The chief thing to be noted about this stage is that profits proper first appear, and become the source of further capital-the first capital having come either from the savings of the small producers, from loans by the money-lender or banker, from the gains made in trade by merchants or dealers, or even, though indirectly, from the rent of landlords. We have, however, reached the stage of capitalist production, though, as yet, in undeveloped form and extending to relatively few industries. In Adam Smith's time it had attained considerable dimensions, though, of course, nothing to be compared with its colossal scale at the present day. : The state of things in the middle of last century, on the eve of the industrial revolution, was briefly this in most of the older trades there was the master worker with his few apprentices and journeymen. The master worked himself, the small necessary capital was his, and so were the small profits. His social status was little superior to his assistant's, and the most he could hope for was, as trade regulations became less stringent in limiting the number of journeymen, to raise himself to the dignity of a small manufacturer. In a considerable number of industries there were small capitalist employers who paid wages to a number of men, but who did no other work than that of superintendence and general conduct of the concern. It is worth noting that in the cotton, woollen, linen, silk, and other textile industries which have since grown great staple trades, the spinning and " See Marx's "Capital," vol. ii., p. 774,-“ On the Genesis of the Industrial Capitalist.” weaving was not generally done in factories, but by men and women in their own homes working on their own account, although in some cases, especially in the woollen trade, there were employers who had 20, 50, or even 100 paid hands. 6 The revolution which totally changed this relatively simple organization of labour began in the middle of last century, and was brought about by a remarkable series of inventions and discoveries, partly referable to increased scientific knowledge, partly to the genius of individuals. This spirit of invention and discovery, which has since extended to every industry - some being even wholly created by it-at first directed itself to the staple textile industries of Great Britain, the cotton, linen, woollen, and others; and these were revolutionized from top to bottom. The essence of the change effected by the new inventions was briefly this the new invention usually took the form of a machine which could produce more in the same time than could be produced by an equal number of workers without its aid; perhaps it could produce two or three, or even five times as much, and if this could only be sold at the old price, or a trifle lower so as to draw new customers, the owner could, before the price fell, make great extra profits—after making good to himself the interest on the money invested in the machine. Or the advantage of the machine may be thus. stated: If the machine produces twice as much in the same time with the same number of hands, then with half or a little more than half the number of hancis, 6 See Toynbee's "Industrial Revolution." and with a less large and less expensive machine, there will be the same turn-out as by the old number without the machine; in other words, the employer will get the same result with half the labourers, and the wages of the displaced half might be put in his pocket as extra profit-minus, of course, the interest of the capital sunk in the machine. "But whence," it may be asked, "came the capital sunk in the machine?" In the first case (when the same hands were kept on), it was either borrowed or saved out of previous profits, or most likely it came from both sources; in the second case the necessary capital can come from the saved wages, being borrowed in the first instance. In the first case the great additional profits soon enabled the employer to extinguish both borrowed principal and interest, after which, the extra profits continuing, he was in a position to still further enlarge the scale of his enterprise, as he usually did. He did not often, until later times, under Trades Union strikes, turn part of his circulating capital into fixed, thereby displacing part of his hands; because the larger the scale of production, the more easily he could undersell not merely the producer by the old and ruder methods, but the producer by machinery on a smaller scale in a smaller factory. He could well afford to sell cheaper, and yet have higher profit. Besides, cheapness widens the circle of customers, enlarges the demand, and the enlarged demand reacting on expenses of production lessens them, thus stimulating him to produce in ever larger quantity. With the incoming of the new machinery there was a great race for wealth and fortune. Whoever got the machinery first could undersell rivals, drive them from the field, and step into their custom. It was a grand case of the survival of the strongest, or the fittest-the fittest being a strange mixture of good and bad types. The small producers were devoured by the large. Morcover, the period of struggle being prolonged, as ever newer and more potent or more cunning machines were invented, the large were in turn liable to be devoured by the still larger, a risk in the business sphere which continues down to our own time. Instead of hands being turned adrift by the new machinery, more and more were needed in the cotton, woollen, and other industries. Then came the conquest and temporary monopoly of the Continental market, which resulted in a demand for more hands and the pressure into the service of women, married and unmarried, girls, boys, infants of both sexes. By the monopoly of the Continental market, as much as by the labour, graduated in cheapness, of women, young people, and children, the profits of the successful capitalist became something extraordinary, being swollen by the conquest of his home and foreign competitors, by excessive working hours, by monopoly prices, sometimes by his own special genius and aptitude for business. The general introduction of steam power into manufactures between 1830 and 1850, and the demands of the new foreign markets in the East and in America, carried the tendency to large production still farther, and the latter date, or 1848, the date of the political revolution, we might roughly fix upon as the com pletion of the industrial revolution, and the establishment of the capitalistic regime in England, the like phenomena following after some time in France, the United States, Germany, and all civilized nations. III. WE are now in a position to see the essence of the new Socialism and of Karl Marx's indictment of the capitalists, on which chiefly the Socialist's argument rests. All wealth, and all exchange value, according to Marx, is the re ult of labour, and of labour only, and to the labourers, the real producers, all wealth should belong. Labour of head, directing and superintending labour, is allowed; how far it contributes to the result he does not attempt to tell us, though the implication is that the labour is neither difficult nor important. But certain it is that it receives an extravagantly exaggerated reward, in addition to interest on capital. Capital, Marx also allows, is necessary as well as labour, and even increasingly necessary, on account of the ever-increasing machinery required by modern industry. But then this capital should belong to the labourers in the total, to the collectivity of labourers, and not to private persons or to limited companies. And why? Because, according to him, capital is the result of spoliation of the capitalists withholding wages due to the labourers; and secondly, if labourers do not own the capital, they must continue as now, the slaves of the capitalist, the financier, and the receiver : |