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XVI

The Reserves of Labour

Dear Mr.——,—Mr. Ramsay Macdonald in the course of his speech on the Unemployed Bill declared that all economists and sociological investigators in the country, with Mr. Charles Booth at their head, had laid it down that modern industry demanded a surplus of labour in order to carry it on. He wanted to supplement that by another doctrine—that modern industry not only required a steady surplusage of labour, which might become a minimum, but also requires now and again a critical condition of unemployment. "It not only required its two per cent always, but its ten per cent occasionally. If they agreed with that, there was an inevitable corollary. If we were to have unemployed, not because the men were inferior to the employed, but because of the very nature of the organisation, it was a logical and humane corollary that the burden of unemployment should not be placed on the backs of these weak men, should not be left to charity or to odds and ends of ill-assorted page 88 legislation, but should be dealt with more and more on the lines of Clause III. of the present Bill."

In other words, Mr. Ramsay Macdonald asserts that modern industry requires certain reserves of labour which can be brought up at moments of stress, and that the unemployed constitute these reserves. With certain limitations, I agree. But if these reserves are necessary to industry, let the cost of supplying them fall upon the industry, and not upon the State. Why should the taxpayers and ratepayers pay to keep during certain months of the year men who will be wanted by Messrs. Brown and Smith in order to get their firm very lucrative orders at another portion of the year? No doubt many owners of factories would be in very great difficulties if they could not feel that when large orders came their way they would find a sufficient body of men to help them to carry out those orders. Heretofore, or rather before the great extension of doles to the unemployed, many firms felt this so strongly that in slack periods they took orders at very low rates—rates which gave them no profit, or which even constituted a loss—in order to keep their body of operatives together. They recognised the need of maintaining reserves which can be drawn upon when large orders are coming in at high rates. Here is a good example of the compensating balance in industrial life.

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Now, however, the capitalists are beginning to realise that there is little or no risk of their reserves of labour being lost if they do not keep them together by occasionally running their works without a profit. In future the reserves, instead of going elsewhere or melting away, will be kept in being for the good of the manufacturers by the State or the municipality. The onus of maintaining its own reserves is no longer imposed on the industry. The ratepayer and the taxpayer have undertaken the obligation. Being human, the employers very naturally fall in with this development of public policy, and shape their own action accordingly. In other words, what is happening in regard to the unemployed is what has happened again and again in our industrial history. We think we are throwing a bone to the poor unemployed terrier, whereas the big capitalist mastiff catches and makes off with it. The same thing occurred under the old Poor Law. The fact that the parishioners could claim maintenance from the parish had the result of driving down wages, and the farmers, in spite of the enormous rates, were often found to be defenders of the system because it enabled them to get farm-hands at 4s. a week. The parish paid, say, 4s. to the labourer and the farmer only paid 4s. No doubt in the long run the farmers suffered from the demoralisation of labour caused by State aid, just as the capitalist will in the end page 90 suffer if we keep his reserves for him. The reserves will be demoralised by the State doles,—whereas they would have been maintained in true vigour had the capitalist been obliged, or rather allowed, to do his own proper work at his own charges.

In fact, the plan of providing for what Mr. Ramsay Macdonald calls surplus labour by means of State action carries a double curse. It curses the recipient, and in the end it will bring a curse upon the capitalist who for the moment appears to benefit by it. The reason is plain. The power to do good work depends in the last resort upon character and rests on a moral basis, and that moral basis is destroyed when we accept what Bastiat called the great fallacy that the State is an institution upon which everybody can live at the expense of everybody else.—Yours very sincerely,