LIMITATIONS OF CAPITALISM

MANY people are so impressed with the achievements of Capitalism that they believe that if you overthrow it you overthrow civilization. It seems to them indispensable. We must therefore consider, first, what are the disadvantages of this way of doing it? and, second, is there any other way?

Now in one sense there is no other way. All the businesses that need to have many weeks or months or years of work done on them by large bodies of men before they can pay their way, require great quantities of spare subsistence. If it takes ten years to make a harbor or twenty years to make a coal mine, the men who are making it will be eating their heads off all that time. Other people must be providing them with food, clothes, lodging, and so forth without immediate return, just as parents have to provide for growing children. In this respect it makes no difference whether we vote for Capitalism or Socialism. The process is one of natural necessity which cannot be changed by any political revolution nor evaded by any possible method of social organization.

But it does not follow that the collection and employment of spare subsistence for these purposes must be done by private companies touting for the money that very rich people are too gorged with luxuries to be able to spend, and that people of more moderate means are prudent enough to put by for a rainy day.

To begin with, there are many most necessary things that the private companies and employers will not do because they cannot make people pay for them when they are done. Take for instance a lighthouse. Without lighthouses we should hardly dare to go to sea; and the trading ships would have to go so slowly and cautiously, and so many of them would be wrecked, that the cost of the goods they carry would be much higher than it is. Therefore we all benefit greatly by lighthouses, even those of us who have never seen the sea and never expect to. But the capitalists will not build lighthouses. If the lighthouse keeper could collect a payment from every ship that passed, they would build them fast enough until the cost was lighted all round like the sea front in Brighton; but as this is impossible, and the lighthouses must shine on every ship impartially without making the captain put his hand in his pocket for it, the capitalists leave the coast in the dark. Therefore the Government steps in and collects spare subsistence in the shape of taxes from everybody (which is quite fair, as everybody shares the benefit), and builds the lighthouses. Here we see Capitalism failing completely to supply what to a seafaring nation like ours is one of the first necessaries of life (for we should starve without our shipping) and thereby forcing us to resort to Communism.

But Capitalism often refuses necessary work even when some money can be made out of it directly.

For example, a lighthouse reminds us of a harbor, which is equally necessary. Every ship coming into a harbor has to pay harbor dues; therefore anyone making a harbor can make money by it. But great harbors, with their breakwaters and piers built up in the sea, take so many years to construct, and the work is so liable to damage and even destruction in storms, and the impossibility of raising harbor dues beyond a certain point without sending the ships round to cheaper harbors so certain, that private capital turns away from it to enterprises in which there is more certainty as to what the cost will be, less delay, and more money to be made. For instance, distilleries make large profits. There is no uncertainty about the cost of building them and fitting them up; and a ready sale for whiskey can always be depended on. You can tell to within a few hundred pounds what a big distillery will cost, whereas you cannot tell to within a million what a big harbor will cost. All this would not influence the Government, which has to consider only whether another distillery or another harbor is more wanted for the good of the nation. But the private capitalists have not the good of the nation in their charge: all they have to consider is their duty to themselves and their families, which is to choose the safest and most profitable way of investing their spare money. Accordingly they choose the distillery; and if we depended on private capitalists alone the country would have as many distilleries as the whiskey market could support, and no harbors. And when they have established their distillery they will spend enormous sums of money in advertisements to persuade the public that their whiskey is better and healthier and older and more famous than the whiskey made in other distilleries, and that everybody ought to drink whiskey every day as a matter of course. As none of these statements is true, the printing of them is, from the point of view of the nation, a waste of wealth, a perversion of labor, and a propaganda of pernicious humbug.

The private capitalists not only choose what will make most money for them, but what will make it with least trouble: that is, they will do as little for it as possible. If they sell an article or a service, they will make it as dear as possible instead of as cheap as possible. This would not matter if, as thoughtless people imagine, the lower the price the bigger the sale, and the bigger the sale the greater the profit. It is true in many cases that the lower the price the bigger the sale; but it is not true that the bigger the sale the greater the profit. There may be half a dozen prices (and consequently sales) at which the profit will be exactly the same.

Take the case of a cable laid across the ocean to send messages to foreign countries. How much a word is the company to charge for the messages? If the charge is a pound a word very few people can afford to send them. If the charge is a penny a word the cable will be crowded with messages all day and all night. Yet the profit may be the same; and, if it is, it will be far less trouble to send one word at a pound than two hundred and forty words at a penny.

The same is true of the ordinary telegraph service. When it was in the hands of private companies, the service was restricted and expensive. When the Government took it over, it not only extended lines of all sorts to out-of-the-way places; cheapened the service; and did without a profit: it actually ran it at what the private capitalist calls a loss. It did this because the cheap service was such a benefit to the whole community, including the people who never send telegrams as well as those who send a dozen every day, that it paid the nation and was much fairer as well to reduce the price charged to the actual senders below the cost of the service, the difference being made up by everybody in taxes.

This very desirable arrangement is quite beyond the power of private Capitalism, which not only keeps the price as high as possible above the cost of production and service for the sake of making the utmost profit, but has no power to distribute that cost over all the people who benefit, and must levy it entirely on those who actually buy the goods or pay for the service. It is true that business people can pass the cost of their telegrams and telephone messages on to their customers in the price of the things they sell; but a great deal of our telegraphing and telephoning is not business telegraphing and telephoning; and its cost cannot be passed on by the senders to anyone. The only objection to throwing the cost entirely on public taxation is that if we could all send telegrams of unlimited length without having to pay across the counter enough ready money to prevent us using the telegraph service when the post would do as well, or sticking in “kind regards from all to dear Aunt Jane and a kiss from Baby” at the end of every message, the lines would be so choked that we should not be able to send telegrams at all. As to the telephone, some women would hang on to it all day if it made no difference to their pockets. Even as it is, a good deal of unnecessary work is put upon the telegraph service by people spinning out their messages to twelve words because they are not allowed to pay for less, and they think they are not getting full value for their money if they say what they have to say in six. It does not occur to them that they are wasting their own time and that of the officials, besides increasing their taxes. It seems a trifle; but public affairs consist of trifles multiplied by as many millions as there are people in the country; and trifles cease to be trifles when they are multiplied on that scale. Snowball letters, which seem a kindly joke to the idiots who start them, would wreck our postal system if sensible people did not conscientiously throw them into the waste paper basket.

It is necessary to understand these things very clearly, because most people are so simple and ignorant of big business matters that the private capitalists are actually able to persuade them that Capitalism is a success because it makes profits, and public service (or Communism) a failure because it makes none. The simpletons forget that the profits come out of their own pockets, and that what is the better for the private capitalists in this respect is the worse for their customers, the disappearance of profit being simply the disappearance of overcharge.