Liberalism/Chapter IV

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Liberalism by L. T. Hobhouse
Chapter IV
‘Laissez-Faire’
CHAPTER IV
laissez-faire

The school of Cobden is affiliated in general outlook both to the doctrine of natural liberty and to the discipline of Bentham. It shared with the Benthamites the thoroughly practical attitude dear to the English mind. It has much less to say of natural rights than the French theorists. On the other hand, it is saturated with the conviction that the unfettered action of the individual is the mainspring of all progress.[1] Its starting-point is economic. Trade is still in fetters. The worst of the archaic internal restrictions have, indeed, been thrown off. But even here Cobden is active in the work of finally emancipating Manchester from manorial rights that have no place in the nineteenth century. The main work, however, is the liberation of foreign trade. The Corn Laws, as even the tariff reformers of our own day admit, were conceived in the interest of the governing classes. They frankly imposed a tax on the food of the masses for the benefit of the landlords, and as the result of the agricultural and industrial revolutions which had been in progress since 1760, the masses had been brought to the lowest point of economic misery. Give to every man the right to buy in the cheapest and sell in the dearest market, urged the Cobdenite, and trade would automatically expand. The business career would be open to the talents. The good workman would command the full money’s worth of his work, and his money would buy him food and clothing at the lowest rate in the world’s market. Only so would he get the full value of his work, paying toll to none. Taxes there must be to carry on government, but if we looked into the cost of government we found that it depended mostly on armaments. Why did we need armaments? First, because of the national antagonisms aroused and maintained by a protective system. Free commercial intercourse between nations would engender mutual knowledge, and knit the severed peoples by countless ties of business interests. Free Trade meant peace, and once taught by the example of Great Britain’s prosperity, other nations would follow suit, and Free Trade would be universal. The other root of national danger was the principle of intervention. We took it on ourselves to set other nations right. How could we judge for other nations? Force was no remedy. Let every people be free to work out its own salvation. Things were not so perfect with us that we need go about setting the houses of other people in order. To complete personal freedom, there must be national freedom. There must also be colonial freedom. The colonies could no longer be governed in the interests of the mother country, nor ought they to require standing garrisons maintained by the mother country. They were distant lands, each, if we gave it freedom, with a great future of its own, capable of protecting itself, and developing with freedom into true nationhood. Personal freedom, colonial freedom, international freedom, were parts of one whole. Non-intervention, peace, restriction of armaments, retrenchment of expenditure, reduction of taxation, were the connected series of practical consequences. The money retrenched from wasteful military expenditure need not all be remitted to the taxpayer. A fraction of it devoted to education—free, secular, and universal—would do as much good as when spent on guns and ships it did harm. For education was necessary to raise the standard of intelligence, and provide the substantial equality of opportunity at the start without which the mass of men could not make use of the freedom given by the removal of legislative restrictions. There were here elements of a more constructive view for which Cobden and his friends have not always received sufficient credit.

In the main, however, the teaching of the Manchester school tended both in external and in internal affairs to a restricted view of the function of government. Government had to maintain order, to restrain men from violence and fraud, to hold them secure in person and property against foreign and domestic enemies, to give them redress against injury, that so they may rely on reaping where they have sown, may enjoy the fruits of their industry, may enter unimpeded into what arrangements they will with one another for their mutual benefit. Let us see what criticism was passed on this view by the contemporaries of Cobden and by the loud voice of the facts themselves. The old economic regime had been in decay throughout the eighteenth century. The divorce of the labourer from the land was complete at the time when the Anti-Corn Law League was formed. The mass of the English peasantry were landless labourers working for a weekly wage of about ten or twelve shillings, and often for a good deal less. The rise of machine industry since 1760 had destroyed the old domestic system and reduced the operative in the towns to the position of a factory hand under an employer, who found the road to wealth easy in the monopoly of manufacture enjoyed by this country for two generations after the Napoleonic war. The factory system early brought matters to a head at one point by the systematic employment of women and young children under conditions which outraged the public conscience when they became known. In the case of children it was admitted from an early date, it was urged by Cobden himself, that the principle of free contract could not apply. Admitting, for the sake of argument, that the adult could make a better bargain for himself or herself than any one could do for him or her, no one could contend that the pauper child apprenticed by Poor Law guardians to a manufacturer had any say or could have any judgment as to the work which it was set to do. It had to be protected, and experience showed that it had to be protected by law. Free contract did not solve the question of the helpless child. It left it to be “exploited” by the employer in his own interest, and whatever regard might be shown for its health and well-being by individuals was a matter of individual benevolence, not a right secured by the necessary operation of the system of liberty.

But these arguments admitted of great extension. If the child was helpless, was the grown-up person, man or woman, in a much better position? Here was the owner of a mill employing five hundred hands. Here was an operative possessed of no alternative means of subsistence seeking employment. Suppose them to bargain as to terms. If the bargain failed, the employer lost one man and had four hundred and ninety-nine to keep his mill going. At worst he might for a day or two, until another operative appeared, have a little difficulty in working a single machine. During the same days the operative might have nothing to eat, and might see his children going hungry. Where was the effective liberty in such an arrangement? The operatives themselves speedily found that there was none, and had from an early period in the rise of the machine industry sought to redress the balance by combination. Now, combination was naturally disliked by employers, and it was strongly suspect to believers in liberty because it put constraint upon individuals. Yet trade unions gained the first step in emancipation through the action of Place and the Radicals in 1824, more perhaps because these men conceived trade unions as the response of labour to oppressive laws which true freedom of competition would render superfluous than because they founded any serious hopes of permanent social progress upon Trade Unionism itself. In point of fact, the critical attitude was not without its justification. Trade Unionism can be protective in spirit and oppressive in action. Nevertheless, it was essential to the maintenance of their industrial standard by the artisan classes, because it alone, in the absence of drastic legislative protection, could do something to redress the inequality between employer and employed. It gave, upon the whole, far more freedom to the workman than it took away, and in this we learn an important lesson which has far wider application. In the matter of contract true freedom postulates substantial equality between the parties. In proportion as one party is in a position of vantage, he is able to dictate his terms. In proportion as the other party is in a weak position, he must accept unfavourable terms. Hence the truth of Walker’s dictum that economic injuries tend to perpetuate themselves. The more a class is brought low, the greater its difficulty in rising again without assistance. For purposes of legislation the State has been exceedingly slow to accept this view. It began, as we saw, with the child, where the case was overwhelming. It went on to include the “young person” and the woman—not without criticism from those who held by woman’s rights, and saw in this extension of tutelage an enlargement of male domination. Be that as it may, public opinion was brought to this point by the belief that it was intervening in an exceptional manner to protect a definite class not strong enough to bargain for itself. It drew the line at the adult male; and it is only within our own time, and as the result of a controversy waged for many years within the trade union world itself, that legislation has avowedly undertaken the task of controlling the conditions of industry, the hours, and at length, through the institution of Wages Boards in “sweated industries,” the actual remuneration of working people without limitation of age or sex. To this it has been driven by the manifest teaching of experience that liberty without equality is a name of noble sound and squalid result.

In place of the system of unfettered agreements between individual and individual which the school of Cobden contemplated, the industrial system which has actually grown up and is in process of further development rests on conditions prescribed by the State, and within the limits of those conditions is very largely governed by collective arrangements between associations of employers and employed. The law provides for the safety of the worker and the sanitary conditions of employment. It prescribes the length of the working day for women and children in factories and workshops, and for men in mines and on railways.[2] In the future it will probably deal freely with the hours of men. It enables wages boards to establish a legal minimum wage in scheduled industries which will undoubtedly grow in number. It makes employers liable for all injuries suffered by operatives in the course of their employment, and forbids any one to “contract out” of this obligation. Within these limits, it allows freedom of contract. But at this point, in the more highly developed trades, the work is taken up by voluntary associations. Combinations of men have been met by combinations of employers, and wages, hours, and all the details of the industrial bargain are settled by collective agreement through the agency of a joint board with an impartial chairman or referee in case of necessity for an entire locality and even an entire trade. So far have we gone from the free competition of isolated individuals.

This development is sometimes held to have involved the decay and death of the older Liberalism. It is true that in the beginning factory legislation enjoyed a large measure of Conservative support. It was at that stage in accordance with the best traditions of paternal rule, and it commended itself to the religious convictions of men of whom Lord Shaftesbury was the typical example. It is true, also, that it was bitterly opposed by Cobden and Bright. On the other hand, Radicals like J. Cam Hobhouse took a leading part in the earlier legislation, and Whig Governments passed the very important Acts of 1833 and 1847. The cleavage of opinion, in fact, cut across the ordinary divisions of party. What is more to the purpose is that, as experience ripened, the implications of the new legislation became clearer, and men came to see that by industrial control they were not destroying liberty but confirming it. A new and more concrete conception of liberty arose and many old presuppositions were challenged.

Let us look for a moment at these presuppositions. We have seen that the theory of laissez-faire assumed that the State would hold the ring. That is to say, it would suppress force and fraud, keep property safe, and aid men in enforcing contracts. On these conditions, it was maintained, men should be absolutely free to compete with one another, so that their best energies should be called forth, so that each should feel himself responsible for the guidance of his own life, and exert his manhood to the utmost. But why, it might be asked, on these conditions, just these and no others? Why should the State ensure protection of person and property? The time was when the strong man armed kept his goods, and incidentally his neighbour’s goods too if he could get hold of them. Why should the State intervene to do for a man that which his ancestor did for himself? Why should a man who has been soundly beaten in physical fight go to a public authority for redress? How much more manly to fight his own battle! Was it not a kind of pauperization to make men secure in person and property through no efforts of their own, by the agency of a state machinery operating over their heads? Would not a really consistent individualism abolish this machinery? “But,” the advocate of laissez-faire may reply, “the use of force is criminal, and the State must suppress crime.” So men held in the nineteenth century. But there was an earlier time when they did not take this view, but left it to individuals and their kinsfolk to revenge their own injuries by their own might. Was not this a time of more unrestricted individual liberty? Yet the nineteenth century regarded it, and justly, as an age of barbarism. What, we may ask in our turn, is the essence of crime? May we not say that any intentional injury to another may be legitimately punished by a public authority, and may we not say that to impose twelve hours’ daily labour on a child was to inflict a greater injury than the theft of a purse for which a century ago a man might be hanged? On what principle, then, is the line drawn, so as to specify certain injuries which the State may prohibit and to mark off others which it must leave untouched? Well, it may be said, volenti non fit injuria. No wrong is done to a man by a bargain to which he is a willing party. That may be, though there are doubtful cases. But in the field that has been in question the contention is that one party is not willing. The bargain is a forced bargain. The weaker man consents as one slipping over a precipice might consent to give all his fortune to one who will throw him a rope on no other terms. This is not true consent. True consent is free consent, and full freedom of consent implies equality on the part of both parties to the bargain. Just as government first secured the elements of freedom for all when it prevented the physically stronger man from slaying, beating, despoiling his neighbours, so it secures a larger measure of freedom for all by every restriction which it imposes with a view to preventing one man from making use of any of his advantages to the disadvantage of others.

There emerges a distinction between unsocial and social freedom. Unsocial freedom is the right of a man to use his powers without regard to the wishes or interests of any one but himself. Such freedom is theoretically possible for an individual. It is antithetic to all public control. It is theoretically impossible for a plurality of individuals living in mutual contact. Socially it is a contradiction, unless the desires of all men were automatically attuned to social ends. Social freedom, then, for any epoch short of the millennium rests on restraint. It is a freedom that can be enjoyed by all the members of a community, and it is the freedom to choose among those lines of activity which do not involve injury to others. As experience of the social effects of action ripens, and as the social conscience is awakened, the conception of injury is widened and insight into its causes is deepened. The area of restraint is therefore increased. But, inasmuch as injury inflicted is itself crippling to the sufferer, as it lowers his health, confines his life, cramps his powers, so the prevention of such injury sets him free. The restraint of the aggressor is the freedom of the sufferer, and only by restraint on the actions by which men injure one another do they as a whole community gain freedom in all courses of conduct that can be pursued without ultimate social disharmony.

It is, therefore, a very shallow wit that taunts contemporary Liberalism with inconsistency in opposing economic protection while it supports protective legislation for the manual labourer. The two things have nothing in common but that they are restraints intended to operate in the interests of somebody. The one is a restraint which, in the Liberal view, would operate in favour of certain industries and interests to the prejudice of others, and, on the whole, in favour of those who are already more fortunately placed and against the poorer classes. The other is a restraint conceived in the interest primarily of the poorer classes with the object of securing to them a more effective freedom and a nearer approach to equality of conditions in industrial relations. There is point in the argument only for those who conceive liberty as opposed to restraint as such. For those who understand that all social liberty rests upon restraint, that restraint of one man in one respect is the condition of the freedom of other men in that respect, the taunt has no meaning whatever. The liberty which is good is not the liberty of one gained at the expense of others, but the liberty which can be enjoyed by all who dwell together, and this liberty depends on and is measured by the completeness with which by law, custom, or their own feelings they are restrained from mutual injury.

Individualism, as ordinarily understood, not only takes the policeman and the law court for granted. It also takes the rights of property for granted. But what is meant by the rights of property? In ordinary use the phrase means just that system to which long usage has accustomed us. This is a system under which a man is free to acquire by any method of production or exchange within the limits of the law whatever he can of land, consumable goods, or capital; to dispose of it at his own will and pleasure for his own purposes, to destroy it if he likes, to give it away or sell it as it suits him, and at death to bequeath it to whomsoever he will. The State, it is admitted, can take a part of a man’s property by taxation. For the State is a necessity, and men must pay a price for security; but in all taxation the State on this view is taking something from a man which is “his,” and in so doing is justified only by necessity. It has no “right” to deprive the individual of anything that is his in order to promote objects of its own which are not necessary to the common order. To do so is to infringe individual rights and make a man contribute by force to objects which he may view with indifference or even with dislike. “Socialistic” taxation is an infringement of individual freedom, the freedom to hold one’s own and do as one will with one’s own. Such seems to be the ordinary view.

But a consistent theory of liberty could not rest wholly satisfied with the actual system under which property is held. The first point of attack, already pressed by the disciples of Cobden, was the barrier to free exchange in the matter of land. It was not and still is not easy for the landless to acquire land, and in the name of free contract Cobden and his disciples pressed for cheap and unimpeded transfer. But a more searching criticism was possible. Land is limited in amount, certain kinds of land very narrowly limited. Where there is limitation of supply monopoly is always possible, and against monopoly the principles of free competition declared war. To Cobden himself, free trade in land was the pendant to free trade in goods. But the attack on the land monopoly could be carried much further, and might lead the individualist who was in earnest about his principles to march a certain distance on parallel lines with the Socialist enemy. This has, in fact, occurred in the school of Henry George. This school holds by competition, but by competition only on the basis of a genuine freedom and equality for all individuals. To secure this basis, it would purge the social system of all elements of monopoly, of which the private ownership of land is in its view the most important. This object, it maintains, can be secured only through the absorption by the State of all elements of monopoly value. Now, monopoly value accrues whenever anything of worth to men of which the supply is limited falls into private hands. In this case competition fails. There is no check upon the owner except the limitations of demand. He can exact a price which bears no necessary relation to the cost of any effort of his own. In addition to normal wages and profits, he can extract from the necessities of others a surplus, to which the name of economic rent is given. He can also hold up his property and refuse to allow others to make use of it until the time when its full value has accrued, thereby increasing the rent which he will ultimately receive at the cost of much loss in the interim to society.

Monopolies in our country fall into three classes. There is, first, the monopoly of land. Urban rents, for example, represent not merely the cost of building, nor the cost of building plus the site, as it would be if sites of the kind required were unlimited in amount. They represent the cost of a site where the supply falls short of the demand, that is to say, where there is an element of monopoly. And site value—the element in the actual cost of a house or factory that depends on its position—varies directly with the degree of this monopoly. This value the land nationalizer contends is not created by the owner. It is created by society. In part it is due to the general growth of the country to which the increase of population and the rise of town life is to be attributed. In part it depends on the growth of the particular locality, and in part on the direct expenditure of the ratepayers’ money in sanitation and other improvements which make the place one where people can live and industry can thrive. Directly and indirectly, the community creates the site value. The landlord receives it, and, receiving it, can charge any one who wants to live or carry on industry upon the site with rent to the full amount. The land-nationalizer, looking at rights of property purely from the point of view of the individual, denies the justice of this arrangement, and he sees no solution except this—that the monopoly value should pass back to the community which creates it. Accordingly, he favours the taxation of site value to its full amount. Another element of monopoly arises from industries in which competition is inapplicable—the supply of gas and water, for example, a tramway service, and in some conditions a railway service. Here competition may be wasteful if not altogether impossible; and here again, on the lines of a strictly consistent individualism, if the industry is allowed to fall into private hands the owners will be able to secure something more than the normal profits of competitive industry. They will profit by monopoly at the expense of the general consumer, and the remedy is public control or public ownership. The latter is the more complete and efficacious remedy, and it is also the remedy of municipal socialism. Lastly, there may be forms of monopoly created by the State, such as the sale of liquor as restricted by the licensing system. In accordance with competitive ideas the value so created ought not to pass into private hands, and if on social grounds the monopoly is maintained, the taxation of licensed premises ought to be so arranged that the monopoly value returns to the community.

Up to this point a thoroughly consistent individualism can work in harmony with socialism, and it is this partial alliance which has, in fact, laid down the lines of later Liberal finance. The great Budget of 1909 had behind it the united forces of Socialist and individualist opinion. It may be added that there is a fourth form of monopoly which would be open to the same double attack, but it is one of which less has been heard in Great Britain than in the United States. It is possible under a competitive system for rivals to come to an agreement. The more powerful may coerce the weaker, or a number of equals may agree to work together. Thus competition may defeat itself, and industry may be marshalled into trusts or other combinations for the private advantage against the public interest. Such combinations, predicted by Karl Marx as the appointed means of dissolving the competitive system, have been kept at bay in this country by Free Trade. Under Protection they constitute the most urgent problem of the day. Even here the railways, to take one example, are rapidly moving to a system of combination, the economies of which are obvious, while its immediate result is monopoly, and its assured end is nationalization.

Thus individualism, when it grapples with the facts, is driven no small distance along Socialist lines. Once again we have found that to maintain individual freedom and equality we have to extend the sphere of social control. But to carry through the real principles of Liberalism, to achieve social liberty and living equality of rights, we shall have to probe still deeper. We must not assume any of the rights of property as axiomatic. We must look at their actual working and consider how they affect the life of society. We shall have to ask whether, if we could abolish all monopoly on articles of limited supply, we should yet have dealt with all the causes that contribute to social injustice and industrial disorder, whether we should have rescued the sweated worker, afforded to every man adequate security for a fair return for an honest day’s toil, and prevented the use of economic advantage to procure gain for one man at the expense of another. We should have to ask whether we had the basis of a just delimitation between the rights of the community and those of the individual, and therewith a due appreciation of the appropriate ends of the State and the equitable basis of taxation. These inquiries take us to first principles, and to approach that part of our discussion it is desirable to carry further our sketch of the historic development of Liberalism in thought and action.

Footnotes[edit]

  1. “If I were asked to sum up in a sentence the difference and the connection (between the two schools) I would say that the Manchester men were the disciples of Adam Smith and Bentham, while the Philosophical Radicals followed Bentham and Adam Smith” (F. W. Hirst, The Manchester School, Introd., p. xi). Lord Morley, in the concluding chapter of his Life of Cobden, points out that it was the view of “policy as a whole” in connection with the economic movement of society which distinguished the school of Cobden from that of the Benthamites.
  2. Indirectly it has for long limited the hours of men in factories owing to the interdependence of the adult male with the female and child operative.