capitalistic system of to-day. Therefore, the conclusion is, sweep away that system, socialise your capital, and the theft will cease.

Such are the two theoretical bases of modern Socialism. German we can call it no longer, for it has become world-wide. The present chapter is devoted to a survey of these two separate, but converging lines of thought-viz. (1) to that part of the basis which rests on the theory of value; (2) to that part of it which rests on the theory of rent.

In both cases I shall show that the whole of this substructure or basis of theory is rotten, and I shall draw the irresistible conclusion that the movement is a mistaken one from the very foundation upwards.

As it is indifferent with which leg we begin, let us begin with the former, the labour-value formula, for that sums up for us more concisely the main idea advanced by Karl Marx.

As I have said, this idea is drawn directly from the writings of the English economists, or, in a word, from Ricardo.

The Ricardian theory of value is a necessary corollary of his theory of rent. According to the theory of rent, the value of all agricultural produce is determined by the cost of production of the part which is grown with the greatest difficulty, or, as the Ricardians would say, on the outermost margin of cultivation. Now, in Ricardo's mind, cost of production on the margin

of cultivation resolves itself into practically only one factor or element-viz. labour, for on the margin of cultivation the land itself is gratuitous. Therefore the value of agricultural produce is determined by the labour requisite to raise produce on the margin of cultivation.

Having once attained this idea, Ricardo applied it to the case, not merely of agricultural produce, but to every commodity "which can be increased in quantity by the exertion of human industry, and on the production of which competition operates without restraint." This he does by simply showing that capital is merely stored up labour assisting labour. He thus arrived at the dictum that the foundation of exchangeable value in commodities is the quantity of human labour realised in them.

There is not the slightest doubt in my mind that this was the process by which Ricardo evolved his theory of value. Having got so far, own deductions by

he proceeded to check his Adam Smith's work, which was practically the only standard by which he could compare it, for his reading in economic literature was not wide. Accordingly, in his chapter on value, Ricardo deliberately quotes passages from Adam Smith which brought out this coincidence with his own views.

The real price of everything, says Adam

Smith, what everything really costs to the man who wants to acquire it, is the toil and trouble of acquiring it. . . . Labour was the first price, the original purchase money, that was paid for all things. . . . The quantities of labour necessary for acquiring different objects seem to be the only circumstance which can afford any rule for exchanging them one against the other.

Thus confirmed in his view, Ricardo went a step further. With this theory of labour as the basis of value in his hand, he approached the problems of distribution. The total values produced remain to be divided between the factors which have co-operated in production. Land gets its rent, capital gets its profit, labour gets its wages. As to rent, he had already determined by his theory of rent that it gets an ever-increasing share. Therefore there must be an ever-decreasing share left for labour and capital. Very well, then, and how do these two divide between themselves? Simply on the following plan, says Ricardo: labour gets what is necessary for its upkeep, capital takes the rest; or, in other words, if the devil is to take the hindmost, he will have to take labour.

It was for the purpose of this deduction that Ricardo makes the allowance which he does in Section IV., for the effects on, or modifications in, labour value, which are produced by the

employment of machinery and other forms of fixed and durable capital. For out of the play or see-saw between these two factors resulted that reduction of the reward of labour to a living wage which Ricardo believed in as a cardinal fact. "There can be no rise in the value of labour without a fall of profits." He therefore treats the term "rise of wages" as synonymous with the term "fall of profit."

Having got thus far, it remained only to be settled as to which of those two factors, capital or labour, will, in the actual world at large, win the day over the other. To determine this, he lays down the dictum that "the natural price of labour is that price which is necessary to enable the labourers, one with another, to subsist, and to perpetuate their race, without either increase or diminution." And then he pauses to show that the action of the population principle will make this natural wage the actual wage. The argument is unusually complicated and confused, even for Ricardo (which is saying much), for he has to explain how it is that variations should ever come to take place in the money rate of wages, and in the standard of living or comfort of the labourer. But by working the population principle, and his own incipient conception of a wage-fund, he arrives, satisfactorily to himself, at the conclusion that, in an advancing state, as much as in a declining one, the labourer really gets only this natural

or living wage. Under a rise of money wages, "the fate of the labourer will be less happy. He will receive more money wages, it is true, but his corn wages will be reduced; and not only his command of corn, but his general condition will be deteriorated by his finding it more difficult to maintain the market rate of wages above their natural rate."

We thus arrive at Ricardo's celebrated dictum of the inevitable tendency of wages to the minimum of the mere necessaries of life. In other men's mouths this became the iron law of wages, and it is practically this which Ricardo has given as a heritage of hatred and strife to all succeeding generations until this day.

The inherent weakness of it will be apparent from the mere exposition. The theory of value on which it rests is itself unsound. In the first place, labour is not the sole basis of value. This would be to ignore all natural agents, and the values which are inherent in all raw material before ever labour has breathed upon it. In the second place, when Ricardo comes to the distribution of this value, it is not true, what he says, that rent takes an ever-increasing share. This I shall clearly show in the second half of the present chapter. And, following him to his next and final step, it is not true that as between capital and labour, labour gets only the necessaries of life, and capital walks off with all the