Now, even were it possible to accept this rehabilitation of laissez-faire theory, accepting this equalising 'tendency' as predominant and normal, and classifying all opposing tendencies as mere friction, it would not supply a law of distribution that would satisfy the conditions of our 'human'
law.It would afford no security of distribution according to 'needs', or human capacity of utilising wealth for the promotion of the highest standard of individual and social welfare.It would remain an ideally good distribution only in the sense that it would so apportion the product as to furnish to all producers a stimulus which would evoke their best productive powers, so contributing to maximise the aggregate production of marketable goods.Only so far as man was regarded as an economic being, concerned merely in the nourishment and improvement of his marketable wealth-producing faculties, would it be a sound economy.
Just as in the case of the older, cruder 'freedom of competition', it rests upon the fundamental assumption that all the product, the real income of the community, will be absorbed in 'productive consumption', defraying the bare 'costs' of maintaining and improving the productive powers of capital, labour and ability, for the further production of objective economic goods and services.It would remain open to the objection that it assumed an identity of economic wealth and human welfare which is inadmissible, and that it refused to provide that subordination of economic production and consumption to the larger conception of human welfare which sound principles of humanity require.Though all work might be most productively applied, it might still contain excessive elements of human cost, and though all products were productively consumed many of the finer needs of individual men and of society might still remain without satisfaction.
§9.But the full divergence between the operation of the actual economic law of distribution and the human law can best be discovered by unmasking the fundamental falsehood of all forms of the laissez-faire or competitive economy, viz., the assumption that the national income tends to be distributed in a just economy of costs.Is there in fact any operative law which distributes or 'tends' to distribute the £2,000,000,000worth of goods that form our income, so that all, or even most of it, acts as a necessarY food and stimulus to evoke the full and best productive work of those who receive it? Or, if there are failures in this economical distribution, are they so few, so small, and so ephemeral, that they may reasonably be treated as 'friction', or as that admixture of error or waste which is unavoidable in all human arrangements?
Now it is of course true that the national income must continually provide for the subsistence of the labour, ability and capital, required to maintain the existing structure of industry and the current output of goods and services.The brain-workers and the hand-workers of every sort and grade, from artist and inventor to routine labourer, must be continuously supplied with the material and non-material consumables sufficient to enable them to replace in their own persons, or through their offspring, the physical and psychical wear and tear involved in their work.The fertility of the soil, the raw materials, fuel, buildings, tools and machines, requisite in the various productive processes, must similarly be maintained out of the current output.These bare costs of subsistence, the wages, salaries and depreciation funds necessary to replace the wear and tear of the human and material agents of production, are a first charge upon the national dividend.To refuse the payments which provide this subsistence would be suicidal on the part of the administrators of the income.They rank, from the standpoint of society6 as costs of production.If the product which results from the productive use of these factors exceeds what is necessary to defray these costs, the surplus may be employed in either of two ways.
It may be distributed among the productive classes in extra-payments so as to evoke by a set of economically-adjusted stimuli such enlarged or improved efficiency as will provide for a larger or a better product in the future.In a society of a progressive order where the numbers or the wholesome needs, or both, are on the increase, no surplus, however large, can be excessive for such provision.A socially sound and just distribution of the surplus would be one which absorbed it entirely in what may be called the 'costs of growth'.This, however, does not by any means imply that the whole of the surplus must advantageously be distributed directly among the individual owners of labour, ability or saving power, in order to evoke from them the maximum extension of their several productive powers.A good deal of the surplus may, indeed, be thus applied in higher individual incomes of producers.But the State, politically organised society, must look to the 'surplus' for its costs, not only of upkeep but of progress.For whatever part we may assign to the State in aiding industrial production, all will agree that much of its work, in the protection and improvement of the conditions of life, is essential to the stability and progress of industry, and involves 'costs' which can only be met by a participation in the industrial dividend.
