Chapter VIII: Introduction (5)

Now with a ludicrous and extreme example of this sort you may say: “That is all very well as a joke, but it has no bearing on real life.” It has. That is exactly the sort of thing which is going on the whole time in a highly-developed economic society. I go to a matinee and pay 10s. for a man to amuse me. He goes off himself in the evening and pays 10s. to hear a man sing at a concert. Next morning that man (I sincerely hope) buys one of my books, and a big part of the price is not paid for the economic values attaching to the material of it, but for the services of writing it, which is not a creation of wealth at all. The publisher pays me my royalty, and I spend part of it in looking at an acrobat in a music hall. The acrobat pays 10s. to keep up his chapel; and the minister of the chapel, in a fit of fervour, pays a subscription of 10s. to a political party.

And so on. Here is a short chain of economic imaginaries: 50s.--five ten-shilling notes--all appearing one after the other in the assessment of the national income and corresponding to no real wealth.

It is exactly the same thing in principle as the case of the two men singing for one loaf of bread. And the same principle applies to the expenditure of rates and taxes. A great part of this expenditure goes in empty services, not in services which add economic values to things.

We must, of course, distinguish between two things which many of the older economists muddled up. A thing may be of the highest temporal use to humanity in the production of happiness, such as good singing, or of high spiritual value, such as good conduct, and yet that thing must not be confounded with economic values. When one says, for instance, that good singing, or a good picture, or a good book has no economic value, or only a very slight material economic value (the best picture ever painted has probably not a true economic value of more than 20s. outside its frame, unless the painter used expensive paints or a quite enormous canvas) one does not mean, as too many foolish people imagine, that _therefore_ one ought not to have good singing, or good pictures, or the rest of it.

What _is_ meant is that the examination of any one set of things must be kept separate from the examination of another, and when you put down the money spent on these things as though it represented real economic values you are making a false calculation.

Well, this is only a hint of quite a new subject in Economics, which I have put in at the end in the hope that it may be of some value to you. Meditate upon it. As societies get more and more luxurious, more and more complicated, more and more “civilised” (as we call it), so do these economic imaginaries grow out of all proportion to the real wealth of the society. If on the top of their growth you suddenly impose high taxation, based upon your assessment, you may think that you are only taking a fifth or a third or a fourth of the whole community’s real yearly wealth, when in reality you are taking a half or more than a half. And this is probably the main reason why so many highly developed societies have broken down towards the end of their brilliance through the demands of their tax-gatherers who worked on assessment inflated out of all reality by a mass of economic imaginaries.

FINIS

FOOTNOTES

[1] From the Latin word “Fiat” = “Let it be so.” As though the Government had said: “This is not a piece of gold, only a piece of paper. But I say it is to be taken as gold. So I order. _Let it be so._”

[2] It is important to keep our ideas rigidly clear on this point. You can exchange a piece of fertile land for some set of values. Yet it is not _wealth_. It is not matter transposed from a condition where it is less useful to a condition where it is more useful to man. See the definitions in the first chapter, “What is wealth?”

[3] “Enjoyment” does not mean, in this connection, pleasure, happiness. It is a conventional phrase to mean “consumption _not_ directed to the making of further wealth?” Thus the wealth consumed at a boring dinner party is consumed in “enjoyment.”

[4] A _Strike_ is a modern English word (only used where the English language is spoken), and signifying the refusal of the Free labourers to sell their labour for the amount hitherto given. They cease work, thereby interrupting the profits of the Capitalist who furnishes them with food, clothing, etc., in the shape of wages. They do so in the hope of compelling him, by loss of profits during their idleness, to pay them more.

A _Lock-out_ is a modern English word now used all over the world to signify an action of the Capitalist refusing to pay his workmen what they have hitherto received, and hoping to starve them into accepting lower wages by “locking them out” of his factory until they submit.

Strikes are only possible when the labourers have accumulated some capital on which to live during the struggle. This they accumulate by contributions to the common fund of a “Trades Union” while still in employment. A Lock-out is only possible from the fact that such funds are small and soon exhausted.

[5] In theory Parliament is stronger than the banks, but Parliament no longer counts as a real governing power. The banks are far more powerful than Parliament.

[6] This very sensible tax was invented by Disraeli in England about a lifetime ago.

[7] Silver and gold were used together, but gold alone will serve as a test.

[8] A simple daily example of an amateur index number is the housewife’s idea of “cost of living.” She finds that, for the purchase of her home, a great deal of bread, a little butter, more cheese, so much for clothing, rent, etc., 40s. to-day go about as far as 20s. in 1913 before the war. In other words she is “taking 1913 as a base and establishing an index number of 200 for 1923.”

Index

Banking, how arose, 168–173;
its machinery, 173–179.

Banking system, its advantage in concentrating capital, 180;
begins to invest money, 183–186;
great modern power of, 186–188.

Blanc, creator of modern socialism, 133;
its definition, 134.

Capital, Character of, 19–26.

“Capitalism,” term for Capitalist Society, 105;
“Paradox,” 120, 122.

Capitalist State, 101, 104–5;
advantages and disadvantage, 115–123.

Categories, Purchasable, 209–210.

Circulation, Efficiency in, 72–75.

Clearing House, 179.

Coal, Example of addition of values to, 27–28.

Coal Mine, example of how rent arises as a surplus, 47–49.

Communism, only logical and necessary form of Socialism, 135.

Consumption of Capital inevitable, 23.

Consumption of wealth is universal, 31–32.

Currency, Debasement of, 79–83.

Currency, Meaning of, 70.

Denmark, example of distributive state, 108, 126.

Diminishing Returns, Law of, 40–44.

Distributive State, 105–6;
advantages and disadvantages, 124–131.

Division of Labour, 54.

Douglas Scheme of Credit, 187.

Economic Imaginaries, examples of, 231–240.

Exchange, a true form of production, 52.

Exchange, Free, Formulæ of maximum wealth through, 59–60.

Exchange, International, factor of National Currencies in, 142, 143.

Exchange, Medium of, or currency, 70.

Exchange, Multiple, 57–58.

Exchange, Multiple, in International trade, 143–144.

Exchange, Potential of, 53–54.

Exchange value, necessary condition of wealth, 12–14.

Expenditure, Luxurious, productive of Economic Imaginaries, 233.

Exports not a test of wealth, 146–149.

Formulæ defining production of wealth, 26.

Formula, defining wealth, 14.

Formula of Consumption, 32.

Formula of Maximum Wealth through freedom of exchange, 59.

Formula, of Production by Transport and Exchange, 32.

Formula of Protection, 64.

Formula of Potential of Exchange, 56.

Formulæ of Subsistence, Interest and Rent, 50.

Free Trade, arguments for, 153–155.

Free Trade and Protection, detailed consideration of, 150–166.

Free Trade and Protection, Elements of, 61–65.

Gold and Silver, Natural advantages of, as money, 69–70.

Great War, its effect in destroying value of currency, 79–83.

Human energy in production of wealth, conventionally called “Labour,”
18–19.

Imaginaries, Economic, examples of, 231–240.

Imports test of wealth, not exports, 146–149.

Incomes, Inequality of, productive of Economic Imaginaries, 235.

Index Number, 204–208.

Inequality of Incomes, productive of Economic Imaginaries, 235.

Intention, a necessary adjunct to Capital, 22.

Interest, high, not connected with though often confused with Usury,
217, 218.

Interest, Nature of, 39–45.

International Exchange, factor of National Currencies in, 142, 143.

International Trade, why vital to England, 148–149.

Islands, Three, Example of in proof of Protectionist Theory, 160–165.

Labour, Division of, 54.

Labour, term for all human energy in production of wealth, 18–19.

Labour “worth while of” or Standard of Subsistence, 30–38.

Land, conventional term for all natural forces used in production of
wealth, 17–18.

Land, Labour, Capital, Conventional terms for three factors of
wealth, 16.

Law of Diminishing Returns, 40–44.

Loan, Unproductive, the test of Usury, 218–221.

Luxurious Expenditure, productive of Economic Imaginaries, 233.

“Marx,” assumed name of Mordecai, 134.

Material objects, not wealth, 11–12.

Means of Production, 99–100.

Medium of Exchange, or currency, meaning of, 70.

Money, how it arises, 66–69;
Qualities of, 68–69.

Money, Paper, its function, 75–78;
its corruption, 78–83.

Money, Social value of, three factors in, 202–203.

Mordecai, or “Marx,” principal propagator of Socialism, 134.

Multiple Exchange, 57–58.

Multiple Exchange in International trade, 143–144.

Natural forces used in production of wealth, called “Land,” 17–18.

National loans and debt, how arise, 189–191;
method of shirking interest on, 192–193.

Overlap, example of an Economic Imaginaries, 231–232.

Potential of Exchange, 53–54;
formulæ of, 56.

Prices, Names for exchange value in gold, 71–72.

Production, Means of, definition, 99–100.

Production of wealth, three necessary factors in, Land, Labour and
Capital, 15–26.

Production, Process of, 27–32.

Property, Nature of, 95–97;
private, 96.

Protection and Free Trade, detailed consideration of, 150–166;
arguments advanced for, 152, 156–157;
example of the Three Islands, 160–165;
of Pig Meal in England, 165–166.

Protection and Free Trade, Elements of, 61–65.

Protection, Economic, Formula of, 64.

Rent, a surplus, 47.

Rent, Example of Coal Mine, 48.

Rent, Interest, Subsistence, the three divisions of wealth produced,
33–51.

Rent, Nature of, 46–51.

Saving, a necessary process in formation of Capital, 24–25.

Services and Wealth, confusion between productive of Economic
Imaginaries, 236–238.

Servile State, 100, 103;
advantages and disadvantages, 109–114.

Silver and Gold, Natural advantages of, as money, 69–70.

Single Tax, theory of, 198–200.

Socialism, its creator in modern terms. Blanc, 133;
its definition, 134.

Socialism, only conceivable as Communism, 135;
failure of, 135–140.

Standard of subsistence, 36–38.

State, Capitalist, 101, 104–5;
advantages and disadvantages, 115–123.

State, Distributive, 105–106;
advantages and disadvantages, 124–131.

State, Servile, 100, 103;
advantages and disadvantages, 109, 114.

Subsistence, Nature of, 35–39.

Subsistence, Standard of, 36–38.

Taxation, direct and indirect, 193–194;
rules of, 194–197.

Taxes, law in distributive state, 129.

Tribute paid to wealthy countries by poor ones, 145–146.

Unproductive Loan, the test of Usury, 218–221.

Usury, definition of, 221;
why neglected, 223–227.

Values, Economic, attached to material objects, 12.

Wealth, Definition of, 10–14.

Wealth, production of, three necessary factors in, Land, Labour and
Capital, 15–26.

Transcriber’s Notes

Punctuation, hyphenation, and spelling were made consistent when a predominant preference was found in the original book; otherwise they were not changed.

Simple typographical errors were corrected; unbalanced quotation marks were remedied when the change was obvious, and otherwise left unbalanced.

Illustrations in this eBook have been positioned between paragraphs and outside quotations. In versions of this eBook that support hyperlinks, the page references in the List of Illustrations lead to the corresponding illustrations.

Footnotes, originally at the bottoms of the pages that referenced them, have been collected, sequentially renumbered, and placed near the end of the book, just before the index.

The index was not checked for proper alphabetization or correct page references.

Page 164: “Island B cannot do.” perhaps should be “Island A cannot do.”