CHAPTER XVI: THE RECONSTRUCTION OF INDUSTRY

Part I: CAPITAL AND LABOUR

§1. Since industry is a great cooperative process for the mutual aid of members of society, it is well that the fact should be held in the consciousness and will of individuals as clearly as possible. For this conscious realisation of the meaning of industry will have a helpful influence on their intelligence and feelings.
Now there are general related tendencies in modern industry which are powerful obstacles to this realisation of the social meaning of industry.
The first is the growing subdivision of labour with the related expansion of markets. When a man made a watch or a pair of shoes and sold them to a neighbour, or known customer, his work had for him a distinct human significance. For, making the whole of a thing, he realised its nature and utility, while, seeing the man who wore his watch or shoes, he realised the human value of his work. Now he performs one of some ninety processes which go to make many watches, or he trims the heels of innumerable shoes. The other processes he cannot do, and does not accurately know how they are done. His separate contribution has no clear utility, and yet it solely occupies his attention. Not only does he thus lose grasp of the meaning of his work, but he has no opportunity of realising its consumptive utility. For he cannot know or care anything about the unknown person in some distant part of the world who shall wear the boots or watch be helped to make. The social sympathy of cooperative industry is thus atrophied by the conditions of his work. Division of labour, in its first intent, thus divides each worker into a section of a producer, and separates each set of producers from the consumers of their products.
Though, therefore, this division of labour is in itself a finer mode of cooperation, it is not realised as such by those who are subjected to it.
§2. The second dehumanising and derationalising influence is the stress which the operations of modern industry lay on competition between trade and trade, business and business, worker and worker. No graver injury has been inflicted on the mind of man, in the name of science, than the prepotence which the early science of Political Economy assigned to the competitive and combative aspects of industrial life. To represent commerce between individuals and nations as a 'competitive system', mainly dependent for its successful operation upon the absorption of each man in seeking his own gain, and in getting the better of others in his trade, was an error of the first magnitude. Nor was this error sufficiently corrected by the qualifying theory that from this pursuit by each of his separate gains the greatest good for all would somehow emerge. For, by laying the stress upon the competitive aspect of industry, this teaching stied the growth of intellectual and moral sympathy between the various human centres of the industrial system, and impaired the sense of human solidarity which, apart from its spiritual value, is the mainspring of efficient economic organisation. The presentation of industry as competition with attendant cooperation, instead of as cooperation with attendant competition, has greatly contributed to the popular misunderstanding of commerce, alike upon its domestic and its international scales.1
Competition, if defended as a socially useful method of industry, must, like division of labour, be proved to contribute to cooperative ends. The general underlying assumption, that it will do so, we have seen to be false. Equally unjustified have been the accounts of actual industry which assume the general prevalence of free competition. At all times the area and liberty of effective competition between business and business, worker and worker, have been limited, and tend in recent times to closer limitation.
But if division of labour and competition, apart from a realisation of their cooperative values, are dehumanising and antisocial, so likewise is the growing anonymity of modern business. 'Compagnie Anonyme' is the significant French name for a Joint Stock Company with its unknown shareholders. But this depersonalising process is everywhere inseparable from the magnitude and intricacy of modern businesses and modern markets. The capital belonging to a crowd of persons, who are strangers to one another, is massed into an effective productive aggregate, and is set to cooperate with masses of labour power whose owners are divorced from all direct contact, either with the owners of the tools and material, or with the purchasers of the product. An effective comradeship among large numbers of workers, distributed over diverse processes and often severed widely in their places of work, is also difficult to maintain. A great modern business is in its structure less effectively human than was the small workshop which it displaced. One effect of this weaker humanity of the business, especially in the relations between capital and labour, employer and employee, has been to shift the sentimental attachment of the worker from his business to his trade-union. He is less a member of a business firm, serving some directly productive function, than a member of a labour-group extending over the area of a local or even a national trade.
§3. This consideration brings to the front the antagonism between capital and labour which has in modern times assumed ever graver dimensions and clearer consciousness. In considering the industrial system as an effective economic harmony it is not easy to determine whether the cooperative or the competitive forces are gaining ground. On the one hand, the competition between businesses in the same trade is in all great staple trades giving place to combinations, which not only unite the formerly conflicting businesses, but weld into close unity the capital of various related trades. Trusts, cartels, pools, conferences and various experiments in federal compacts, for regulating output and selling prices, are everywhere engaged in substituting industrial peace for war. Direct and conscious harmony thus grows among formerly antagonistic capitalists and employers. The organisation of labour in the several trades, on the basis of a standard wage upheld by collective bargaining, marks a similar though less close harmony on the side of labour.
But these advances towards conscious harmony among hitherto competing capitalists and labourers have been attended by a widening and intensification of the conscious antagonism between capital and labour within the several trades. Indeed, there are signs of a growing extension of combination for definitely hostile purposes, a ranging of capital on the one side, labour on the other, animated by a broad class consciousness which is new in the history of industry.
In fact, it has all along been inevitable that the combinatory forces, which appeared to make for social solidarity in industry, should be brought up at what appears to be an impenetrable barrier, the class hostility between the owners of instruments of production and the workers. For this hostility is inherent in the distribution which evokes an Unproductive Surplus. So long as economic advantages permit some groups of capitalists, landowners and owners of organising power, to take for themselves large masses of unearned income, which might have gone to improve the conditions of the workers, had they been able to divert it into wages, no false platitudes about the harmony of capital and labour will secure industrial peace.
For that harmony, as we have seen, only extends to the portion of the product distributed as costs. Now, the enormously increased productivity of modern industry has resulted in an increase of the size and relative importance of the surplus, and the large proportion of that surplus which is distributed unproductively in 'unearned' income represents a growing element of discord.
This real divergence of economic interests between capital and labour is not then to be bridged by an economy of costs based upon the fact that, since each factor needs the other, it is interested in its proper remuneration. The complaints of the existing system made by the workers not merely testify to a growing realisation of their economic weakness and a growing sensitiveness to the inequitable modes of distribution. They are founded on the belief that upon the whole distribution is becoming more inequitable and more wasteful. For though the absolute share of the workers and the standard of real wages have been rising in most countries,2 that rise has not been commensurate with the aggregate increase of wealth. In other words, a larger proportion of the total is passing into unproductive surplus, the factor of discord, a smaller into costs, the factor of harmony. If this is true, it implies inevitably a worsening of the relations between capital and labour. For, so long as the owners of strong or scarce factors of production are rewarded according to their strength or scarcity, no peace is possible. The absorption of the unassimilated mass of wealth in a higher standard of life for the workers and an enlargement and improvement of the public services is essential to secure the substance and the sense of social harmony in industry.
§4. Leaving out for the moment the claim of the State for public services, this socially sound distribution of the product could only be achieved by a recasting of the governmental structure of the Business, the Trade and industry. Towards this governmental reform many different experiments are afoot. Various modifications of the ordinary wage-system, by way of bonuses upon individual and departmental efficiency of labour, are tried. More direct attempts to harmonise the interests of capital and labour within the business take shape in schemes of profit-sharing, which are sometimes carried further into the closer form of co-partnership, by which the workers own a share of the capital and, by virtue of this ownership may be admitted to a share of the administration.
Regarded as methods of harmonising capital and labour in the business structure, most of these schemes appear to be of dubious worth, when we apply the proper test, viz., the ability to divert into wages a portion of the unproductive surplus. For, though the stimulus of a 'bonus' or a so-called3 share of profit may increase the absolute wage of the workers in the business, if at the same time it proportionately increases the dividend or profit, it does nothing to reduce either the aggregate or the proportion of unproductive surplus. Moreover, if the increased productivity of labour under such a stimulus is attended by enhanced intensification of effort in muscle or in nerve, with accompanying exhaustion, the total utility of the process to the worker may be a negative quantity, when the increased human cost of production has been set against the utility of the higher income, less advantageously consumed by reason of the exhaustion. Again, though many of these schemes expressly induce the workers to become small shareholders in the business, by applying the 'bonus' or 'profit' to the purchase of shares, nowhere has this ownership by the workers been permitted to go so far as to give them any determinant voice in the administration of the business. Finally, many of these schemes by express intention, nearly all of them in actual tendency, weaken the attachment of the workers in these businesses to their fellow-workers in other businesses belonging to the trade. So, whatever power proceeds from collective bargaining, for raising wages and improving the other conditions of employment, is diminished by these attempts to harmonise the capital and labour within the area of the single business.
It is significant that nearly all the businesses where co-partnership shows signs of enduring success are legal monopolies, or are otherwise protected from free competition, so that the prices for the commodities or services they sell contain a considerable element of surplus. A fraction of this surplus is diverted from unproductive into productive purposes by a subsidy to wages. In the case of gas-works, the most conspicuous example, this process is furthered by the fact that legal restrictions upon dividends make what at first sight appears a policy of generosity to labour, costless to capital.
§5. This criticism of the defects of these private experiments in industrial peace is reinforced by the experience of cooperative movements. Of the completely self-governing workshop or other business in which the whole body of the workers are sole owners of the whole capital they employ, there have been too few examples to enable any conclusion to be drawn. But nearly all the cases where the actual full administration of a business has been in the hands of those employed have been signal failures, save in rare instances where the possession of some skill or situation endowed with a scarcity value has assisted them. Experiments in the self-governing workshop make it evident that direct government by the workers in their capacity of producers is technically worse than government by the owners of the capital. The selection and the remuneration of ability of management are always found defective, and the employees are often unwilling to submit to proper discipline, even when they have elected the persons who shall exercise it. A few successful experiments conducted in favourable circumstances, i.e., where a special market is available, or where only a section of the employees wield the power of administration, afford no considerable grounds of hope for this mode of cooperative settlement.
Thus there seems no ground for holding that any really satisfactory settlement of the conflicts between capital and labour can be got by private arrangements of a profit-sharing or a cooperative character.

Part II: PRODUCER AND CONSUMER

§6. Before considering more definitely 'socialistic' remedies, it is best, however, to open out the other conflict of interest, between producer and consumer. It is, of course, often held, even by those who recognise some reality in the opposition between capital and labour, that the supposed opposition between producer and consumer has no real foundation.
When producers compete, the gains of such competition in lower prices, better quality, etc., drop into the consumer's lap. Even where producers combine, or a single business holds the market, it is supposed that the monopolist will generally find it most profitable to furnish a sound article at a moderate price.
But this natural harmony between producer and consumer is subject to precisely the same qualification as that between capital and labour. Producer and consumer are necessary to one another, there is community of interests up to a limit. But beyond that limit there is an equally natural conflict. It is true that where producers compete freely prices are cut down for the consumer. But it is by no means true that he tends to get the cheapest goods which current arts of production render possible. For the expenses of competition, which are enormous, are defrayed by him in the price he pays. Nor does free competition secure quality of product. It stimulates the arts of adulteration and deceit, and sets the cunning of the skilled producer against the simplicity of the unskilled purchaser. While, therefore, it may be urged that where competition of producers is effective, comparatively little 'surplus' passes into their hands, the waste of industrial power through the maintenance of excessive machinery of production and of distribution is a grave social loss.
Still less can it be admitted, that where combination has displaced competition, the consumer's interests are safe. On the contrary, it is recognised by all economists that where any effective monopoly is established, the selling prices to consumers will always be such as to secure a surplus profit to the producer. Prices may not always be as high as, or higher than, they would have been if a wasteful competition were maintained, but they will always be such as to extract a higher profit than is needed for the remuneration of capital and ability. Where the articles sold are necessaries or prime conveniences of life, and do not admit of effective substitutes, the prices will be indefinitely higher than under competition, and the conflict between producer and consumer more acute. Since under modern capitalism an ever-increasing number of 'routine' requirements, covering the chief necessaries of large populations, are passing under some form or other of effective combination, it is clear that the problem of industrial peace must come to concern itself more and more with the conflicts of producer and consumer. At present the consumer, at any rate in England, largely realises this conflict as a by-product of the struggle between capital and labour. Though the strikes and lock-outs, which express that struggle, disastrously affect his welfare, he is told that they are not his business, and he has no right to interfere. Where a settlement has taken place between capital and labour on a basis of higher wages or shorter hours, he finds the cost of this settlement is usually passed on to him in higher rates or prices.
As joint-agreements between employers, federations and trade unions become more common and more effective, as methods of conciliation and arbitration receive legal sanction and assistance, as wage-boards extend to new fields of industry, the falsehood and the social wrong which underlie the maxim 'caveat emptor' become more manifest. The consumer will become increasingly more impotent to protect himself against the depredations of organised groups of producers. Indeed, experience proves that even where combinations are subject to the sanction and control of the State, which theoretically is dedicated to the service of the public as a whole, and might at least be expected to hold the balance even between producer and consumer, producers, interests are preferred. In the present policy of state control of Railways, and in the various schemes for the extension of Wage Board legislation, there is no proper recognition of the interests of the consumer. An ill-devised lopsided Socialism is springing up, the likely result of which appears to be to set up groups of selected and preferred employments, whose higher wage-bill will in reality be defrayed not out of rents, surplus profits or any other unearned income, but in large measure out of the reduction of real wages which arbitrary rises of consumers, prices will impose upon other wage-earners. A flagrant instance of this defective social policy is supplied by the recent arrangement by which the railways of this country have been empowered by government to raise the wages of their employees by reducing the real wages of the general body of the wage-earners, who are called upon to bear a large part of the cost in the higher prices of commodities which follows upon the rise of railway rates.
§7. Now, admitting, as we must, that a real divergence of interests between producers and consumers may and must arise in the ordinary course of industry, what remedy is possible?
There is one large working-class movement which seems expressly designed for the protection of the consuming public. I allude of course to the great Cooperative Movement on the Rochdale plan, in which the supreme control is vested in the consumers and their representatives. How far does this scheme represent a true reconcilement of producers' and consumers, interests? A very little investigation will show that, however excellent the other services it renders to the working-classes, its conduct of business affords no complete harmony of the interests of the several factors.
For its entire structure and working are motived by the intention to absorb in real wages (by means of dividends on purchases) the 'profits' to which in ordinary trade most of the unproductive surplus seems to adhere. By dispensing with the profits of various grades of middlemen, by reducing the expenses of management, by saving most of the costs of advertising and other incidental costs of distribution, much surplus is diverted into real wages. But, regarding this scheme from the standpoint which immediately concerns us, as a reconcilement of capital and labour within the business, we find an obvious defect. There is nothing in the theory, or commonly in the practice, of the cooperative store or workshop, to evoke from the employees any special interest in its successful conduct. If they are members, they do indeed get in this capacity a gain equal to that enjoyed by other members not employed in the business. But, as employees, they have no voice in the administration and no share in the gains. Where, as in the Scottish Wholesale, a profit-sharing scheme is attached, this scheme is exposed to the same criticism that we have applied to other profit-sharing schemes. There is no security afforded by this cooperative form of business for the full reconcilement of the claims of capital and labour within the business. But, after all, it might be objected, that does not really matter. For, if the worker in a cooperative mill or store is also a cooperative consumer, he will, as such, enjoy a collective gain as great as he could hope to gain if he were assigned a special lien upon the surplus that emerged from the successful conduct of the particular business in which he worked. It will be his intelligent interest, as consumer, to help to elect and to maintain an effective administration in all the various productive and distributive businesses from which are derived the half-yearly dividend on purchases which he receives.
Now if the working-classes of the nation made all their purchases through cooperative stores, and if these stores, in their turn, bought what they sell exclusively from cooperative productive businesses, and if all working-class consumers were employed in these cooperative businesses, a solution of the social problem on cooperative lines might be plausible. For any surplus made at any stage would flow in the ordinary course of events into consumers' dividends, forming an addition to the real wages which they earned as producers. Nor need it matter that the cooperative consumers were not full owners of all the capital they needed to employ, provided they could borrow it in a free market. If the agricultural and mining lands, whose produce they required, did not belong to them, there would indeed remain a large leakage in the shape of economic rent. But the nature of the so-called land monopoly is not such as to prevent the cooperative consumers from taking in real wages the great bulk of the surplus which otherwise would have gone to capitalists and entrepreneurs in unearned income.
Unfortunately, large and important as is this Cooperative Movement, it falls far short of the full conditions here laid down. The majority of the wage-earners are not members of Cooperative Stores: those who are members only purchase certain sorts of goods at the store: owing to the slighter development of productive cooperation, a large proportion of the goods sold in the stores are bought in the ordinary markets: comparatively few of the cooperative consumers are employed in cooperative businesses. There are large tracts of industry, such as agriculture, mining, transport, building,4 metal-working and machine-making, which the Cooperative Movement has hardly touched, nor are there signs of any rapid extension in these fields of enterprise. In point of fact, cooperation has almost entirely confined itself to trades and industries where competition is normally free, and where the object of cooperation has rather been to save and secure as 'divi' certain ordinary expenses of competitive businesses than to invade the strongholds of highly profitable capitalism where unearned surpluses are large. While, then, a considerable proportion of the total working-class income is expended upon articles bought in the stores5 and valuable economies are affected, only a small proportion of the eleven millions paid in dividends and interest to consumers can be taken to represent unproductive surplus absorbed into wages. While, therefore, the advance of the Cooperative Movement in recent years, alike in membership, in volume of trade and in profits, has been rapid, a careful examination of the field of cooperative progress does not indicate any solution of the main problem of distribution along these lines. The areas of really profitable private enterprise are to all appearance unassailable by the Cooperative Movement.
§8. But we find within the Cooperative Movement some experiences which shed light upon the problem of business administration. If the truly social nature of the 'business' is to be expressed in its government, the Rochdale plan, upon which the main cooperative structure has been erected, contributes an element of really vital importance. It asserts that a business exists, not to furnish profit to the capitalist employer or wages to the workers, but commodities to consumers. The consumer, being the end and furnishing by his purchase-power the stimulus, should hold the reins of government. He is the owner, he shall rule, he shall receive the whole gain. This is a complete reversal of the ordinary idea of the business world, to which a business exists to secure profits to business men, the worker and the market (consumer) being mere instruments in profit-making. Hardly less does it counterwork the ordinary ideas and feelings of the working-man, for whom the business exists merely as a means of remunerative employment, and whose sole idea of reform is to secure in higher wages and improved conditions of labour as much of the profits as possible. To neither does it for one moment seem reasonable that the consumer should interfere in the administration of the business, or take any share in its gains, save such as must come to him in the ordinary course of trade.
Thus the success of the Rochdale plan is a dramatic assertion of a revolutionary idea in the organisation of business. It is proved that large numbers of routine businesses can be conducted by and for consumers. But it cannot be assumed that this concentration of the meaning, the utility and the government of industry in the consumer, has complete validity. It may be called consumers, socialism, as distinguished from the sort of producers, socialism which prevails among trade unionists. As the latter aims at controlling businesses in order to divert directly into wages all surplus profit, so the former aims at controlling businesses in order to divert the same fund into consumers' dividends. Now, if the producers and the consumers of the goods produced in any business were the same, it might seem a matter of indifference in which capacity they took the gain. But they are not. The workers in a particular mill or store buy for their own use a very minute fraction of the goods there produced. Even if the workers, by means of their unions or their cooperative societies, could capture the whole industrial machinery, it would still remain a matter of importance how far they paid themselves in higher wages, how far in consumers, dividends. For unless their claims as producers and as consumers were properly adjusted in the control of the several businesses, there would be little or nothing to distribute.
Few thoughtful cooperators will claim finality and all-sufficiency for the cooperative idea as embodied in the present movement.
The persistent struggles in the movement itself to temper the absolutism of the consumer by the assertion of cooperative employees to a higher rate of pay than obtains in the outside labour market and to a share of the profits, is an interesting commentary on the problem of social administration of the business. It is widely felt that the view that a business exists in order to supply utilities to consumers is defective as a principle of business government. The claim of the owners of the factors of production employed in the business to some voice in the conduct of that business is not lightly to be set aside by asserting that the factors of production are mere means to the consumer's end. If the consumers themselves own the share-capital or borrow other capital at market rates with good security, the issue of the control of capital need not arise. But the labour employed in a cooperative business has a human interest in the conduct of the business separate from that of the consumers. In virtue of this human interest, these workers impugn the doctrine that the business exists solely for the consumers, and insist that their human interest shall be adequately represented in the conduct of the business and the distribution of its gains.
§9. Those who have followed and accept the general principles of our analysis of industry into human costs of production and human utilities of consumption will be disposed a priori to accept the view that, in the equitable control of every business, the interests of the worker as well as of the consumers should be represented. Regarded from the social standpoint, it is as important that good conditions of employment shall prevail in a business, as that good articles shall be furnished cheaply to consumers. Nor, as we recognise, can we assume that an enlightened business government by consumers, any more than by capitalists, will necessarily secure these good conditions for employees. Definite and not inconsiderable instances of sweating inside the cooperative movement itself testify to the reality of this need. But it is urged not merely on grounds of equity, as a protection against possible abuses of power by consumers or their representatives, but on grounds of sound economy. For if it be admitted that the employees in a cooperative business have a special human interest, it is idle to argue that it is socially advantageous to leave this interest without representation in the conduct of the business.
The cooperation which assigns all power and all gain to the consumer is in fact vitiated by the same social fallacy as the syndicalism which would assign the same monopoly to the employee, or as the capitalism which does assign it to the profit-monger. Equity and economy alike demand that the interests of all three shall be adequately represented. Social remuneration in its application to the business unit must proceed upon this fundamental principle. A business consists of capital, labour, and the market. To place unlimited control in the hands of any of those factors is wasteful and dangerous. The human defects of uncontrolled capitalism have been made sufficiently apparent. Any adequate experiment in uncontrolled trade-unionism or in syndicalism would disclose similar abuses. The idea of the miners running the mine, or the factory-hands the factory, the railway workers the railway, is not so much unsound in the sense that they must fail to run it properly. For though unlikely, it is at least conceivable that they might have enough intelligence and character to buy competent managers and carry out their detailed instructions. Its fundamental vice consists in ignoring the factor of the market, and in building up a number of separate industrial structures in which the consumers, interests are unrepresented. It may appear plausible to argue that the control of each process of production should be left to the producers who may be presumed to know it best. But it becomes evident, even to the syndicalist, that no business could be conducted upon this policy unmodified. No house-building could proceed, if the plasterers, the bricklayers, the carpenters, had each full power to determine when they would work, at what pace they would work, and what remuneration they should exact. There must be a definite arrangement between the groups of workers in the several processes within each business, which will qualify the control of plastering by the plasterers, bricklaying by the bricklayers, by a wider control that represents the common. Interests of the business. Not merely does the syndicalist idea recognise this cooperation of the processes within a business, but it extends the cooperative character of the control to the trade as a whole. Under syndicalism the building trade would not be broken into a number of businesses in each of which would be made a separate arrangement between the carpenters, bricklayers, etc., employed in it. The arrangements as to hours and pace and remuneration, etc., would be determined by representatives of the various crafts on a trade basis. and would be the same for all businesses and all jobs. But the organisation of producers could not stop there. Each trade could no more be entirely self-governing than each business or each process in a business. The trade-organisation of the miners could not, having regard to the interests and needs of other trades, be safely entrusted with the absolute control of mining, or the railway workers with the absolute control of the railways. There must be some power to prevent the miners reducing their amount of work and their output to an extent which will cripple the other trades which need coal, and to compel the railway workers to afford reasonable facilities of transport on reasonable terms to shippers and travellers. For, otherwise, there would be substituted for the conflict of capital and labour within each business or each trade, a conflict of trades, each striving to do as little and to get as much as possible out of the aggregate wealth. Nor can it be assumed that the intelligent self-interest or social sympathy of the miners, or railwaymen, or other trades, would be adequate safeguards against such abuses. This is evident when we bear in mind the central concrete problem before us, the social distribution and utilisation of the surplus. For it will be technically possible for any strongly-placed special group of workers, such as the miners or railway workers, to take to themselves, in remuneration or in leisure, an excessive proportion of this surplus, leaving very little for any other group of workers. The guild-feeling, upon which syndicalism mainly relies, not merely supplies no safeguard against this abuse of power, but would almost certainly evoke it, unless a potent control, representing industry in general, were established over the individual trades or guilds. Experience of cases where local trade-unions are occasionally placed in a position of tyranny shows that they will play for their own hand with a disregard to the interests of their fellow-workers in other trades as callous as is displayed by any trust of capitalists. Assuming, then, that it were possible for guild-societies to develop to the point that the workers in each trade were in possession of all the instruments of production, and were able to conduct the processes efficiently, the problem of distributing the 'surplus' among the several trades or guilds, in the shape of pay or leisure, would still remain unsolved. Among the groups of producers, in a word, there would remain divergencies of interest, which would be incapable, upon a producers' policy, of solution. Syndicalists, confronted with this phase of their problem, plunge into vague assurances that the process of agreement which had taken place between the workers in the several processes and the several businesses in a trade, could be extended to the workers grouped in the larger trade-units, and that the real solidarity of working-class interests would somehow instinctively express itself in equitable and durable arrangements. But the moment one passes from the region of phrases to that of concrete facts the difficulties thicken. An elected council of national workers would have to devise some practicable method of comparing units of railway service with units of mining, bricklaying, doctoring, acting, waiting, etc., so as to apply to each productive process the support and stimulus needed to induce the workers engaged in it to do their share of work and to receive their share of wealth. No mere time basis for such competition would be practicable. It would be necessary to induce a body of labour and capital to apply itself to each process of each occupation, sufficient in quantity and in efficiency to supply the requirements of the working community as a whole, and to devise a mode of remuneration, or distribution of products, which would satisfy this requirement.
It is quite evident that all this adjustment of the claims and needs of individuals within a process in a business, of businesses in a trade, of trades in industry, would need an elaborate hierachy of representative government, with a supreme legislature and executive, whose will must over-rule the will of the national or local groups within the several trades, as to the quantity and method of work to be done in each concrete process, and as to the remuneration of each sort of work. In other words, society, as a whole, would have imposed its final control upon each group of workers, diminishing to that extent their power to determine the conditions under which they would work, and their effective separate ownership of the instruments of production. The ideal of the self-governing mine, or factory, or railway would thus be over-ridden by the superior ideal of a self-governing society. But that self-government by society, the supreme legislation of industry, could not perform its work by confining its attention to the various productive processes, and the businesses and trades in which they were conducted. It would be compelled to study the wants and will of the consumers, or, if it be preferred, of the workers in their capacity of consumers. For, only by the study of the consumer, or the market, could the work of adjusting the application of productive power at the different productive points, and the process of remuneration by which that distribution was achieved, possibly be accomplished. Thus, although the whole body of this syndicalist legislature might have been elected to represent the interests of separate groups of producers, or trades, it would be compelled to give equal attention to the wants and the will of the consuming public. But it would discover that, just in proportion as it was accurately representative of the separate interests of groups of producers, to that extent was it disqualified for safe-guarding the interests of the consuming public, which in each concrete problem would be liable to cut across the interests of special groups of producers. In other words, it would be impossible properly to regulate the railway service without direct regard to the interests of the travelling and trading public as a whole, to regulate the mining industry without regard to the local, seasonal and other needs of coal consumers. But these consumers, interests could not be properly considered in a legislature chosen entirely by separate groups of producers, with the object of promoting the special interests of these groups. The impossibility of syndicalism thus turns upon ignoring in the control of business the will of the consumer.
§10. Thus we are compelled to recognise that in a sound social organisation of the industrial system, and of each part of it, the business, the trade, (or the group of trades) and the consumer or market must be introduced as integral factors of government. We cannot content ourselves with the view that a producer, or any composite body of producers, is necessarily impelled by its self-interest to safeguard the interests of the consumer. Nor can the consumer safeguard his interests adequately through the guidance or stimulus he brings to bear through his separate individual acts of demand. He is incapable of protecting himself properly, even when producers are not combined but are competing. When they are combined he is helpless. The cleavages of immediate economic interest between the worker and the consumer are so numerous that no abstract identity of interests in a community where all consumers were also workers, all parasites being excluded, would suffice to secure the requisite economy and harmony. This economy and harmony can only be secured by giving the consumer a direct voice in the government of industry.
Syndicalism is in large measure a reaction against forms of state socialism which are vitiated by a defect similar to that which we find in the Rochdale cooperative plan. So far as the public services are honestly and efficiently administered by public officials, the public which these officials represent is primarily the citizen in his capacity of consumer. The municipal services are run, either to give him cheap transport or lighting of sound standard quality, or else to enable him to get police, street-cleaning or some other service which he could not otherwise have got. But this bureaucratic socialism is apt to neglect or to ignore the interests of its employees, and to deny them any influence in determining the conditions of their employment, other than that which they can bring to bear as citizen-consumers. Thus are found cases where public departments, or the contractors they employ, are allowed to pay wages so low or to offer such irregular employment, as to contribute to that inefficiency and destitution for which the same public is subsequently called upon to make financial and administrative provision. This is an inevitable defect of a one-sided or consumers, socialism. Nor is it likely to be remedied by any general perfunctory recognition of the duty of the public employer to observe standard conditions. For in most cases public employment will, by virtue of its monopolistic character, contain features that have no precise analogy in the outside business world, so that some separate method of determining the application of standard conditions is necessary. Unless that method admits direct representation of the interests of the employees, there can be no sufficient security that these interests shall receive proper consideration. This is not a demand that the employees shall 'interfere' with the public management, or 'dictate' the terms of their employment. On the contrary, it is clear that the official managers must, in the ordinary course of business, secure the execution of their orders. But, considering that their standpoint must always be biassed towards a special interpretation of the public interest in the sense of efficiency and economy of a particular output, this narrower public interest must be checked by reference to a wider public interest in which the human costs of production shall be represented. An accumulating weight of recent experience in various countries makes it evident that state-socialism must fail unless adequate provision is made for safe-guarding the interest of particular groups of public employees. This safeguard cannot, of course, be given by any mere concession of the right of combination and of collective bargaining. For while collective bargaining may enable the employees to secure fair terms where they are dealing with competing private businesses, it cannot where the sole employer is the State or Municipality. The latter is technically able to impose its terms upon any group of workers who are specialised for the work it offers. Recognition of the Union, and an admission by the management of the right of union-officials to consultation and discussion of conditions of employment, do not really furnish any basis of settlement, though they may often ease a difficulty and remove misunderstanding. What is required is a statutory right of appeal to a public authority, outside of and independent of the particular department, competent to take that wider view of public interest from which the departmental public official is, by the necessity of his situation, precluded. That claim of the public employee is frequently misunderstood. It does not arise from any real or pretended opposition of interests between the public and a group of its employees, and a claim on the part of the latter that the public shall make some concession or sacrifice to their particular group interest. There is no such real opposition of interests. The valid claim for an appeal from the arbitrary decisions of the public departmental managers is based upon the fact that the latter are disqualified for a full impartial view of the public interest, so far as that public interest is affected by the conditions of employment of the employees under them. The fact that the employees are often likely to make unreasonable demands and to claim in wages, hours and other conditions, an excessive share of the public revenue, does not affect the validity of this contention. For practical convenience official departmentalism exists. But this departmentalism involves a business management essentially defective from the standpoint of public welfare, inasmuch as it tends to depreciate or overlook the interest which the public has in the total welfare of that section of the public which is in its direct employment.
§11. Of course, in treating the issue of a public business as if it consisted simply in reconciling the immediate interests of the consuming public with those of the public employees, we have intentionally excluded another view which may often be more important. State socialism may be run primarily in the interests, neither of the citizen-consumer nor of the employer, but of the bureaucracy, who here occupy the place of the capitalist-managers under private enterprise. The official may be held to be naturally disposed to magnify his office and to abuse any power which can be made to subserve his personal or class interests. Practical permanency of tenure of his office, and the special knowledge which it brings, enable him, with safety, either to neglect his public duties, or to encroach upon the liberties of citizens, according as he is lethargic or self-assertive. He may squander the resources of the public upon ill-considered projects, or in serving the private interests of his friends. Or, he may practice a tyrannical or a niggardly policy towards his employees, not through a narrow interpretation of public economy, but from sheer carelessness or from defective sympathy. These charges against officialism are too familiar to need expansion here. However carefully the public service is recruited, such abuses will be liable frequently to occur, and the structure of government should be such as to supply effective checks and remedies.

NOTES:

1. Adam Smith, by opening his Wealth of Nations with a dissertation upon the economy of division of labour, without explaining that this economy rests upon a prior conception of cooperation, unwittingly assisted to set English Political Economy upon a wrong foundation.
2. Even this measure of working-class progress has been checked during the last decade. Recent statistics show that in Great Britain and in most other Western civilised countries, the rise of prices since 1896 and still more since 1905 has not been attended by a corresponding rise of wages, though profits and rate of interest have risen at least equally with prices.
3. The ordinary profit-sharing scheme is vitiated, alike in theory and in practice, by the erroneous attribution of the concept 'profit' to that which is 'shared.' This is recognised at once when the experiment is properly described. For the ordinary profit-sharing scheme begins by laying down a normal rate of wages and of profits, based upon current facts of commerce. The provision for this standard wage and standard profit constitutes a first charge upon the takings of the business. Under normal conditions this would absorb the whole. But the workers are now told that, if they produce an additional income, they shall have in extra wages half of it. Now the whole of this additional income is due to the increased efficiency of labour under the new stimulus. For if any more capital than before is required, provision for its payment at the normal rate is made before account is taken of the so-called profit that is shared. No more ability or effort of superintendence is required; in fact it is usually contended that the greater care taken by the workers renders less supervision necessary. Thus 'profit' is a misnomer for what is 'shared.' For this so-called 'profit' is entirely produced by greater intensity, skill or care on the part of labour. The fact that labour gets only half, and that only after the whole of what should be called the deferred 'wage-fund' has served to meet any deficiency in the sum required to pay the normal dividends, explains why most of these schemes fail after a short trial. The proportion of the extra-product (evoked entirely by the increased stimulus applied to labour), that is actually paid to labour, is too small to maintain the efficiency of the stimulus. When these profit-sharing schemes succeed, the success is nearly always traceable to the fact that in the original agreement, the benevolent employer has fixed his rate of interest or salary, or both, upon a lower scale than is current in the trade, so that the stimulus to labour is effective.
4. Building Societies are only in a very restricted sense cooperative.
5. In 1909 the aggregate sales at the Retail Stores amounted to £70,423,359, or about 10% of the working-class income, and the profit (including interest paid on shares) was £10,851,739.