VI。THEWAGE-FUND
Thisdoctrineledtooneofthestrangestofcontroversialcatastrophes。Inhischapterupon’wages’96*Millhadbegunwithanunluckyparagraph。Heintroducedtheword’wage-fund’todescribethesumsspentin’thedirectpurchaseoflabour’；andstatedthatwagesnecessarilydependedupontheproportionofthisfundtothelabouringpopulation。ThisdoctrinewasassailedbyThorntonin1869。97*Mill，reviewingThornton，astonishedthefaithfulbyacompleterecantation；and，thoughadiscipleortwo——especiallyCairnesandFawcett——continuedtoupholdthedoctrine，orwhattheytooktobethedoctrine，politicaleconomistshaveeversincebeenconfutingit，ortreatingitastooridiculousforconfutation。Ifwearetoassumethatthewage-fundwasatonceanessentialpropositionoftheold’classical’economyandapalpablefallacy，thewholestructurecollapses。Thekeystoneofthearchhascrumbled。Nor，again，isitdoubtfulthatthiscatastrophemarkedacriticalchangeinthespiritandmethodsofpoliticaleconomy。Andyet，whentheactualdiscussionisconsidered，itseemsstrangethatitshouldhavehadsuchimportance。Whatwasthis’wage-fundtheory’？TheanswerisgenerallygivenbyquotingthepassagealreadymentionedfromM’Culloch，aparagraphfromMill，andFawcett’sreproductionofMill。Mill’ssentences，saysProfessorTaussig，’containallthatheeversaiddirectlyandexplicitlyonthetheoryofthewage-fund。’98*Itisstrangethatsovitalapointshouldhavebeensobrieflyindicated。ThenMill’sablestfollower，Cairnes，declaresthatthoughhehadlearnedpoliticaleconomyfromMill，hehadneverunderstoodthewage-fundtheoryinthesensewhichThorntonputuponitandwhichMillaccepted。99*ButforMill’sadmission，hesays，hewould’haveconfidentlyasserted’thatnotonlynoeconomistbut’noreasonablebeing’hadeverassertedthedoctrine。Wearelefttodoubtwhetheritbereallyacorner-stoneofthewholesystemoranaccidentalsuperstructurewhichhadreallynogreatimportance。Atanyrateitwasratherassumedthanasserted；andyetissocloselyconnectedwiththesystemthatImusttrytoindicatethemainissue。
Inthefirstplace，the’wage-fund’isMill’sequivalentforAdamSmith’s’fundwhichisdestinedforthemaintenanceofservants’；100*andMill，again，startsfromapropositioninheritedfromSmith。’Industry，’hesays，’islimitedbycapital’——adoctrine，asheadds，perfectlyobviousthoughconstantlyneglected。101*Undoubtedlyanindustrialarmyrequiresitscommissariat：itsfood，clothes，andweapons。Itsveryexistencepresupposesanaccumulationofsuchsuppliesinordertothedischargeofitsfunctions。AmoredoubtfulassumptionisstatedbyAdamSmith。’Thedemand，’hesays，102*
’forthosewholivebywagesnaturallyincreaseswiththeincreaseofnationalwealth，andcannotpossiblyincreasewithoutit。’Thegrowthofthenationalwealth，thatis，’naturally’
involvesthegrowthofthewealthofeveryclass。Machineryincreasestheefficiencyoflabourandthereforeincreasesthepoweratleastofsupportinglabourers。Moreover，inthelongrun，andgenerallyatthemoment，thispowerwillcertainlybeexercised。103*Theinterestsofthecapitalistwillleadhimtosupportmorelabourers。Theidentityofinterestbetweentheclassesconcernedmightthusbetakenforgranted。Hence，wemaytrusttothespontaneousor’natural’orderofthingstobringtoallclassesthebenefitofimprovedindustrialmethods。Thisnaturalorder，again，includingtherateofwages，isunderstoodtoimply，atleast，theabsenceofstateinterference。Politicalrulersmustnottamperwiththeindustrialmechanism。Itwillspontaneouslyworkouttheprosperityofthewholenationandofeachclass。Lefttoitselftheindustrialorganismgeneratesthoseeconomicharmoniesuponwhichtheoptimistdelightedtodwell。’Natural’seemstotakethesenseof’providential。’The’economicharmonies’are，liketheharmoniesperceivedbyPaleyortheBridgewaterTreatisewritersinexternalnature，somanyproofsofthedivinebenevolence；anyattempttointerferewiththemcouldonlyleadtodisaster。Toshowindetailthemischiefsinvolved，toexposethecharlatanswhoseschemesimpliedsuchinterference，wasthegrandaimofmosteconomists。Mill，asweshallsee，wasveryfarfromacceptingthisviewwithoutqualification。HethoughtwiththeUtilitariansgenerallythatthe’sovereign’hadenormouspowers，andmoreoverwasboundtoapplythemfortheredressofsocialevils。Society，heheld，wasfullofinjustice。Lawsaggravatedmanyevilsandcouldsuppressothers。Stillthenormalfunctionofgovernmentistopreventviolence，seefairplay，andenforcevoluntarycontracts。Whenitexceedsthesefunctions，andtriesbysheerforcetoobtainresultswithoutconsideringthemeans，itmaydoinfinitemischief。Itactslikeanignorantmechanic，whoviolentlymovesthehandsoftheclockwithoutregardtothemechanism。ErroneousconceptionsoftheverynatureofthemachineryhadledtothepestilentfallacieswhichSmithandhissuccessorshadbeenlabouringtoconfute。Thefree-traders104*hadoftentoexposeonesophistrywhichdeludedthevulgar。Itsessenceis，asMillputsit，thatweattendtoonehalfofthephenomenonandoverlooktheother。105*Theprotectionistthinksoftheproducerandforgetstheconsumer。Halfthepopularfallaciesimplythefailuretotakeintoaccountalltheactionsandreactionswhichareimpliedbyagivenchange。Theprocessesbywhichindustryadaptsitselftovaryingconditions——
compensatingforanebbinonequarterbyaflowinanother——ismistakenforachangeinthewholevolume。Fromtheneglecttotraceoutthemoreremote，thoughnecessaryconsequences，allmannerofabsurddoctrineshadarisen。Thedoctrineof’gluts’
and’over-production’confoundedthecaseofaproductionofthewrongthingswithanexcessofproductioningeneral。Improvedmachinerywassupposednotmerelytodisplaceoneclassoflabourersforatime，buttosupersede’labour’ingeneral。Weshouldforbidthesubstitutionofpower-loomsandsteam-ploughsforhand-weavingandspades，ortrytoincreasewealthbydeprivingworkmenoftheirtools。Astrangeconfusionofideasisinvolved。People，saidWhately，106*askfor’work’whenwhattheywantisreally’wages。’Theyassumethatbecausemorelabourisrequired，morewageswillbeforthcoming。ThefireofLondon，asMandevilleobserved，wasanexcellentthingforthebuilders。
Iftheirwageshadsimplydroppedoutoftheskies，itmighthavebeengoodforeverybody。So，again，Millhastolabourthepoint107*thatsocietydoesnotgainbyunproductiveexpenditure，thatis，bythesupportofhorsesandhounds，butby’production’；thatis，byexpenditureonminesandrailways。Helaysdownaprinciplewhich，hesays，ismostfrequentlyoverlooked，that，demandforcommoditiesisnotdemandforlabour。’Hisdoctrinehasbeenridiculedandtreatedasparadoxical。Itimpliesatanyrateanimportantdistinction。Itisintendedtodrawthelinebetweenchangeswhichmerelymeanthatadifferentemploymentisbeingfoundforlabourers，andchangeswhichmeanthatagreatersumisbeingdevotedtothesupportoflabourersingeneral。108*Theargumentagainstsuchfallaciesmightnaturallybesummedupbysayingthattherealpointtobeconsideredwastheeffectofanychangeuponthe’wage-fund。’Theerror，commontoall，istheconfusionbetweenthesuperficialandthemorefundamental——thefunctional，wemaysay，andtheorganicchanges。Theyareexposedbytracingthesecondaryresults，whichhavebeenoverlookedinattendingtothemorepalpablebutlessconspicuouspartofthephenomenon。Thenweseethatsomechangesimplynotachangeinthequantityoflaboursupported；onlyaredistributionoftheparticularenergies。Theydonotaffectthe’wage-fund。’Thephrasewasusefulasemphasisingthispoint；anduseful，thoughitmightbeinsomesenseatruism。Truismsarerequiredsolongasself-contradictorypropositionsareaccepted。Butafurtherproblemissuggested。What，afterall，isthewage-fund？Whatdeterminesitsamount？Ifthisorthatphenomenondoesnotimplyachangeinthefund，whatdoesimplyachange，andwhatareitslaws？Tothisweget，inthefirstplace，theoldMalthusiananswer。Whateverthefundmaypreciselybe，theshareofeachmanwillbedeterminedbythewholenumberdependinguponit。Thisisobviouslytrue，butdoesnotanswerthequestion，Whatactuallyfixesthesumtobedivided？Thatproblemseemstodropoutofsightortobetakenassomehowimplicitlyanswered。Theanswershould，however，beindicatedbyMill’streatmentofthemostimportantcases。
Thedistributionproblem，madeprominentbyRicardo，wasemphasisedbycontroversiesoverthepoor-laworthefactoryactsandtrades-unionism。Theeconomistshadbeenconstantlyendeavouringtoexposequackremediesforpoverty。Theoldattemptstoregulatewagesbydirectlegislationhadbeentoolongdiscreditedtobeworthpowderandshot。Mill，indiscussing’popularremediesforlowwages，’109*arguesthatcompetition’distributesthewholewage-fundamongthewholelabouringpopulation。’Ifwageswerebelowthepointatwhichthishappenstherewouldbe’unemployedcapital’；capitalistswouldthereforecompeteandwageswouldberaised。If，ontheotherhand，lawor’opinion’fixeswagesabovethepoint，somelabourerswillbeunemployed，orthe’wage-fund’mustbeforciblyincreased。
’Popularsentiment，’however，claimedthat’reasonablewages’
shouldbefoundforeverybody。Nobody，hesays，wouldsupportaproposaltothiseffectmorestrenuouslythanhehimself，weretheclaimmadeonbehalfoftheexistinggeneration。110*Butwhentheclaimextendstoallwhomthatgenerationoritsdescendantschooses’tocallintoexistence’thecaseisaltered。
Theresultwouldbethatthepoor-ratewouldswallowupthewholenationalincome，andthechecktopopulationbeannihilated。
Here，again，insteadofhearingclearlywhyorhowthewage-fundisfixed，weareatoncereferredtoMalthus。Thefactorylegislationsuggeststhesamequestion。Therigideconomistshadmaintainedthathereagaintheattempttointerferemustbeinjurious。Itwouldhamperthegrowthofcapital，andthereforeinjurethosedependentuponcapital。Milltreatsthecasewithremarkablebrevity。Heapparentlyregardedthewholemovementassavouringofquackery。Buthediscussesthequestionbrieflyfromthemoralpointofview。Children，hesays，shouldofcoursebeprotectedfromoverwork，forintheircase，freedomofcontractisbutanotherwordforfreedomofcoercion。’111*Women，henotes，areprotectedbythefactoryacts；butthisisonlyexcusable，ifexcusableatall，because，asthingsnoware，womenareslaves。Iftheywerefree，itwouldbetyrannicaltolimittheirlabour。Theoldpoliticaleconomystillsuffices。Meanwhiletheproblemwascomingupinothershapes。TheUtilitarianshavebeenactiveinprocuringtherepealofthelawsagainstcombination。Theyhadthought，indeed，thattheworkmen，oncesetfree，wouldfindcombinationneedless，andwouldlearntoactbymeansofindividualcompetition。Trades-unionism，onthecontrary，haddeveloped，andwasproducinglongandobstinatestruggleswiththecapitalist。Werethesestrugglesattemptstointerferewitha’natural’order？Weretheywastefulmodesofattemptingtosecureashareofthe’wage-fund’whichwouldcometotheminanycasebythespontaneousplayoftheindustrialmachinery？Socialistswerebeginningtodeclarethatinsteadofanidentitytherewasaradicaloppositionofinterests。Theanswermadebyorthodoxeconomistsimpliessomewage-fundtheory。Theywerenevertiredofdeclaringthatallattemptstoraisewagesbycombinationwerefallacious。Thestrugglewasalwayscostly，and，evenifsuccessful，couldonlybenefitonesectionofworkmenattheexpenseofothers。Whatpreciseassumptionmightunderliethisdoctrineisanotherquestionnotsoeasilyanswered。Itistakenforgrantedthatthereisadefinitefund，suchthatnostrugglingcanwringmorefromthecapitalist；andalltheruggingandrivingoflabourersandunionscanonlysucceedinonebodygettingalargershareoutofthemouthoftheothers。Mill’sfinalviewseemstobegiveninhisdiscussionoferroneousmethodsofgovernmentinterference。Legislationagainstcombinationstoraisewagesismostvigorouslycondemned。112*Thedesiretokeepwagesdownshows’theinfernalspiritoftheslave-master，’thoughtheefforttoraisethembeyondafixedlimitisdoomedtofailure。Weoughttorejoiceifcombinationcouldreallyraisetherateofwages；andifallworkmencouldcombinesucharesultmightbepossible。Buteventhentheycouldnotobtainhigherwagesthantheratefixedby’supplyanddemand’——theratewhichdistributesthe’wholecirculatingcapitalofthecountryamongthelabouringpopulation。’113*Combinationsaresuccessfulattimes，butonlyforsmallbodies。Thegeneralrateofwagescanbeaffectedbynothingbutthe’generalrequirementsofthelabouringpeople。’