Popular Science Monthly/Volume 44/December 1893/State Interference in Social Affairs
By JOSEPH SHIELD NICHOLSON, D. Sc.,
PROFESSOR OF POLITICAL ECONOMY IN THE UNIVERSITY OF EDINBURGH.
WE are confronted with the limited power of the state and the infinite variety of individual enterprise. To the older economists the difference seemed so great that they considered the presumption against state interference to be established. The rule, it is true, was never absolute and unqualified. Adam Smith himself indicated some of the most important of these exceptions, and the list has been extended by his successors. But these exceptions were all based upon reasoned principles, such as the incapacity of the persons concerned, e. g., children to make fair contracts; the lack of individual interest in public works, e. g., the maintenance of roads, and the importance of the highest security, as in the regulation of the issues of bank notes. And in spite of all these exceptions—strengthened and purified by these exceptions—the presumption remained undisturbed. Recently, however, some writers, under the influence of the ideal of maximum happiness and impressed by the power of the state, have sought to extend its interference far beyond these admitted principles-But, so far as this movement has any theoretical support, the reaction has already begun. The fundamental importance of freedom of contract has become more apparent than ever through the application of the comparative and historical methods to jurisprudence; the proposition that the progress of society has been from status to contract has almost acquired the force of an axiom. The analysis, too, of modern industrial systems in which division of labor has become more and more intricate and interdependent has shown the hopelessness of the attempt to transfer the management and control to the state. Changes in the methods of production, in the diffusion of knowledge, and in the transport of material commodities have been so rapid and so great that no executive government could have overtaken them. In the most advanced communities even that legislation which is necessary for the new conditions lags behind; even those elementary forms which simply aim at giving an interpretation to contracts in doubtful cases, or which are necessary for the adjustment of responsibility (as in bankruptcy and partnership), are behind the times. The growth of joint-stock enterprises has outstripped the development of the law of companies, and there is a crop of new frauds without corresponding penalties. Turning to the executive and administrative functions of government, the analysis of existing conditions shows that we have not yet overtaken those exceptions admitted by the strongest supporters of laisser faire. The British Government has, it is true, wasted its energies in devising temporary expedients of various kinds, but it has not yet accomplished the programme of Adam Smith. Not only are there privileges and restrictions that ought to have been abolished long ago, but on the positive side the programme is not complete. We have just begun universal education on the lines laid down by Adam Smith, but his scheme for imperial federation is not yet within the range of practical politics. We have effected great financial reforms, but we still fall far short of the full development of his principles. Even in matters of currency and banking—in relation to which the function of the state has always been recognized—we are lamentably in need of reform. But if the state can not overtake those duties which are so necessary and persistent that they were forced on the attention of the strongest supporters of laisser faire, how can we possibly justify the assumption of new functions which rest upon no better principle than the vague idea that the state ought to do something? Not only theoretically but practically signs of a reaction in favor of the old position are rapidly increasing. The experiments already made at playing the rôle of omnipotence and omniscience, against which governments were so emphatically warned by Adam Smith, have begun to bring forth thorns instead of figs. A government which lends its power and assistance to one set of people must be prepared to act in a similar manner in all similar cases. If once this principle is abandoned, governmental action becomes either a matter of chance or depends upon clamor and jobbery. It is wonderful how quickly the human mind discovers analogies in grievances, and how soon one cry leads to another. How can we justify the use of state credit for the purchase of lands in Ireland and fishing boats in Scotland if we are not prepared to give similar aid to the poor of England who are similarly situated? If we grant judicial rents in the country, why not in the towns, and if we fix by law one set of prices why not all prices? We must not be content with looking at the immediate effects of legislation; we must consider also the secondary and more remote consequences. The British Government is beginning to find that the camel is getting too far into the tent. The admission of a single ear is nothing to the admission of the hump and the knees and the rest of the beast. Now the ear may be interpreted to mean the grant of a few thousand pounds to Scottish fishers, the hump is universal old-age pensions at a cost of some fifteen or twenty millions a year, and for the knees you may take the nationalization of land at a cost of some two thousand millions, and for the whole beast you have the complete socialist programme. The conclusion that when the beast was in the Arab was out needs no interpretation. We have not yet reached the limits of tolerable taxation, but at the present rate of growth of imperial and local expenditure we are rapidly approaching those limits. It has been firmly established in theory, and confirmed by the experience of many nations, that excessive taxation is ruinous to a country. It may be replied that those who demand a large increase of expenditure for public purposes do not propose to tax the poor, but only to take the superfluities of the rich—to take, as is sometimes said, twenty shillings in the pound from that part of every income which extends above four hundred pounds a year. The certain effect of this kind of taxation would be that in a very short time nobody would have more than four hundred pounds a year, and the sources of taxation would dry up just as people had become used to and dependent on governmental assistance. [Laughter.] The general argument may be summarized in the favorite phraseology of the day. The utility of every increment of governmental work rapidly diminishes, and the disutility of every increment of taxation rapidly increases. The classical economists maintain that even if the state could do something for individuals as cheaply and effectively as they could do it for themselves, it is in general better to trust to individual effort. The decisive consideration is the effect on the character and energies of the people. Self-reliance, independence, liberty these were the old watchwords—not state reliance, dependence, and obedience. In the matter of pauperism, for example, they teach us to distinguish between the immediate effects of relief which may be beneficial and the effects of reliance on that relief which may be disastrous. They are bold enough to maintain that the condition of life of the dependent pauper should not be made by aids and allowances better than that of the independent laborer. They insist on the great historical distinction between the sturdy rogues and vagabonds—who can work and will not—and the impotent poor, the poor in very deed, who can not support themselves. They look upon the payment of poor rates as they look upon other forms of taxation—namely, as the lesser of two evils; they do not try to persuade themselves and other people that it is a duty which is essentially pleasant. If Christian charity realized a tithe of its ideal there would be no need for relief on the part of the state. It does not take ten ants to relieve another ant, and in this land of ours there are more than ten professed Christians to every pauper. To the student I would say, political economy has a vast literature, and you will not find all the good concentrated in the last marginal increment; you must master the old before you can appreciate the new; a portion of truth just rediscovered for the hundredth time by some amateur is not of such value as a body of doctrines that have been developed for more than a century by economists of repute. And to the legislator I would say, vaster than the literature of political economy is the economic experience of nations; the lessons to be learned from the multitudinous experiments of the past can never become antiquated, for they have revealed certain broad features of human character that you can no more disregard than the vital functions of the human body. Just as Harvey did not invent but discovered the circulation of the blood, so Adam Smith did not invent but discovered the system of natural liberty. And nothing has been better established than the position that legislation which neglects to take account of the liberties of individuals is foredoomed to failure. If they can not break through the law they will get behind the law. The first duty of the legislator is to take account of the natural forces with which he must contend, and the classical economists have made a survey and estimate of these forces which, based as it is on the facts of human nature and the experience of nations, it would be willful folly to overlook.
- From the presidential address before the Section of Economic Science and Statistics of the British Association for the Advancement of Science, at the Nottingham meeting, September, 1893 (London Times Report).