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In describing the doctrines of Socialism I do not mean to state in detail the whole of the Socialistic theories. Such a statement would fill a volume, it would be excessively tedious to most readers, and it is for all practical purposes quite unnecessary. A statement of the leading doctrines on which the activity of the Socialists is based—the doctrines which are constantly asserted and which are the fundamental dogmas of the Socialist faith—will enable us to obtain a clear view of the foundations upon which the theoretic fabric of Socialism is built, and to judge whether that foundation is scientific and sound, or unscientific and unsound.

The basic doctrine of Socialism, upon which the great edifice of Socialistic theory has been reared, may be summed up in the phrase

"Labour is the only Source of Wealth"

Therefore we read in the celebrated pamphlet "Facts for Socialists," of which some important extracts were given in the preceding chapter: "Commodities are produced solely by the 'efforts and sacrifices' (Cairns), whether of muscle or of brain, of the working portion of the community, employed upon the gifts of Nature. Adam Smith 'showed that labour is the only source of wealth. … It is to labour, therefore, and to labour only, that man owes everything possessed of exchangeable value (McCulloch's 'Principles of Political Economy,' Part II., section 1). 'No wealth whatever can be produced without labour' (Professor Henry Fawcett (Cambridge), 'Manual of Political Economy,' p. 13),"[151]

This statement is scarcely honest, for it quotes opinions of Adam Smith and others which are erroneous, as will be seen in the following, and which have been generally abandoned. This statement may impose upon the simple by its show of learning, but it is somewhat vague, for it only suggests, but does not distinctly assert, that manual labour is the only source of wealth. However, in most—one might say in nearly all—Socialist books, pamphlets, and declarations of policy we find the basic doctrine of Socialism asserted in a form which leaves no doubt that according to the Socialist theories the manual labour of the labourer is the only source of wealth.

The founder of modern Socialism declared, "Labour is the only source of wealth,"[152] and his disciples—at least his British disciples—support that declaration. "All wealth is due to labour; therefore, to the labourers all wealth is due."[153] "Labour applied to natural objects is the source of all wealth."[154] The Socialist Party of Great Britain declares: "Wealth is natural material converted by labour-power to man's use, and as such is consequently produced by the working class alone."[155] The Independent Labour party asserts: "No man or class of men made the first kind of wealth, such as land, minerals, and water. Therefore no man or class of men should be allowed to call these things their own, or to prevent others from using them (except on certain conditions), as the landowners and mine-owners do now. The only class of human beings who make the second kind of wealth are the workers. Working men and women produce and prepare for us all those things which we use or consume, such as food, clothing, houses, furniture, instruments and implements, trams, railways, pictures, books, gas, drains, and many other things. They produce all the wealth obtained by toil from the land."[156]

Those who maintain that labour, or, as some Socialists assert, the labourer's labour, is the only source of wealth, look merely at the mechanical factor, but omit the force which directs and controls it. The Socialistic argument "We can run the mills without the capitalists, but they cannot run them without us"[157] is misleading. Labour is certainly an indispensable ingredient in production, but it is no more indispensable than is direction, invention, and thrift. Hence it is as absurd to assert "All wealth is due to labour" as to say "All wealth is due to invention," or "All wealth is due to thrift." As the brain is more important than the hand, at least in a highly organised state of production, so invention, organisation, management, and thrift are more important than manual labour, because invention, organisation, management, and thrift alone enable manual labour, working with modern machinery, to be highly productive. In fact, it may be asserted that wealth is created not so much by labour as by the saving of labour. A factory-owner who is dissatisfied with the profits of his factory or with its products does not get better workers, but gets a better manager or better machinery, keeping his workers. This fact proves that labour is the least important factor in modern production. The doctrine "Labour is the only source of wealth" is untenable and absurd.

Another fundamental doctrine of Socialism is that of

"The Iron Law of Wages"

According to that law, "wages under competition can never be higher than that which will just support the labourer and enable him to renew his kind."[158] In the words of Lassalle, the inventor of the Iron Law of Wages, "the wages of the labourer are limited to the exact amount necessary to keep him alive."[159]

The British Socialist writers tell us: "The average price of wage-labour is the minimum wage—i.e. that quantum of the means of subsistence which is absolutely requisite to keep the labourer in bare existence."[160] "The labourer cannot as a rule command more than his cost of subsistence in return for his labour. This principle, that the return to labour is determined by the cost of subsistence of the labourer, is generally known as 'The Iron Law of Wages.' But has not this law been discarded even by some Socialists? There have been attempts in some quarters to demonstrate that this law does not actually operate with the rigidity at first claimed for it; but in truth, it stands as firmly to-day as when insisted upon by Lassalle."[161] "Capitalism always keeps the wages down to the lowest standard of subsistence which the people will accept,"[162] for "the basis of wages is the cost of subsistence of the labourer. This is called the 'Iron Law of Wages.'"[163] "By the Iron Law of Wages the recompense of the workers always tends to the minimum on which they are willing to subsist. If they are content with water to drink and cabbage to eat, they may be sure that the means of buying whisky or roast beef will very soon be taken from them. Messrs. Rentmonger, Interestmonger, and Profitmonger will speedily scent additional swag, and they will have it, too."[164] "The 'Iron Law of Wages' reduces the wages to as near the level of the means of subsistence as local circumstances will admit of."[165] If these arguments were correct it would follow that the workers could cause their wages to rise by drinking wine instead of whisky, and by smoking Havana cigars instead of pipe-tobacco.

This theory of wages is called the "Iron Law of Wages" because of its absolute and pitiless rigidity. For instance, the Iron Law of Wages will prevent lower prices of food benefiting the workman in any way. "If the working class is enabled to buy cheap bread, the operation of the 'Iron Law of Wages' will secure all the advantage for the capitalists, as it did in the days of the saintly Bright, when the corn laws were repealed. Capital is always the same in its effect on the working-class, whether manipulated by an individual capitalist, joint-stock enterprise, municipality, or government, and with each step in concentration the working-class gets relatively less and the master class gets richer, more corrupt, and more bestial, as recent events in Berlin and elsewhere show."[166] The "Iron Law of Wages" is irrefutable and irresistible. "Economists have come to talk about the 'Iron Law of Wages' with as much assurance as if it were an irreversible law of Nature."[167]

The Iron Law of Wages exists chiefly in the imagination of British Socialists. The general wage of British workmen living in towns ranges from, say 18s. to more than 2l. per week, and its amount does not depend on the cost of subsistence, but on the working skill and various other factors. If the Iron Law of Wages were correct, wages would be almost uniform. The Iron Law of Wages can possibly apply only to one small class of workers, the lowest and least skilled labourers, provided that unemployment is so great among them that they abandon collective bargaining and underbid one another down to the level of subsistence. When workers are organised, the Iron Law of Wages does not apply. The level of wages depends, broadly speaking, on supply and demand. Wages rise when two employers run after one workman; wages fall when two workmen run after one employer. An employer who engages a workman does not ask, "How much do you eat?" but "What can you do?" and he proportions the worker's remuneration not to his appetite, but to his ability and his value as a producer. The wages paid to married men and to unmarried men are identical in the same trade. If there was an "Iron Law of Wages," the wages of married men should be about twice as large as those of unmarried men.

The Iron Law of Wages is manifestly absurd. It has therefore been officially abandoned by the German Socialists at the Halle Congress of 1890 "as being scientifically untenable."[168] "German Social Democracy no longer recognises the Iron Law of Wages."[169] The British Socialists have not abandoned it, probably not because they believe it to be scientifically correct—no one can believe that—but because it is a plausible and effective means of poisoning the minds of the people.

As regards the factors which determine wages, one of the foremost Socialist authorities says: "Thoughtful workmen in the staple trades have become convinced by their own experience, no less than by the repeated arguments of the economists, that a rising standard of wages and other conditions of employment must depend ultimately on the productivity of labour, and therefore upon the most efficient and economical use of credit, capital, and capacity."[170] In other words, productivity and profit determine wages, and it is ridiculous that Socialists argue: "Over 90 per cent. of our women do not drink, back horses, smoke, attend football or cricket matches, they do not stop off their work to watch England and Australia play at cricket, and the result is they are paid less wages than men in our factories for doing the same work."[171] Does Councillor Glyde really believe that women's wages would rise as soon as they took to smoking and drinking?