciable risk of loss at all. Yet at the end of a year the man who risked nothing would be wealthier by the amount of the interest, and the man who risked much would be no better off. Capitalist practice disposes of the risk theory.

We are also told that the capitalist advances capital to the worker over the period which passes before the product of the latter’s labour is completed, and thus the capitalist aids production and earns his reward. But here again capitalist usage refutes the argument. It is customary for weekly, monthly and even many yearly contracts to be so framed that the workers do not receive their pay until after they have put in their agreed amount of work. In truth then it is the worker who advance his service to his employer. And, moreover, how does the capitalist himself live in the meantime, except on the food, clothing, etc., produced by the labour of other workers?

A defence of private property of which we still occasionaly hear is that it is a “Divine” institution and must not be touched. We might be more ready to believe that those who use this, do so sincerely, if they demonstrated their confidence in their “omnipotent God” by trusting him to look after his own. Instead they behave just like any non-believer and employ policemen, soldiers and sailors to protect their property for them. We are compelled therefore to assume that this relic of a day when religious “dope” was more effective than now, is intended to deceive the unwary.

A whole tribe of defenders of private property concentrate on the alleged social virtues which with culture and learning are the monopoly of a leisured ruling class. The argument fails for three reasons, if for no others. In the first place the monotonous series of disclosures in the law courts of the filthy intrigues and low standards of the “upper ten” do not bear out the assumption that leisure to cultivate necessarily results in cultivation of social virtues. In the second place neither learning nor artistic achievement and appreciation are by any means confined to the wealthy, in spite of certain decided advantages they enjoy. And lastly there is no such thing as an hereditary and exclusive ruling class. Every revolution in industrial processes brings some new section of property owner to the fore and the blue-blooded and effete aristocrat of one century is invariably the descendant at a few removes of the upstart new-rich of the century before. What education and surroundings can do for the few we propose to make possible for the many.

These and other futilities produced by the profound thought of professors of economics are the kind of thing they offer in the name of economic science. The stagnation of economic thought is due largely to the necessity felt by university lecturers of pleasing those, whether Governments or private companies, who endow these “educational” establishments. The stagnation was foreseen by Marx, whose work they all agree to decry (the only thing they can agree upon), and their capitalist bias was admitted in a letter to “The Times (March 11th) by E. J. P. Benn, a publisher of economic works. He writes of Cannan, Mallock, H. D. Henderson, etc., as “writers whose object is the defence . . . of the existing order of things.”

Their inability is well illustrated by the consequences of the recent war. All the economists of Allied and Central powers were quite unable to forecast in even the most elementary way the effect of war on prices, production, currency and trade. Even now, seven years after the Peace, when the gold standard is returning to Europe, they still have not made up their minds whether it was ever necessary to depart from it. They have not even been able to agree on an explanation for the rise of prices. The capitalists who imagine that social progress will cease at the strange medley of commands issuing from the professors are in truth relying on a broken reed.


(Socialist Standard, April 1925)

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