transfer would necessarily have to be effected on terms of adequate compensation to the present owners. We are now leaving questions of equity entirely out of consideration, and regarding only the economic aspects of the question. During the time when the State was engaged in appropriating the instruments of production, there should be no disturbances of a nature to occasion direct distress, and such disturbances would be inevitable where sentence of confiscation was hanging like a sword of Damocles over the head of every capitalist for a number of years. The more it became evident from experience that the danger was real and no mere bogey, the worse would things grow. People would become much less inclined to save, and much more disposed to squander. The properties which the State was to take over would ultimately have got into the most melancholy condition of decay, and habits of neglect and recklessness would have become general and would be slow to disappear.

A State, which meant to become socialist, would have to do one of two things: if it offered no full compensation, it would have to take over the whole production in a very short period of time; if, on the other hand, it meant to take over the various branches of production by degrees, it would be unable to escape the necessity of offering compensation. The former alternative would be impossible, even in such a small country as Holland. The second alternative would, therefore, have to be chosen on purely economic grounds, apart from all considerations of justice. And the compensation would have to be such as would be deemed sufficient by the recipients themselves, otherwise it would fail in its object. It has been suggested that the compensation might be paid in thirty or fifty annuities. Certainly this system, like many another, could be applied; but we must clearly understand that everything which reduced the compensation would diminish the care given to such goods as the State had not yet appropriated. And it would be of the utmost importance that this care should not be relaxed, but should continue unabated up to the very end.

It would of course be possible to create a certain inducement for the owner not to neglect his property, by providing that the number or the amount of the annual payments made by way of compensation should depend upon the state of the property at the time of its transfer to the Government; it is very much to be questioned, however, whether this would prove a sufficient inducement. Every one would compare the actual advantage that accrued from saving the expense of upkeep with the possible disadvantages of the annual

and extension of industry. A socialist régime could not permit the paid-off capitalists to utilize their dividends in this manner, increasing their grip on industry; they would be compelled to spend it in an orgy of consumption. All provision for capital extension would therefore have to come out of what was left of the national dividend. The last state would be worse than the first.

Recognizing this, various socialists have proposed, once the capital has been appropriated, to put on the screws by imposing income, property, and inheritance taxes which will eventually wipe out all obligations against the state. In other words, they would imitate the humanitarian youngster who thoughtfully cuts off the cat's tail an inch at a time, to save it pain. Doubtless there are, within the existing order, great possibilities of extension of such taxes for the furtherance of social reform. Possibly our withers would be unwrung if the socialistic state confiscated the multimillionaire's top hundred million by a progressive tax. But the fortunes of the multimillionaires, spectacular as they are and politically dangerous as they are, form but a small proportion of the total wealth. So soon as the tax came to threaten the confiscation of the small income as well as the great, the matter would again become one of relative physical force.

373. Socialism and Inequality90

BY N. G. PIERSON

Under State socialism, pure and simple, the Government of the country would assume the ownership of the instruments of production. We take it that this end might be achieved in the following manner. Just as at the present it already owns the postal system, just as in certain countries it already owns and works the railways, manufactures cigars and matches, so it might successively assume the ownership, and undertake the working of all factories. and workshops, all means of transport, farms, fisheries, warehouses, and shops. In order to be able to form by degrees a staff of properly qualified officials, the State would have to be careful not to proceed with undue haste. Beginning with those branches of industry, in which no great experience or intelligence was required, it would have to proceed step by step in extending the sphere of its operations, and would have to be content if, at the end of sixty or a hundred years, it had succeeded in bringing the whole of production within that sphere. From this, however, it follows that the

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30 Adapted from Principles of Economics, II, 88-91. Copyright by Macmillan & Co. (1902).

transfer would necessarily have to be effected on terms of adequate compensation to the present owners. We are now leaving questions of equity entirely out of consideration, and regarding only the economic aspects of the question. During the time when the State was engaged in appropriating the instruments of production, there should be no disturbances of a nature to occasion direct distress, and such disturbances would be inevitable where sentence of confiscation was hanging like a sword of Damocles over the head of every capitalist for a number of years. The more it became evident from experience that the danger was real and no mere bogey, the worse would things grow. People would become much less inclined to save, and much more disposed to squander. The properties which the State was to take over would ultimately have got into the most melancholy condition of decay, and habits of neglect and recklessness would have become general and would be slow to disappear.

A State, which meant to become socialist, would have to do one of two things: if it offered no full compensation, it would have to take over the whole production in a very short period of time; if, on the other hand, it meant to take over the various branches of production by degrees, it would be unable to escape the necessity of offering compensation. The former alternative would be impossible, even in such a small country as Holland. The second alternative would, therefore, have to be chosen on purely economic grounds, apart from all considerations of justice. And the compensation would have to be such as would be deemed sufficient by the recipients themselves, otherwise it would fail in its object. It has been suggested that the compensation might be paid in thirty or fifty annuities. Certainly this system, like many another, could be applied; but we must clearly understand that everything which reduced the compensation would diminish the care given to such goods as the State had not yet appropriated. And it would be of the utmost importance that this care should not be relaxed, but should continue unabated up to the very end.

It would of course be possible to create a certain inducement for the owner not to neglect his property, by providing that the number or the amount of the annual payments made by way of compensation should depend upon the state of the property at the time of its transfer to the Government; it is very much to be questioned, however, whether this would prove a sufficient inducement. Every one would compare the actual advantage that accrued from saving the expense of upkeep with the possible disadvantages of the annual

payment system, and it is easy to judge what the result of the comparison would be in most cases; more especially if the payments took a form which did not commend itself to the owner, or if there were any reason to suppose that the socialist State might not fulfill its obligations.

We look further into the future; sixty, or, say, a hundred years have passed; what condition of things do we see now? What has changed and what has not?

The principal survival is the inequality, the very thing that some people found most difficulty in submitting to in the past. There are no longer any merchants, shipowners, or manufacturers, there are no landowners or bankers; but, unless the annuity system of compensation has been adopted, we find, instead, a very large number of holders of Government stock, so that there are as many owners of property as before. This class will remain and increase. For the socialistic State will have recognised-if not at once, then after being taught by bitter experience that with growth of population, capital also must grow, and that it must grow even more rapidly than the population. The State will therefore have to encourage thrift by paying a certain rate of interest on all savings entrusted to its keeping. It will have to maintain the law of inheritance; for there can be no strong incentive to save, unless goods for consumption and claims in respect of debt can be handed down from one generation to another. We do not know if this is quite compatible with the socialistic system, but we do know that it is absolutely necessary, since the need for capital will always remain, no matter on what lines society may be organized.

The inequality thus remains; only certain of its causes disappear. Fortunes can no longer be accumulated in commerce or industry, nor does increased demand for agricultural or building land tend any longer to enrich the few at the expense of the many. But gambling on the Stock Exchange will not have disappeared. Even though the compensation should have taken the form of terminable annuities, it would be many years before all the bonds establishing their holders' claims to such annuities had disappeared, and it is probable that in a socialistic State these bonds would be subject to considerable fluctuations in the market. Even if all the annuities in the country itself were to have expired, there would still, no doubt, be bonds of other countries to speculate in. Besides, there will never be wanting things to serve as the subject of betting and gambling transactions. If any one expects that the socialistic State will be able to get rid of these causes of inequality, his optimism must be rather extravagant.

374. Some Objections to Socialism31

BY WILLIAM GRAHAM

To the general scheme of socialism it is easy to see many objections. The first is that nothing could be produced either in the sphere of material or intellectual production that was not pleasing to the chiefs or the heads of the departments of production. At present it is demand which determines what shall be produced, and every conceivable demand is catered to. Under collectivism production will determine demand; at least demand will have to accommodate itself to production. The state would practically control the production of immaterial things. It could print or suppress what books it pleased, because it would control all the printing presses and pay all the printers.

The next objection refers to the quantity and quality of the production. It is urged that the great stimulus to the private interests of the industrial chief being withdrawn, he will take little interest in the result. The workers will be disposed to take things easy, work in itself not being pleasant, and no one fearing dismissal under a socialist régime. Were the chiefs restricted to shares equal with the laborers, no economic incentive would be furnished them to make the output of their departments as much and as good as possible. In a word, impracticality may be written large over the collectivist scheme so far as it would largely cut down the salaries of superiors, discourage inventors, or arbitrarily dictate production.

A common objection to socialism is that under it the supply of capital to create or to prevent the deterioration of instruments of production would be insufficient, from the withdrawal of the present potent stimulus to saving in the shape of interest. Under Collectivism the new capital would take the form of a tax or a deduction from gross product. Abstinence, necessary to the accumulation of capital would not be paid for by the receipt of interest by the individual. There is reason for thinking that he therefore would refuse to sanction the tax which made his abstinence necessary.

But the commonest of all the objections to socialism is that liberty would be in danger; liberty, which, as Mill says, is next to food and drink, the most craving want. It is objected that the State being sole producer, the leaders and directors of industry might be despotic. The power of buying the things we pleased would be

Adapted from Socialism New and Old, 162-182 (1891). This selection merely enumerates the objections to socialism; it makes no critical estimate of their validity. For the author's estimate see the reference.