All the political application of Economics—that is, all the application of Economic Science to the conduct of families in the State—turns on The Control of Wealth, and of the things necessary to make wealth.

The first thing to grasp is that someone must control every piece of wealth if it is to be used to any purpose. Every bundle of economic values in the community must be under the control of some human will; otherwise those pieces of wealth “run to waste,” that is, are consumed without use to mankind. For instance, a ton of threshed wheat represents a bundle of economic values. It represents a piece of wealth equivalent, in currency measure, to say £16. If no one has the right to decide upon its preservation and use, when and how it is to be kept dry and free from vermin, when and how it is to be ground and the flour made into bread, then it will rot or be eaten by rats, and in a short time its economic values will have disappeared. It will be worthless. The £16 worth of wealth will have been “consumed without use”; in plain language, wasted. But if wealth were all wasted humanity would die out. So men must, of necessity, arrange for a control of all wealth, and this they do by laws which fix the control of one parcel of wealth by one authority, of another by another; men make laws allowing such control by some people and preventing attempted control by other people not authorised. This lawful control over a piece of wealth we call Property in it.

Thus, the coal in your cellar which you have bought is by our laws your property. It is for you to burn it as you want it and when you choose. If another person comes in and takes some of it without your leave, to burn it as he chooses, he is called a thief and punished as such. The coal in the Admiralty Stores is State property. The State has the right to decide into what ships it is to be put and how and when it is to be burnt, and so on. But whether the control is in private hands such as yours, or in the naval authorities who are officers of the State, control there must always be.

When people say that they want to “abolish property,” or that “There ought to be no property,” they mean Private property: the right of individuals, or families, or corporations to control wealth. Property in the full sense, meaning the control of wealth by someone, whether the State, or private individuals, or what not, is inevitable, and is necessary in every human society. So, granting that property must exist, we will first examine the various forms it may take.

At the beginning of our examination we noticed that wealth, owned and controlled by whoever it may be—the State, or an individual, or a corporation—is of two kinds. There is the wealth which will be consumed in enjoyment and the wealth which will be consumed in producing future wealth.

The wealth which will be consumed in producing future wealth is, as we have seen, called Capital. For instance: if a man has a ton of wheat and eats half of it while he is doing nothing but taking a holiday, or doing work which has some moral but no material effect—that is not Capital. But if he uses the other half to keep himself alive while he is ploughing and sowing for a future harvest, and keeps a little of it for the seed of that harvest, all that he so uses is Capital. Since control of wealth is necessary, no matter of what kind the wealth be, it is clear that there must be property not only in what is about to be consumed in enjoyment but also in Capital. Someone, then, must own Capital.

But here comes in a very important addition. The fertility of land, space upon which to build, mines of metal, water power, natural opportunities of any kind and natural forces, though they are not wealth,2 are the necessary conditions for producing wealth. Someone, therefore, must control these also: someone must have the power of saying, “This field shall be ploughed and sown thus and thus. This waterfall must be made to turn this turbine in such and such a spot, and the power developed must be applied thus and thus.” For if no one had such power the fertility of the land, the force of the stream, would be wasted.

Property, therefore, extends over two fields, one of which is itself divided into two parts. A.—It extends over natural forces. B.—It extends over wealth, and, in the case of B, wealth, it extends over B.1 wealth to be used for future production (which kind of wealth, when it is so used, is called Capital), and also B.2 wealth which is going to be consumed without the attempt to produce anything else: consumed, as the phrase goes, “in enjoyment.”3 Natural forces may be grouped, as we have grouped them in the first part of this book, under the conventional term “Land.” So Property covers Land and Capital, as well as Wealth to be consumed without the attempt to produce other wealth. You may put the whole thing in a diagram thus:—

In studying the social effects of Property it is convenient to group together Land and that part of wealth which is used for further production and is called Capital, and to call the two “the means of production”: because, in a great many social problems the important point is not who owns the Capital separately or the land separately, but who owns the whole bundle of things which constitute the “Means of Production,” without which no production can take place.

For instance: Supposing a man owns a hundred acres of fertile land, that is his property, and though we call it wealth in ordinary conversation it is not real wealth at all. It is only the opportunity for producing wealth. If no one worked on that land, if no one even worked so little as to take the trouble of picking fruit off the trees or cutting the grass or looking after animals on it, it would be worth nothing. Supposing another man to own the stores of food and the houses and the clothing necessary for the livelihood of the labourers on the land, and also the horses and the ploughs and the stores of seeds necessary for farming, then that man owns the Capital only. But to the labourers the important thing is that someone else owns the “Means of Production,” without which they cannot live, and they are equally dependent whether one or many control or own the Means of Production in any particular case. Their condition has for its main character the fact that they do not own the “Means of Production.”

Labour must be kept going. That is, human energy, for producing wealth from land, while it is at work, waiting between one harvest and another, will consume part of the stores of food and some proportion of the housing (which is a perishable thing, though it only perishes slowly) and of the clothing, and of the seed, etc. So we have to examine the various ways in which labour (which is not wealth) and land (which is not wealth) and capital (which is wealth) may be controlled.

There are three main types of human society which differ according to the way in which control is exercised over these three factors of Labour, Capital and Land. These three types are:—

There is also a fourth imaginary kind of state which has never come into being, called the Socialist or Communist State. We will examine this in its right place, but the only three actual states of which we know anything in history and can deal with as real human experiences, are these three just described: the Servile State, the Capitalist State, and the Distributive State.

But, before going farther, we must get hold of a very important principle, which is this:—

No one can exactly define the amount of this “determining number,” but we all know in practice what it means. For instance: we say the English are a tall race, from 5½ to 6 feet high. But that does not mean necessarily that the majority of the people are over 5½ feet. You have, of course, to exclude the children, and there are a great number of very short people and a few very tall people. It means that the general impression conveyed when you mix with English people—the size of the doors and the implements with which men work, and the clothes that are produced, and the rest of it—turn upon the general experience that you are dealing with a race of about that size—5½ to 6 feet. Or again, you say that the determining number or proportion of our society speaks English. That does not mean that they all speak English. Some are dumb; some speak Welsh or Gaelic. Many speak with such an accent that others with a different accent find it difficult to understand them. Yet it is true to say that the society in which we live speaks English.

Now it is exactly the same with the economic conditions of society. You may have a society in which there is a certain number of slaves, and yet it is not a slave-owning society, because the number of free men is so great as to give a general tone of freedom. Or you have, as we have in England, a great deal of property owned by the State—barracks and battleships and arsenals, some of the forests, and so on—but we do not say that England is economically a State-owned society, because the determining proportion of property is not owned by the State but by private people. The general effect produced is one of private ownership and not of State ownership.

One more principle must be set down before we go farther, and that is that almost any society is mixed. A society of which the determining proportion is slave-owning will yet certainly have a proportion of free men; for if it did not there would be no one to own the slaves. In the same way what is called a Capitalist Society, which I will describe in a moment (and which is the society in which we now live in England) has a great number of people not living under purely capitalist conditions. It is mixed.

But, though only a determining number is required to mark the character of a particular society, and though every society is mixed in its character, it remains true that all societies we know of, in the past or the present, fall into one of these three groups—the Servile (that is, slave-owning), the Capitalist, and the Distributive.

The definition of these three systems is as follows:—

1. In the Slave-owning Society, or SERVILE STATE, a certain minority owns a determining amount of the wealth and also of land—that is, the means of production (land and capital) and the wealth ready for consumption in enjoyment. The rest of the community is compelled by positive law to give its labour for the advantage of these few owners; and this rest of the community are, by economic definition, (whether they call themselves by the actual name or not) slaves: that is, they can be compelled to work for the owners, and can be punished by law if they do not work for the owners.

2. In the CAPITALIST STATE a determining number of the families or individuals are free; that is, they cannot be compelled by positive law to work for anybody. They are at liberty to make a contract. Each can say to an owner of land or capital: “I will work for you for so much reward, such and such a proportion of the wealth I produce. If you will not give me that I will not work at all,” and no one can punish him for the refusal.

But the mark of the Capitalist State is that a determining amount of land and capital is owned by a small number of people, and that the rest of the people—much the greater number—though free, cannot get food or housing or clothing except in so far as the owners of these things (that is, of the means of production) choose to give it them. In such a state of society the people who own nothing, or next to nothing, are free to make a contract and to say: “I will work on your farm” (for instance) “if you will give me half or three-quarters of the harvest. If you will not, I will not work for you.” But this contract is bound by a very hard condition, for if they push their refusal to the limit and continue not to work they will starve, and they will not be able to get housing against the weather or clothes to wear.

We are living to-day, in England especially, in such a Capitalist State. In such a state the free men who contract to sell their labour often have a certain very small proportion of things on which they can live for a short time. They have a suit of clothes and perhaps a little money with which they can purchase a few days’ livelihood—some of them more, some of them less. But the tone or colour of the society is given by the fact that the great majority, though free, are dispossessed of the means of production, and therefore of livelihood, and that a small minority controls these things.

The word “Capitalism” does not mean that there exists capital in such a society. Capital exists in all societies. It is a necessary part of human society and of the production of wealth, without which no society can live at all. The word “Capitalism” is only “shorthand” for the condition we have just described: a condition where capital and land are in few hands though all men are free.

3. The DISTRIBUTIVE STATE is a state in which a determining number of the citizens, a number sufficient to colour the habits, laws and conditions of the whole society, is possessed of the means of production, as private property, divided among the various families. The word “distributive” is an ugly, long word, only used for want of a better; but the reason that we have to use such a tiresome word is an odd and paradoxical reason well worth grasping. The Distributive State is the natural state of mankind. Men are happiest in such conditions; they can fulfil their being best and are most perfectly themselves when they are owners and free. Now whenever you have natural and good conditions, not only in Economics but in any other aspect of life, it is very difficult to find a word for it. There is always a word ready for odd, unnatural conditions: but it is often difficult to find a word for conditions normal to our human nature. For instance: we have the words “dwarf” and “giant,” but we have no similar common, short word to describe people of ordinary stature. So it is with the Distributive State. We have to use an ugly new word, because men more or less take for granted this state of affairs in their minds, and have never thought out a special word for it.

However, a name it must have; so let us agree to call that kind of society in which most men are really free and dignified and full citizens, not only possessing rights before the law, but owning, so that they are at no other man’s orders but can live independently, “The Distributive State.”

Then we have these three main types of Society within human experience: the Servile, the Capitalist, the Distributive.

To put these three estates clearly before our minds, let us describe the kind of thing you would see in any one of the three.

In the Servile State, as you travelled through the country, you would most ordinarily see working on the fields men who were the slaves of a master. That master would own the land and the seed, and the food and the houses, and the horses and ploughs and everything, and these men you would see working would be compelled to work for their master, and he would have the right by law to punish them if they did not.

If you were in a Capitalist State (as we are in England) the men you would see working would, as a rule, be earning what are called “wages,” that is, an allowance (actually of money but immediately translated into food and clothes and house-room and the rest), which allowance would be paid to them at fairly short intervals, and without which they could not live. The ploughs and horses with which they would be working, the seed they would be sowing, the houses they lived in would be the property of another man owning this capital, and therefore called The Capitalist. If you asked any one of these men who were working whether he were compelled to work by law he would indignantly tell you that he was not. For he is a free man; his wages are paid him as a result of a contract; he has said: “I will work for you for so much,” and no one could compel him to work if he did not choose to work. But in this state of society a man without capital must make a contract of this sort in order to live at all. He is not compelled by law to work for another, but he is compelled by the necessity of living to work for another.

Lastly, if you were travelling through a Distributive State (Denmark is the best example of such a state in modern Europe) you would find that the man working on the land was himself the owner of the land, and also of the seed and of the horses and the houses, and all the rest of it. He would be a free man working for his own advantage and for nobody else’s. He would also have a share in the factories of the country and be a part owner in the local dairies, sharing the profit of those dairies where the milk of many farms is gathered together, turned into butter and cheese, and sold.

This is what we mean by the three types of State. In each you would find many exceptions, but each has its determining number—of slaves in the one case, wage earners in the other, and independent men in the third.

We will now take each of these three kinds of State separately and see the good and evil of them and what the consequences of them are.