Book Review: Principles of Political Economy by J. S. Mill

“The principle of private property has never yet had a fair trial in any country” John Stuart Mill writes in his Principles of Political Economy.

The version I read, edited by Johnathan Riley

What then is the principle of Private Property? According to Mill:

“The social arrangements of modern Europe commenced from a distribution of property which was the result, not of just partition, or acquisition by industry, but of conquest and violence: and notwithstanding what industry has been doing for many centuries to modify the work of force, the system still retains many and large traces of its origin. The laws of property have never yet conformed to the principles on which the justification of private property rests. They have made property of things which never ought to be property, and absolute property where only a qualified property ought to exist. They have not held the balance fairly between human beings, but have heaped impediments upon some, to give advantage to others; they have purposely fostered inequalities, and prevented all from starting fair in the race. …

Private property, in every defense made of it, is supposed to mean the guarantee to individuals of the fruits of their own labour and abstinence. The guarantee to them of the fruits of the labour and abstinence of others, transmitted to them without any merit or exertion of their own, is not of the essence of the institution, but a mere incidental consequence, which, when it reaches a certain height, does not promote, but conflicts with, the ends which render private property legitimate. To judge of the final destination of the institution of property, we must suppose everything rectified, which causes the institution to work in a manner opposed to that equitable principle, of proportion between remuneration and exertion, on which in every vindication of it that will bear the light, it is assumed to be grounded.”

He was writing during the mid nineteenth century and keen to respond to socialism’s challenge to private property, one he saw as arising from legitimate grievances. As Mill saw it, the institution itself was just, but had been corrupted to serve opposite ends to the intended ones. Mill goes on to describe how the produce of labour is apportioned:

“as we now see it, almost in an inverse ratio to the labour—the largest portions to those who have never worked at all, the next largest to those whose work is almost nominal, and so in a descending scale, the remuneration dwindling as the work grows harder and more disagreeable, until the most fatiguing and exhausting bodily labour cannot count with certainty on being able to earn even the necessaries of life”

Mill urges us to compare socialist proposals to limit (or communist ones to abolish wholesale) private property not with the institution as it stands today but “as it might be made”. For the rest of the book, he thus concerns himself with trying to modify the existing institutions to help them better serve their legitimate ends, but is open minded about prospects for socialistic experiments to develop a better kind of society than that which he outlines, writing in his autobiography that:

“The deep rooted selfishness which forms the general character of the existing state of society, is so deeply rooted, only because the whole course of existing institutions tends to foster it… These considerations did not make us [himself and his wife, Harriet Taylor] overlook the folly of premature attempts to dispense with the inducements of private interest in social affairs, while no substitute for them has been or can be provided: but we regarded all existing institutions and social arrangements as being (in a phrase I once heard from Austin) ‘merely provisional’ and we welcomed with the greatest pleasure and interest all socialistic experiments by select individuals (such as the cooperative societies) which, whether they succeeded or failed, could not but operate as a most useful education of those who took part in them, by cultivating their capacity of acting upon motive pointing directly to the general good, or making them aware of the defect which render them and others incapable of doing so.”

As you can see, this is not a man who would ever think to utter the notion that history had ended or that “there is no alternative” to today’s ‘neo-classical’ political economy. Perhaps he would be pleased by and interested in today’s Occupy movements and their experiments with forms of participatory democracy? Mill thus advocates private property as the means to remuneration for work done ‘merely provisionally’ and on the grounds that it will be more likely to prove ‘immediately successful’ in light of the paucity of aforementioned ‘socialistic experiments’ to educate us otherwise:

“The proportioning of remuneration to work done, is really just only in so far as the more or less of the work is a matter of choice:when it depends on natural differences of strength or capacity, this principle itself is an injustice: it is giving to those who have; assigning most to those already favoured by nature… [however] until education shall have been entirely regenerated, is far more likely to prove immediately successful, than an attempt at a higher ideal.”

A recent attempt to ‘regenerate education’ in the direction of a ‘higher ideal’, which I find promising, is the International Organisation for a Participatory Society. But back to Mill’s book! How is Private Property to be tamed to serve these legitimate (though provisional) ends? Mill proposes reforms to the law of inheritance and the ownership of land. First inheritance, about which Mill writes that:

“We may suppose, for instance … a limitation of the sum which any one person may acquire by gift or inheritance to the amount sufficient to constitute a moderate independence. Under this twofold influence society would exhibit these leading features: a well-paid and affluent body of labourers; no enormous fortunes, except what were earned and accumulated during a single lifetime; but a much larger body of persons than at present, not only exempt from the coarser toils, but with sufficient leisure, both physical and mental, from mechanical details, to cultivate freely the graces of life, and afford examples of them to the classes less favourably circumstanced for their growth.”

Mill recognizes that large fortunes have historically been built up through violence and expropriation of the land, but with a reform to the law of inheritance great inequality can be made to disappear within a generation or two, without the need for a wholesale reconstitution of society in a socialist or communistic mold, or the abandonment of the just principle of private property. The goal is a clearly more equitable society, in which education towards high culture can be cultivated freely by all. Like Adam Smith before him, Mill desires greater equality of conditions, not merely of opportunity, and greater education of the labouring classes.

Now land – why does Mill make a special exception out of property in land? For the following reason:

“When the ‘sacredness of property’ is talked of, it should always be remembered that any such sacredness does not belong in the same degree to landed property. No man made the land. It is the original inheritance of the entire species …

To me it seems almost an axiom that property in land should be interpreted strictly, and that the balance in all cases of doubt should incline against the proprietor. The reverse is the case with property in moveables, and in all things the product of labour: over these, the owner’s power both of use and of exclusion should be absolute, except where positive evil to others would result from it: but in the case of land, no exclusive right should be permitted in any individual, which cannot be shown to be productive of positive good.

To be allowed any exclusive right at all, over a portion of the common inheritance, while there are others who have no portion, is already a privilege. No quantity of moveable goods which a person can acquire by his labour, prevents others from acquiring the like by the same means; but from the very nature of the case, whoever owns land, keeps others out of the enjoyment of it. The privilege, or monopoly, is only defensible as a necessary evil; it becomes an injustice when carried to any point to which the compensating good does not follow it.”

Mill goes on to propose further measures to modify the institution of private property such that it might lift the poor out of poverty and check disproportionate riches. He proposes that taxes be levied only upon luxuries and not upon necessities:

“People should be taxed, not in proportion to what they have, but to what they can afford to spend [on luxuries]. It is no objection to this principle that we cannot apply it consistently to all cases… the difficulty of doing perfect justice is no reason against doing as much as we can.”

In line with the exceptional status of landed property he subsequently proposes a tax on land ownership:

“The ordinary progress of a society which increases in wealth, is at all times tending to augment the incomes of landlords; to give them both a greater amount and a greater portion of the wealth of the community, independently of any trouble or outlay incurred by themselves… The ascendancy of landholders in the legislature has prevented any tax from being imposed, as it so justly might, upon the very large portion of this increase which was unearned, and, as it were, accidental…

Land tax… ought not to regarded as a tax, but as a rent charge in favour of the public; a portion of the rent, reserved from the beginning by the state, which has never belonged to or formed part of the income of the landlords, and should not therefore be counted to them as part of their taxation.”

Substitute the ‘landlords’ above with today’s ‘bankers’ and you have quite a good description of our contemporary power struggle, the capture of parliament by finance and an argument in favour of a financial transaction tax! The analogy is so precise because financiers rent our vital means of exchange (money) to us in the same way that Mill’s landlords rented the vital means of subsistence (land). Money, like land, is a common inheritance that should belong to all the people, since we the people (and not the banks) give it value. We should thus create our own money debt-free, for common causes, rather than allowing banks to create it as interest bearing debt for private profit. A “rent charge in favour of the public” on money is a pretty good description of demurrage, incidentally.

Silvio Gesell in 1895. In his book “The Natural Economic Order” he argued that a use fee on money (demurrage) could prevent the accumulation of capital into fewer and fewer hands: a system he termed “free money”. Like J. S. Mill, he also argued for land reforms, proposing what he called “free land”. That his book argues equally for both reforms further emphasises the similarity between rent on land and interest on money.

As you can see, all Mills’ reforms to private property have in mind as their goal a society where greater equality of conditions and mutually beneficial cooperation between largely self-sufficient individuals becomes the norm. Mill lays this vision for the future society out towards the end of the book, stating that:

“Finally, I must repeat my conviction, that the industrial economy which divides society absolutely into two portions, the payers of wages and the receivers of them, the first counted by thousands and the last by millions, is neither fit for, nor capable of, indefinite duration: and the possibility of changing this system for one of combination without dependence, and unity of interest instead of organized hostility, depends altogether upon the future developments of the Partnership principle.”

By “Partnership principle”, Mill has in mind something like a system of cooperatives to serve the public good and quotes Henry Charles Carey’s description of the early American colonies to afford a vivid picture of such a society:

The best existing [1848] laws of partnership appear to be those of the New England States. According to Mr. Carey, “nowhere is association so little trammeled by regulations as in New England; the consequence of which is, that it is carried to a greater extent there, and particularly in Massachusetts and Rhode Island, than in any other part of the world. In these states, the soil is covered with compagnies anonymes—chartered companies—for almost every conceivable purpose. Every town is a corporation for the management of its roads, bridges, and schools: which are, therefore, under the direct control of those who pay for them, and are consequently well managed. Academies and churches, lyceums and libraries, saving fund societies, and trust companies, exist in numbers proportioned to the wants of the people, and all are corporations. Every district has its local bank, of a size to suit its wants, the stock of which is owned by the small capitalists of the neighbourhood, and managed by themselves”

It puts one in mind of the concluding passages to Wilhelm von Humboldt’s essay On the Limits of State Action, which was formative reading for Mill himself:

“The whole tenor of the ideas and arguments unfolded in this essay might fairly be reduced to this, that while they would break all fetters in human society, they would attempt to find as many new social bonds as possible. The isolated man is no more able to develop than the one who is fettered.”

Not that 1848 Massachusetts was perfect, you understand; vibrant workers’ movements of the time were readily condemning the “new spirit of the age: gain wealth forgetting all but self” as they put it. The New England  ‘utopias’ described above later fell afoul of legal changes to the structure of corporations. They went from temporary associations chartered to serve the public good (and if they couldn’t prove they were doing this, their charter could be revoked) to today’s Frankenstein-esque patchwork of legal protections affording corporations the “rights of persons” and legally obliging them to maximise private profits whatever the social costs, rather than serve local communities. Very recently, they were essentially granted permission to buy congress.

It’s a real shame that classical liberal ideas like Mills’ were thus “wrecked on the realities of capitalist economy” as anarchist historian Rudolf Rocker put it:

“Democracy with its motto of equality of all citizens before the law, and Liberalism with its right of man over his own person, both were wrecked on the realities of capitalist economy. As long as millions of human beings in every country have to sell their labour to a small minority of owners, and sink into the most wretched misery if they can find no buyers, the so-called equality before the law remains merely a pious fraud, since the laws are made by those who find themselves in possession of the social wealth. But in the same way there can be no talk of a right over one’s own person, for that right ends when one is compelled to submit to the economic dictation of another if one does not want to starve.”

I hope it’s clear from much of this post that J. S. Mill, a classical economist, would be horrified by much of what goes by the name ‘neo-classical economics’ today, which is far from a continuation of the classical economic vision that he espoused. Rather, it borrows certain notions from this vision (private property, contract law, the market) but ultimately cuts these adrift from their ethical foundations and stands in radical violation of the ends Mill laboured to make these notions serve – the foundation of a more equitable and just society, in which all members would find themselves better able to enquire, to create and to continually develop and refine their capacities as free human beings.

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~ by freedomthistime on May 18, 2012.

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