A Policy of Free Exchange: An Argument Against Socialism and Socialistic Legislation
By Thomas Mackay
Thomas Mackay (1849-1912) was a successful English wine merchant who retired early from business so he could devote himself entirely to the study of economic issues such as the Poor Laws, growing state intervention in the economy, and the rise of socialism. Mackay was asked by the individualist and laissez-faire lobby group, the Liberty and Property Defense League (founded in 1882 by the Earl of Wemyss), to put together a collection of essays by leading classical liberals to rebut the socialist ideas contained in
Fabian Essays in Socialism edited by George Bernard Shaw in 1889. The result was a volume of essays called
A Plea for Liberty: An Argument against Socialism and Socialistic Legislation which appeared in 1891, and another volume of essays
A Policy of Free Exchange: Essays by Various Writers on the Economical and Social Aspects of Free Exchange and Kindred Subjects, which appeared in 1894.Two of the guiding intellectual lights of the Liberty and Property Defense League were Herbert Spencer (1820-1903), whose
The Man versus the State had appeared in 1884, and Auberon Herbert (1838-1906), whose
The Right and Wrong of Compulsion by the State had appeared in 1885. Both Spencer and Herbert were troubled by the direction in which the British Liberal Party was heading, away from strict adherence to policies of individual liberty and non-intervention in the economy and towards a “New Liberalism” which laid the intellectual foundations for the modern welfare state. The aim of Mackay and the members of the Liberty and Property Defense League was to use the occasion of the publication of a major defense of state interventionism in the economy, the
Fabian Essays, as an opportunity to oppose all advocates of these policies whether from the “right” (the Liberal Party) or the “left” the Fabian socialists and the Labour Party. The result were the two volumes mentioned above. The strategy adopted was to argue against both the morality and the practically of socialism. The latter resulted in many essays showing how specific examples of state intervention or control, such as electrical distribution or public housing, led to unintended, harmful consequences.The ideas expressed in the two volumes,
A Plea for Liberty and
A Policy of Free Exchange, are still timely even after the passage of some 110 years. In spite of the fall of communism and the discrediting of the idea of a centrally planned economy, myriad government interventions in the operation of the economy are still with us, seemingly entrenched and impossible to remove. It is thus interesting to see the response to socialism by free market people who were present at its birth.Dr. David M. Hart
Library of Economics and Liberty
December, 2002Recommended ReadingEric Mack,
“Foreword” to Herbert Spencer,
The Man versus the State, with Six Essays on Government, Society, and Freedom (Indianapolis: LibertyClassics, 1981).Eric Mack, “Introduction” to Auberon Herbert,
The Right and Wrong of Compulsion by the State, and Other Essays (Indianapolis: LibertyClassics, 1978).Jeffrey Paul, “Foreword” to
A Plea for Liberty: An Argument against Socialism and Socialistic Legislation, consisting of an Introduction by Herbert Spencer and Essays by Various Writers, edited by Thomas Mackay (1891) (Indianapolis: Liberty Fund, 1981).Edward Bristow, “The Liberty and Property Defence League and Individualism,”
The Historical Journal, 1975, vol. XVIII, no. 4, pp. 761-789.N. Soldon, ”
Laissez-Faire as Dogma: The Liberty and Property Defence League, 1882-1914″, in
Essays in Anti-Labour History: Responses to the Rise of Labour in Britain, ed. Kenneth D. Brown (Macmillan, 1974), pp. 208-233.J. W. Mason, “Thomas Mackay: The Anti-Socialist Philosophy of the Charity Organisation Society,” in
Essays in Anti-Labour History: Responses to the Rise of Labour in Britain, ed. Kenneth D. Brown (Macmillan, 1974), pp. 290-316.J. W. Mason, “Political Economy and the Response to Socialism in Britain, 1870-1914,”
The Historical Journal, 1980, vol. XXIII, no. 3, pp. 565-587.
Thomas Mackay, ed.
First Pub. Date
New York: D. Appleton and Co.
Collected essays, various authors.
The text of this edition is in the public domain.
- Preface, by Thomas Mackay
- The Science of Economics and its relation to Free Exchange and Socialism, by Henry Dunning Mac Leod
- The Coming Industrial Struggle, by William Maitland
- National Workshops, by St. Loe Strachey
- State Socialism and the Collapse in Australia, by the Hon. J. W. Fortescue
- The Influence of State Borrowing on Commercial Crises, by Wynnard Hooper
- The State in Relation to Railways, by W. M. Acworth
- The Interest of the Working Class in Free Exchange, by Thomas Mackay
- The Principle of Progression in Taxation, by Bernard Mallet
- The Law of Trade Combinations, by the Hon. Alfred Lyttelton
‘LET not the people—I mean the masses—think lightly of those great principles upon which their strength wholly rests. The privileged and usurping few may advocate expediency in lieu of principles, but depend upon it we, reformers, must cling to first principles, and be prepared to carry them out, fearless of consequences…. I yield to no man in the world (be he ever so stout an advocate of the Ten Hours Bill) in a hearty good-will towards the great body of the working classes; but my sympathy is not of that morbid kind which would lead me to despond over their future prospects. Nor do I partake of that spurious humanity which would indulge in an unreasoning kind of philanthropy at the expense of the independence of the great bulk of the community. Mine is that masculine species of charity which would lead me to inculcate in the minds of the labouring classes the love of independence, the privilege of self-respect, the disdain of being patronised or petted, the desire to accumulate, and the ambition to rise. I know it has been found easier to please the people by holding out flattering and delusive prospects of cheap benefits to be derived from Parliament rather than by urging them to a course of self-reliance; but, while I will not be the sycophant of the great, I cannot become the parasite of the poor; and I have sufficient confidence in the growing intelligence of the working classes to be induced to believe that they will now be found to contain a great proportion of minds, sufficiently enlightened by experience to concur with me in the opinion that it is to themselves alone individually that they, as well as every other great section of the community, must trust for working out their own regeneration and happiness. Again I say to them
Look not to Parliament, look only to yourselves.’—From a Letter of Richard Cobden, dated October 21,1836.
A POLICY OF FREE EXCHANGE
Essays by Various Writers
Economical and Social Aspects of Free Exchange
and Kindred Subjects
THE articles contained in this volume have been written by the various authors independently. For the title, the preface, and for such general argument as is to be found in the book as a whole, no responsibility necessarily attaches to the writers, who are answerable each for his own contribution and for that only.
The title suggests that the principle of Free Exchange is capable of inspiring a constructive policy, in which freedom is limited only by a mutual respect for the freedom of all, that is, by the reciprocal responsibility inherent in every voluntary act of Exchange: the articles have been arranged, as far as possible, according to the natural sequence of thought; and for this attempt to give an appearance of unity of design the Editor is alone responsible.
The first paper, from the pen of Mr. H. D. Mac Leod, gives an historical sketch of the course of economic speculation with regard to the doctrine and policy of Free Exchange. He traces the rise of freedom of internal and international trade from the teaching of the French Economists and Adam Smith, and points out how the misconceptions of Ricardo and his followers on the subject of value have led mankind astray, and confused in the most mischievous manner all our ideas on the economic mechanism of society.
Free Trade, he argues, is the first great benefit which just economic reasoning has conferred on this country. The task before this and the next generation must be the clear establishment of the truth that a largely increased production of wealth and its equitable distribution among all classes of
the population can be attained only by developing the facility and the multiplicity of exchange—in other words, by Free Exchange; and, further, that this rule is applicable to all forms of value, whether they be labour or credits or material commodities.
Mr. Maitland draws attention to a problem of the immediate future. The adoption of Free Trade by America will produce, without doubt, great industrial changes. If we are to retain our markets, in face of the decreased cost of production which this policy will permit in America, we must cast off from us all unnecessary burdens and all unnecessary restrictions. Mr. Maitland’s argument is designed to show that our political leaders are very little alive to the reality of this danger. Changes such as he forecasts can only be met by permitting the principle of Free Exchange to be the distributor both of capital and labour. It is one of the evil consequences of Protection that, even when men become persuaded of its injustice and folly, they cannot return to Free Trade without causing considerable economic disturbance. We are about to encounter an industrial crisis arising from this cause; and it is Mr. Maitland’s argument that such redistribution of the industrial markets, as is inevitable, will come on us more gradually and with less suffering, if we accept the principle of Free Exchange in every relation of life. Thus encountered, the process of change need have for us no terror, for it must ultimately lead to an ever-increasing satisfaction of human wants at an ever-decreasing expenditure of human exertion.
Mr. Strachey gives an account of the
Ateliers Nationaux of Paris in 1848. The attempt was there made to give labour a right to force the community to purchase it for wages. This violation of the principle of Free Exchange rapidly—in three months’ time—produced anarchy and revolution.
Mr. Fortescue’s paper deals with a somewhat similar attempt in our own Colonies to carry on civilization by that vast system of public works which is most briefly described under the term State Socialism.
Another aspect of the same problem is treated by Mr. Hooper from the purely financial point of view. The pledging
of the credit of taxpayers for government borrowing and government trading is a contravention, possibly in many cases a necessary contravention, of the principle of Free Exchange. Mr. Hooper shows how treacherous a basis for the expansion of industry this method affords, and how readily it lends itself to the creation of disastrous financial complications.
Mr. Acworth deals with the vexed question of State-interference in railway management. He shows what a limited amount of truth there is in the allegation that a railway is a monopoly. On the important question of tariff legislation, subject to the necessity of State-interference legislative, judicial, and executive for the purpose of preventing undue preferences and unreasonable discriminations, he is disposed to leave the public and the railways to deal with each other on the principle of Free Exchange. In most other respects he suggests that more advantage will be gained by an enforcement of publicity than from any other form of regulation. Just as in the great Free Trade controversy, the maxim was laid down that a hostile tariff is best combatted by a more thorough free trade, so Mr. Acworth argues that the difficulties arising out of an alleged monopoly, like a railway, are best overcome, not by turning it into a real monopoly in the hands of a government department, but by subjecting it as far as possible to the health-giving influence of publicity and Free Exchange.
Mr. Mackay’s paper deals with the principle of Free Exchange in its relation to the property of the working classes in their own labour and in their own savings. The argument seeks to justify the opinion that Free Exchange is capable of becoming to labour what a right of free mintage is to bullion, viz. a certain guarantee of employment and wages; further that, in the vast series of exchanges which constitute the economic mechanism of a free community, the value of labour must unceasingly tend to enhancement. It is, therefore, to the organizing influence of Free Exchange that labour has to look for the realization of its legitimate ambition.
Here the controversial portion of the volume may be said to end. The two papers which follow, though not, strictly
speaking, covered by the title, have a relevance which is sufficiently obvious. Mr. Mallet’s paper is a theoretical discussion of one aspect of the interesting problem of taxation. The principle of progression or graduation has been already, as he points out, either avowedly or unconsciously adopted in the financial system of most civilized countries, and its extension is to be looked for in the future. Unless the theory be deliberately adopted that taxation is to be used as a lever for redressing the inequalities of fortune between the different classes of a community, there is, he thinks, much exaggeration both in the fears and in the hopes which this proposal evokes. In the distinction, as stated by Jevons, between value and utilities, he finds a defence of a progressive as opposed to a merely proportional rate of taxation; but he shows that at a point, which can only be discovered by actual experiment, the abstraction by the State of the surplus wealth of individuals may become not merely a deduction from the wealth of a country, but a positive bar to its further growth; further, that taxation is just and politic when it aims at equalizing the sacrifice imposed on individuals, but that it is the reverse when it seeks to equalize incomes.
Mr. Lyttelton, in explaining the state of the law with regard to trade combinations, has adhered strictly to the legal aspect of the question. If there is any force in the argument contained elsewhere in the book that, as regards labour as well as all other forms of wealth, Free Exchange, and not coercive combination, should be our rule of guidance, it is obvious that an estimate of the intricacies of the law of trade combinations is an interesting and pertinent addition to the controversy, even though, as in this case, the writer confines himself to a statement of fact, and takes no responsibility for the general argument in which his narrative may serve as an illustration.