Dhananjayarao Glldgil Libra~ 1111111 11111 11111 11111 IllD miD 1111 liD GlPE-PUNE-008488 THE ECONOMfC7 CO-NSEQUENCES OF SOCIALISM The Westminster Library A Series of Volome5 dea1inC with the History, Politics, and Economic Life of the British Empire. a-dla aatIa 1/6"""" TM loUollli", 110/.. _ Are pu6lis,," : THE EMPIRE: A FAMILY AFFAIR By PERCY HURD, •.•• THE LEGACY OF LIBERALISM By AI.. CARTHILr. STATE SOCIALISM IN PRACTICE By ARCHIBALD HURD TRADE UNIONS By W. A. APPLETON, C••• Il. THE FINANCE OF GOVERNMENT By MAJOR J. W. HILLS THE PROBLEM OF 'DEFENCE . By SIa GEORGE ASTON SOME HISTORICAL··PRINCIPLES OF THE CONSTITIJTION By KENNETH PICKTHORN THE GROWTH OF THE CONSTITIJ­ TION By Eo W; JrL BALFOUR·MELVILLE POLITICS RETOLD • • By P. G. CAMBRA Y THE COST OF LIVING By NORMAN DEARLE THE ORIGINS OF EMPIRE By IAN COLVIN THE SOCIALIST MOVEMENT Part I, 1824-1914: Part II, 19J4~ By Da. A. SHADWELL THE ECONOMIC CONSEQUENCES OF SOCIALISM By GEORGE W. GOUGH LONDON: PHILIP ALLAN & CO., LTD. QUALITY COURT Firs' J'ffblishe4 j,. 1926 CONTENTS CHAP. PAGE I. OUR SCOPE AND OBJECT I II. SOCIALIST CHARGES AGAINST CAPITALISM 6 III. THE CAPITALIST SYSTEM 23 IV. SCHOOLS OF SOCIALISM 50 V. THE NEW SOCIAL ORDER 64 ·VI. INDUSTRY ON A RAZOR'S EDGE 86 VII. CAUTIONS AND PRECAUTIONS 103 VIII. THE CORE OF THE CASE II4 IX. SOCIALISM AND MARKETS 144 X. ENGLAND UNDER SOCIALISM. 159 BOOKS by GEORGE W. GOUGH ECONOMICS Wealth ana Work Talks with Workers NOVELS The Yeoman Adventurer The Terror by Night My Lady Vamp PREFACE SINCE • His Majesty's Opposition' is definitely a Socialist Party, in its leadership, its creed and its immediate proposals, a knowledge of Socialism is no longer a merely academic attainment but the necessary equipment of every good citizen. to the Westminster Library Dr. Shadwell has already contributed a masterly history of The Socialise Movement, to which my own book is in some sort a sequel and companion. I have tried to explain clearly what Socialism is, and what are the chief economic characteristics of the country to which its advocates wish to apply its principles. I then examine these principles, always with special reference to British conditions, and seek to establish the conclusion that grave and immediate damage would be done to the economic structure of this country i~ British Socialists were ever permitted to make a. beginning with their plans for constructing what they are pleased to call • A New Social Order.' Economics is not an exact science, but it is exact enough to enable its criteria to be applied to the problem of forecasting the effects of British Socialism on British trade and industry, and that is what I have tried to do. This is obviously a department of economic study vii viii PREFACE in which the writer. must clearly set forth the con­ clusions to which he has come on the.matters before him. In that sense only, this book is a c:"ontribution to a great controversy, and I have not avoided plainness of speech where I deemed it called for; but, while not concealing iny own view that Socialism is a deadly enemy of social progress, I have throughout stated the case for Socialism as emphatically as if I were myself a Socialist. The economic future of this country depends upon an ever-growing efficiency in manufacturing and marketing its products. Failure here means failure everywhere, hopeless and irremediable. Economic analysis shows that Socialism inevitably means failure here. Such is the position I seek to establish. G.W.G. August, I926. P.S.-It may be well to point out that this book was not only written but in type before the pUblication of Mr. H .. G. Wells' World o/William Clissold. My acCount of the fallacy-breeding word 'system' is therefore quite independent of, though so closely similar to, the brilliant pages which he devotes to the same topic. The Economic Consequences of Socialism CHAPTER I OUR SCOPE AND OBJECT No man can set himseU a higher or more honourable task than that of improving the organised frame­ work of institutions within which his fellow-men must of necessity do their work and live their daily lives. Whatever a man, or a society of like-minded men, honestly proposes with this end in view is well worth close examination in order to find out whether all or any of it, if it is in its nature capable of adop­ tion and were actually adopted, would serve its proposed purpose. A- , Socialist' is one who believes that he has definite plans and proposals which could be adopted and, if adopted, would do this most desirable thing: and the name given to these plans and proposals, and to the underlying theories and beliefs on which they are based, is 'Socialism: It need not give the student any trouble to learn that there are over two hundred definitions of Socialism. In strict truth, there are probably as many definitions of Socialism as there are Socialists. The Scotch fisher­ man who told Sir Robert Peel that he was ' a free 2 OUR SCOPE AND OBJECT trader in everything but herrings,' had innumerable ancestors, and has had countless successors, in aU spheres of political life, not excluding Socialism. But, however numerous the definitions of Socialism may be, there is one thing common to them all, and it is this one common thing, the final preci. pitate of all Socialisms, to which attention will be almost exclusively directed in this little book. Socialism, however defined, always comprises two main 'elements or J>ropositions. Both of them will be found in any of the authentic treatises which expound the faith for the instruction of the elect, and both of them will be heard in any open-air by· - election speech intended to get votes for a Socialist candidate. The first of these two fundamental propositions of Socialism is that social evils, the existence of which all admit because they are patent to the eye, art! due exclusively to the private ownership of capital and the conduct of business by private individuals in order to make profits for the private owners of this capital; . the second of them is that the one and only way to remove the admitted evils is to remove the alleged cause of them, and set up a new form of society in which there shall be no privately-owned capital and no making of business 'profits for its owners.. The differences between Socialists and schools of Socialists, which account for the two hundred definitions of Socialism and the unending wrangles and mutual antagonisms of Socialists, begin after these two main propositions have been accepted by THE CENTRAL CORE 3 all of them as their common basis of belief and ground of action. A Fabian lea1let on municipalised milk and a • Left Wing' volume on Direct Action have them in common. Mr. Zinoviev would heartily agree concerning them with Mr. Sidney Webb before proceeding to shoot him as a reactionary. This central core of Socialism, which it is our special purpose to examine, is economic in its nature and structure. This implies that we shall be occupied in examining Socialism from the special view-point of the economist. Socialism may be profitably examined from other angles. Oscar Wilde, for instance, wrote a study of • the soul of man under Socialism.' August Bebel, the German Socialist leader, wrote at length on the subject of • Woman under Socialism.' Mr. J. H. Thomas, again, has paid careful attention to the position of the monarch • when Labour rules,' and Mr. and Mrs. Webb have drawn up the • Constitution' of the coming • Socialist Commonwealth.' Indeed, it is difficult to think of any side of life which would not be profoundly modified by a change over to Socialism, and, consequently, the student of Socialism must • see life steadily and see it whole' if he is to come to sound conclusions concerning it. If he sees economic loss as a possible outcome of Socialism, he must consider whether it might not be more than compensated by- non-economic gains. The narrowness of our own special study is deliber­ ately adopted, and pointed attention is drawn to the fact, to prevent misconception on the reader's 4 OUR SCOPE AND OBJECT part. Narrow as it is, it is, however, decisive. Socialism is a scheme, a system, a plan, for remedying economic evils. To this all other purposes are sub­ ordinate. If it has other objects they are as a matter of fact not often or specially expounded. Socialists themselves put all the stress on the economics of Socialism. We shall do the same. Moreover, in a; very short book on Socialism written for English readers it is necessary to limit the field to be covered even more drastically than has been indicated. Unlike John Wesley and Lenin I do not regarcJ. the whole world as my parish. The whole art of mastering a subject of study is to -get hold from the very first of its central positions. It is greatly to be wished that we had full, accurate and authentic information of what has happened, and is now happening, in Russia under Sovietism; but if our information were as encyclop:edic as it is in fact scanty, there would be little or no use for it here. For I propose to study Socialism with special reference to economic conditions in our own ~~try. - In the space available one cannot do m~, and I shall not subordinate the urgent neces­ sity of being thorough to a vain attempt to be comprehensive.