Chapter XIII: Part 13

Also, the poor were not wholly voteless. The owner of a freehold worth forty shillings a year had a vote; and a number of odd old franchises existed which gave quite poor people a certain weight at elections. They could not return a Labor member (such a thing was then unheard of); but they could sometimes turn the scale as between the Conservative landlord and the Liberal employer. If the Conservatives and Liberals had understood that their political interests were the same, and that they must present a united front to Labor, the employees would have had no hope except in revolution. But the Conservatives and Liberals did not understand their commercial interests. The Conservative clung blindly to his old privileges: the Liberal followed the slot of his new profits as thoughtlessly as a hound follows the slot of a fox. Both of them wanted to be in Parliament because it gave them personal importance, opening the way to the front bench, where the Cabinet Ministers sit, and to knighthoods, baronetcies, and peerages. The Liberals considered themselves the party of reform because they had carried the Reform Bill, and, as the employees wanted all sorts of reform very badly, took it for granted that they would always vote gratefully for the Liberals.

Under this delusion a Liberal Government made a bid for popular support by offering votes to the working class. The Conservatives at first opposed this so fiercely that they turned the Liberals out at the next election; but a very clever Conservative leader named Benjamin Disraeli, afterwards Earl of Beaconsfield, a Jew who had begun his political career, like Karl Marx, as a champion of the proletariat, persuaded the Conservatives that they were really more popular in the country than the Liberals, and induced them to make the very extension of the franchise they had just been opposing. Naturally the employees, when they got some votes in this way, used them to get more votes; and the end of it was that everybody got a vote, including at long last the women, though the women had to make a special and furious fight for their inclusion, and did not win it until the national work they did when they took the place of the absent men during the war of 1914-18 shamed the country into enfranchising them.

The proletarian voters who could formerly only turn the scale between Conservative and Liberal can now turn out both Conservative and Liberal, and elect candidates of their own. They did not at first realize this, and have not fully realized it yet. They began by timidly sending into Parliament about a dozen men who were not called Labor members, but working class members of the Liberal Party. It became the custom for Liberal Governments to give a minor ministerial post to some mild middle class professor who was vaguely supposed to be interested in factory legislation and popular education, and who was openly treated as a negligible nobody by the rest of the Cabinet.

Meanwhile Socialist societies were growing up among students of Karl Marx’s famous exposure of the sins of Capitalism, and of a very widely circulated book called Progress and Poverty, written by an American named Henry George, who had seen within his own lifetime American villages, where people were neither poor enough to be degraded and miserable nor rich enough to be idle and extravagant, changed by the simple operation of private property in land and capital into cities of fabulous wealth, so badly divided that the mass of the people were weltering in shocking poverty whilst a handful of owners wallowed in millions. These Societies broke the tradition of proletarian attachment to the Liberal Party by making the workers what Marx called class-conscious, a phrase which the Intelligent Woman has probably met several times in the papers without knowing any more clearly than the newspaper writers exactly what it means. The voters who had believed that there were only two parties in politics, the Conservatives and the Liberals (or Tories and Whigs), representing the two great religious parties of the Churchmen and the Dissenters, and the two great economic interests of the country farmers with their landlords and the town men of business with their capitalists, were now taught that from the point of view of the employee there is not a penny to choose between Conservatives and Liberals, as the gain of either means the employee’s loss, and that the only two parties who really have opposed interests are the party of the propertied class on the one hand and the party of the propertyless proletariat on the other: in other words, the party of Capital and the party of Labor. What mattered was not the Parliamentary struggle between the Liberal Mr Gladstone and the Conservative Mr Disraeli as to which should be Prime Minister, or between their successors Mr Balfour, Mr Bonar Law, and Mr Baldwin of the one party, and Sir Henry Campbell-Bannerman, Mr Asquith, and Mr Lloyd George of the other. To the class-conscious proletarian all that is mere Tweedledum and Tweedledee: what is really moving the world is the Class Struggle, the Class War (both terms are in use) between the proprietors and the proletariat for the possession of the land and capital of the country (the Means of Production). When a man realized that, he was said to be class-conscious. These terms are misleading because they imply that all the proletarians are in one camp and all the bourgeoisie in the other, which is untrue; but as the Intelligent Woman who has read thus far now knows what they mean, let them pass for the moment.

The Socialist Societies had begun badly by treating Parliament as the enemy’s camp; boycotting the Churches as mere contrivances for doping the workers into submission to Capitalism; and denouncing Trade Unionism and Co-operation as mistaken remedies. Under Marx and Engels, Morris and Hyndman, Socialism was a middle class movement caused by the revolt of the consciences of educated and humane men and women against the injustice and cruelty of Capitalism, and also (this was a very important factor with Morris) against its brutal disregard of beauty and the daily human happiness of doing fine work for its own sake. Now the strongest and noblest feelings of this kind were quite compatible with the most complete detachment from and ignorance of proletarian life and history in the class that worked for weekly wages. The most devoted middle class champions of the wage workers knew what housemaids and gardeners and railway porters and errand boys and postmen were like; but factory hands, miners, and dockers might as well have been fairies for all their lady and gentleman sympathizers knew about them.

Whenever your sympathies are strongly stirred on behalf of some cruelly ill used person or persons of whom you know nothing except that they are ill used, your generous indignation attributes all sorts of virtues to them, and all sorts of vices to those who oppress them. But the blunt truth is that ill used people are worse than well used people: indeed this is at bottom the only good reason why we should not allow anyone to be ill used. If I thought you would be made a better woman by ill treatment I should do my best to have you ill treated. We should refuse to tolerate poverty as a social institution not because the poor are the salt of the earth, but because “the poor in a lump are bad”. And the poor know this better than anyone else. When the Socialist movement in London took its tone from lovers of art and literature who had read George Borrow until they had come to regard tramps as saints, and passionate High Church clergymen (Anglo-Catholics) who adored supertramps like St Francis, it was apt to assume that all that was needed was to teach Socialism to the masses (vaguely imagined as a huge crowd of tramplike saints) and leave the rest to the natural effect of sowing the good seed in kindly virgin soil. But the proletarian soil was neither virgin nor exceptionally kindly. The masses are not in the least like tramps; and they have no romantic illusions about oneanother, whatever illusions each of them may cherish about herself. When John Stuart Mill was a Parliamentary candidate in Westminster, his opponents tried to defeat him by recalling an occasion on which he had said flatly that the British workman was neither entirely truthful, entirely sober, entirely honest, nor imbued with a proper sense of the wickedness of gambling: in short, that he was by no means the paragon he was always assumed to be by parliamentary candidates when they addressed his class as “Gentlemen”, and begged for his vote. Mill probably owed his success on that occasion to the fact that instead of denying his opinion he uncompromisingly reaffirmed it. The wage workers are as fond of flattery as other people, and will swallow any quantity of it from candidates provided it be thoroughly understood that it is only flattery, and that the candidates know better; but they have no use for gushingly idealistic ladies and gentlemen who are fools enough to think that the poor are cruelly misunderstood angels.

In the eighteen-eighties the Socialists found out their mistake. The Fabian Society got rid of its Anarchists and Borrovians, and presented Socialism in the form of a series of parliamentary measures, thus making it possible for an ordinary respectable religious citizen to profess Socialism and belong to a Socialist Society without any suspicion of lawlessness, exactly as he might profess himself a Conservative and belong to an ordinary constitutional club. A leader of the society, Mr Sidney Webb, married Miss Beatrice Potter, who had made a study at first hand of working-class life and organization, and had published a book on Co-operation. They wrote the first really scientific history of Trade Unionism, and thereby not only made the wage-workers conscious of the dignity of their own political history (a very important step in the Marxian class-consciousness) but shewed the middle-class Socialists what the public work of the wage-working world was really like, and convinced them of the absurdity of supposing that Socialists could loftily ignore the organization the people had already accomplished spontaneously in their own way. Only by grafting Socialism on this existing organization could it be made a really powerful proletarian movement.

The Liberals, still believing themselves to be the party of progress, assumed that all progressive movements would be grafted on the Liberal Party as a matter of course, to be patronized and adopted by the Liberal leaders in Parliament as far as they approved. They were disagreeably surprised when the first effect of the adoption of constitutional parliamentarism by the Fabian Society was an attack on the Liberal Government of that day, published in one of the leading reviews, for being more reactionary and hostile to the wage-workers than the Conservatives. The Liberals were so astonished and scandalized that they could only suggest that the Fabian Society had been bribed by the Conservatives to commit what seemed to all Liberals to be an act of barefaced political treachery. They soon had their eyes opened much more widely. The Fabian Society followed up its attack by a proposal for the establishment of a Labor Party in Parliament to oppose both Conservatives and Liberals impartially. A working-class leader, Keir Hardie, formerly a miner, founded a Society called the Independent Labor Party to put this proposal into practice. Among the members of the Fabian Society who became a leader in this new Society was Mr Ramsay MacDonald, who, by his education and knowledge of the world outside the wage-working class, was better qualified than Keir Hardie for successful leadership in Parliament. From the Independent Labor Party sprang The Labor Party, a political federation, much more powerful, of Trade Unions and of Socialist Societies, whose delegates sat on its executive committee. As all the persons who were members of Trade Unions at that time could, by subscribing a penny a week each, have provided a political fund of over £325,000 (there are three times as many now), this combination with the Trade Unionists was decisive. At the election of 1906 enough Labor members were elected to form an independent party in Parliament. By 1923 they had encroached so much that neither the Liberals nor the Conservatives had a majority in the House; and Mr Ramsay MacDonald was challenged to form a Government and shew whether Labor could govern or not. He accepted the challenge, and became British Prime Minister with a Cabinet of Socialists and Trade Unionists. It was a more competent government than the Conservative Government that preceded it, partly because its members, having risen from poverty or obscurity to eminence by their personal ability, were unhampered by nonentities, and partly because it knew what the world is like today, and was not dreaming, as even the cleverest of the Conservative leaders still were, of the Victorian mixture of growing cotton lordship and decaying feudal lordship in the capitalist class, with starved helpless ignorance and submissive servitude in the proletariat, which had not even lasted out Queen Victoria’s lifetime. In fact, the Labor leaders were to an extraordinary degree better educated and more experienced than their opponents, who infatuatedly took it for granted that rich men must be superior in education because they graduate in the two aristocratic universities instead of in the school of economically organic life.

The Liberals and Conservatives, disgusted with this result, and ruefully sorry that by derisively giving Labor a chance to prove its relative incompetence it had proved the opposite, combined to throw Mr MacDonald out of office in 1924. Although he had as yet no real chance of a majority in the country, he had so scared the plutocrats in Parliament by his comparative success as Secretary of State for Foreign Affairs, which they had regarded as the department in which Labor was certain to break down ridiculously, that they overdid their attack by persuading the country that he was connected with the Communist Government of Russia. The panic which followed, lasting until the election was over, wiped out at the polls, not the Labor Party, which just managed to hold its own, but the innocent Liberal Party.

The danger of stampeding a general election is that all sorts of political lunatics, whom no one would dream of taking seriously in quiet times, get elected by screaming that the country is in danger, whilst sober candidates are defeated ignominiously. In 1906, when a general election was stampeded by an alarm of Chinese labor, third rate Liberal candidates ousted first rate Conservative ones by the score. In 1924 the Red Russian scare enabled third rate Conservatives to oust first rate Liberals. In both cases the result was a grave falling-off in the quality of the victorious party. When the Sirdar, our representative in Egypt, was unluckily assassinated just after the election, the Conservatives, drunk with their victory, could not be restrained by the Prime Minister, Mr Baldwin, from hurling at the assassins an insane threat to cut off the water supply of Egypt. This extravagance, which startled all Europe, was felt to be just the sort of thing that Mr MacDonald would not have done. The Government had to climb down rather abjectly when it discovered that it could neither carry out its threat nor expect anything but reprobation from all sides, both at home and abroad, for having been so absurd as to make it; for though a forceful wickedness is, I am sorry to say, rather popular than otherwise when our Governments indulge in it at the expense of foreigners, we expect it to be successful. A climb-down is unpopular in proportion to the arrogance of the climb-up. Consequently the Government lost on the Egyptian fiasco the support won by the Russian scare; but it lost its head again at a crazy threat of a general strike by the Trade Unions. The Russians sent us a very handsome subscription to the strike funds; and the Government, frightened and infuriated, and quite incapable of measuring the danger (which need not have alarmed a mouse) brought in a futile but provocative Bill to make Trade Unionism illegal, and broke off diplomatic relations with Russia after raiding the offices of the Russian Government in London. Meanwhile, Labor in Parliament, having recovered from the shock of the election, settled into its place as the official Opposition.

To sum up the story to the point it has now reached (1927), the Proletariat, having begun its defensive operations in the Class War by organizing its battalions into Trade Unions, only to discover that it could not retain its winnings without passing them into law, organized itself politically as a Labor Party, and returned enough members to Parliament to change the House of Commons from a chamber in which two capitalist parties, calling themselves Conservative and Liberal, contended for the spoils of office and the honor and glory of governing, to an arena in which the Proletariat and the Proprietariat face each other on a series of questions which are all parts of two main questions: first, whether the national land and capital and industry shall be held and controlled by the nation for the nation, or left in the hands of a small body of private men to do as they please with; second, whilst the capitalist system lasts, which shall be top dog, the provider of capital or the provider of labor. The first is a Socialist question, because until land and capital and the control of industry are in the hands of the Government it cannot equalize the distribution either of the product or of the labor of producing it.

The second is a Trade Unionist question. The Labor Party consists not only of Socialists aiming at equality of income, but of Trade Unionists who have no objection to the continuance of the capitalist method in industry provided that Labor gets the lion’s share. It should be easier to maintain the capitalist system with the proletarians taking the lion’s share, and the landlords, capitalists, and employers reduced to comparative penury, than to maintain it as at present; for the laborers and mechanics and their wives and daughters form about nine-tenths of the nation; and on all accounts it should be safer and steadier to have only one discontented person to every nine contented ones than nine discontented persons to every one contented one. To put it another way, it should be easier for a government supported by nine-tenths of the voters to collect income tax and supertax from landlords and capitalists until they had to sell their country houses and motor cars to their tenants and employees, and live in the gardener’s cottage themselves, than it is for a landlord to collect his rents or a capitalist to find investments on which he can live in luxury. An engineer designing a Forth Bridge, or an architect a cathedral or a palace, can quite easily be reduced to accept less money for his work than the riveters and fitters and masons and bricklayers and painters who carry out the designs. It is true that labor could no more do without them than they could do without labor; but labor would have the advantage in bargaining, because the talented worker, sooner than waste his talent, would rather exercise it for a low wage than fix rivets or pile bricks for a high one. At his own job he will work on any terms for the pleasure of working, and loathe any other job; whilst the reluctant laborer will do nothing for nothing and very little for a halfpenny.

Thus a Trade Unionist Government, with the mass of the people at its back, could, by ruthless taxation of unearned incomes, by Factory Acts, by Wages Boards fixing wages, by Commissions fixing prices, by using the income tax to subsidize trades in which wages were low (all of these devices are already established in parliamentary practice) could redistribute the national income in such a way that the present rich would become the poor, and the laborer would be cock of the walk. What is more, that arrangement would be much more stable than the present state of affairs in which the many are poor and the few rich. The only threat to its permanence would come from the owners of property refusing to go on collecting rent and interest merely to have it nearly all seized by the tax collector. If you have a thousand a year and a turn for business, you must sometimes feel that you are really only collecting money for the Government at a commission of seventy per cent or thereabouts. Suppose the commission were reduced to twenty-five per cent, what could you do but pay £750 out of your thousand as helplessly as you now pay £250? Just as the owners of property, when they controlled Parliament, used their power to extort the utmost farthing from Labor, Labor can and probably will use its power to extort the utmost farthing from Property unless equal distribution for all is made a fundamental constitutional dogma. At present the propertied classes are looking to capitalist Trade Unions to save them from Socialism. The time is coming when they will clamor for Socialism to save them from capitalist Trade Unionism: that is, from Capitalized Labor. Already in America Trade Unionism is combining with Big Business to squeeze the sleeping partner. More of that later on.

51

DOMESTIC CAPITAL

After talking so long about Capitalism in the lump, let us take a few chapters off to examine it as it affects you personally if you happen to be a lady with a little capital of your own: one who, after living in the style customary in her class, still has some money to spare to use as capital so as to increase her income. I will begin by the simple case of a woman earning money, not as an employer, but by her own work.

Let us assume that her work involves doing sums (she is an accountant), or writing (she is an author or scrivener), or visiting clients instead of waiting in an office to receive them (she is a doctor). It is evident that if she can spare money enough to buy an adding-machine which will enable her to do the work of three ordinary bookkeepers, or a sewing-machine, or a typewriter, or a bicycle, or a motor car, as the case may be, the machine will enable her to get through so much more work every day that she will be able to earn more money with them than without them. The machine will be carelessly called her capital (most people muddle themselves with that mistake when they discuss economics); but the capital was the money saved to pay for the machine, and as it was eaten up by the workers who made the machine, it no longer exists. What does exist is the machine, which is continually wearing out, and can never be sold secondhand for its price when new. Its value falls from year to year until it falls to nothing but the value of the old iron of which it is made.

Now suppose she marries, thus changing her profession for that of wife, mother, housekeeper, and so forth! Or suppose that the introduction of an electric tram service, and the appearance of plenty of taxis in the streets, enable her to do all the travelling she wants as well and more cheaply than her private car! What is she to do with her adding-machine or sewing-machine, her typewriter or her car? She cannot eat them or wear them on her back. The adding-machine will not iron shirt fronts: the sewing-machine will not fry eggs: the typewriter will not dust the furniture: the motor car, for all its marvels, will not wash the baby.

If you shew what I have just written to the sort of male who calls himself a practical business man, he will at once say that I am childishly wrong: that you _can_ eat an adding-or sewing-machine; dust the furniture with a typewriter; and wash a hundred babies with a motor car. All you have to do is to sell the sewing-machine and buy food with the price you get for it; sell the typewriter and buy a vacuum cleaner; sell the motor car and hire a few nurses after buying a bath and soap and towels. And he will be so far right that you certainly can do all these things _provided too many other people are not trying to do them at the same time_. It is because the practical business man always forgets this proviso that he is such a hopeless idiot politically. When you have sold the sewing-machine and bought food with the price, you have not really turned the sewing-machine into food. The sewing-machine remains as uneatable as ever: not even an ostrich could get a tooth into it or digest it afterwards. What has happened is that you, finding yourself with a sewing-machine which you no longer want, and being in want of food, find some other woman who has some spare food which she does not want, but who wants a sewing-machine. You have a sewing-machine for which you have no use, and an unsatisfied appetite. She has food for which she has no appetite, and wants a sewing-machine. So you two make an exchange: and there you are! Nothing could be simpler.

But please remark that it takes two to make the bargain, and that the two must want opposite things. If they both want the same thing, or want to get rid of the same thing, there will be no deal. Now suppose the Chancellor of the Exchequer took it into his head as a practical business man to raise money by a tax on capital instead of on income. Suppose he were to say that as thousands of women have capital in the form of sewing-machines which they can sell for, say, £5 apiece, they can each afford to pay a tax of £3. Suppose he actually induced the House of Commons to impose such a tax under the title of a Capital Levy or some such practical business nonsense, and that every woman had to sell her sewing-machine to pay the tax! What would be the result? Each woman trying to sell her machine would find all the other women trying to sell their machines too, and nobody wanting to buy them. She could sell it as old iron for a shilling perhaps, but that would not enable her to pay the tax. The tax collector, not being paid, would distrain on her goods: that is, he would seize the sewing-machine. But as he also could not sell it, he would have to hand it over unsold to the Chancellor of the Exchequer, who would find himself heaped up with thousands of unsellable sewing-machines instead of the thousands of pounds he was looking forward to. He would have no money; and the women would have no sewing-machines: all because the practical business men told him that sewing-machines could be turned into bread.

If you consider this a little you will see that the difference between private affairs and State affairs is that private affairs are what people can do by themselves, one at a time and once in a way, whereas State affairs are what we are all made to do by law at the same moment. At home you are a private woman dealing with your own private affairs; but if you go into Parliament and perhaps into the Cabinet, you become a stateswoman. As a private woman all you have to consider is, “Suppose I were to do this or that”. But as a stateswoman you must consider “Suppose everybody had to do this or that”. This is called the Kantian test.

For instance, if you become Chancellor of the Exchequer, your common sense as a private woman will save you from such a folly as supposing that a sewing-machine in the house is the same as £5 in the house. But that very same private common sense of yours may persuade you that an income of £5 a year is the same as £100 ready money, because you know that if you want £100 your stockbroker can get it for you in exchange for £5 a year of your income. You might therefore be tempted to lay a tax of £30 on everyone with £5 a year, and imagine that you would not only get the £30, but that the taxpayer would have £70 left to go on with. Let me therefore explain the nature of this business of £5 a year being worth £100 cash to you privately, and worth just £5 a year to the Chancellor publicly and not a rap more.

When we were dealing with the impossibility of saving I pointed out that there are certain everyday transactions that are like saving and that are called saving, very much as selling a sewing-machine and buying food with the price may be called eating the sewing-machine. Do not bother to try to remember this now: it is easier to go over it again. Suppose you have £100 and you wish to save it: that is, to consume it at some future time instead of immediately! The objection is that as the things the money represents will rot unless they are used at once, what you want to do is impossible. But suppose there is in the next street a woman who has been left by the death of her parents with nothing but an income of £5 a year. Evidently she cannot live on that. But if she had £100 in ready money she could emigrate, or set up a typewriting office, or stock a little shop, or take lessons in some moneymaking art, or buy some smart clothes to improve her chances of getting respectable employment, or any of the things that poor women imagine they could do if only they had a little ready money. Now nothing is easier than for you to make an exchange with this woman. She gives you her right to take £5 every year fresh-and-fresh out of each year’s harvest as it comes; and you give her your hundred pounds to spend at once. Your stockbroker or banker will bring you together. You go to him and say that you want him to invest your £100 for you at five per cent; and she goes to him and says that she wants to sell her £5 a year for ready money. He effects the change for a small commission. But the transaction is disguised under such fantastic names (like the water and breadcrumb in doctors’ prescriptions) that neither you nor the other woman understands what has really happened. You are said to have invested £100, and to be “worth” £100, and to have added £100 to the capital of the country: and she is said to have “realized her capital”. But all that has actually occurred is that your £100 has been handed over to be spent and done for by the other woman, and that you are left with the right to take £5 out of the income of the country without working for it year after year for ever, or until you in your turn sell that right for £100 down if you should unhappily find yourself in the same predicament as the other lady was in when you bought it.

Now suppose you brought in your tax of £30 on every £5 a year in the country! Or suppose a Conservative Government, led by the nose by practical business men who know by experience that people who have £5 a year can sell it for £100 whenever they want to, were to do it! Or suppose a Labor Government, misled by the desire to take capital out of private hands and vest it in the State, were to do it! They would call it a levy of thirty per cent on capital; and most of them would vote for it without understanding what it really meant. Its opponents would vote against it in equal ignorance of its nature; so that their arguments would convince nobody. What would happen? Evidently no woman could pay £30 out of £5 a year. She would have to sell the £5 a year for £100, and then reinvest the odd £70. But she would not get the £100 because, as the tax would not fall on her alone, but on all the other capitalists as well, her stockbroker would find everybody asking him to sell future incomes for ready money and nobody offering ready money for future incomes. It would be the story of the sewing-machines over again. She would have to tell the tax collector that she could not pay the tax, and that he might sell her furniture and be damned (intelligent women use recklessly strong language under such circumstances). But the tax collector would reply that her furniture was no good to him; for as he was selling up all the other capitalists’ furniture at the same time, and as only those who were too poor to have any capital to be taxed were buying it, Chippendale chairs were down to a shilling a dozen and dining room tables to five shillings; so that it would cost him more to take her furniture away and sell it or store it than it would fetch. He would have to go away empty handed; and all the Government could do would be to take her £5 a year from her for six years and four months, the odd months being for the interest to pay for waiting. In other words it would find that her income was real, and her capital imaginary.

But even this would not work if the tax were imposed every year, like the income tax, because at the end of the six years she would owe £180, incurring a debt of £30 every year and getting only £5 to pay it with; so that it would be much better for her to give up her £5 a year for ever and support herself entirely by work. And the Government would have to admit that a tax on capital is an impossibility, for the unanswerable reason that the capital has no existence, having been eaten up long ago.

There is a tax on capital actually in existence which is often referred to as proving that such taxes are possible. When we die, taxes called Death Duties (officially Estate Duties) are levied on the fictitious capital value of our estates, if we leave any. The reason people manage to pay them is that we do not all die simultaneously every year on the 5th April and thus incur death duties payable on the following 31st December. We die seldom and slowly, less than twenty out of every thousand of us in one year, and out of that twenty not more than two at the outside have any capital. Their heirs, one would think, would find it easy to sell part of their income for enough ready money to pay the duties, the purchasers being capitalists whose fathers or uncles have not died lately. And yet the Government has to wait for its money often and long. The tax is a stupid one, not because it confiscates property by making the State inherit part of it (why not?) but because it operates cruelly and unfairly. One estate, passing by death from heir to heir three times in a century, will hardly feel the duties. Another, passing three times in one year (as happens easily during a war), is wiped out by them, and the heirs reduced from affluence to destitution. When you make your will, be careful how you leave valuable objects to poor people. If they keep them they may have to pay more for them in death duties than they can afford. Probably they will have to sell them to pay the duty.

This is so little understood, that men not otherwise mad are found estimating the capital of the country at sums varying from ten thousand millions before the war to thirty thousand millions after it (as if the war had made the country richer instead of poorer), and actually proposing in the House of Commons to tax that thirty thousand millions as available existing wealth and to pay off the cost of the war with it. They all know that you cannot eat your cake and have it too; yet, because we have spent seven thousand millions on a frightful war, and, as they calculate, twenty thousand millions more on mines and railways and factory plant and so on, and because these sums are written down in the books of the Bank of England and the balance sheets of the Companies and Trusts, they think they still exist, and that we are an enormously rich nation instead of being, as anyone can see by the condition of nine-tenths of the population, a disgracefully poor one.

52

THE MONEY MARKET

And now, still assuming that you are a lady of some means, perhaps I can be a little useful to you in your private affairs if I explain that mysterious institution where your investments are made for you, called the Money Market, with its chronic ailment of Fluctuations that may at any moment increase your income pleasantly without any trouble to you, or swallow it up and ruin you in ways that a man can never make a woman understand because he does not understand them himself.

A market for the purchase and sale of money is nonsense on the face of it. You can say reasonably “I want five shillingsworth of salmon”; but it is ridiculous to say “I want five shillingsworth of money”. Five shillingsworth of money is just five shillings; and who wants to exchange five shillings for five shillings? Nobody buys money for money except money changers, who buy foreign coins and notes to sell to you when you are going abroad.

But though nobody in England wants to buy English money, we often want to hire it, or, as we say, to borrow it. Borrow and hire, however, do not always mean the same thing. You may borrow your neighbor’s frying-pan, and return it to her later on with a thank you kindly. But in the money market there is no kindness: you pay for what you get, and charge for what you give, as a matter of business. And it is quite understood that what you hire you do not give back: you consume it at once. If you ask your neighbor to lend you, not a frying-pan, but a loaf of bread and a candle, it is understood that you eat the bread and burn the candle, and repay her later on by giving her a fresh loaf and a new candle. Now when you borrow money you are really borrowing what it will buy: that is, bread and candles and material things of all sorts for immediate consumption. If you borrow a shilling you borrow it because you want to buy a shillingsworth of something to use at once. You cannot pay that something back: all you can do is to make something new or do some service that you can get paid a shilling for, and pay with that shilling. (You can, of course, borrow another shilling from someone else, or beg it or steal it; but that would not be a ladylike transaction.) At all events, not until you pay can the lender consume the things that the shilling represents. If you pay her anything additional for waiting you are really hiring the use of the money from her.

In that case you are under no obligation to her whatever, because you are doing her as great a service as she is doing you. You may not see this at first; but just consider. All money that is lent is necessarily spare money, because people cannot afford to lend money until they have spent enough of it to support themselves. Now this spare money is only a sort of handy title deed to spare things, mostly food, which will rot and perish unless they are consumed immediately. If your neighbor has a loaf left over from her week’s household supply you are doing her a service in eating it for her and promising to give her a fresh loaf next week. In fact a woman who found herself with a tenpenny loaf on her hands over and above what her family needed to eat, might, sooner than throw the loaf into the dustbin, say to her neighbor, “You can have this loaf if you will give me half a fresh loaf for it next week”: that is to say, she might offer half the loaf for the service of saving her from the total loss of it by natural decay.

The economists call this paying negative interest. What it means is that you pay people to keep your spare money for you until you want it instead of making them pay you for allowing them to keep it, which the economists call paying positive interest. One is just as natural as the other; and the sole reason why nobody at present will pay you to borrow from them, whereas everyone will pay you to lend to them, is that under our system of unequal division of income there are so very few of us with spare money to lend, and so very many with less than they need for immediate consumption, that there are always plenty of people offering not only to spend the spare money at once, but to replace it later on in full with fresh goods and pay the lenders for waiting into the bargain. The economists used to call this payment the reward of abstinence, which was silly, as people do not need to be rewarded for abstaining from eating a second dinner, or from wearing six suits of clothes at a time, or living in a dozen houses: on the contrary, they ought to be extremely obliged to anyone who will use these superfluities for them and pay them something as well. If instead of having a few rich amid a great many poor, we had a great many rich, the bankers would charge you a high price for keeping your money; and the epitaph of the dead knight in Watts’s picture, “What I saved I lost”, would be true materially as well as spiritually. If you then had £100 to spare, and wanted to save it until next year, and took it to the manager of your bank to keep it for you, he would say “I am sorry, madam; but your hundred pounds will not keep. The best I can do for you is to promise you seventy pounds next year (or fifty, or twenty, or five, as the case might be); and you are very fortunate to be able to get that with so much spare money lying about. You had really much better not save. Increase your expenditure; and enjoy your money before what it represents goes rotten. Banking is not what it was.”

This cannot happen under Capitalism, because Capitalism distributes the national income in such a way that the many are poor and the few enormously rich. Therefore for the present you may count on being able to lend (invest) all your spare money, and on being paid so much a year for waiting until the borrower replaces what you have lent. The payment for waiting is called interest, or, in the Bible, usury. Interest is the polite word. The borrower, in short, hires the use of your spare money from you; and there is nothing dishonest nor dishonorable in the transaction. You hand over your spare ready money (your capital) to the borrower; and the borrower binds herself to pay you a certain yearly or monthly or weekly income until she repays it to you in full.

The money market is the place in the city where yearly incomes are bought for lump sums of spare ready money. The income you can buy for £100 (which is the measuring figure) varies from day to day, according to the plenty or scarcity of spare money offered for hire and of incomes offered for sale. It varies also according to the security of the income and the chances of its fluctuating from year to year. When you take your spare £100 to your stockbroker to invest for you (that is, to hire out for an income in the money market) he can, at the moment when I write these lines (1926) get you £4: 10s. a year certain, £6 a year with the chance of its rising or falling, or £10 a year and upwards if you will take a sporting chance of never receiving anything at all.

The poor do not meddle with this official money market, because the only security they can give when borrowing ready money from anyone but the pawnbroker is their promise to pay so much a week out of their earnings. This being much more uncertain than a share certificate or a lease of land, they have to pay comparatively prodigious prices. For instance, a poor working woman can hire a shilling for a penny a week. This is the usual rate; and it seems quite reasonable to very poor people; but it is more than eighty-six times as much as the Government pays for the hire of money. It means paying at the rate of £433: 10s. a year for the use of £100, or, as we say, interest at 433½ per cent: a rate no rich man would dream of paying. The poorer you are the more you pay, because the risk of your failing to pay is greater. Therefore when you see in the paper that the price of hiring money has been fixed by the Bank of England (that is why it is called the Bank Rate) at five per cent, or reduced to four-and-a-half per cent, or raised to six per cent, or what not, you must not suppose that you or anyone else can hire money at that rate: it means only that those who are practically certain to be able to pay, like the Government or the great financiers and business houses, can borrow from the banks at that rate. In their case the rate changes not according to any risk of their being unable to pay, but according to the quantity of spare money available for lending. And no matter how low the rate falls, the charwoman still has to pay 433½ per cent, partly because the risk of her being unable to pay is great, partly because the expense of lending money by shillings and collecting the interest every week is much greater than the expense of lending it by millions and collecting the interest every six months, and partly because the charwoman is ignorant and helpless and does not know that the slum usurer, whom she regards as her best friend in need, is charging her anything more than a millionaire is charged.

The price of money varies also according to the purpose for which it is borrowed. You are, I hope, concerned with the money market as a lender rather than as a borrower. Do not be startled at the notion of being a moneylender (not, I repeat, that there is anything dishonorable in it): nobody will call your investments loans. But they are loans for all that. Only, they are loans made, not to individuals, but to joint stock companies on special conditions. The business people in the city are always forming these companies and asking you to lend them money to start some big business undertaking, which may be a shop in the next street, or a motor bus service along it, or a tunnel through the Andes, or a harbor in the Pacific, or a gold mine in Peru, or a rubber plantation in Malaya, or any mortal enterprise out of which they think they can make money. But they do not borrow on the simple condition that they pay you for the hire of the money until they pay it back. Their offer is that when the business is set up it shall belong to you and to all your fellow lenders (called shareholders); so that when it begins to make money the profits will be distributed among you all in proportion to the amount each of you has lent. On the other hand, if it makes no profits you lose your money. Your only consolation is that you can lose no more. You cannot be called on to pay the Company’s debts if it has spent more than you lent it. Your liability is limited, as they say.

This is a chancy business; and to encourage you if you are timid (or shall we say cautious?) these companies may ask you to lend your spare money to them at the fixed rate of, say, six or seven per cent, on the understanding that this is to be paid before any of the ordinary lenders get anything, but that you will get nothing more no matter how big the profits may be. If you accept this offer you are said to have debentures or preference shares in the company; and the others are said to have ordinary shares. There are a few varieties both of preference and ordinary shares; but they are all ways of hiring spare money: the only difference is in the conditions on which you are invited to provide it.

When you have taken a share, and it is bringing you in an income, you can at any time, if you are pressed for ready money, sell your share for what it may be worth in the money market to somebody who has spare money and wants to “save” it by exchanging it for an income. The department of the money market in which shares are bought and sold in this way is called the Stock Exchange. To sell a share you have to employ an agent (called a stockbroker), who takes your share to the Exchange and asks another agent (called a stockjobber) to “make him a price”: It is the jobber’s business to know what the share is worth, according to the prospects of the company, the quantity of spare money being offered for incomes, and the number of income producing shares being offered for sale. Never speak disrespectfully of stockjobbers: they are very important people, and consider themselves greater masters of the money business than the stockbrokers.

The legitimate business of the Stock Exchange is this selling and buying of shares in companies already established. It is largely occupied also with a curious game called speculation, in which phantom prices are offered for imaginary shares; but for the moment let us keep to the point that the shares dealt in are practically all in established companies, because what is nationally important is the application of spare money, not to the purchase of shares in old companies, but to the foundation of new ones, or at least to the extension of the plant and operations of the old ones. Now the business done on the Stock Exchange is no index to this, and indeed may have nothing to do with it. Suppose, for example, that you have £50,000 to spare, and you invest it all in railway shares! You will not by doing so create a single yard of railway, nor cause a single additional train to be run, nor even supply an existing train with an extra footwarmer. Your money will have no effect whatever on the railways. All that will happen is that your name will be substituted for some other name or names in the list of shareholders, and that for the future you will get the income the owners of those names would get if they had not sold their shares to you. Also, of course, that they will get your £50,000 to do what they like with. They may spend it on the gambling tables at Monte Carlo, or on the British turf; or they may present it to the funds of the Labor Party. You may disapprove strongly of gambling; and you may have a horror of the Labor Party. You may say “If I had thought this was going to happen to my money, I would have bought shares privately from some persons whose principles were well known to me and whom I could trust not to spend it foolishly instead of from that wicked stockjobber who has no more conscience than a cash register, and does not care what becomes of my money”. But your protest will be vain. In practice you will find that you must buy your shares in established companies on the Stock Exchange; that your money will never go into the company whose shares you buy; and that its real destination will be entirely beyond your control. A day’s work on the Stock Exchange, nominally a most gratifying addition of hundreds of thousands of pounds of spare money to the industrial capital of the country, may be really a waste of them in extravagant luxury, or ruinous vice, to say nothing of the possibility of their being sent abroad to establish some foreign business which will capture the business of the company whose shares you have bought, and thus reduce you to indigence.