Cartesian Economics.
The Bearing of Physical Science upon State Stewardship.
Two Lectures to the Student Unions of Birkbeck College and The London School of Economics, November 10th and 17th, 1921.
By Frederick Soddy, M.A., F.R.S.
[These lectures owe much to a long controversial correspondence
carried on with Dr. H. Lyster Jameson, whose sad death is just reported
in the papers. Dr. Jameson upheld the neo-Marxian or proletarian view
in economics and the determinist or, as I style it, the “ ultra-materialistic.”
philosophy, and from the controversy my own views gained in
definiteness and clearness. March 3rd, 1922. F. S.]
First Lecture. — Chairman, Sir Richard Gregory.
IT is my intention to try to bring the existing knowledge of
the physical sciences to bear upon the question “ How do
men live ? ” This question ought to be the first the economist
should try to answer. I am by no means the first to essay
this task, but the modern economist seems to have forgotten
that there is such a question, whilst the earlier ones lived at
a stage of the development of scientific knowledge when no
exact answer was forthcoming.
My own point of departure could not be better illustrated
than by a quotation from Descartes, and the aspects I propose
to examine might well be called “Cartesian Economics.”
"Starting from the forms of knowledge most useful to
life, instead of from that speculative philosophy taught in
our schools, and knowing the force and processes of fire,
the air, the stars and all the other bodies which surround
us as distinctly as we know the different occupations of
our own workmen, we shall be able to employ them in the
same fashion and so render ourselves as the masters and
possessors of nature and contribute to the perfection of
the human life."
The enormous progress made in the mastery of man over
nature and the meagre contribution to the perfection of the
human life is a contrast that can only be accounted for by
some such enquiry as that which I propose to essay. But in
language more homely than that of Descartes I may illustrate
my starting point by means of a story. An expert organist,
drawing enthusiastic applause from his audience, was surprised
and annoyed by the blower coming to the front of the screen
and remarking to him, “ Yes ! we played that piece very
well.” The blower not being encouraged in well-doing, in the
next piece the divine music rose majestically to its climax and
there petered out in a dismal wail, whilst a head appeared round
the screen and remarked, “ Now ! is it we ? ” Nor is it without
significance to note that, since the occurrence, the human
labour upon which the organist relied has been replaced so
completely by electric power. Power, rather than any qualifying adjective,
human, mechanical or electrical, is the starting
point of Cartesian economics.
At the risk of being redundant, let me illustrate what I
mean by the question, “ How do men live ? " by asking what
makes a railway train go. In one sense or another the credit for
the achievement may be claimed by the so-called " engine-driver,"
the guard, the signalman, the manager, the capitalist,
or the share-holder, — or, again, by the scientific pioneers who
discovered the nature of fire, by the inventors who harnessed
it, by Labour which built the railway and the train. The fact
remains that all of them by their united efforts could not drive
the train. The real engine-driver is the coal. So, in the present
state of science, the answer to the question how men live, or
how anything lives, or how inanimate nature lives, in the sense
in which we speak of the life of a waterfall or of any other
manifestation of continued liveliness, is, with few and unimportant
exceptions, “ By sunshine.” Switch off the sun and a
world would result lifeless, not only in the sense of animate
life, but also in respect of by far the greater part of the life of
inanimate nature. The volcanoes, as now, might occasionally
erupt, the tides would ebb and flow on an otherwise stagnant
ocean, and the newly discovered phenomena of radioactivity
would persist. But it is sunshine which provides the power
not only of the winds and waters but also of every form of life
yet known. The starting point of Cartesian economics is thus
the well-known laws of the conservation and transformation of
energy, usually referred to as the first and second laws of
thermodynamics.
But let us, before starting on this quest, go to the other
extreme and try to obtain a consistent mental picture of the
whole of knowledge and the inter-relationship of the sciences,
if only to rebut two, in my opinion, errors, caricatured rather
than described by the terms "Mechanistic " and "Vitalistic"
in philosophy. In any classification of the sciences it is customary
to distinguish three great groups, (i) the Mechanical,
Physico-Chemical and Mathematical ; (2) the Biological ; and
(3) the Mental, inter-related much as in the order enumerated,
like the links of a chain, two end links and a middle link, and
the latter, the great division of animal and vegetable life,
alone in direct relation to the two ends.
Without perhaps any more quantitative notion than that
the subjects enumerated in the list are in order of cognateness,
one may regard the first link of the chain as commencing with
the present ultimate realities of physics — Electricity, Energy,
Ether, and Matter in increasing complexity from the element
to the complex colloid, actuated by the liveliest Brownian
movement under the microscope, and yet not alive. The
second link begins with the simplest unicellular form of life
and stretches in ever-increasing complexity from amoeba to
man. The third begins with rudimentary forms of instinctive
behaviour closely allied to those produced by purely physical
stimuli in simple creatures, through free-will and the deliberate
choice of action to secure predetermined ends, up to the human
reason and the highest intellectual, aesthetic, ethical, moral
and spiritual perceptions of humanity.
My own philosophy can be expressed by a line of Kipling —
“East is East and West is West and never the twain shall meet.”
One thousand years hence it is certain, if civilisation lasts as
long, that men will still be examining into the fundamental
realities of the physical world, far beyond the world of atoms
and energy which marks its present boundary. Equally, we
may believe that they may in psychological enquiry and in
spiritual perceptions be much advanced from our time. In each
direction possibilities of further knowledge extend
ad infinitum,
but in each direction diametrically away from and not towards
the problems of life. It is in this middle field that economics
lies, unaffected whether by the ultimate philosophy of the
electron or of the soul, and concerned rather with the
interaction with the middle world of life of these two end worlds of
physicist and mind in their commonest everyday aspects, matter
and energy on the one hand, obeying the laws of mathematical
probability or chance as exhibited in the inanimate universe,
and, on the other, with the guidance, direction and willing of
these blind forces and processes to predetermined ends. The
physicist claims that his world of matter and energy exists as a
reality independent of life, and points to the laws of conservation
to show that it is eternal, without beginning and without
end, and to the record of the rocks to show that it is life, rather
than the universe of nature, which began. The theologian and
religious philosopher claims under the name of Deity the
independent and eternal existence of the qualities of guidance,
will and direction outside of life, and points to this to account
for the ascending scale of evolution and the appearance of
perceptions above the level of animal. I have no claim or call
to express an opinion on the reality of the existence of intelligence
apart from and outside of life. But that life is the expression
of the interaction of two totally distinct things represented
by probability and free-will is to me self-evident, though
the ultimate nature of those two different things will probably
remain, a thousand years hence, as far off as ever.
It is simple now to indicate what to my mind are the two
errors that hinder progress. Both are monistic obsessions due
to the mind in its innate desire to reduce everything to its
simplest terms ending by trying to reduce everything to its
simplest term. The first links up the two ends of the chain
running in diametrically opposite directions into a grand circle,
and so gets the sublimated conceptions of the mental world
inextricably mixed up with the physical. The oriental philosophies
and religions seem to have been freer from the cruder
forms of this confusion than our own. In the early forms deities
were given physical powers analogous to those of trinitrotoluene,
as for example the hammer of Thor and the thunderbolt
of Jove. The idea that the physical universe must, like life,
have had a beginning and therefore a creator still survives.
Heaven to the ordinary man is at once the abode of disembodied
souls and of constellations which perform their evolutions
with such mathematical accuracy that events therein can
be accurately predicted in advance. Its most recent phase is
the theosophistical enquiry by occult powers into the internal
structure of the atom and the prevalent belief that the discovery
of wireless telegraphy lends strong support to the
reality of telepathy.
The second error is perhaps more common in the sphere of
economics. It may be called “ Ultra-Materialism ” and is the
attempt to derive the whole of the phenomena of life by continuous
evolution from the inanimate world. We begin with a
nebula of primordial material condensing into ever more
complex forms, first to the light and then the heavy elements,
then to chemical compounds up to the complex colloid. By a
continuation of the same processes such a complex results that
it is continually decomposing and as continually regenerating
itself. The inanimate molecules begin to live and life then runs
through its course of evolution up to man. This may satisfy a
biologist, but it fails to satisfy me as a chemist. I cannot
conceive of inanimate mechanism, obeying the laws of probability,
by any continued series of successive steps developing
the powers of choice and reproduction any more than I can
envisage any increase in the complexity of an engine resulting
in the production of the “ engine-driver ” and the power of its
reproducing itself. I shall be told that this is a pontifical
expression of personal opinion. Unfortunately, however, for
this argument, inanimate mechanism happens to be my special
study rather than that of the biologist. It is the invariable
characteristic of all shallow and pretentious philosophy to seek
the explanation of insoluble problems in some other field than
that of which the philosopher has first-hand acquaintance.
The biologist has first-hand knowledge of animate mechanism
and seeks the origin of it in colloid chemistry. The test of the
hypothesis is not so much what the biologist as what the
chemist has to say about it. The difference to my mind between
dead and living matter is much that between Niagara Falls
thirty years ago and now, and is not to be explained by the
laws which Niagara formerly obeyed, by the laws of pure probability,
but by their opposite, the operations of intelligence, as
typified in their most rudimentary form by Clerk-Maxwell’s
conception of the "sorting-demon."
Life, or animate mechanism, is essentially to my mind a
dualism, and any attempt to subordinate either partner is fatal.
But the economist is peculiarly liable to mistake for laws of
nature the laws of human nature and to dignify this complex of
thermodynamical and social phenomena with the term "inexorable economic law."
Is it any wonder that such crude confusions, such triumphs
of mental instincts over reason, experience and common sense,
have produced a general sterility of constructive thought ? I
cannot do better to illustrate this than to quote Stephen Leacock
in his most serious mood, and if it be objected that he is a
humorist, I can only retort that he is a professor of economics.
It is rather the avowal of the combination that is uncommon.
"Our studies consist only in the long-drawn proof of the
futility of our search after knowledge effected by exposing
the errors of the past. Philosophy is the science which
proves that we can know nothing of the soul. Medicine is
the science which tells us that we know nothing of the body.
Political Economy is that which teaches that we know
nothing of the laws of Wealth, and Theology is the critical
history of those errors from which we deduce our ignorance
of God.
"When I sit and warm my hands, as best I may, at the
little heap of embers that is now Political Economy, I
cannot but contrast its dying glow with the vainglorious
and triumphant science that once it was."
Against this I would put the paradoxical words of Poincare
discussing the doctrine of mathematical probability, which
dominates the inanimate world.
“ You wish me to tell you about these complex phenomena.
If by ill luck I happened to know the laws which
govern them I should be helpless. I should be lost in endless
calculations and could never supply you with an answer to
your questions. Fortunately for both of us I am completely
ignorant about the matter. I can therefore supply you with
an answer at once. This may seem odd. But there is
something odder still, namely, that my answer will be right."
It is perhaps fortunate that we know nothing about the
ultimate nature of the fundamentals of either the physical or
mental worlds. We have pursued each so far as to know that
both alike lead away from rather than toward the solution of
the problems of life. The sublimated theoretical concepts in
either case have long ceased to possess actuality. We have
rather to find the interaction between their commonest forms,
matter and energy on the one hand and will and direction on
the other.
Let us now leave generalities and concentrate upon the
question as to what precisely humdrum mechanical science can
contribute to economics. It insists primarily on the fact that
life derives the whole of its physical energy or power, not from
anything self-contained in living matter, and still less from an
external deity, but solely from the inanimate world. It is
dependent for all the necessities of its physical continuance
primarily upon the principles of the steam-engine. The
principles and ethics of human law and convention must not run
counter to those of thermodynamics. For men, no different
from any other form of heat engine, the physical problems of
life are energy problems. You have to consider the source, the
sunshine. It supplies a continuous revenue of energy which is
consumed by the living engine in its life. Consumption here does
not mean destruction, for destruction, like creation in the world
of which we speak is an absurdity, but merely the rendering
unfit for further use. All the radiant energy received from the
sun sooner or later finds its way into the great energy sink, the
ocean of heat energy of temperature uniform with the
surroundings, and is incapable of any further transformation.
This is the form we know most about. It is the energy of the
perpetual thermal agitation of the molecules of which Poincaré
spoke, and of which we know nothing (of any individual
molecule’s motion) and yet know everything (of the statistics
of the motion as a whole). And, it is useless.
We have next to consider the transformation of the form in
which nature supplies the energy into the form men can utilise
and assimilate. In general, transformation of energy can proceed
only in the one direction, much as water only runs downhill.
The water may do useful work on the way turning waterwheels, or
it may not, but may reach the ocean level quite
unutilised. So of the revenue of sunshine which ultimately
warms imperceptibly the whole mass of the globe, it may
en
route energise a man, or, again, it may not.
As regards the utilisation you have to distinguish very
carefully in Cartesian economics two uses. First, there is the
fundamental metabolic use in the body for the life process, which I
shall for brevity term
life-use. Secondly, there is a use in lieu
of the first for the doing of external work or labour, better done
directly by inanimate energy. This I shall term the
labour-use.
Physically, the life-problem is the reversal of winding a
clock. Before any man can confer the animation of his body
upon a mechanism as in clock-winding, the animation of nature’s
mechanism has first to be conferred upon him. History could
be rewritten from the standpoint of how this has been done. At
first it was done blindly and intuitively by trial and error, the
survival of the fittest and the extravagantly wasteful methods
that only the unconquerable resurgence of life can afford. Even
now the process is so indirect, being only possible through the
agency of vegetable life, that few realise the terms on which
they exist or the supreme importance of the original sources
and amounts of energy available.
But the labour-use of natural energy has always been a
matter of consciously directed effort and development, since
the use of the wind in navigation, and had proceeded far before
the formulation of the principles of energetics. But in neither
case is the sudden break in the continuity of history, which
marked the age of steam, explained by these developments.
The key is to be found in this. Pre-nineteenth century man
lived on revenue. Present day man augments the revenue
within certain well-defined limitations out of capital.
All forms of energy previously utilised by life, with one or
two minor exceptions, as tidal energy and that of hot springs,
were forms of the solar revenue. Wind-power, water-power and
world fuel are parts of the year-to-year revenue of sunshine no
less than cereals and other animal foods. But when coal became
king, the sunlight of a hundred million years ago added itself
to that of to-day and by it was built a civilisation such as the
world had never seen.
The fundamental fact underlying this civilisation is that
whilst men can lighten their external labours by the aid of
fuel-fed machinery, they can only feed their internal fires with
new sunshine and then only through the good offices of the
plant. The vegetable world alone can transform the original
flow of inanimate energy into vital energy. The animal, as yet,
is constitutionally incapable of effecting this transformation.
The technical features of this subject are not without significance. Whatever the origin of the energy, the penultimate
step must always be its storage by the plant precedent to its
use by animals for food. It is possible to draw upon the energy
of a water-fall and to store it up in various chemical compounds by electro-chemical methods, and in this form to supply
it as a fertiliser to the plant. Increased crops are so produced
supporting an increased population. The reversal of clock-winding has been consciously achieved. The falling weight of
Niagara’s waters work the man. There is no technical objection
to utilising the energy of coal in the same way, other than that
of prime cost. But for practical purposes it is true that the
great capital store or energy in fuel is not yet utilised for the
life-use, but only primarily for the labour-use of energy by life.
The life-use demands the intermediary of the plant, and though
coal was once alive it is long since dead. The laborious and
wasteful travail, through farming and agriculture, has once
again to be gone through. In spite of the striking advances of
the past century, the agriculturalist, peasant and farm-labourer form the dominant economic class, and will remain so
until some new discovery of science deposes them. To my mind
this is one of the least obvious and yet most fundamental facts
of economics and social science at the present time.
It certainly has not been sufficiently realised by economists,
particularly in this country. In the flamboyant period of the
utilisation of the capital store of energy in fuel which is now
closing, so far at least as this country is concerned, we could
and did by machinofacture make almost every sort of commodity
and all sorts of labour-saving machinery in exchange for
the food which we could not so make and did not make. The
population of Great Britain rose on account of this exchange of
capital for revenue, of factory products for food, from 10.5
millions in 1801 to 40.9 millions in 1911. Whereas in Ireland,
which has not coal, it fell from 5 to 4.3 millions over the same
period. Cartesian economics is capable of diagnosing instantly
the root of the Irish trouble, as Sir Leo Chiozza Money has
pointed out.
By this process of exchange of factory products the whole
world gradually drew more and more for its labour-use upon
the capital energy of fuel, and used it to widen the area under
cultivation and to transport the harvests from the most distant
regions of the globe and so
indirectly augmented the revenue of
sunshine upon which it is still entirely dependent for its life-use.
But this is a very passing phase. New countries grow old.
Their populations tend to expand to the limit of their food
supply, and their industries and manufactures become developed
by the aid of their own resources. For a double reason,
therefore, the flamboyant period of prosperity through which
Great Britain has passed is destined to be short-lived.
"Imperialism" marks its final bid for survival.
Coal is the real capital, out of the consumption of which the
capitalist civilisation has been built up, but, as regards the
means of livelihood of the swollen population that has accompanied
its exploitation, its use in this respect, has been indirect
and will cease. This is the great paradox of Capitalism. It is
capitalistic as regards the accessories, conveniences and luxuries
of existence. As regards its necessities it is still, to coin a word,
revenual. Even Adam Smith could say, “When food is provided
it is easy to find the necessary clothing and lodging."
Today, by the development of mechanical power, it is vastly
easier than then. But, once this has done all it can to develop
new countries and increase the food supply, it can meet the
demand for bread only by offering a stone. True, by the advances
of chemical and biological science, by the development
of agricultural chemistry and the breeding of better brands of
wheat, much may be done, but scarcely as much as will provide
for the requirements of a four or five-fold increase of population.
The industrialised countries are, with an enthusiasm reminiscent
of a lunatic asylum, turning out an ever-increasing
plethora of mere factory products and sending them forth to
compete in ever-shrinking markets in exchange for food, and
are pouring forth an ever-increasing stream of armaments to
fight amongst themselves for markets. The only goal in sight is
war and yet war, the blowing up of the plethora and the permanent
devitiation of the stock of the white race, at the time, too,
when, by reason of failing fecundity, the prospect of its having
to fight about something other than markets is becoming
evident.
Physical science thus answers precisely, and, I think for the
first time, the problem of political economy, or, as one Marxian
writer puts it, “ What are the sources of our society's wealth,
that is, the means of subsistence and comforts of the individuals
comprising it ?" The means of subsistence are derived from
the daily revenue of solar energy, through the operations of
agriculture. The accessories of life, clothes, houses and fuel, as
well as its comforts and luxuries, are derived in great part by
the augmentation of this revenue out of a capital store of
energy preserved from bygone geological times. Life depends
from instant to instant on a continuous flow of energy, and
hence wealth, the enabling requisites of life, partakes of the
character of a flow rather than a store.
[Had Karl Marx lived after instead of before the establishment of
the modern doctrine of energy there am be little doubt that his acute
and erudite mind would easily have grasped its significance in the social
sciences. As it was, in fairness to him it must be said that he did not
attempt to solve the real nature of wealth, but concentrated entirely
upon the problem of its monetary equivalent, that is, upon exchange-
value rather than use-value. Lest I be misunderstood I may emphasize here that I am using the
term energy throughout these lectures in the strictest scientific sense,
for potential or kinetic energy as understood by the physical scientist
and engineer, and never in the vague and misleading sense of mental
energy which 1 have rather termed the guidance and direction of
physical energy. In this strict sense of the word it cannot be maintained
that wealth wholly originates in human labour, for there is no real
distinction in physical science between animate and inanimate energy. But
since wealth is not available energy merely, but rather available energy
usefully directed, or some embodiment of it, human "labour" (that is,
some form or intelligent human activity which may need only a minimum of physical energy) is usually, though not necessarily, an essential
factor in its creation.]
This answer, though of fundamental importance to social
science and to political philosophy, has little application to
present economical systems, because these are founded upon a
simple confusion between wealth and debt, or, to put it another
way, between the wealth of the community and the wealth of
the individual member of the community.
The wealth of the community is its revenue, which, in the
last analysis, is a revenue of energy available for the purposes
of life. That being given, in sufficient amount and in form
capable of being utilised by the existing knowledge of the time,
everything requisite for the life of the society can be maintained.
It is impossible to save or store this flow to any appreciable
extent. True, you can dam a river, at great expense, and make
a reservoir. But, even if not used, the accumulated waters
evaporate and leak away. You can under the same, but even
more unfavourable terms, store electric energy. But to
contemplate storing wealth on a national scale for even a day is
something like contemplating a storage battery large enough to
satisfy the demand of the world for electric power for one day.
True, nature has stored it in coal by processes requiring geological
epochs, but what we do is to
unstore it, an easier matter, and
to convert it into a flow before it is of the least possible use to
us. Again, for short periods, the flow may be embodied in
some concrete commodity, in food which rots, in houses which
fall into desuetude if not kept perpetually under repair, and in
all the tangible assets of our civilisation, in railroads, roads, and
public works, factories, wharves, shipping and the like. All
alike are subject to a process of compound decrement, needing
ever larger annual expenditure of new wealth to maintain them
in order, and even then rapidly, with each fresh advance of
science, becoming out of date. Such accumulated assets, at
best, are classified not as accumulated wealth, but as aids and
accessories in the maintenance and increase of wealth out of the
available revenue of energy. The wealth is the revenue,
and it
cannot be saved.
The wealth of an individual, on the other hand, is something
totally different. The ordinary modern individual member of
the community in the vast majority of cases does not possess
enough wealth to keep him alive for a week. By means of a
token, legalised as a form of currency, whether a cowrie stone
or a metal counter, but now, more and more exclusively, a
simple paper note, the community acknowledges its indebtedness
to the holder of the token, and empowers the individual to
indent upon the revenue of real wealth flowing through the
markets at any time. Even at this stage we see the interests of
the community opposed diametrically to those of the individual
members. As Ruskin puts it, it is the rule and root of all
economy that what one person has, another person cannot have,
and the more the private individual is able to indent upon the
revenue the less is left for public services and the carrying on of
enterprises designed to increase the revenue for the general
benefit rather than private profit. The concern of the scientific
man is with the revenue and with how it may be increased in
the directions most essential for the general well-being. If and
in so far as political economy can claim to be a science, that,
also, should be its first concern. The individual, on the other
hand, is concerned only to obtain a larger share of the revenue
for his own private use. In so far as he can only do so by
increasing, or aiding in increasing, the real revenue of wealth for
the purpose of use rather than of usury the community gains.
A very real complaint that the worker has with the existing
system is that it provides much more easy and lucrative means
of making money without any contribution to the general
wealth, and sometimes actually by destroying it, by individuals
possessed of sufficient of the power conferred by money to hold
up the revenue for usury.
Ruskin appears to have had a very much clearer conception
of the real nature of wealth than either earlier or later economists. He pointed out, and his view would now be understood
by anyone who has suffered from the dearth of servants on
account of the war, that the art of becoming rich was to get
more
relatively than other people, so that those with less may
be available as the servants and employees of those with more.
In this acute and original analysis of the real nature of the
individual’s wealth — power over the lives and the labour of
others — Ruskin disclosed probably the most important difference
between the interests of the individual and the interest of
the State, and the main reason why the mastery of man over
nature has hitherto resulted in so meagre a contribution to the
perfection of human life. For this reason the community in its
struggle with nature resembles an army officered almost
entirely by the enemy. Of what use are the discoveries of
scientific men into new modes and more ample ways of living
so long as the laws of human nature turn all the difficultly won
wealth into increased power of the few over the lives and
labours of the many ?
In another respect Ruskin was vastly ahead of his own, not
to say our own, time. He and Marx both fully appreciated the
main contention of present day exponents of economics from
the point of view of the creator and producer of wealth rather
than that of the financier or merchant. The wealth of a
community can only be increased by production and discovery, not
by acquisition and exchange. In commerce and exchange
“ for
every plus there is a precisely equal minus.” But the pluses wax
magnificent and the minuses retire into back streets or underground,
”which renders the algebra of the science peculiar.” (“Unto This Last,” John Ruskin, 1877.)
This, then, is my main quarrel with orthodox economics,
that it confuses the substance and the shadow. It mistakes
debt for wealth and is guilty of the same mistake as the old
lady, who, when remonstrated with for overdrawing her
account, promptly sent her banker a cheque for the amount.
The confusion enters even into the attempt of the earlier
economists to define the main subject matter of their studies —
"Wealth," though the modern economist seems to be far too
wary a bird to define even that. Thus we find that wealth
consists, let us say, of the enabling requisites of life, or something
equally unequivocal and acceptable, but, if it is to be had
in our limited abundance, like sunshine or oxygen or water, then
it is not any longer wealth in the economic sense, though without
either of these requisites life would be impossible.
Now it is the object of science to render the enabling
requisites of life, such as food, warmth and other forms or
embodiments of energy necessary for a decent existence, so
abundant that they shall cease to be wealth in the sense of the
economist. By increasing a real quantity you do not diminish
it, nor by increasing it without limit do you destroy it. The
object of science is to destroy wealth in the economist’s sense
of doubt altogether by increasing real wealth without limit.
At the first blush and before they have had time to think,
most youthful students of economics will probably tell me that
I am playing with words by using the word wealth in two senses
equally well understood by the economist. The fact is that the
economist, ignorant of the scientific laws of life, has not arrived
at any conception of wealth, apart from the elaborate code of
enactments and legal conventions which give to the individual
in actual non-possession of wealth the right to acquire it,
whereas I, from the application of the laws of energy to the
problem of how men live, have arrived at such a conception.
In conclusion, I may devote my attention to the commonest
form of debt, money, because I believe that until correct views
are more widely diffused about this convention, and the
purchasing power of money is fixed as definitely as are the standards
of weights and measures, there can be no peace in society
and he whole elaborate political and social system will remain
merely a dreary and elaborate make-believe.
Once more owing to the war, the real nature of money can
be apprehended by anybody. It ought to bear precisely the
same relation to the revenue of wealth as a food ticket bears to
the food supply or a theatre ticket to a theatrical performance.
Whereas, as a matter of fact, at present there is no more connection
between the currency and the revenue than there is
between the birth-rate and the barometer. The revenue
depends upon the chances of the harvest, and all the causes such
as the prevalence or absence of disease, tempests, drought and
suns] line which affect the productivity of nature. The currency
is, or was, left to the luck of the gold prospector, and his
spasmodic discoveries, to the state of knowledge of extracting
the precious metals in which a single innovation, such as
cyaniding, may enormously increase the supply, the invention
of such a system as that of cheques, the solemn carting around
of gold from one capital to another to concertina the prices up
and down to suit the hierarchy who have made of money a
mystery and of the currency a never-failing confidence trick.
Whereas, if money is to fulfil its function as a measure of
value, it is clear that the currency must be regulated
pari-passu
with the changing revenue, issued as the latter expands and
destroyed as the latter contracts. Since it would neither be
given away in the first nor taken away in the second event, but
used to buy back old, or taken in exchange for new State loans,
the community as a whole would share the prosperity of good
times as well as the stringency of bad ones, instead of only the
latter as under the existing system.
I remember reading as a young man, in some book on
economics which I have not since been able to trace, of the
almost mystical virtues of gold in human welfare and how each
successive discovery of that metal in California, South Africa
and Australia was followed by a boom of trade and increased
national prosperity. To a chemist the mystical virtues of any
metal, even gold, seemed a wholly chimerical illusion, but I
waited twenty years before the real explanation became obvious.
Last century was a time, when, wholly beyond the understanding
of those who lived in it, science was increasing the
revenue of the world by leaps and bounds by the consumption
of the store of energy preserved in coal. If the food supply is
increased without a corresponding issue of new food tickets,
every holder of an old ticket gets proportionately more. Whereas
if the ticket issue is increased
pari-passu with the food supply,
the old ticket holders get the same as before and fresh people
get the surplus of food. Hence every increase of currency in
that flamboyant era of prosperity, whether it resulted from the
discovery of gold-mines or the invention of cheques, meant that
the increased prosperity did not go to the community’s
creditors, but a part corresponding with the increase of currency
went to fresh people and general prosperity was the
result. How much easier it would have been simply to print
the money and use the issue to repay the National Debt. But
the opportunity passed and the like may not occur again.
I shall be asked by those who are unaware of the proposals
made by Gesell on the Continent and by Kitson in this country
how is it possible to fix the purchasing power of money. The
answer is simple enough. By fixing it, that is, by printing more
as average prices, determined by index numbers, tend to fall
and by withdrawing it from circulation as they tend to rise.
As it is, these matters, which are the most vital factors of all
that enter into the economic welfare of the community, are left
to the oddest combination of natural luck and human cunning
to which, surely, any race ever entrusted its destinies.
Money, I shall be told, must function not merely as a
measure of value, but as a medium of exchange and as a store
of value.
As regards the latter, humanity is crying for the moon.
Wealth is a flow, not a store. After the search-light of the war,
I can conceive no nation so barbaric as to regard gold as a store
of value. Demonetise it and where is its value ? Not a gold
mine would be at work on the morrow. The world has enough
gold to stop its teeth and gild the inside of its tea-spoons for
hundreds of years. Nor, as a medium of exchange, can anyone,
after the experience of the war, really find any fault with paper,
provided of course its issue were directed to the end of maintaining
average prices constant from century to century.
Civilised nations maintain at great expense elaborate testing
institutions to fix with meticulous accuracy and disseminate
replicas of all quantities that enter
into one side of every
commercial transaction involving buying and selling. They
maintain an army of officials and inspectors to suppress the hollow
pound weight, the elastic yard-wand and the telescopic quart
pot. What an elaborate fraud upon the public all this one-
sided passion for accuracy is ! The public are not interested in
the absolute magnitude of weights and measures. What is
solely of practical importance is the relative measure, not
merely how much coal there is in the sack or how much beer
in the mug, but how much coal and how much beer for how
much money.
Do we keep a National Economic Bureau to stabilise the
purchasing power of money and an elaborate organisation of
inspectors, the counterpart of those who suppress petty fraud,
to deal with organisations to concertina the pound sterling ?
Our system is precisely analogous to sealing up only one arm
of a balance and making an imposing parade of protecting it
from the wind and tamperers, while leaving the calibrating
arrangements of the other arm to the manipulation of a class
of persons deriving their livelihood from the business. It is
on record that a group of American financiers on one occasion,
having sold British and bought American securities in advance,
removed £11,000,000 from the Bank of England and put it
into circulation in America, with the result that the prices of
the securities they had sold fell greatly in value and those they
had bought rose correspondingly. Since gold never constitutes
more than a few per cent, of the total currency, a reduction or
increase of the gold basis in a country is followed by an
enormously larger total fall or rise of values, and financiers in the
position to cart about a few millions of the “ precious ” metal
at their will can very easily and certainly acquire other people’s
wealth.
No doubt the instance quoted is an extreme one, but when
one enquires further as to who is in charge of the calibration
arrangements that fix the purchasing power of money, much
that has hitherto seemed inexplicable about our time becomes
clear. These powers are wielded, by private banks, like the
Bank of England, in the steadfast interests not of the
community but of the creditors of the community. Whereas no
changes of revenue, so long as the currency remains constant,
affect the
relative proportion of the whole revenue secured by
the creditors, any increase of currency diminishes their relative
share and hence is known as inflation, while any decrease
increases their relative share, and hence is called sound finance.
Even so far as we have yet got in disentangling current
misconceptions of wealth from reality, it is not difficult to
understand why the blessings conferred by science have been of so
limited incidence. Civilisation has been, in its most vital
interests, not in the hands of those who have contributed most
to its wealth, but of those to whom in a very literal sense it is
indebted, and is likely, under this system, to become ever more
indebted. This gives a short practical remedy for the most
obvious of the ills that civilisation is heir to. Institute a
complete organisation for ascertaining, on every public proposal,
the feeling of the City, and the views of the captains of finance
and banking, but act in precisely the opposite direction. From
the point of view of the welfare of the community rather than
of its creditors, you could hardly fail to be right every time.
Second Lecture. — Chairman, Principal Senter.
Some questions I was asked at the end of last lecture seem
to indicate the necessity of first clearing away some
misconceptions, partly, perhaps, due to my citing Ruskin as
an economist. Although my views are very similar in some
respects to those arrived at long ago by Ruskin, I may be
permitted to remark that I have deduced them, without at the
time being aware of Ruskin's writings on this subject, from the
principles of the heat-engine, rather than from those of ethics.
I know it is a burning question whether economics ought to
concern itself with ethics at all, but of its obligation to
understand the engineering of life I do not think there can be two
minds. If it is a science at all, it is, in Huxley’s words,
concerned with truth as " veracity of thought and action, and the
resolute facing of the world as it is when the garment of make-believe with which pious hands have hidden its uglier features
has been stripped off.” Neither the ethical nor statistical sides
of make-believe are to-day of any very great interest, but
economics has still to achieve the emancipation which, in
Huxley’s day, the biological sciences accomplished. It is just
because the application of the every-day principles of engineering
to the living engine offers such a powerful corrective to the
make-believes of the economic systems of society that I have
ventured to address you on the subject.
On the strength of a quotation from Ruskin, that there was
no profit in exchange, Ruskin was condemned by one
distinguished economist, I think unfairly. I am well aware that it is
the fashion to regard Ruskin as out-of-date as an economist,
though as a matter of fact the times are even yet hardly ripe
for a judgment on this point. But on the actual statement that
there can be no profit in exchange there can surely be merely a
difference of meaning to be attached to the word
profit.
There is much making of money but no making of wealth by
exchange, much advantage to Society for which the merchant
is highly remunerated, much acquisition by the merchant of
wealth, but no profit, for the sum total of wealth is unaffected
by exchange and against the merchant’s plus there is a
precisely equal minus.
The word economics was coined by Aristotle as signifying
household management in contradistinction to money and
trade (chrematistics). What Aristotle meant 2,250 years ago,
I pointed out again last lecture when I charged "economists"
with confounding debt for wealth. A ham merchant working
on what he is pleased to call a 10 per cent, basis of profit, may
buy ten hams for the same sum as he sells nine. He may be
pleased to think he has made a profit of one ham, but he
certainly has not made a ham. There were and remain ten,
whereas if anyone had made a profit of one ham, there should
now be eleven. These hams represent the life-time profit of a
certain number — 2 1\2 to be precise — of pigs, fed, according to
nursery tradition, on the skins of potatoes, which in turn
derived their feeding value from the sunshine. Wealth being
some form of embodied useful energy, the law of the
conservation of energy applies to wealth in that for every plus there
is a minus. But fortunately in this case the earth is credited
with the plus while the sun is debited with the minus, and that
is as good as an actual creation of wealth from the terrestrial
point of view. Nearer than that the laws of matter and energy
do not allow.
The
opposite (for every minus there is a plus) is not true of
wealth, because we are dealing with the availability of energy
rather than with its total amount, and because of the natural
tendency of all available or wealth-forming energy to pass, more
or less quickly, into the waste heat of uniform temperature of
the surroundings.
The exposure of the shams of economic systems is a time-consuming task, and, as we have still to consider the nature of
capital and usury, it is as well first to say something about the
realities. How' is wealth produced and what, if any, are the
limitations to the wealth of an intelligently directed
community ?
The first factor, a continuous flow of energy of an available
form, has so far only been considered. If that were unlimited
in amount and under human control in the same way as the
energy of fuel now is, this factor would impose no limit on the
production of wealth. Even the distinction Which it is at
present so necessary to make, between the life-use and the
labour-use of energy, would be of less importance, for it is not
so much that the synthetic production of food-stuffs, except
by the aid of the plant, is impossible as that it is impracticable
with energy at its present value. Last century it must have
appeared, to any one following the line of thought we are
pursuing, that the limitations of this first factor of wealth must
always limit human ambition and expansion. But now we
know that it is not so. The extraordinary developments since
the beginning of the century in the study of radioactivity and
of the internal structure of the atom have proved that there is
resident in ordinary materials amounts of energy of the order
of a million times that which can be obtained from fuel during
combustion, but that to liberate this store the transmutation of
the elements one into another must first be made possible. The
radioactive elements are in course of a natural transmutation,
which, while it is impossible to stop, is likewise impossible to
imitate. The energy of radium, the element which for thousands
of years emits as much heat every two days as its own weight
of fuel in burning, is derived from this hitherto unsuspected
store of energy in the structure of the radium atom in its
change into atoms of lead and helium.
No ! it is the second factor in the production of wealth
that now limits, and probably will always limit, human
properity. It is knowledge, or rather ignorance. For untold years
men froze on the site of what now are coal mines, and starved
within sound of the Niagara that is now at work providing
food. Every single factor in wealth production existed prior
to tie phenomenal expansion of the last century except one,
the knowledge how to control and utilise for life the capital
store of sunlight preserved in fuel. It is precisely the same
to-day. We are as far from utilising the stones of energy, which
we know exist all round us in unlimited abundance, as savage
men, who had not yet learned how to kindle a fire, were from
utilising the power which has made our owm age great. The
whole matter could not compete in public interest with a ball
game or a prize-fight, and, as has been recently said, civilisation
depends for its future on the long vacations when the scientific
men in the Universities get the opportunity for a few weeks’
uninterrupted and continuous research.
Although it is far from my own view of the matter to
divide, as is sometimes done, the winning of knowledge into
two water-tight compartments, pure and applied, academic
and technical, or discovery and invention, and to elevate the
former upon a pinnacle attainable only by the few and to
depress the latter to a level only a little above the capacity of
the ordinary efficient routine worker, it is undeniable that in
point of time at least, pure scientific knowledge, acquired for
the sake of knowledge only and with no definite utilitarian end
in view, must invariably precede any great advance in
technology and invention. But in both fields the qualities of mind
and temperament required are much alike, and in both, in
their highest expressions, attain that undefinable and elusive
quality we characterise as genius. All genius in this respect is
alike — it creates, and in all creation the whole is invariably
incomparably greater than the sum of the component parts.
Those whose philosophy consists in passing by little steps,
each almost trivial apparently, from the electron to the soul,
try also to pass from the humblest beginnings of intelligence
above the animal level to the present heights of intellectual
achievement attained in the exact sciences. Genius to such is
"only" the cumulative sum of infinitely little steps in intellectual
progress which began with man himself. To my mind
you might as well describe an old master as a cumulative
effect of infinitely little daubs of paint, or a symphony of an
accumulation of sound vibrations. The whole is greater than
the parts, but even so, that is not the chief point that is missed.
Everyone knows the difference between reading or translating
a foreign language and speaking it. Some of us, who are being
required now to spend a year of research work before taking
the degree may realise the difference between knowing all
about every important advance ever made in the subject of
our study as well as or better than those who actually made
these discoveries, and achieving the most infinitesimal advance
therein ourselves.
Just as I am constrained to put a barrier between life and
mechanism in the sense that there is no continuous chain of
evolution from the atom to life, so I put a barrier between the
assimilation and the creation of knowledge. Each one of these
infinitesimal steps of intellectual progress which look so small
in retrospect, once had a different character. Otherwise why,
for example, was it left for Newton to discover the law of
gravitation or Benjamin Franklin the nature of lightning ?
We have here a rather remarkable peculiarity of the human
mind. Every teacher knows how apt his best pupils are to
acquire and follow the achievements of the past and present,
so that at the age of twenty they often may have a vaster range
of knowledge than any of the pioneers who contributed to the
subject. Yet how rare, so far at least, is it to find these uniquely
equipped and finished repositories of knowledge capable of
making a single step forward, that is not merely imitative, and
which a hundred years hence will survive to the honour of
appearing trivial ? Possibly we are on the eve of understanding
something about the nature of intellectual creation as distinct
from mimicry. But until we do, the wealth of the world,
material no less than spiritual, has, ultimately, to be ascribed
to the work of singularly few minds.
After energy and genius we come to Labour, the one factor
in wealth production which hitherto has been adequately
recognised. So far at least this factor has not limited the
expansion of wealth, but rather expands
pari-passu with it,
though, in this respect, in all the European countries and also
Australia, the increase of population appears definitely to have
been checked. It is probable, at least of our own day, that any
definite retrogression, as regards knowledge once attained, is
unlikely, and even if civilisation has to pass through a time
in the future analogous to the Dark Ages of the past, the
intellectual achievements of the present day will remain
preserved. Granted a certain stage in the technology of wealth
production, it is probable that this, without any further aid
from what I regard as the essentially creative type of mind,
can be maintained from generation to generation by Labour in
its widest sense, including in that term every kind and grade of
routine and imitative worker, whether by hand or brain.
Thus we have three factors, two of the character of a
continuous never-ending contribution, a flow of energy and
the unremitting attention, whether physical or mental,
required for its utilization, and one, the creation of knowledge,
of the character of a definite step forward made once and ever
afterwards available for all time. The latter factor limits the
rate of expansion of wealth but, strictly speaking, contributes
nothing to its actual production. It will ever be the prerogative
of genius to endow posterity rather than its own day.
More and more as time goes on, this character of wealth,
essentially as a flow rather than something that can be stored,
forces itself upon our attention as we grow out of the merely
subjective views we derive from our own means of livelihood
and bank balance. The time is fully ripe that the world should
reconsider from a scientific basis the conventions by which it
empowers individuals to “save” and amass “riches.”
Broadly, the object of such conventions should be definitely
directed to provide for the period of childhood, adolescence
and old age, for genius and for the dissemination and diffusion
of its results and for similar work of a publicly beneficial
character. These must be charges on the revenue rather than
debts handed on by private individuals to their heirs and
successors and swollen by the ridiculous pretensions of the usurer
to an absurdity.
With the growing appreciation of the general public, made
wise because of the war, of the real nature of money, the much
vexed question of what is usually called capital should not
give us much difficulty. Just as money is a paper indent upon
the revenue, capital is the paper receipt for the expenditure
of wealth. Economists brought up on the mythical origin of
man, as recorded in the book of Genesis, used to be fond of
inventing, to explain the origin of capital, a mythical Robinson
Crusoe, of exceptional industry and acumen, as the primitive
capitalist. With the advance of knowledge the real Adam has
turned out to be an animal, and now the original capitalist
proves to have been a plant !
The material and scientific greatness of our day is due to
the primitive accumulation of the solar energy of the forests
of the carboniferous era, and preserved to this day as coal.
The plant accumulated, we
spend.
When coal is burnt it is burnt. You cannot both burn it
and keep it in the cellar, and still less can you go on drawing
interest from it for ever at so much per cent., as is the case
with the so-called capital of the economist and the business
world. Here again the economist is mistaking our old friend
debt for wealth. The wealth has been spent, not saved, and
exchanged for some form of receipt, giving the holder a purely
conventional right to so much per cent, per annum until the
debt is repaid.
The capitalist wishes to have it both ways, to be regarded
as a public benefactor because he spends his wealth, not in
drinking himself to death, but in enterprises designed to
increase the revenue. If he did this he would indeed be a
public benefactor. But the community having spent his
wealth, as regards himself he expects it all back in due course
with interest on the loan. The consequences of his abstinence
are that civilisation has got inextricably "into the hands of
the Jews.” Compared with this, the wildest profligacy on
the part of the original capitalist would have been a relatively
minor evil.
It is of course a colossally hard task wisely to expend
wealth so as to increase the revenue. All honour is due to the
business energy and enterprise of the commercial and technical
managers and the workers who effect the conversion of capital
wealth into increased revenue. But as regards the people
who merely lend the wealth spent, the ordinary dividend
holder of a joint-stock company for example, he is of course
simply that peculiar type of benefactor which used to be termed
a usurer. We are all in it now, ever since it became possible
to buy a £i War Saving Certificate bearing compound interest
for 15s. 6d. The extraordinary changes of legal and social
conventions with respect to interest and usury, recorded in
history, make it quite clear that political economy, which
depends upon such factors quite as much as upon the laws of
energy, can never be a science in the same exact sense as
physics or chemistry. To Aristotle a usurer was a person
beneath contempt. To-day, even the Vice-Chancellors of the
ancient Universities, which purport to hold up to reverence
Greek thought and culture, are as enamoured as anyone of the
excellence of compound interest.
Of all hard critics of the usurer, Martin Luther is easily
first, and in his vigorous denunciation there is a certain
perspicuity which we moderns seem to lack. Otherwise few
could tolerate the economics of an ordinary daily newspaper
or social club.
“ The heathen were able by the light of reason to
conclude that a usurer is a double-dyed thief and murderer.
We Christians, however, hold them in such honour that we
fairly worship them for the sake of their money. . . .
Usury is a great huge monster, like a were-wolf, who lays
waste all, more than any Cacus.... For Cacus means
the villain that is a pious usurer and steals and robs and
eats everything. And will not own that he has done it
and thinks no one will find him out, because the oxen
drawn backwards into his den make it seem from their
footsteps that they have been let out. So the usurer would
deceive the world as though he were of use and gave the
world oxen while he however rends and eats all alone."
One must admit that it would be difficult to find a better
description of usury than is given here,
" Oxen drawn back
into the den which, from their footsteps appear to have been
let out." Current orthodox economics gives the credit that
rightly belongs to the scientific discoverer, the expander of
wealth, to the usurer, the expander of debt.
I shall be told that there is something to show for capital
expenditure and that against the paper receipts there are
tangible assets. Thus, if a railway is taken as an example,
there are the rolling stock and the rails. But admittedly these
would have but a scrap metal value if railways ceased to pay
and the shareholders wanted their money back. As the world
gets older all this initial expenditure has to be periodically
renewed to make good depreciation, and, further, the plant
and the methods of operation become, with the advance of
knowledge, out of date. The indebtedness to the original
shareholders does not, however, usually cease on that account.
Railways continue to pay dividends on all capital expended,
though, as in the case of the canal systems purchased, much
of it altogether ceases to bring in revenue. It seems to me to
be merely a matter of time before this happens with every
form of capital expenditure. The normal old-age form of
capital is simple debt, a permanent lien upon the future
revenue of wealth. The assets are much overrated. If the
world worked as hard on construction as it did during the
war on destruction, and was permitted by the usurer to do
so, all civilisation could probably be rebuilt upon an up-to-date
plan and the Augean stable of a modern industrialised
community cleaned up in less time than the war took.
The vast heritage of wealth which science made available
at the commencement of the 19th century, in so far as it has
been spent, has been replaced by paper receipts for the expenditure
which bear interest in perpetuity. Capital merely
means unearned income divided by the rate of interest and
multiplied by 100. If I invent a process bringing in £1,000
a year revenue, its capital value is £20,000 if the rate of interest
is 5 per cent., and I can sell it for some such sum. The capital
of the world in this sense to-day aggregates to an altogether
inconceivable sum. There never has existed at one time such
an amount of wealth. It represents the accumulated capital
expenditure of generations of men. During the war the capital
of the country was increased by some £7,000,000,000, which
brings in £350,000,000 a year permanent interest. I may
be told that everyone will admit that this is debt, whereas
it is in fact, in this respect, precisely on the same footing as
so-called productive capital expenditure, a private lien upon
the revenue,
wealth to the individual owner and debt to the
community. As regards the national accounts this £350,000,000
a year is a simple transference, rather than an item of
expenditure. The sum is collected from the taxpayer, and paid
to the holders of War securities. It amounts to £8 13s. 4d.
per head of population, and includes the small item of 10s. per
head in respect of the Napoleonic wars. There can be only
one possible end to this process. Though for a time the advances
of science may so increase the revenue from year to year as to
render these payments by way of interest possible, in the end
the whole of the revenue must be in the control of the usurer.
A small part of the population will get into the position of a
great rentier class living on interest, and most of the rest will
be reduced to starvation in so far as they are not kept alive
by State doles. How far this process has already gone in this
country is obvious, since something like a quarter of the
population at the present time is unemployed and the
expenditure on national education is only about a quarter as much
as that upon the holders of war securities.
Wealth is a flow and it cannot be saved. Spent it must be
as it accrues, whether on consumption or on capital outlay designed to produce future wealth. As regards the first,
life
is consumption from the cradle to the grave, consumption of
that pristine flow of energy we owe to the sun. The efforts
of the financier and monied person to make life a balance-sheet with the debit and credit sides in agreement are untrue
to nature. Life is a continuous expenditure of wealth and in
this point again Ruskin, rather than the modern chrematist,
was absolutely in agreement with science. And, as regards
the second, capital expenditure, even though it is designed to
increase the flow of wealth, and admittedly, over a certain
natural period which is not infinite, it does achieve this object,
it is expenditure as much as the other. The river of wealth
is thus divided, but a part is metered carefully and recorded
as an accumulation of capital indebtedness against the community.
Scientific men, in the innocence of their hearts and
the benevolence of their souls, fondly imagine that by increasing
the revenue available for life they benefit the community.
But do they ? The larger the revenue, and the greater the
flow above that required for immediate consumption, the
greater the debts incurred by the community and the
impossibility of their ever being repaid. Meantime, though real
wealth rots if stored, the meter readings spontaneously bear
interest and increase
ad infinitum. The principles and ethics
of human conduct and convention have their own code and
standards, but whatever they may be, they must conform to
and not run counter to the principles of thermodynamics.
A chauffeur may have a soul above the mechanism of his
car, but if it led him to try to run it on already consumed
petrol, none the less he would be considered a great ass.
The usurer in Martin Luther’s time had not achieved the
colossal success
"in deceiving the world as though he were of
use and gave to the world oxen " that he can claim to-day.
The professional economist seems to be an easy conquest.
Thus Mr. J. M. Keynes, in his “ Economic Consequences of
the Peace,” seriously seems to think that the law of compound
interest is the law of increment of wealth rather than that of
debt, and offsets it against the Malthusian law of increase of
population !
“ One geometrical ratio might cancel another
and the 19th century was able to forget the fertility of the
species in a contemplation of the dizzy virtues of compound
interest.” To him capital is a vast accumulation of fixed
wealth,
in danger of being prematurely consumed in war. He
likens it to a cake, which one day, owing to the dizzy virtues
of usury, may be large enough to go round.
“In that day
overwork, overcrowding and underfeeding would come to an
end, and men secure of the comforts and necessities of the
body could proceed to the nobler exercise of their faculties.”
Cake happens to be the one material of which it has been well
said that you cannot eat it and have it too, and I would suggest
that this is the real reason for Mr. Keynes's somewhat mystical
references to a peculiarity of capital considered as accumulated
cake, that this “ is only in theory — the virtue of the cake was
that it was never to be consumed.” In a similar vein we have
Major Douglas and Mr. Orage advocating the salvation of the
economic system by the bringing of the dizzy virtues of
dividends within the reach of the many rather than of the few.
I do not mean to imply that their system might not be a great
improvement upon the present one. Indeed, any system almost
must be an improvement upon one that is administered solely
in the interests of the creditors, rather than the creators and
consumers of the community’s wealth. But my analysis
would lead me to class their suggestion rather as a temporary
palliative, for no system founded upon usury can be stable.
It is wonderful how people, who never come up against
reality from the cradle to the grave, and live all their lives a
purely artificial existence in some city divorced from all
contact with primitive nature, get into the habit of supposing
that the conventions which regulate their businesses and
livelihoods can be applied to the economy of the world at
large. It would be quite impossible for any member of the
agricultural community, for example, accustomed to the ways
on which wealth is really produced, to fall down and worship
the institution of usury in such a naive fashion, or for a
Labour Government, to be guilty of the confusions between
wealth and debt which are characteristic of orthodox politicians
at the present time. We have in the hitherto association
of the function of Government almost entirely with those who
live by rent, interest and profit, and thus take from rather
than contribute to the revenue of the wealth of the
community, a further justification for the view already expressed,
that the community in its struggle for existence resembles an
army officered almost entirely by the enemy.
You cannot permanently pit an absurd human convention, such as the
spontaneous increment of debt, against the
natural law of the spontaneous decrement of wealth. This
applies whether it is simple or compound interest which regulates
the increment of debt. For obvious reasons the law of
compound interest over great periods of time rarely as yet
has fully operated. But the significant and distressing fact
is that this absurd law, with the concentration of money in
the hands of trusts and combines of financiers, now tends to
operate more and more fully every day. Some of you may
have heard of the story of the reward asked of the Emperor
of China by the man who taught him chess. It looked modest
enough. He wanted one grain of corn for the first square of
the chess-board, two for the second, four for the third, eight
for the fourth, and so on in a geometrical progression to the
64th square. The story goes that the first half of the board was
easily accounted for, but before three-quarters had been so dealt with, the Emperor had to cry off, as his couriers came
back to him reporting that there was not such a quantity of
corn (actually 23 million tons) in the Empire. If the matter
lad been pushed to the bitter end, at the 64th square, the
number of grains would have been one less than 2
64 — just
about one million million tons — more than the present population
of the world could consume in a period of time longer
than that covered by the records of history. This is the law
of compound interest. To-day £1 of debt doubles itself in
about 12.5 years, and becomes £1,024 in 125 years and over
a million in 250 years at 5.5 per cent compound interest. If
this is to be the inevitable consequence of scientific men
increasing the wealth of the world, enthusiasm in well-doing
may well dry up. Nevertheless, on no other terms than a
perpetual increase of the revenue by scientific discovery can
such a system of " economics ” be maintained, and, even so,
were the 20th century as prolific in discovery as the 19th,
there is no escape for it from ruin under the law of usury and
the rule of the usurer.
Let us, in conclusion, put in the light of the analysis of
wealth and wealth production which has been attempted, the
aspect of this mad system which is now uppermost in the
minds of many thoughtful people, its inevitable end in world-
war. Remember that it is impossible to save. The revenue of
wealth must be spent as it accrues either in consumption or in
capital expenditure. The latter is for the purpose of securing
a lien on the future revenue, by producing more goods or
services out of which a profit can be made. But as the masses
do not receive the profit, they cannot buy this increased
production. It was the discovery of the classical economists that
wages are the purchasing power necessary to maintain a supply
of labour, that is to provide food and shelter for the labourer
and his family in the particular condition of life necessary and
customary for that kind of labour. Man-power is now
cheapened by being pitted against the infinitely greater and
more docile power of inanimate nature. For a brief period,
which is now closing, though only after terrible hardship and
suffering, the displaced labour found an outlet ultimately by
reason of the increased fraction of the revenue devoted to
capital expenditure. But the world fills up. Its markets, at
first open to the excess production of the industrialised nations
in exchange for food, tend to close as time goes on. The fiercest
international rivalry for markets ensues, and to industrialised
nations armaments are, as products of machino-facture, the
one thing that can be turned out in almost limitless abundance.
But armaments and war do not produce food. They merely
determine the distribution as between competing nations, and
tend to destroy food-producing power to an extent that makes
even the victors actual losers. In this Ruskin was again far
ahead of his own times. He alone seems to have had sufficient
veracity of thought and power of penetrating below the conventions
of society to realise that, in the frenzied pursuit of
gain, the objective was illusory in a physical sense.
" Capital is a root which does not enter into the vital
function till it produces fruit. Capital producing nothing
but capital is root producing root, bulb issuing in bulb,
never in tulip. The Political Economy of Europe has hitherto
devoted itself to the multiplication of bulbs. It never
saw nor conceived such a thing as a tulip. Nay ! boiled
bulbs they might have been, glass bulbs — Prince Rupert's
drops consummated in powder — well if it were glass
powder and not gunpowder.”
I do not pretend to be able to have got further in my own
conclusions than this, that the rule of the usurer in political
and social affairs has become impossible and that he has to
go. During a time of expanding revenue, or before the burden
of interest charges on the revenue from accumulated debts
equals the annual expansion, he may be an efficient, if brutal,
task-master, and the lure of private interest and gain may be a
safe principle in place of government. But at a time like the
present, when the usurers of the world, if cheated of their
expectations, like Shylock are bent on a pound of flesh next
to the heart, their pretentiousness and futility is obvious, and
some form of government according to economic, rather than
chrematistic, principles will have to be resumed. The laws of
energy under which men live furnish an intellectual foundation
for sociology and economics, and make crystal clear some of
the chief causes of failure not only of our own but, I think also,
of every preceding great civilisation. They do not give the
whole truth, but, in so far as they are correct to physics and
chemistry, they cannot possibly be false. I think with but
little amplification and modification they might furnish a
common scientific starting point from which all men concerned
with the public rather than with their own private interests
might start to rebuild the world more in conformity with the
great intellectual achievements which have distinguished the
present age. The first step towards such a scientific Utopia
would be the due delimitation of the rights of the community’s
creditors — the curbing of the demon of debt which masquerades
among the ignorant as wealth.
