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Production and Consumption From a Communistic Point of View

( Originally Published Early 1900's )

By a communistic view of economic processes we mean a view which includes only the processes themselves in their relations to the community at large, considered as a co-opera, five body, and leaves out of consideration those associated features which do not constitute essential parts of the process. The reason for this view is that the associated features alluded to confuse our thought, and stand in the way of our seeing the essential conditions of the problem.

Let us see what are the conditions essential to the enjoyment of a coat. They are the labor devoted to the production and transportation of the various materials of which the coat was made, their combination into a coat, the transportation of the coat to some point within easy reach of the wearer, and the act of the latter in going to that point and getting the coat. I say these operations are the essential ones. For it is certain that that coat could not have been enjoyed by the wearer without these processes. And it is equally certain that if these processes are all performed, he will have the coat. Now, that without which a result will certainly not be, and with which it certainly will be, is, in the highest degree, the essential condition of the result.

Besides these essential operations by which the coat was produced and placed in possession of the wearer, there have been certain acts of another kind. These acts have consisted in a certain number of persons in succession each calling the wool " my property" and receiving money from the following person in exchange for the right on his part to call the wool his property, and so with the various materials, and with the finished coat, which the wearer had to pay money for. Now, these acts of exchanging the right of ownership, however necessary they may be (and they are absolutely necessary as society and human nature are constituted), are not parts of those operations of production and transformation which we have shown to be essential. The fact that we cannot get along without ownership and exchange in no manner modifies the fact that if the thousands of producers unite in performing all the operations necessary to making the coat and putting it into your possession, you will have it, and if' they do not you will not have it. Now, our object in the present chapter is to leave out of consideration the processes of exchange and the rights of ownership, in order to show what necessary relations exist between the producing operations and the enjoyment of commodities. We call this view communistic, because the word communism is used to designate a system in which the private ownership of property is not recognized. We view economic conditions from this standpoint because it affords us the basis of solving a number of economic problems in an easy and simple manner which otherwise would be very complex.

We suppose it evident to the reader that the population of the country comprises some fifteen millions of laboring units, heads or members of families, who are producing commodities for the benefit of others. Farmers are producing wheat and corn ; millers are producing flour ; carpenters and bricklayers are producing houses ; actors are producing amusement; tailors are producing clothing. If we add up all the bread, all the clothing, all the amusements, all the houses, we shall have in each case a certain sum total representing the entire production of each separate commodity by the whole community.

In return for his contributions to this sum total, each producer is getting a larger or smaller share of other sums total for his own use. By the process of exchange he gets small quantities of a large number of commodities in exchange fora considerable quantity of some one commodity which he himself has produced. His welfare depends on how much of these separate commodities his labor will enable him to command. The more he puts in the better for the others, and the more they put in the better the chance for him to be supplied.

To fix the ideas, let us suppose that all these things produced are brought together into one central reservoir. We employ this conception merely to enable us to think of them as wholes rather than as scattered masses of parts. Then, every commodity which is brought into the reservoir will be brought in by some person or body of persons, everything will be taken out by somebody, and every commodity which is taken out will be consumed by some person or family. It is certain that nothing can be taken out except what has been put in.

An apparent difficulty may arise in making this conception correspond to the actual case. If we add up all the quantities of everything actually produced, we find that the greater part are taken out, not for the consumption of the individual who takes them, but for the purpose of being worked up by him and brought back to the reservoir in an improved form. For example, the wool which the drover throws into the reservoir is taken by the manufacturer, not to be consumed by himself, but to be made up into cloth. The tailors take the cloth out of the reservoir in order to throw it back again in the shape of clothing. But this process need not cause any difficulty. The ultimate object of the wool is clothing, and the ultimate object of everything is to satisfy the wants of individuals. The only consumption with which we are concerned at present is that of the commodities withdrawn by the individuals, not to be re-turned by them, but to be applied to their own uses. We therefore leave the wool and cloth out of consideration, and conceive the coat to be brought in, not as the sole contribution of the tailor, but as the joint contribution of wool-growers, shearers, railway managers, spinners, weavers, merchants, and tailors. We may, if we please, imagine a separate central reservoir into which nothing enters but finished houses, furniture, bread, pictures, clothing, and other articles to be used for the support of those who withdraw them.

The economic welfare of each individual depends upon what share of these finished products he has the privilege of withdrawing, and upon nothing else. Now, as a first step towards understanding what causes affect the power of the individual to withdraw commodities from the reservoir, we shall have to make a distinction between causes which affect only the general welfare and those which affect individuals, or special classes. Everything which increases either the sum total or the quality of any commodity brought into the reservoir tends to increase the general welfare, because then there is either more of that commodity, or a better article, for everybody who wants it. If this commodity is one of which there is already all ample supply, then the increase to the general welfare will be unimportant... If it is something of Which people stand in great need, and of which the supply is small, the increase forms an important addition to the general welfare. Moreover, in any case, the addition of any commodity will directly benefit only those who use that commodity. Now, economics and govern-ment policy can concern themselves only with the welfare of whole classes of individuals; and since one class has as good a right to their consideration as another, the general welfare is that with which they are principally concerned. Hence our first conclusion as to whether an economic cause is beneficial or injurious in its action must depend on whether it tends to increase or diminish the general supply of commodities brought into the great central reservoir. But as a matter of scientific interest, it is perfectly allowable and proper to consider how special classes and subdivisions of men are affected by economic causes.

Now, it does not follow, because an increased supply of some one commodity is brought into the reservoir, that of course everybody who wants that Commodity can get more of it. It may happen that through the indirect action of the same cause a few unfortunate persons may be able to command only a smaller supply. We also must recognize the action of economic causes which, without altering the total quantity brought into the reservoir, would result in that quantity being divided very differently among separate classes of men. If then we find it satisfactorily established that any economic cause will result in some class of men (carpenters, for example) being able to get a larger supply of commodities, we must see in which of two ways this cause acts. If it acts through a larger production of those commodities, then it is a public benefit of which the carpenters are simply getting a share. But if it is a cause which merely enables the carpenters to get something which otherwise some one else would have got, then it is merely transferring the benefit from one class to another, and is not to be regarded as an economic good, unless it can be shown that the commodities do more good when consumed by carpenters than when consumed by others.

This classification will enable us to make an important generalization. Those industrial and business efforts in which every man competes with his fellows by trying to supply a better article to his customers than his competitors can supply tend to increase the sum total of commodities produced and so promote the general good. Those efforts which consist in placing restrictions on competition by limiting in ally way the freedom of everybody to produce as much as he is able can only benefit one class at the expense of others.

Let us now see what regulations would have to be established for the public good in the distribution of the sum total of products. The reason why regulations are necessary is that every one wants to get a share of a great many things, and especially of the useful and scarcer things. His welfare depends on what he can get, and as a general rule he is a safe judge of what he wants. Bat it is different with the things he brings in. These are for other people, and it is necessary for the public good that he bring in, not what the likes to produce, but what other people want to consume. How shall he be induced to do this ?

In considering this question we shall assume that there is a central authority which can make and enforce what regulations it pleases. Let us see what would be possible to such an authority, and what, from the very nature of things, impossible.

I. The first regulation which we see to be necessary is that no one shall be allowed to draw things out of the reservoir unless he puts in an equivalent of something that somebody wants. But what kind of equivalent ? If nothing more than an equivalent in labor, then everybody would put in what he found it easiest to make, and would neglect that he found it difficult to make. The result would be that there would be a great collection of those things easy to make, and a great scarcity of everything else. Since many useful things are hard to make, we must require something else than equivalent in labor of production. We may, at this juncture, be guided by the principle that the quantity of each commodity brought in must, so far as possible, be so regulated as to be just equal to the quantity wanted to be taken out. But even under the most favorable regulations an accumulation of some things and a scarcity of others would be unavoidable.

II. The central authority would then have to remedy this inequality. It would perhaps say to the combined farmer and miller, " You are bringing in more flour than we possibly can eat, while the people cannot find enough good paper to write their letters on. Cannot some of you leave off making flour and begin the making of paper ?" The answer would naturally be, "It is very easy to make flour and 'very hard to learn how to make paper. You must therefore, offer us some inducement to change." The question would now arise on the part of the central authority whether some privilege or advantage must be held out to induce the makers of 'flour to learn how to make paper. If the principle is introduced that labor is the only measure of value, and that one person must gain no more than another, it would be impossible to make the change. Evidently the easiest way would be to offer some inducement for making paper rather than flour. Thus would arise that inequality in the rights of different contributors to the reservoir which human experience in all states of society has shown to be unavoidable.

III. Having thus established the principle that inducements must be held out to secure the manufacture of the scarcer articles, the question would arise just how strong the inducement would have to be. The public at large would have an interest in getting the paper with the smallest possible inducement, and the latter ought to be so regulated that there should be an exact balance between the benefit from the increased supply of paper and the evil of offering a premium to paper-makers. This would require some measure of benefit and evil, so that the benefit of getting a little more paper, and the corresponding evil of paying for its production, would be set off against each other. This consideration would lead to the still further development of the plan.

IV. Every producer who made an addition to the supply of plentiful articles would do only a little good, while if he added to the supply of the scarcer ones he would do the more good the scarcer the article. The person who took away a supply of the plentiful articles would do very little evil to his fellows, while he. who took a supply of the scarcer ones would do more and more evil in proportion to their scarcity. Thus would arise the idea of a measure of good or evil; that is, of value. The central authority might begin by establishing this-measure in the case of each commodity. It might say: "Every man who brings in a barrel of good flour shall be held to do a good of $5 ; and every man who takes away a barrel to do an evil of $5. Every man who brings in a ream of paper shall be held to do a good of $2; and he who takes it out an evil of $2" Having established such a scale for every commodity in the market, the authority would await the result. The most equitable result would evidently be that every one should be allowed to take out a value equal, on the established scale, to that which he brought in, and that he should also be allowed to bring in what he pleased. If inequalities were still found, some things being plenty and others scarce, it would be necessary to continue adjusting the scale of values; and the final result should be such adjustment of the scale that the quantity of every-thing taken out should be just equal to that brought in. When this was done the operations of the imaginary society would correspond exactly with those which have grown up among us.

To what in this picture corresponds the case of non-employment of laborers? In our picture every man is at liberty to bring in as much or as little as he pleases, but laborers out of employment can bring in nothing, and so can acquire no right in the store. But what is meant when we say that laborers can find no employment? Everybody can find employment on some terms. What is generally meant is that they cannot find employment at satisfactory wages. Wages being what they can buy from the common stock with the proceeds of their labor, this is simply saying that what they are allowed to take out of the reservoir is not, in their opinion, the proper equivalent of that which they are willing to put in. For this we may say that there is no possible remedy so long as every one is at liberty to work or stay idle. He must be his own judge of the value of his services, and if he values them too highly nobody can help it.

The Conditions of General Prosperity. The careful thinker will note the general tendency of the preceding considerations towards one conclusion, namely, that general prosperity is but slightly affected by those measures in which the public take the greatest interest, that it can practically vary little from year to year, and that it can change but slowly from generation to generation. An illustration has already been adduced showing how illusory the popular estimates of economic well-being are apt to be. So accustomed are we to measure this well-being by entirely insufficient standards, that it may be well to review the subject once more from the standpoint of common-sense.

When is a community, a class, or an individual prosperous ?

When they have plenty of money? No, for the money is of no use to them. It may enable them to buy, but it cannot do this unless the things they want to buy are first produced. Is a man prosperous when his goods and services are in demand ? Not unless this demand will enable him to buy. When he sells lie gives what is valuable, and does not receive a return until he buys something. The true answer is that lie is economicalIy prosperous when he is able to supply his natural and artificial wants without more labor than is conducive to his physical health. A class is prosperous when all its members enjoy this condition of prosperity; and when all classes in the community enjoy it, then certainly is the community prosperous, no matter how weak and badly off it may be when we measure it by the popular standard. Two opposing factors therefore come in—the supply or mass of commodities, and the labor by which that supply is obtained.

We have already shown, what indeed ought scarcely to need showing to a reasonable being, that, so far as the community at large is concerned, a necessary prerequisite to the supply of these wants is that all the agencies necessary to that end shall be produced. If all the people of the country are comfortably housed and supplied with all the food, clothing, furniture, books, and other wealth necessary to supply their wants, then that country is prosperous. They cannot enjoy this wealth unless it is produced : the houses must be built, the grain raised, the furniture manufactured, and the clothing made. Moreover, if the community is increasing, not only must the existing houses be kept in repair, but there must be a continual addition to their number. Conversely, if all these things exist, that is, if there are enough of houses, furniture, food, clothing, for everybody, we may be satisfied that no one will be compelled to go without these necessaries. It is indeed conceivable that they might all be owned by a few persons, and that those few might refuse to let the majority have any share of them. Practically, however, this is out of the question. No matter how rich and fortunate he may be, a man can eat only a certain small quantity of bread, and he has not the slightest occasion for taking more than that quantity from the common store. Therefore he can have no motive for keeping anybody else from eating his share of the bread. He can only live in one house, and if he has more houses than that one he will be practically forced to let other people occupy them on such terms as they choose to make. He may own a ship, but if this ship could bring nothing but what he wanted for his own personal use he would burn her up. He bought or built her in order that she might bring things for other people. We may therefore lay it down as a practical rule, taking human nature as it is, that when a community as a whole is amply supplied, no industrious and well-behaved member of that community is likely to be in serious permanent want. Thus we are led to our second factor, the conditions of production.

It is equally evident that producing power is the necessary and sufficient condition that the wealth just shown to be required for prosperity shall exist. So long as the community possesses the necessary land and minerals, so long as it has factories; mills, and mines all in good working order, so long as its railways continue to run, and its laborers and merchants maintain their skill and good morals, so long will the necessaries of life be produced. The producing power can be impaired only by moral or physical causes acting upon the community at large. Of course, every cause which impairs confidence between man and man, or which leads one to doubt whether he will be compensated for his services; every cause which prevents producers from working, and every cause which cuts off the supply of material for them to work with, tends to diminish production. Hence the question of national prosperity resolves itself almost entirely into that of the stimulus to production.

This chapter is, more than any other one, the starting-point in the system of economic investigation which will be employed in subsequent parts of the present work.

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