II: SISMONDI’S CRITICISM OF OVER-PRODUCTION AND COMPETITION
Deceived as to the best method to follow, mistaken in its conception of the nature of the object to be kept in view, it is not surprising that the “Chrematistic school” should have gone astray in its practical conclusions. The teaching of the school gave an undoubted incentive to unlimited production, for it was loud in its praise of free competition. It preached the doctrine of harmony of interests, and considered that the best form of government was no government at all. These were the three essential points to which Sismondi took exception.
First as regards its immoderate enthusiasm for production. According to the Classical writers, the general growth of production presented no inconvenience, thanks to that spontaneous mechanism which immediately corrected the errors of the entrepreneur if he in any way under-estimated the necessities of demand. Falling prices warned him against a false step and influenced him in directing his efforts towards other ends. In a similar way rising prices proved to the producers that supplies were insufficient and that more must be manufactured. Hence the evils committed would always be momentary and transient.
To this Sismondi replied: If instead of reasoning in this abstract fashion economists had considered the facts in detail, if instead of paying attention to products they had shown some regard for man, they would not have so light-heartedly supported the producers in their errors. An increased supply, if supply were already insufficient to meet a growing demand, would injure no one, but would be profitable for all. That is true. But the restriction of an over-abundant supply when the needs grow at a less rapid rate is not so easily accomplished. Does anyone think that capital and labour could on the morrow, so to speak, leave a declining industry in order to engage in another? The worker cannot quickly leave the work he lives by, to which he has served a long and costly apprenticeship, and wherein he is distinguished for a professional skill that will be lost elsewhere. Rather than consent to leave it, he will let his wages fall, he will prolong the working day, remaining at work for fourteen hours, and will toil during those hours that would otherwise be spent in pleasure or debauchery; so that the produce raised by the same number of workmen will be very much increased.[387] As for the manufacturer, he will not be less loath than the worker to quit an industry into the management and construction of which he has put half or even three-quarters of his fortune. Fixed capital cannot be transferred from one use to another, for even the manufacturer is bound by custom—a moral force whose strength is not easily calculated.[388] Like the worker, he is tied to the industry which he has created and from which he draws a living. Consequently production, far from being spontaneously restrained, will remain the same or will even perhaps tend to increase. In the end, however, he must yield, and adaptation will take place, but only after much ruin. “Producers will not withdraw from that industry entirely, and their numbers will diminish only when some of the workshops have failed and a number of workmen have died of misery.” “Let us beware,” says he in conclusion, “of this dangerous theory of equilibrium which is supposed to be automatically established. A certain kind of equilibrium, it is true, is re-established in the long run, but it is only after a frightful amount of suffering.”[389] The dictum which was to some extent true in Sismondi’s day controls the policy of every trust and Kartel of the present day.
Nowadays production chiefly grows as the result of the multiplication of machinery, and Sismondi’s most telling attacks were directed against machinery. Consequently he has been regarded as a reactionary and treated as an ignoramus, and for half a century was refused a place among the economists.
On the question of machinery the Classical writers were unanimous.[390] Machinery they considered to be very beneficial, furnishing commodities at reduced rates and setting free a portion of the consumer’s revenue, which accordingly meant an increased demand for other products and employment for those dismissed as a result of this introduction. Sismondi does not deny that theoretically equilibrium is in the long run re-established. “Every new product must in the long run give rise to some fresh consumption. But let us examine things as they really are. Let us desist from our habit of making abstraction of time and place. Let us take some account of the obstacles and the friction of the social mechanism. And what do we see? The immediate effect of machinery is to throw some of the workers out of employment, to increase the competition of others, and so to lower the wages of all. This results in diminished consumption and a slackening of demand. Far from being always beneficial, machinery produces useful results only when its introduction is preceded by an increased revenue, and consequently by the possibility of giving new work to those displaced. No one will deny the advantage of substituting a machine for a man, provided that man can obtain employment elsewhere.”[391]
Neither Ricardo nor Say denies this; they affirmed that the effect of machinery is just to create some part of this demand for labour. But Sismondi’s argument is vitiated by the same false idea that, as we have seen above, made him admit the possibility of general over-production—the idea that increased production, if it is going to be useful, must always be preceded by increased demand. He was unwilling to admit that the growth of production itself created this demand. On the other hand, what is true in Sismondi’s attitude—and we cannot insist too much on this—is the protest he makes against the indifference of the Classical school in the face of the evils of these periods of transition.
The Classical school regarded the miseries created by large-scale production with that sang-froid which was to characterise the followers of Marx amid the throes of the “inevitable Revolution.” Among many similarities which may be pointed out between the writings of Marx and the doctrines of the Classical school, this is one of the most characteristic. The grandeur of the new régime is worthy of some sacrifice. But Sismondi was an historian. His interest lay primarily in those periods of transition which formed the exit from one régime and the entrance into another, and which involved so much suffering for the innocent. He was anxious to mitigate the hardships in order that the process of transition might be eased. Nothing can be more legitimate than a claim of this kind. J. B. Say recognised its validity to a certain extent, and this is precisely the rôle of social economics.
Sismondi makes another remark which is no less just. What disgusted him was not merely that workmen should be driven out by machinery, but that the workers who were retained only had a limited share of the benefits which they procured.[392] For the Classical school it was enough that workers and consumers should have a share in the general cheapening of production. But Sismondi demanded more. So long as toil is as laborious as it is to-day, is it not just that the workman should benefit by the introduction of machinery in the way of increased leisure? In the social system as at present existing, owing to the competition among workers as the result of excessive population, machinery does not increase leisure, but it rather strengthens competition, diminishes wages, provokes a more intense effort on the part of the workman, and forces him to extend his working day. Here again Sismondi appears correct. We cannot see why the consumer alone should reap all the profit of improved machinery, which never benefits the workman unless it affects articles which enter into his consumption. There would be nothing very striking if the benefits of progress, at least during a short time, were to be shared between consumer and worker just as to-day they are shared between inventor, entrepreneur, and society. This idea is the inspiring motive of certain trade unions to-day, which only accept a new machine in exchange for less work and more pay.
Sismondi’s method when applied to production and machinery