519

p According to Schultze-Gavernitz, the decrease in the distance between the rich and the poor in Britain was proved by that country’s "leading statistician" Robert Giffen, in an address "The Increase of Moderate Incomes”, supposed to have been given at a meeting of the Royal Statistical Society in December 1887. Schultze Gavernitz made reference to this address both in his Zum sozialen Frieden (Vol. II, p. 490) and in his book on large-scale production {p. 229 in the Russian translation). But he was mistaken in ascribing it to Giffen. In fact, the address was really given at the meeting mentioned by Schultze-Gavernitz, but it was delivered by Goschen.  [519•*  This circumstance, of course, in no way impairs the value of the speech itself, but Goschen should not be deprived of the laurels he deserved, which should not be presented to Giffen even by mistake. Suum cuiquel

p The speech on the increase in moderate incomes seemed convincing to many others besides Schultze-Gavernitz. After its delivery (December 6, 1887), Collet, Governor of the Bank of England, expressed warm thanks to the speaker for his having shown the -degree in which the hackneyed prattle on the constantly growing enrichment of the wealthy and impoverishment of the poor was contrary to the truth. "Nothing was more valuable in these days of visionary theories and excited propositions for the distribution of wealth,” said the esteemed Governor, "than to have it shown in a manner so perspicuous and indisputable, that the distribution which is so ardently called for, is in fact already in active although silent operation, through the regular action of economic laws...."  [519•**  However, Mr. Collet’s opinion may be considered insufficiently authoritative. Some sceptic may suppose that, like Edward Atkinson, the Governor of the Bank of England did not have 520 enough time for a study of economic theory, a knowledge of which is, after all, necessary for a correct understanding of statistical data. That is why we shall also mention a well-known German economist, Gustav Schmoller, who, while regarding the writings of a "leading British statistician”, viz., Giffen, with a dash of scepticism, yet finds that Goschen’s conclusions are based on an objective and convincing analysis of reality.  [520•*  It would therefore be useful to take a closer look at what the British Chancellor of the Exchequer had to say.

p Goschen was in full agreement with Collet in his view on the great social significance of the data he had adduced. "I do not know,” he told his audience, "whether the statistics I have brought before you will to any extent have caused the same impression in your minds that they have made on mine. To me it seems that, while some people are crying out for the artificial reconstruction of society a sort of silent socialism is actually in progress. There is a silent movement towards the further distribution of wealth over a larger area, which from whatever point of view it is regarded seems to me to be a matter for national congratulation. No violent specifics have been applied to produce it. The steady working of economic laws, under a system of commercial and industrial freedom, is bringing about the result I have described.... And the best of this automatic socialism is that it appears to operate even in a time of depression. Despite the complaint of absence of profit and of bad times generally; despite want of work and the irregularity in the employment even of those who have work, the great central body of society is strengthening its economic position."  [520•** 

p The reader will see that both Goschen and his audience were under the influence of the "cries for the artificial reconstruction of society”. Indeed, such outcries were very loud in Britain at the time Goschen delivered his speech, a time of industrial stagnation and unemployment, which led to disturbances among the workers. Meetings of unemployed were held in London, Manchester, Birmingham, Leicester, Yarmouth and elsewhere, with incendiary speeches being made. There were some who thought then that Britain was on the eve of social revolution. Some people, says Sidney Webb, even specified the time of the forthcoming revolution: 1889, the hundredth anniversary of the Great French Revolution.  [520•***  This foment in minds could be soothing neither to the ministers 521 nor to the upper classes in general, so it should be admitted that Goschen was speaking at a time when the conditions hardly favoured "objective research" into economic phenomena. It is also well known, however, that love of truth sometimes gains the upper hand over formidable external obstacles. Though Goschen probably found it very hard to preserve his moral calm and scientific impartiality, this does not yet mean that he had to get worked up and see Britain’s economic development through the prism of his class prejudices. Who knows? Perhaps the "automatic socialism" discovered by him is indeed penetrating more and more into British social life? The question however is: on what actual foundation did the British minister’s confidence in the slow, silent but steady development of that socialism rest?

p The actual foundation of that confidence was the following: the statistics told him that, in 1875, the number of (physical and juridical) persons registered under Schedule D  [521•*  and in receipt of incomes of between & 150 and £ 1,000 reached 317,839, while in 1886 the number increased to 379,004, i.e., went up by 19.26 per cent. During the same period, the number of persons with incomes of £ 1,000 or more fell from 22,848 (1877) to 22,298 (1886), a fall of 2.4 per cent. A more detailed analysis of the statistics enabled Goschen to draw up the following table:

Per cent

1877 1886

p increase or
decrease
Between
£150 and
£500 . . .
285,754
347,021
+21.4
£500 and
£1,000 . .
32,085
32,033
nil
£1,000 and
£5,000 . .
19,726
19,250
—2.5 ’
Over £5
,000 ....
3,122
3,048
—2.3

p Hence Goschen concluded that "during ordinary times, and during times of depression, during times such as we have recently gone through and which certainly have not been times of great prosperity, there has yet been a most satisfactory and steady increase in the number of incomes below & 1,000."

p But under Schedule/), British income tax statistics do not register all those who can be referred to the middle class. Quite 522 a number of such persons also register under Schedule E, which includes, besides officials in the public service, also persons employed privately or with companies. The number of persons under this schedule rose from 78,224 to 115,964 during the decade under review. In Goschen’s opinion, this growth also testified to the strengthening of the economic position of "the great central body of society”, i.e., the middle class.

p These figures are no doubt interesting on the theoretical plane but they do not in any way have the significance ascribed to them by Goschen.

p In the first place, as already pointed out by Mr. Isayev, the data for the decade 1877–1886 showed a fall in the number of big incomes. "The sharp fall in the prices of all commodities; the lower profits of all enterprises to half of the average level, or less; the vast number of bankruptcies (up to 1877, an average of 8,500 bankruptcies per year; between 1877 and 1884—over 12,000)—all these led to a large number of wealthy persons with incomes of between & 1,000 and £ 2,000 in the mid-seventies receiving hardly more than £ 500-£ 1,000, while those with incomes of over £ 500 descended to a lower group, i.e., of those with incomes of between £ 150 and £ 500."  [522•* 

p How the industrial depression affected the growth of Britain’s national wealth is shown by the following figures: in the years between 1865 and 1875, Britain’s aggregate capital rose from £ 6,113,000 thousand to £ 8,548,000 thousand, i.e., a 40 per cent increase; in the years between 1875 and 1885, it rose from £8,500,000 thousand to £10,037,000 thousand, i.e., increased only by 17.5 per cent.  [522•** 

p It will readily be understood that the slower rate of capital accumulation was caused by a fall in the level of profits during the industrial depression. This fall in the level of profits was alone sufficient to transfer income-tax payers from higher schedules to lower ones. But it is noteworthy that the lower level of profits was far from the same in various kinds of enterprises. It was felt with special force in industrial enterprises and was far weaker in those unrelated directly to industry. Thus, retailers had very few complaints to make. Low losses were also incurred by those who had invested their capital abroad, for instance in foreign loans and the like. One of the members of the Commission appointed to inquire into the depression of industry pointed out  [522•***  that 523 British capital investments abroad were one of the causes of a phenomenon that appeared strange at first glance, namely, that the total sum of taxable incomes had grown, despite the business depression. Since the growth of this overall sum was nevertheless accompanied by a fall in big incomes, it was to be surmised that capital of relatively smaller size had been invested in trading concerns both within the country and abroad. Such was the opinion of the minority on the Commission. The great increase in the number of low incomes and a fall in a number of large incomes under Schedule D probably took place in considerable measure because industry, to which large enterprises with big capital belong, did not produce incomes, while trade, especially retail trade, the greater part of which is conducted with small capital, yielded profits.  [523•* 

p In view of these considerations alone, the British Chancellor of the Exchequer’s "automatic socialism" loses a considerable part of its “admirable” and “consoling” qualities. But it seems even more pitiful to us if we remember that another cause of the growth in the total of taxable incomes (Schedule D) was simply more thorough governmental assessment of private incomes. The majority of the Commission were in full agreement with the minority in indicating this cause, but while the majority did not ask themselves how it had affected the number of registered persons with “moderate” incomes, the minority pointed out with good reason that it should have increased that number as a result of the incometaxing of many new taxpayers of modest means, who had previously had no difficulty in declining the honour.  [523•** 

p Thus, the actual foundation of the gratifying conclusions drawn by Goschen is quite groundless. Just as groundless, of course, is the gratifying conviction of those friends of "social peace" who think that Goschen has proved the narrowing of the distance between poor and rich.

p We would ask the reader also to note the following. Goschen had high praise for the concluding report, quoted by us, which studied the causes of the depression in industry, and voiced regret that the conclusions it had arrived at did not attract due attention from the reading public.  [523•***  It might have been thought that he himself had made a thorough study of those conclusions and conveyed them to his audience in all their fullness and variety. In fact, however, the reverse was true. So trifling was his attitude to the report in question, that he found it possible to unreservedly make use of statistics concerning which the Commission minority 524 had stated forthright that their significance was not what it had seemed at first sight and was ascribed to them by Goschen himself shortly after the publication of the Final Report. The “worthy” speaker found it discreet to make no mention of this statement of the minority in his speech, so firm and inflexible was his “objectivity”.

Goschen wished to hearten his audience, who were under the strong impression of the workers’ disturbances; clutching at the first figures that had come to hand, he began to set forth to them, in a new version, the very theory that had previously been brought forward by Carey, Bastiat and similar apologists of capitalism. The delighted listeners thanked the speaker in most heartfelt fashion. Continental scholars like Schmoller and Schultze– Gavernitz were overjoyed too. These “objective” men of science were not concerned with any critical verification of the arguments brought forward by the British Minister, for they, too, were delighted to hear that the admirable and consoling Bastiat law could be backed by a new data. Since Goschen’s reasoning was met respectfully by Schmoller, Schultze-Gavernitz and other “scholars”, the “critics” of Marxism had no other choice than to proclaim from the houses that social contradictions had been blunted as a result of the "growth of moderate incomes”. Our “critics” do not at all engage in criticising bourgeois scholars; they specialise in “criticising”’ Marx alone.